STOCK PURCHASE AGREEMENT
BETWEEN
FAMILY GOLF CENTERS, INC.,
AND
GOLDEN BEAR GOLF, INC.
DATED AS OF JUNE 16, 1998
TABLE OF CONTENTS
ARTICLE I
THE SALE..........................................................................................................1
Section 1.1 The Sale...............................................................................1
Section 1.2 Closing................................................................................1
Section 1.3 Calculation of Purchase Price..........................................................2
Section 1.4 Definition of Subsidiary and Affiliate.................................................2
Section 1.5 Spinoff................................................................................2
ARTICLE II
DELIVERIES AT THE CLOSING.........................................................................................3
Section 2.1 Deliveries by Buyer to Seller..........................................................3
Section 2.2 Deliveries by Seller to Buyer..........................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER...........................................................................4
Section 3.1 Existence, Good Standing, Corporate Authority..........................................4
Section 3.2 Authorization, Validity and Effect of Agreements.......................................4
Section 3.3 No Violation...........................................................................5
Section 3.4 No Brokers.............................................................................5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER..........................................................................5
Section 4.1 Existence, Good Standing, Corporate Authority..........................................5
Section 4.2 Authorization, Validity and Effect of Agreements.......................................6
Section 4.3 Seller Capitalization..................................................................6
Section 4.4 GBGC Capitalization; Title to the Shares...............................................6
Section 4.5 No Violation...........................................................................7
Section 4.6 Subsidiaries and Affiliates............................................................7
Section 4.7 Financial Statements...................................................................7
Section 4.8 Absence of Undisclosed Liabilities.....................................................8
Section 4.9 Tangible Personal Property; Sufficiency of Assets......................................9
Section 4.10 Real Property.........................................................................10
Section 4.11 Machinery and Equipment...............................................................11
Section 4.12 Copyrights and Trademarks.............................................................12
Section 4.13 Contracts.............................................................................12
Section 4.14 Absence of Default....................................................................13
Section 4.15 Insurance.............................................................................13
Section 4.16 Third Party Options...................................................................14
Section 4.17 Distributions, Satisfactions, Obligations.............................................14
Section 4.18 Capital Expenditures..................................................................15
Section 4.19 Litigation............................................................................15
Section 4.20 Compliance with Law...................................................................15
Section 4.21 Transactions with Affiliates..........................................................16
Section 4.22 Prohibited Payments...................................................................16
Section 4.23 Tax Matters...........................................................................17
Section 4.24 Employee Benefit Plans................................................................19
Section 4.25 Executive Employees...................................................................21
Section 4.26 Employees.............................................................................21
Section 4.27 Environmental Laws....................................................................22
Section 4.28 Bank Accounts, Letters of Credit and Powers of Attorney...............................23
Section 4.29 Minute Books; Records.................................................................23
Section 4.30 Full Disclosure.......................................................................23
Section 4.31 Brokers or Finders....................................................................24
Section 4.32 Licenses..............................................................................24
ARTICLE V
COVENANTS........................................................................................................24
Section 5.1 Alternative Proposals.................................................................24
Section 5.2 Interim Operations of GBGC............................................................25
Section 5.3 Filings; Other Action.................................................................26
Section 5.4 Inspection of Records.................................................................27
Section 5.5 Further Action........................................................................27
Section 5.6 Expenses..............................................................................28
Section 5.7 Survival of Representations and Warranties of Seller..................................28
Section 5.8 Governmental Approvals................................................................28
Section 5.9 Public Announcements..................................................................28
Section 5.10 Real Estate and Other Consents........................................................29
Section 5.11 Preparation of Closing Date Balance Sheet.............................................29
Section 5.12 Estoppel Certificates.................................................................29
Section 5.13 Name Change...........................................................................30
Section 5.14 Post-Closing Covenants................................................................30
Section 5.15 Title Commitments.....................................................................30
Section 5.16 Schedules and Documents...............................................................30
Section 5.17 Letters of Intent and Works-In-Progress...............................................30
ARTICLE VI
CONDITIONS.......................................................................................................30
Section 6.1 Conditions to Obligation of Each Party to Effect the Sale.............................30
Section 6.2 Conditions to Obligation of Seller to Effect the Sale.................................31
Section 6.3 Conditions to Obligation of Buyer to Effect the Sale..................................31
ARTICLE VII
TERMINATION......................................................................................................32
Section 7.1 Termination...........................................................................32
Section 7.2 Effect of Termination.................................................................34
ARTICLE VIII
INDEMNIFICATION..................................................................................................34
Section 8.1 Indemnity.............................................................................34
Section 8.2 Limitations...........................................................................34
Section 8.3 Procedure.............................................................................35
ARTICLE IX
TAX MATTERS......................................................................................................36
Section 9.1 Tax Returns...........................................................................36
Section 9.2 Pre-Closing Taxes.....................................................................36
Section 9.3 Transfer Taxes........................................................................37
Section 9.4 Post-Closing Taxes....................................................................37
Section 9.5 Tax Cooperation.......................................................................37
Section 9.6 Notification of Proceedings, Control; Refunds.........................................37
Section 9.7 Indemnification.......................................................................38
Section 9.8 Section 338(h)(10) Election...........................................................39
ARTICLE X
GENERAL PROVISIONS...............................................................................................40
Section 10.1 Notices...............................................................................40
Section 10.2 Assignment, Binding Effect............................................................40
Section 10.3 Entire Agreement......................................................................40
Section 10.4 Amendment.............................................................................41
Section 10.5 Governing Law.........................................................................41
Section 10.6 Counterparts..........................................................................41
Section 10.7 Headings..............................................................................41
Section 10.8 Interpretation........................................................................41
Section 10.9 Waivers...............................................................................41
Section 10.10 Incorporation of Schedules and Exhibits...............................................41
Section 10.11 Severability..........................................................................41
Section 10.12 Enforcement of Agreement..............................................................41
Section 10.13 Knowledge.............................................................................42
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is dated as of June 16, 1998 (the "Agreement") between
Family Golf Centers, Inc., a Delaware corporation ("Buyer"), and Golden Bear
Golf, Inc., a Florida corporation ("Seller").
WHEREAS, the parties wish to provide for the terms and conditions upon
which Seller will sell (the "Sale") Buyer all of the outstanding capital stock
of GBGC, a Florida corporation ("GBGC").
NOW THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE SALE
Section 1.1 The Sale. Upon the terms and subject to the conditions of
this Agreement, (a) Seller shall sell, transfer and assign to Buyer all of
Seller's right, title and interest in and to 4,068 shares (the "Shares") of the
Class A Common Stock, par value 1.00 per share, of GBGC representing all of the
issued and outstanding capital stock of GBGC and (b) Buyer shall pay an amount
equal to $32 million in cash minus (i) GBGC's Closing Date Liabilities (as
defined), and (ii) the amount of GBGC's Working Capital Deficiency (as
defined). Such amounts shall be estimated by Seller in good faith for purposes
of determining the amount to be paid as of the Closing Date (as defined) and
shall be subject to adjustment as set forth in Section 5.11. Of the purchase
price, $1.6 million shall be deposited in an escrow account with United States
Trust Company of New York (the "Escrow Agent") pursuant to an escrow agreement
(the "Escrow Agreement") in the form of Exhibit A hereto among Buyer, Seller
and the Escrow Agent. Seller shall deliver, at the Closing (as defined), a
certificate (the "Estimate Certificate") setting forth its good faith estimate
of GBGC's Closing Date Liabilities (which estimate shall not be less than $9
million) and GBGC's Working Capital Deficiency. If the actual amounts of such
Closing Date Liabilities and Working Capital Deficiency as determined pursuant
to Section 5.11 are higher by more than 5% than the amounts estimated by
Seller, then, in addition to the purchase price adjustment to be made pursuant
to Section 5.11, Seller shall pay Buyer interest at the rate of 18% per annum
on the total amount of such adjustment from the Closing Date.
Section 1.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Sale (the "Closing") shall take place (a) at the
offices of Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on the first business day after all the
conditions set forth in Article VI of this Agreement (other than those that are
waived by the party or parties for whose benefit such conditions exist) are
satisfied; or (b) at such other place, time, and/or date upon which the parties
hereto may otherwise agree. The date upon which the Closing shall occur is
referred to herein as the "Closing Date."
Section 1.3 Calculation of Purchase Price. As used in Section 1.1,
"GBGC's Closing Date Liabilities" shall mean all indebtedness of GBGC and its
Subsidiaries (as defined) as of the Closing Date (including the amount of any
prepayment penalties if such indebtedness was paid off as of the Closing Date
and any debt discounts), the profit participation referred to in the notes to
the March 31, 1998 financial statements and notes thereto, $150,000 in respect
of the Dome Consulting Agreement with Xxxxx Xxxxxx referred to on Schedule
4.13, amounts reflected on Schedule 1.3, all amounts payable under capital
leases, and tax liabilities related to the Spin-Off (as defined). "Working
Capital Deficiency" shall mean the amount by which GBGC's "Adjusted Current
Liabilities," as defined below, as of the Closing Date exceed its "Adjusted
Current Assets," as defined below, as of the Closing Date, provided that, if
Adjusted Current Assets exceed Adjusted Current Liabilities, Working Capital
Deficiency shall be deemed to equal zero. As used herein, "Adjusted Current
Assets" shall mean GBGC's consolidated current assets, as of the Closing Date,
determined in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with that applied to the financial statements
referred to in Section 4.7, but minus $247,789 representing the insurance
proceeds shown as receivable on the March 31, 1998 balance sheets referred to
in Section 4.7. As used herein, "Adjusted Current Liabilities" shall mean
GBGC's consolidated current liabilities as of the Closing Date, determined in
accordance with GAAP, but excluding the current portion of long-term debt which
would be included in accordance with GAAP. Both GBGC's Closing Date Liabilities
and Working Capital Deficiency shall be determined after giving effect to the
Spin-Off.
Section 1.4 Definition of Subsidiary and Affiliate. As used in this
Agreement, (i) a "Subsidiary" of any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party or
any other Subsidiary of such party is a general partner or at least a majority
of the securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party, by any one or more of
its Subsidiaries, or by such party and one or more of its Subsidiaries (ii) an
"Affiliate" of any party 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
party. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of any
corporation or other organization, whether incorporated or unincorporated,
whether through the ownership of voting securities, by contract or otherwise.
Section 1.5 Spinoff. Prior to the Closing Date, GBGC intends to
dividend, distribute or otherwise dispose of certain of its assets and related
liabilities not related to the golf center business to either Seller or a
newly-formed Subsidiary of Seller ("Newco") as more fully described on Schedule
5.2 (the "Spin-Off").
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ARTICLE II
DELIVERIES AT THE CLOSING
Section 2.1 Deliveries by Buyer to Seller. At the Closing, Buyer shall
deliver to the Seller the following:
(a) The purchase price of $32 million minus the amount
estimated in good faith by Seller in the Estimate
Certificate of (i) Closing Date Liabilities (which
estimate shall not be less than $9 million) and (ii)
GBGC's Working Capital Deficiency, provided that, of
such purchase price, $1.6 million shall be deposited
in escrow pursuant to the Escrow Agreement.
(b) The certificate referred to in Section 6.2(a) hereof;
(c) The certificate referred to in Section 6.2(b) hereof;
(d) Copies of all consents, approvals and waivers required
of Buyer as a condition precedent to the consummation
of the transactions contemplated hereby;
(e) The License Agreement substantially in the form of
Exhibit B hereto (the "License Agreement") executed by
Orient Associates International, Inc. ("OAI"), a
wholly-owned Subsidiary of Buyer; and
(f) The Visa Agreement and the Marketing Agreement
referred to in Section 6.1(f) executed by Buyer, or
GBGC or OAI, as the case may be.
Section 2.2 Deliveries by Seller to Buyer. At the Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) certificates evidencing the Shares of GBGC to be sold,
assigned and transferred to Buyer, including stock
powers or other necessary instruments duly executed
transferring all right, title and interest to the
Shares to the Buyer;
(b) the certificate referred to in Section 6.3(a) hereof;
(c) the certificate referred to in Section 6.3(b) hereof;
(d) the opinion referred to in Section 6.3 (c) hereof;
(e) the License Agreement executed by Seller or Newco, as
the case may be, and GBGC;
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(f) the commitments and consents contemplated by Section
6.3(d);
(g) the resignations referred to in Section 6.3(f) hereof;
(h) copies of all consents, approvals and waivers required
as a condition precedent to the Closing;
(i) The Estimate Certificate;
(j) the originals of deeds, easements, franchises,
licenses, contracts and other documents described
herein and such keys, access codes, books and records
and other items as are necessary for Buyer to enjoy
the ownership of GBGC and its Subsidiaries; and
(k) The Visa Agreement and the Marketing Agreement
referred to in Section 6.1(f) executed by the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof as follows:
Section 3.1 Existence, Good Standing, Corporate Authority. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Buyer is duly licensed or qualified
to do business as a foreign corporation or partnership and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
respective business makes such qualification necessary, except where the
failure to be so qualified or to be in good standing would not have a material
adverse effect on the business, results of operations or financial condition of
Buyer and its Subsidiaries taken as a whole (a "Buyer Material Adverse
Effect").
Section 3.2 Authorization, Validity and Effect of Agreements. Buyer has
the requisite corporate power and authority to execute and deliver this
Agreement and the Escrow Agreement and OAI has such power and authority to
execute and deliver the License Agreement. The execution and delivery of this
Agreement and the License Agreement and Escrow Agreement (the "Ancillary
Agreements") and the consummation by Buyer and OAI of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action. This Agreement constitutes, and all Ancillary Agreements to
be executed and delivered in connection herewith (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
Buyer and OAI, as the case may be, enforceable against Buyer and OAI in
accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws.
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Section 3.3 No Violation. Neither the execution and delivery by Buyer of
this Agreement or the Ancillary Agreements nor the consummation by Buyer of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof, will (a) conflict with or result in a breach of any provisions of
the Certificate of Incorporation, as amended, or the Bylaws of Buyer or any of
its Subsidiaries; (b) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, result in the termination, or
in a right of termination or cancellation of, accelerate the performance
required by, result in the triggering of any payment or other material
obligations pursuant to, result in the creation of any lien, security interest,
charge or encumbrance upon any of the material properties of Buyer or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which Buyer or any of its Subsidiaries is a party, or by which
Buyer or any of its Subsidiaries or any of their respective properties is bound
or affected, except for any of the foregoing matters which would not have a
Buyer Material Adverse Effect; (c) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgement, injunction, order
or decree binding upon or applicable to Buyer or any of its Subsidiaries which
would have a Buyer Material Adverse Effect; or (d) other than the filings
required under the Exchange Act, and the Securities Act, and the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (collectively, the "Regulatory Filings"), require any consent, approval
or authorization of, or declaration, of or filing or registration by Buyer
with, any domestic governmental or regulatory authority, which the failure to
obtain or make would have a Buyer Material Adverse Effect.
Section 3.4 No Brokers. Buyer has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Seller to pay any finder's fee, brokerage or agent's commissions
or other like payment in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
for such fees or commissions which will be borne by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof (after
giving retroactive effect to the Spin-Off as if it had occurred as of the date
hereof) as follows:
Section 4.1 Existence, Good Standing, Corporate Authority. Seller, GBGC
and IMG (as defined) are corporations duly organized, validly existing and in
good standing under the laws of their respective jurisdictions of
incorporation. Seller, GBGC and IMG are duly licensed or qualified to do
business as a foreign corporation and are in good standing under the laws of
each state of the United States in which the character of the properties owned
or leased by it or in which the transaction of its respective business makes
such qualification necessary, except where the failure
5
to be so qualified or to be in good standing would not have a material adverse
effect on the business, results of operations or financial condition of either
Seller or GBGC, in each case, taken as a whole (a "Seller or GBGC Material
Adverse Effect"). Seller, GBGC and IMG have all requisite corporate power and
authority to own, operate and lease their respective properties.
Section 4.2 Authorization, Validity and Effect of Agreements. Seller has
the requisite corporate power and authority to execute and deliver this
Agreement and all the Ancillary Agreements. The execution and delivery of this
Agreement (and the agreements contemplated hereby) and the consummation by
Seller of the transactions contemplated hereby has been duly authorized by all
requisite corporate action and approval of the shareholders of Seller is not
required therefor. This Agreement constitutes, and all Ancillary Agreements to
be executed and delivered in connection herewith (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
Seller, enforceable against Seller in accordance with their respective terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws.
Section 4.3 Seller Capitalization. The authorized capital stock of
Seller consists of 100,000,000 shares divided into 20,000,000 preferred shares,
$.01 par value per share, of which none are issued and outstanding, and
70,000,000 shares of Seller's Class A Common Stock, par value $0.01 per share,
2,744,962 of which are outstanding and 10,000,000 shares of Seller's Class B
Common Stock par value $.01 per share, of which 2,760,000 shares are
outstanding. Seller has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable or exchangeable for securities having the right
to vote) with the stockholders of Seller on any matter. All issued and
outstanding shares of Seller Class A and Class B stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.
Section 4.4 GBGC Capitalization; Title to the Shares. The authorized
capital stock of GBGC consists of 6,500 shares of common stock, $1.00 par value
per share, 4,068 of which are issued, outstanding and owned by the Seller. The
Shares constitute 100% of the issued and outstanding shares of capital stock of
GBGC. The Shares being sold have been duly and validly authorized and issued,
and are fully paid and nonassesable, with no liability attaching to the
ownership thereof. Except for IMG Properties, Inc., a Michigan corporation
("IMG"), GBGC does not have any Subsidiaries. The authorized capital stock of
IMG consists of 50,000 shares of common stock, without par value, 1,000 of
which are issued, outstanding and owned by GBGC. There are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts
(voting or otherwise), or rights of any kind whatsoever granting to any person
or entity any interest in or the right to purchase or otherwise acquire, at any
time, or upon the happening of any stated event, any securities, or other
equity interests of GBGC or IMG, whether or not presently issued or
outstanding, nor are there any outstanding securities or other equity interests
of GBGC or IMG which are convertible into or exercisable or exchangeable for
shares or other securities, or other equity interests of GBGC or IMG, nor are
there any agreements, subscriptions, options, warrants, calls, commitments or
rights of any kind whatsoever granting to any person or entity any interest in
or the right to
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purchase or otherwise acquire any securities so convertible or exercisable or
exchangeable, nor are there any proxies, agreements or understandings with
respect to the voting of or with respect to such interests. Seller has, and at
the Closing will have, valid title to all of the Shares to be sold and
transferred to Buyer by Seller, and such Shares are free and clear of any lien,
claim, charge, security interest, voting agreement, proxy or encumbrance.
Section 4.5 No Violation. Neither the execution and delivery by Seller
of this Agreement or the Ancillary Agreements, nor the consummation by Seller
of the transactions contemplated hereby or thereby in accordance with the terms
hereof or thereof, will (a) conflict with or result in a breach of any
provisions of the Certificate of Incorporation, Bylaws or similar
organizational documents of Seller, GBGC or any of their respective
Subsidiaries; (b), except as set forth on Schedule 4.5, violate, conflict with,
result in a breach of any provision of, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
result in the termination, or in a right of termination or cancellation of,
accelerate the performance required by, result in the triggering of any payment
or other material obligations pursuant to, result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties of Seller,
GBGC or any of their respective Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Seller, GBGC or any of their
respective Subsidiaries is a party, or by which Seller, GBGC or any of their
respective Subsidiaries or any of their respective properties is bound or
affected, except for any of the foregoing matters which would not have a Seller
or GBGC Material Adverse Effect; (c) contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgement, injunction,
order or decree binding upon or applicable to Seller, GBGC or any of their
respective Subsidiaries which would have a Seller or GBGC Material Adverse
Effect; or (d) other than applicable Regulatory Filings, require any consent,
approval or authorization of, or declaration, of or filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make would have a Seller or GBGC Material Adverse Effect.
Section 4.6 Subsidiaries and Affiliates. GBGC, does not own, directly or
indirectly any interest in any entity other than IMG.
Section 4.7 Financial Statements.
(a) Buyer has previously been furnished with true and
complete copies of the following financial statements of Seller and GBGC:
(i) audited consolidated balance sheets as of December 31,
1997 and 1996, each certified by independent certified public auditors, and
unaudited balance sheets of Seller and GBGC as of March 31, 1998 (the "Balance
Sheet Date"), all prepared by management of such
7
entity (an unaudited consolidated balance sheet as of the Balance Sheet Date, a
"Company Balance Sheet") in accordance with GAAP; and
(ii) audited consolidated statements of income, retained
earnings and cash flows and a statement of changes in shareholders equity for
the fiscal years ended December 31, 1997 and 1996, each certified by
independent certified public auditors, and unaudited consolidated statements of
income, retained earnings and cash flows and a statement of changes in
shareholders equity for the quarters ended March 31, 1998 and 1997, all
prepared by management of such entity in accordance with GAAP and reviewed by
independent certified public auditors.
(b) The foregoing financial statements were prepared in
accordance with GAAP applied on a basis consistent with that of preceding
accounting periods (except as may be indicated therein or in the notes thereto).
Such financial statements are in accordance with the books and records of
Seller, GBGC and their respective Subsidiaries, as the case may be, in all
material respects. As of the date hereof, all the accounts, books, ledgers and
financial and other records of whatever kind of each such entity have been
properly and accurately kept and are correct and complete in all material
respects. The financial statements fairly present in all material respects the
financial position of each such entity as of the dates thereof and the results
of operations and changes in financial position of each such entity for each of
the periods then ended.
(c) Except as set forth on Schedule 4.7(c), the prepaid
insurance, expenses and taxes as set forth on each Company Balance Sheet, or
arising since the date thereof, represent amounts of a benefit to future
periods.
(d) Each Company Balance Sheet and the notes thereto, correctly
and completely set forth all known material liabilities of such entity as of
the date thereof (i) pursuant to all Plans, as that term is defined below,
including all unfunded past service costs, (ii) pursuant to all bonus,
incentive, compensation, insurance, deferred compensation, severance and other
fringe benefit plans, contracts, agreements, arrangements and programs of any
type coverage or form, including, without limitation, where applicable, any
employee welfare benefit program as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and (iii) for
vacation pay and compensatory time.
Section 4.8 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 4.8 hereto, there are no material liabilities or obligations (whether
absolute, accrued, contingent or otherwise) with respect to either Seller or
GBGC, except (i) liabilities, obligations or contingencies which are accrued or
reserved against in the Company Balance Sheets, and (ii) normally recurring
liabilities incurred after the Balance Sheet Date in the ordinary course of
business and consistent with past practice.
Section 4.9 Tangible Personal Property; Sufficiency of Assets.
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(a) Except as disclosed on Schedule 4.9 hereto, each of GBGC and
IMG has good and valid title to all tangible personal property which it owns or
uses in the operations of its business, including all such tangible personal
property reflected in its Company Balance Sheet as owned by such entity, except
(x) for personal property leased (exclusive of capitalized leases) by such
Company pursuant to a written agreement identified on Schedule 4.9 and (y) for
such tangible personal property disposed of to third parties since the date of
the Balance Sheet Date in the ordinary course of business and consistent with
past practices in each case free and clear of all liens, claims, security
interests, charges or encumbrances of any kind whatsoever ("Liens"), except (i)
mechanics', materialmen's, carriers', workmen's, 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 4.9; and (iv) other Liens, if any, set forth in
Schedule 4.9. Except as set forth in Schedule 4.9, all of the tangible personal
property owned or used in the operation of the business of GBGC and IMG is,
taken as a whole, in working order, reasonable wear and tear excepted, and are
suitable for the use for which they are intended.
(b) Schedule 4.9 sets forth a list, as of March 31, 1998, of the
video, amusement and arcade games owned or leased by GBGC and IMG. Since March
31, 1998, 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 4.9, each Company owns all such video,
amusement and arcade games, free and clear of all Liens. All of the inventory
of GBGCand IMG consists of a quality and quantity reasonably usable and
saleable in the ordinary course of business consistent with past practices,
subject to normal and customary allowances for spoilage, damage and outdated
items reflected on the books and records of GBGC and IMG. All items included in
the inventory of GBGC and IMG are the property of such entities, free and clear
of all Liens, are not held by such entities 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 4.9, the tangible personal
property of each of GBGC and IMG 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 12-month
period ended March 31, 1998 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 Seller or a
GBGC Material Adverse Effect.
Section 4.10 Real Property.
(a) Schedule 4.10 sets forth a list of all real property owned in
fee by GBGC and IMG (individually, an "Owned Property" and, collectively, the
"Owned Properties"). Except as set forth on Schedule 4.10, each of GBGC and IMG
has good and marketable fee title to its Owned
9
Property, including the buildings, structures and other improvements located
thereon, in each case free and clear of all Liens, except for (i) Liens for
taxes and other governmental charges, assessments or fees which are not yet due
and payable; (ii) the exceptions contained in the policies to be delivered
pursuant to Section 4.10; and (iii) 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 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 Seller and GBGC, threatened that
would reasonably be expected to have a Seller or GBGC Material Adverse Effect.
None of Seller, GBGC nor their respective Subsidiaries have received any
written 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 and violations which could not reasonably be expected,
individually or in the aggregate, to have a Seller or GBGC Material Adverse
Effect. To the knowledge of Seller and GBGC, there are no structural defects
relating to any improvements on any of the Owned Properties. Seller has
delivered to Buyer complete and accurate copies of all title insurance policies
and surveys for the Owned Real Property located in the United States.
(b) Schedule 4.10 lists all real property (including all land and
buildings) which is leased by GBGC or IMG as lessee or sublessee (the "Leased
Real Estate"). Seller has delivered or caused to be delivered to Buyer complete
and accurate copies of the written leases and subleases which are listed in
Schedule 4.10. None of Seller, GBGC nor their respective Subsidiaries has
received written notice of condemnation or eminent domain proceedings pending
or threatened against any Leased Real Estate. Except as set forth on Schedule
4.10, none of Seller, GBGC nor their respective Subsidiaries has received any
written notice from any city, village or other governmental entity of any
zoning, ordinance, building, fire or health code or other legal violations in
respect of any Leased Real Estate, other than violations which have been
corrected and violations which could not reasonably be expected, individually
or in the aggregate, to have a Seller or GBGC Material Adverse Effect. To the
knowledge of Seller and GBGC, there are no structural defects relating to any
Leased Real Estate. Except as set forth in Schedule 4.10:
(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 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 generally or by the principles governing the
availability of equitable remedies), and all consents required under any Lease
in connection with this Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been
obtained or will be obtained as of the Closing Date;
(ii) no amount payable under any Lease is past due;
10
(iii) each of Seller, GBGC and IMG 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) none of Seller, GBGC nor their respective Subsidiaries
has 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
such entity to comply with any provision of any Lease or asserting
noncompliance, or asserting such entity has waived or altered its rights
thereunder, and, to the knowledge of Seller and GBGC, 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 such entity or any other party thereto, or (B) of any action, complaint,
claim, prosecution, indictment, suit, arbitration, investigation or proceeding
(an "Action") by or before any governmental entity against any party under any
Lease which if adversely determined would result in such Lease being terminated
or modified in a manner adverse to such entity;
(v) Neither Seller, GBGC nor IMG has assigned, mortgaged,
pledged or otherwise encumbered its interest, if any, under any Lease; and
(vi) Neither Seller, GBGC nor IMG has exercised, or failed
to exercise 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 GBGC
and IMG in the manner in which such business was conducted during the 12-month
period ended March 31, 1998 and since such time. Except as set forth on
Schedule 4.10, no consent is required of any party to any of the Leases by
virtue of this Agreement, and the consummation of any of the transactions
contemplated hereby will not result in the termination of any Lease. Except as
set forth on Schedule 4.10, to the knowledge of Seller, none of the Leased Real
Estate is owned, in whole or in part, by any director, officer, stockholder,
partner or member of Seller, GBGC or their respective Subsidiaries, by any
affiliate of any affiliate of Seller, GBGC or their respective Subsidiaries, or
by any entity created for the benefit of any family member(s) of any of the
foregoing persons.
Section 4.11 Machinery and Equipment. Schedule 4.11 sets forth a correct
and complete list of each item of machinery and equipment owned by GBGC and IMG
having a value in excess of $25,000. All such items are in working order,
subject to normal wear and use, and are usable in the ordinary course of
business conducted by GBGC and IMG.
Section 4.12 Copyrights and Trademarks. Schedule 4.12 sets forth a
correct and complete list of all registered trademarks, trade names, service
marks, patents and copyrights which GBGC and IMG own or utilize and all
applications pending therefor, if any. As of the date hereof, there are no
pending, and no threatened, interference or opposition actions or proceedings
with respect to any
11
such trademarks, trade names, service marks, patents or copyrights, and the use
of any such trademarks, trade names, service marks, patents and copyrights does
not infringe upon or conflict with, any trademark, trade name, patent,
copyright, or other proprietary right of any other person. As of the date
hereof, no notice has been received of any claim of any such infringement upon,
or conflict with, any trademark, trade name, patent, copyright or other
proprietary right of any person.
Section 4.13 Contracts. Schedule 4.13 lists each and every:
(i) contract or commitment to which GBGC or IMG is a party
not made in the ordinary course of business or continuing over a period of more
than six months from the date hereof or exceeding $25,000 in value, other than
contracts and commitments listed in any other Schedule hereto;
(ii) contract with or commitment to employees, advisors,
consultants;
(iii) debt instrument, including, without limitation, any
loan agreements, promissory notes, security agreements or other evidences of
indebtedness, where GBGC or IMG is a lender or borrower;
(iv) contract, commitment or arrangement restricting GBGC
or IMG, or any of their respective employees from engaging in business or from
competing in any line of business with any other parties;
(v) contract, agreement or arrangement to which GBGC or
IMG is a party (whether as an original party or an assignee or successor) for a
line of credit or guarantee, pledge or undertaking of the indebtedness of any
other person or entity;
(vi) contract or commitment to which GBGC or IMG is a party
(whether as an original party or an assignee or successor) for any charitable
or political contribution;
(vii) loan agreement, security agreement, note, debenture,
or other contract or commitment (except for this Agreement) limiting or
restraining GBGC or IMG from declaring, setting aside, authorizing or making
payment of any dividend or any distribution, whether in cash or property;
(viii) joint venture or partnership agreement to which GBGC
or IMG is, directly or indirectly, a party (whether as an original party or as
an assignee or successor);
(ix) agreement or agreements to which GBGC or IMG is a
party (whether as an original party or as an assignee or successor) with
respect to any assignment, discounting or reduction of any receivables, other
than normal trade discounts, of GBGC or IMG;
12
(x) distributorship, sales agency, sales representative or
marketing agreement;
(xi) any license pursuant to which GBGC or IMG has any
liability or obligation or is receiving or will become entitled to receive any
benefits in excess of $25,000 in value, and any permit pursuant to which such
entity currently operates its business;
(xii) existing agreements, options, commitments or rights
with, to or in any third party to acquire any assets or properties, real,
personal or mixed, or any interest therein, of GBGC or IMG; and
(xiii) existing agreements, options, commitments or rights
("Acquisition Contracts") of GBGC or IMG to acquire any assets or properties,
real, personal or mixed, or any interest therein, except for those relating to
the acquisition of inventory in the ordinary course of business, and letters of
intent, agreements-in-principal and heads of agreement ("Letters of Intent")
with respect to any of the foregoing.
Seller has heretofore delivered, or will deliver, to Buyer true, correct
and complete copies of all documents described in Schedule 4.13.
Section 4.14 Absence of Default. Except as set forth in Schedule 4.14
hereto, each of GBGC and IMG has complied with and performed in all material
respects all of its obligations required to be performed under all material
contracts, agreements and leases to which it is a party (whether as an original
party or as an assignee or successor) as of the date hereof, and is not in
default in any material respect under any contract, agreement, lease,
undertaking, commitment or other obligation; and no event has occurred which,
with or without the giving of notice, lapse of time or both, would constitute a
default thereunder in any material respect. Seller, after due inquiry, has no
knowledge that any party has failed to comply with or perform in all material
respects all of its obligations required to be performed under any material
contract, agreement or lease to which GBGC or IMG is a party (whether as an
original party or as an assignee or successor) as of the date hereof, or that
any event has occurred which, with or without the giving of notice, lapse of
time or both, would constitute a default by such party thereunder permitting
termination thereof or giving rise to a potential damage claim in excess of
$25,000.
Section 4.15 Insurance. GBGC and IMG maintains insurance coverages on its
structures, facilities, fixtures, machinery, equipment, motor vehicles,
inventory and other properties and assets and with respect to its employees and
operations, covering risks which Seller reasonably believes are prudently
insured against by similar businesses. Seller has previously furnished to Buyer
a correct and complete description of all such policies or binders of insurance
held by or on behalf of GBGC and IMG or any of their respective properties or
assets (specifying the insurer, the amount of the coverage, the type of
insurance, the risks insured, the expiration date, the policy number, the
premium and any agent or broker). Except as may otherwise have been disclosed
to Buyer in writing (i) no notice of cancellation or nonrenewal with respect
to, or disallowance of any claim under, any
13
such policy or binder has been received by either Seller, GBGC or their
respective Subsidiaries, and (ii) Seller, after due inquiry, has no knowledge
of any state of facts or the occurrence of any event which reasonably might
form the basis of any claim against or relating to GBGC's or IMG's businesses
or operations or any of their respective assets or properties which are covered
by any of such policies or binders which might substantially increase the
insurance premiums payable under any such policy or binder. Seller has
previously furnished to Buyer a correct and complete description of all
outstanding performance bonds which have been delivered to any person in
connection with the business and operations of GBGC or IMG.
Section 4.16 Third Party Options. Except as set forth pursuant to Section
4.13(xiii) hereof, there are no existing agreements, options, commitments or
rights with, to or in any third party to acquire any assets or properties,
real, personal or mixed, or any interest therein, of GBGC or IMG, except for
those contracts entered into by any of them in the ordinary course of business.
Section 4.17 Distributions, Satisfactions, Obligations. Except as
disclosed in Schedule 4.17 hereto, since the Balance Sheet Date, neither GBGC
nor IMG has:
(i) issued any stock, bonds, partnership or membership
interests or other securities or equity interests;
(ii) incurred any obligations or liabilities for money
borrowed;
(iii) incurred any material obligations or liabilities,
absolute or contingent;
(iv) discharged or satisfied any lien, encumbrance or
obligation, or paid any material liabilities, absolute or contingent, other
than in the ordinary course of business;
(v) declared or made any dividend payment or distribution
to any stockholder, partner or member of GBGC or IMG;
(vi) purchased or redeemed any shares of the capital stock
or other equity interests of GBGC or IMG;
(vii) mortgaged or pledged or subjected to lien, charge or
other encumbrance, any of its material assets, tangible or intangible;
(viii) sold, transferred or disposed of any of its assets
except assets used or consumed in the ordinary course of business and obsolete
equipment and equipment which has been replaced in the ordinary course of
business;
(ix) taken as a whole, suffered any material adverse
change, material damage, material disruption of business or losses, whether
covered by insurance or not, or waived any rights of substantial value;
14
(x) increased compensation payable to or to become payable
by such entity to any of its employees whose salary (inclusive of bonus) is
expected to exceed $50,000 in 1998, except for increases in the ordinary course
of business to an employee on the anniversary date of his employment, or upon
his annual award date, which do not exceed 10% of the base salary of such
employee; or
(xi) operated its business in any way other than in the
ordinary course.
Section 4.18 Capital Expenditures. Except as set forth in Schedule 4.18
hereto, neither GBGC nor IMG has made or budgeted for any capital expenditures
or commitments, whether or not contracted for, in an aggregate amount exceeding
$25,000.
Section 4.19 Litigation. Except as set forth in Schedule 4.19 hereto, as
of the date hereof, there are no actions, suits, material labor disputes or
arbitrations, legal or administrative proceedings or investigations pending
against GBGC or IMG (or against Seller or its Subsidiaries other than GBGC or
IMG, which could reasonably be expected to adversely affect GBGC or IMG, taken
as a whole, or the Sale) and no actions, suits, labor disputes or arbitrations,
legal or administrative proceedings or investigations are contemplated or, to
the knowledge of Seller or GBGC, threatened against GBGC or IMG (or against
Seller or its Subsidiaries other than GBGC or IMG, which could reasonably be
expected to adversely affect GBGC and IMG, taken as a whole, or the Sale) or
any of its assets, properties or businesses, nor is any basis known by Seller
or GBGC, after due inquiry, to exist for any such action or for any
governmental investigation relating to any of GBGC or IMG (or against Seller or
its Subsidiaries other than GBGC or IMG, which could reasonably be expected to
adversely affect GBGC and IMG, taken as a whole, or the Sale) or its or their
properties or businesses. Neither Seller, GBGC nor their respective
Subsidiaries nor their assets, properties or business, are subject to any
judgment, order, writ, injunction or decree of any court, governmental agency
or arbitration tribunal.
Section 4.20 Compliance with Law.
(a) Each of GBGC and IMG:
(i) has complied with each, and is not in violation of
any, law, ordinance or governmental rule or regulation to which it or its
business is subject except where the failure to so comply, individually or in
the aggregate, would not have a Seller or GBGC Material Adverse Effect, and
(ii) has not failed to obtain any license, permit,
certificate or other governmental authorization or inspection necessary to the
ownership or use of its assets and properties or to the conduct of its
business, which, in the event of any noncompliance, violation or failure to
obtain, as the case may be, would have a Seller or GBGC Material Adverse
Effect.
15
(b) Except as set forth in Schedule 4.20 hereto, none of
Seller, GBGC nor their respective Subsidiaries has received any claim or notice
of any violation, within the past three years, of any building, zoning, fire,
health or employment laws, ordinances, rules or regulations relating to the
properties, premises, business or employees of GBGC or IMG, which in the event
of any non-compliance or violation would have a Seller or GBGC Material Adverse
Effect.
(c) None of Seller, GBGC nor their respective Subsidiaries has,
nor, to the Seller's knowledge, has any director, officer, agent or employee of
any such entity: (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 purposed, 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 foreign, where such contributions were or would be violative of
applicable law; or (iv) violated the U.S. Federal Corrupt Practices Act of
1977, as amended.
Section 4.21 Transactions with Affiliates. Except as set forth on
Schedule 4.21, Neither GBGC, IMG nor, to the Seller's knowledge, any current
director or officer thereof controls or during the last three years has
controlled, directly or indirectly, any business, corporate or otherwise, which
is or was a party to any agreement, business arrangement or course of dealing
with GBGC or IMG or any property or asset which was the subject of any
agreement, business arrangement or course of dealing with GBGC or IMG.
Section 4.22 Prohibited Payments. Neither Seller, GBGC nor their
respective Subsidiaries nor any of their respective officers, directors,
employees, agents or affiliates has offered, paid, or agreed to pay to any
person or entity, including any governmental official, or solicited, received
or agreed to receive from any such person or entity, directly or indirectly,
any money or anything of value for the purpose or with the intent of obtaining
or maintaining business for any such entity or otherwise affecting the
business, operations, prospects, properties, or condition (financial or
otherwise) of any such entity and which is or was in violation of any
ordinance, regulation or law, or not properly and correctly recorded or
disclosed on the books and records of such entity. Neither Seller, GBGC nor
their respective Subsidiaries has engaged in any transaction, maintained any
bank account or used any other funds except for transactions, bank accounts and
funds which have been and are properly and correctly reflected in the normally
maintained books and records of such entity.
Section 4.23 Tax Matters.
(a) Each of GBGC and IMG has filed or will file all required
Tax Returns within the prescribed period or any extension thereof for all
periods to the Closing Date. No claim has ever been made by an authority in a
jurisdiction where GBGC or IMG does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. All Taxes owed by GBGC or IMG
(whether or
16
not shown on any Tax Return) have been paid. Each of GBGC and IMG has disclosed
on its Tax Returns all positions taken therein that could give rise to a
substantial understatement of Tax within the meaning of Code Section 6662 or
any similar provision of state or local law. Each of GBGC and IMG has paid or
will pay all Taxes shown to be due or which become due on such returns and
reports pursuant to any assessment, deficiency notice, 30-day letter or similar
notice, including interest and penalties with respect thereto, to the Closing
Date. The liabilities for Taxes on the GBGC Balance Sheet are sufficient for
the payment of all Taxes of GBGC and IMG attributable to all periods through
the Closing Date and include adequate provision for all deferred Taxes in
accordance with GAAP. There are no Tax Liens upon any property of GBGC and IMG
except for Liens for current Taxes not yet due. All amounts required to be
withheld by GBGC and IMG in connection with amounts paid or owing to any
employee, independent contractor or other third party have been collected and
withheld, and either paid to the respective governmental agencies, set aside in
accounts for such purpose, or accrued, reserved against and entered upon the
books and records of the employer.
(b) Except as set forth on Schedule 4.23 hereto, all Federal
income Tax deficiencies asserted in writing as a result of such examinations
have been paid or finally settled and no issue has been raised by the IRS in
any such examination which, if raised with regard to any other period not so
examined, could reasonably be expected to result in a proposed Federal income
Tax deficiency for such other period. Further, no written notice has been
received by Seller, GBGC or any of their respective Subsidiaries and, to the
knowledge of Seller and GBGC, no state of facts exists or has existed which
would constitute grounds for the assessment of any Federal income Tax liability
against any of them with respect to the periods which have not been audited by
the IRS. Except as set forth in Schedule 4.23, none of the state, local or
foreign income or franchise tax returns of Seller, GBGC or any of their
respective Subsidiaries have been audited by any governmental agency within the
past five years.
(c) Except as set forth on Schedule 4.23, none of Seller, GBGC
nor their respective Subsidiaries is a party to any pending action,
investigation or claim by any governmental authority for assessment or
collection of Taxes, or party to any dispute or threatened dispute in which an
adverse determination would have a Seller or GBGC Material Adverse Effect, and
no claim for assessment or collection of Taxes has been made upon Seller, GBGC
or their respective Subsidiaries, nor is there any basis for such action or
claim.
(d) Neither Seller, GBGC nor their respective Subsidiaries is
liable for any "accumulated earnings" penalty tax, as provided in Section 531
of the Code. Neither Seller, GBGC nor their respective Subsidiaries is liable
for any "personal holding company" penalty tax, as provided in Section 541 of
the Code.
(e) Neither Seller, GBGC nor their respective Subsidiaries has,
with regard to any assets or property held, acquired or to be acquired, filed a
consent to the application of Section 341(f)(2) of the Code.
17
(f) Neither Seller, GBGC nor their respective Subsidiaries has
agreed to make an adjustment or is required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(g) Neither Seller, GBGC nor their respective Subsidiaries is
liable for "back-up withholding" Taxes, as provided in Section 3406 of the Code
or other withholding Taxes as provided in Section 1461 of the Code.
(h) Seller has previously furnished to Buyer correct and complete
copies of:
(i) all Federal, state, local and foreign income and
franchise tax returns and reports filed by GBGC or IMG and, if relevant to
GBGC, Seller and its other Subsidiaries within the past five years;
(ii) all Federal, state, local and foreign taxes to which
GBGC or IMG and, if relevant to GBGC or IMG, Seller and its other Subsidiaries
is subject with respect to its business, assets or income, showing the name of
the taxing authority, the assessment date, and the date on which the return is
required to be filed; and
(iii) all currently effective or proposed agreements,
consents, elections and waivers filed or made with Federal, state, local or
foreign taxing authorities relating to GBGC or IMG, and if relevant to GBGC or
IMG, Seller and its other Subsidiaries.
(i) Except as set forth in Schedule 4.23 as of the time of
filing, all Tax Returns required to be filed by Seller, GBGC or their
respective Subsidiaries, or any affiliated, combined or unitary group of which
any such corporation is or was a member were in all respects true, complete and
correct and filed on a timely basis.
(j) Each of GBGC and IMG as of March 31, 1998 has established on
its books and records reserves that are adequate for the payment of all accrued
Taxes not yet due and payable and there shall be no material difference between
the amounts of the book basis and the tax basis of assets (net of liabilities)
that are not accounted for by an accrual on the books for income tax purposes.
(k) No power of attorney has been granted by Seller, GBGC or any
of their respective Subsidiaries with respect to any matter relating to Taxes
which is currently in force.
(l) Except as set forth in Schedule 4.23, neither Seller, GBGC
nor their respective Subsidiaries (i) is a party to any agreement or
arrangement (written or oral, express or implied) providing for the allocation
or sharing of Taxes, or (ii) has any liability for the Taxes of any person
(other than GBGC), as a transferee or successor, by contract or otherwise
(excluding joint and several liability under Treasury Regulations Section
1.1502-6).
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(m) Seller and GBGC are United States persons within the meaning
of Code Section 7701(a)(30).
(n) Neither GBGC nor IMG has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
Definitions
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Tax" means any income, corporation, gross receipts, profits, gains,
capital stock, capital duty, franchise, business, license, payroll,
withholding, social security, unemployment, disability, property, wealth,
welfare, stamp, environmental, transfer, excise, occupation, sales, use, value
added, alternative minimum, estimated or other similar tax (including any fee,
assessment or other charge in the nature of any tax) imposed by any
governmental authority (whether national, federal, state, local, municipal,
foreign or otherwise) or political subdivision thereof, and any interest,
penalties, reasonable attorney's fees, additions to tax or additional amounts
in respect of the foregoing.
"Tax Returns" shall mean all reports, declarations of estimated tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
Section 4.24 Employee Benefit Plans
(a) Seller has previously furnished to Buyer a list of all of
employee benefit plans, funds or programs (within the meaning of the Code or
ERISA), whether or not they are or are intended to be (i) covered or qualified
under the Code, ERISA or any other applicable law, (ii) written or oral, (iii)
formal or informal, (iv) funded or unfunded, or (v) generally available to all
employees of each of Seller, GBGC and their respective Subsidiaries, which were
or are established or maintained by such entity (individually, a "Plan", and
collectively, the "Plans"). For purposes of this Section 4.24, the term
"Company" shall mean and include Seller, GBGC and their respective Subsidiaries
and any corporation which is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code) which includes any of Seller, GBGC or
their respective Subsidiaries; any trade or business (whether or not
incorporated) which is under common control (as defined in Section 414(c) of
the Code) with any Company; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes any Company; and any other entity required to be
aggregated with any Company pursuant to regulations under Section 414(o) of the
Code.
(b) No Company has been required to contribute to a multiemployer
plan (within the meaning of Section 3(37) of ERISA) during the six-year period
ending on the Closing Date.
19
(c) None of the Plans which are welfare plans (as such term is
defined under ERISA Section 3(1)) provide benefits to retirees, except to the
extent required by the Consolidation Omnibus Reconciliation Act of 1985, as
amended.
(d) Each Plan which is intended to be qualified under Section
401(a) and exempt from tax under Section 501(a) of the Code has been determined
by the IRS to be so qualified and such determination remains in effect and has
not been revoked. Nothing has occurred since the date of any such determination
which may reasonably be expected to adversely affect such qualification or
exemption, or result in the imposition of excise taxes on Seller or GBGC or tax
on unrelated business income under the Code or ERISA, subject to the Seller's
right to amend each such Plan to conform to the Small Business Job Protection
Act and the Taxpayer Relief Act of 1997 within such laws' respective "remedial
amendment periods," as described in Code Section 401(b) and regulations
thereunder. No Plan is funded through a trust intended to be exempt from tax
under Section 501(c) of the Code.
(e) No reportable event (as defined in Section 4043 of ERISA or
the regulations thereunder) for which the reporting requirements have not been
fully waived, or accumulated funding deficiency whether or not waived (as
defined in Section 302 of ERISA), or liability to the Pension Benefit Guaranty
Corporation ("PBGC") under Sections 4062, 4063, 4064 or 4069 of ERISA, nor any
prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of
the Code) that may be expected to result in liability to Seller or GBGC, has
occurred or exists with respect to any Plan. The Plans and provisions thereof,
the trusts created thereby, and the operation of the Plans are in material
compliance with and conform in all material respects to applicable provisions
of the Code (including but not limited to Section 412), ERISA, other statutes,
and governmental rules and regulations except for any noncompliance or
nonconformity which may not reasonably be expected to result in a Seller or
GBGC Material Adverse Effect.
(f) There is no matter, action, audit, suit or claim pending or
threatened relating to any Plan, fiduciary of any Plan with respect to the Plan
or assets of any Plan, before any court, tribunal, or government agency, other
than routine claims for benefits.
(g) Each Company has made, or will make, all contributions to the
applicable Plans for all periods up to the Closing Date as required by the
terms of the Plans, the Code and ERISA.
(h) With respect to any Plan that is an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan"), (i) each
such Welfare Plan the contributions to which are claimed as a deduction under
any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund within the meaning of Section 419 of the Code that comprises part
of a Welfare Plan, there is no disqualified benefit within the meaning of
Section 4976(b) of the Code that would subject the Company to a tax under
Section 4976(a) of the Code, and (iii) any such Plan that is a group health
20
plan within the meaning of Section 5000(b)(1) of the Code has complied in all
material respects with the requirements of Section 4980B of the Code.
(i) The consummation of the transaction contemplated hereby will
not accelerate any liability under the Plans because of an acceleration of any
rights or benefits to which any participant or beneficiary (as such terms are
defined in Section 3 of ERISA) may be entitled thereunder that may result in
liability to GBGC.
Section 4.25 Executive Employees.
(a) Annexed hereto as Schedule 4.25 is a correct and complete
list of the names, titles and current annual salary rates of and bonuses paid
or payable to all present non-union officers and employees of GBGC and IMG
whose 1998 annual salary (including bonuses paid or payable in 1997 or
thereafter) is expected to exceed $50,000 USD ("Executive Employees").
(b) GBGC and IMG do not have any employment agreement with, and
do not maintain any Plan with respect to, any Executive Employees, except as
disclosed on Schedule 4.25.
Section 4.26 Employees. Annexed hereto as Schedule 4.26 is a correct and
complete list of all labor and collective bargaining agreements (whether
written or oral) to which GBGC or IMG is a party or by which it is bound, and
all employment, profit sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer, consultant, retirement, severance, welfare
or incentive agreements, plans or contracts (other than those identified
herein) to which any of them is a party. Seller has delivered, or will deliver,
copies of all such agreements, contracts and plans to Buyer. Neither GBGC nor
IMG, taken as a whole, is in default with regard to any of such agreements,
plans or contracts which default could reasonably be expected to result in a
Seller or GBGC Material Adverse Effect. Each of GBGC and IMG, taken as a whole,
is in compliance in all material respects with all applicable laws relating to
the employment of labor. There are no controversies (other than routine
grievances) pending or, to the knowledge of Seller and GBGC, threatened,
between GBGC or IMG, and any of their respective employees or labor unions or
other collective bargaining units representing any of their respective
employees. To the knowledge of Seller and GBGC, no unfair labor practice
complaints have been filed against GBGC or IMG with the National Labor
Relations Board, and none of Seller, GBGC nor their respective Subsidiaries has
received any notice or communication reflecting an intention or a threat to
file any such complaint affecting GBGC or IMG.
Section 4.27 Environmental Laws.
(a) Each of GBGC and IMG has obtained and holds all permits,
licenses and other authorizations which are required with respect to the
operation of their respective businesses under Federal, state, local and
foreign laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases or
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes ("Hazardous Substances") into the
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environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial
toxic or hazardous substances or wastes (the "Environmental Laws"), except any
permits, licenses and other authorizations the absence of which would not,
individually or in the aggregate, have a Seller or GBGC Material Adverse
Effect, and all such permits, licenses and other authorizations are in good
standing and GBGC and IMG are not in default thereunder.
(b) Each of GBGC and IMG is in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except where such failure to comply, individually or in the aggregate, would
not have a Seller or GBGC Material Adverse Effect.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing notice or demand letter pending or, to the knowledge of
GBGC and Seller, threatened against GBGC or IMG relating in any way to the
Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
(d) No actions or plans of action taken or to be taken by GBGC or
IMG are reasonably likely and no events, conditions, activities, practices or
incidents are, to the knowledge of Seller and GBGC, reasonably likely to (i)
interfere with or prevent compliance or continued compliance in all material
respects with the Environmental Laws or with any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, (ii) give rise to any common law or legal
liability, including, without limitation, liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorizations Act of 1986, or any other
applicable Environmental Laws or similar state or local laws, or (iii) form the
basis of any claim, action, demand, suit, proceeding, hearing or notice of
violation based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, chemical, or industrial, toxin or hazardous substance
or waste.
(e) Seller has made available to Buyer 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 relating in whole or in part to GBGC, any Owned Property or any
Leased Real Estate undertaken by or on behalf of Seller, GBGC or Their
respective Subsidiaries, and any written communications received by any of them
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 GBGC or IMG or the compliance of GBGC or IMG with respect to any
Environmental Law.
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Section 4.28 Bank Accounts, Letters of Credit and Powers of Attorney. Set
forth on Schedule 4.28 is a true and correct list of (a) all bank accounts,
lock boxes and safe deposit boxes relating to the business and operations of
GBGC and IMG, (b) all outstanding letters of credit issued by financial
institutions for the account of GBGC and IMG (setting forth, in each case, the
financial institution issuing such letter of credit, the maximum amount
available under such letter, the terms (including the expiration date) of such
letter of credit and the party or parties in whose favor such letter of credit
was issued), and (c) the name and address of each person who has a power of
attorney to act on behalf of GBGC and IMG. Seller has heretofore delivered, or
will deliver, to Buyer true, correct and complete copies of each such letter of
credit and each such power of attorney.
Section 4.29 Minute Books; Records. The minute books and/or other
official records, as applicable, of GBGC and IMG as previously made available
to Buyer for inspection, contain complete and accurate records of all meetings
and accurately reflect all other action of the stockholders, boards of
directors, management committees or other governing bodies, as applicable, of
GBGC and IMG. The stock certificate books, stock transfer ledgers and/or
capital account records, as applicable, of GBGC and IMG as previously made
available to Buyer for inspection, are true and complete. All stock and/or
other applicable transfer taxes levied or payable with respect to all transfers
of shares and/or other equity interests, as applicable, of GBGC and IMG prior
to the date hereof have been paid and appropriate transfer tax stamps affixed.
Section 4.30 Full Disclosure. No representation or warranty by Seller in
this Agreement, any Schedule hereto or in any certificate delivered by Seller
to Buyer pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary to make any
statement herein or therein, in the light of the circumstances under which it
was made, not misleading. There is no fact known to Seller, which Seller has
not disclosed or will not disclose to Buyer which materially adversely affects
or, so far as Seller, can now reasonably foresee, which may materially
adversely affect, the continued operation of GBGC. Notwithstanding the
foregoing, no representation or warranty is given and no disclosure to Buyer is
required with respect to events, conditions, or facts which relate to or effect
the national, state or local economy, political situation, or the golf center
industry generally.
Section 4.31 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 Seller, GBGC or any Subsidiary, 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 4.32 Licenses.
(a) Each of GBGC and IMG 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
respective businesses operations as currently conducted except such Licenses
which GBGC's of IMG's failure to hold,
23
individually and in the aggregate, could not reasonably be expected to cause a
Seller or GBGC Material Adverse Effect. All of the Licenses (including, without
limitation, all liquor licenses) are in full force and effect, and no Action is
pending or, to the knowledge of Seller, threatened, seeking the revocation or
limitation of any of the Licenses. Schedule 4.32 lists all Licenses (including
all liquor licenses) that are material to the business of GBGC and IMG taken as
a whole. Except as indicated on Schedule 4.32, no License will terminate as a
result of this Agreement or the transactions contemplated hereby.
(b) Schedule 4.32 lists all entities, other than GBGC and IMG,
that hold licenses to serve or sell alcoholic beverages in locations on the
premises of or associated with the facilities operated by GBGC and IMG in
connection with the business of GBGC and IMG.
Section 4.33 Consulting Agreements with, and Capital Commitments to,
Sellers of Centers. The present value of the amounts due over the remaining
life of each consulting or similar agreement between GBGC or IMG and the
sellers of any golf facilities or their affiliates (collectively, "Selling
Parties") will be included as a liability in GBGC's Closing Date Liabilities,
except for amounts due under the consulting agreements with Xxxxx Xxxxxx and
Public Country Clubs, Inc. referred to in Schedule 4.13 and the employment
agreement with Xxxxxxx Xxxxxx. Except as set forth on Schedule 1.3, neither
GBGC nor IMG has made any commitments to Selling Parties to spend any amounts
on golf facilities.
ARTICLE V
COVENANTS
Section 5.1 Alternative Proposals. From the date hereof until the
Closing Date, Seller agrees (a) that neither it, GBGC nor any of Seller's other
Subsidiaries shall, nor shall it, GBGC nor any of Seller's other Subsidiaries
permit their respective officers, directors, employees, agents, representatives
or Affiliates (including, without limitation, any investment banker, attorney
or accountant retained by them) to initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation any proposal or offer to its or their
stockholders) which constitutes or is reasonably likely to lead to any
Alternative Proposal, as hereinafter defined, or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, or otherwise cooperate in any way with, any corporation,
partnership, person or other entity or group (each a "Third Party") relating to
an Alternative Proposal, or otherwise facilitate any effort or attempt to make
or implement an Alternative Proposal; (b) that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing, and
will take the necessary steps to inform the individuals or entities referred to
above of the obligations undertaken in this Section 5.1; and (c) that it will
notify Buyer immediately if any discussions or negotiations are sought to be
initiated, any inquiry or proposal is made, or any information is requested by
any Third Party with respect to an Alternative Proposal or which could lead to
an Alternative Proposal and immediately notify Buyer of all material terms of
any proposal
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which it may receive in respect of any such Alternative Proposal, including the
identity of the Third Party making the Alternative Proposal or the request for
information, if known, and thereafter shall inform Buyer on a timely, ongoing
basis of the status and content of any discussions or negotiations with such
Third Party, including immediately reporting any material changes to the terms
and conditions thereof. As used herein, "Alternative Proposal" means any
inquiry, proposal or offer from any Third Party relating to a direct or
indirect acquisition or purchase of GBGC or any of its equity or capital stock,
any merger, consolidation, business combination, sale of all or substantially
all of the assets, recapitalization, liquidation, dissolution or similar
transaction involving GBGC or involving Seller and affecting GBGC or the Sale
other than the transactions contemplated by this Agreement, or any other
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Sale or which would reasonably
be expected to dilute materially the benefits to Buyer of the transactions
contemplated hereby.
Section 5.2 Interim Operations of GBGC. Except as otherwise required in
connection with the Spin-Off, prior to the Closing Date, unless Buyer has
consented in writing thereto, GBGC:
(a) Shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
(b) Shall use its reasonable efforts to preserve intact its
business organizations and goodwill, keep available the services of officers
and employees and maintain satisfactory relationships with those persons having
business relationships with them;
(c) Shall not amend its Certificate of Incorporation or Bylaws or
comparable governing instruments;
(d) Shall promptly notify Buyer of any material emergency or
other material change in its condition (financial or otherwise), business,
properties, assets, liabilities or the normal course of its business or of its
properties, any material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the breach of any representation or warranty contained
herein;
(e) Shall not (A), issue any capital stock or otherwise change
its capitalization as it existed on the date hereof; (B) grant, confer or award
any option, warrant, conversion right or other right to acquire any capital
stock; (C) increase any compensation or enter into or amend any employment
agreement with any of its present or future officers, directors or employees;
(D) grant any severance or termination package to any employee or consultant;
or (E) adopt any new employee benefit plan (including any stock option, benefit
or purchase plan) or amend any existing employee benefit plan in any respect;
(f) Shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock;
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(g) Shall not enter into any material transaction, or agree to
enter into any material transaction, outside the ordinary course of business,
including, without limitation, any transaction involving a merger,
consolidation, joint venture, partial or complete liquidation or dissolution,
reorganization, recapitalization, restructuring or a purchase, sale, lease or
other disposition of a substantial portion of assets or capital stock;
(h) Shall not incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of others;
(i) Shall not make any loans, advances or capital contributions
to, or investments in, any other person;
(j) Shall not make or commit to make any capital expenditures
except as set forth in Schedule 5.2,;
(k) Shall not apply any of its assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any Affiliate or enter into any transaction
with any Affiliate.
(l) Shall not alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected;
(m) Shall not grant or make any mortgage or pledge or subject
itself or any of its properties or assets to any lien, charge or encumbrance of
any kind;
(n) Shall maintain insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are currently
in effect; and
(o) Shall not make any material Tax elections.
Notwithstanding the foregoing, GBGC may dividend, distribute or dispense
of certain assets and related liabilities not related to the golf centers
business and more fully described on Schedule 5.2. Notwithstanding anything to
the contrary contained herein, Seller may use any working capital surplus prior
to the Closing Date to reduce GBGC's Closing Date Liabilities.
Section 5.3 Filings; Other Action.
(a) Subject to the terms and conditions herein provided, Seller
and Buyer shall use all reasonable efforts to take, or cause to be taken, all
action and do, or cause to be done, all things necessary, proper or appropriate
to consummate and make effective the transactions contemplated by this
Agreement. If, at any time after the Closing Date, any further reasonable
action
26
is necessary or desirable to carry out the purpose of this Agreement, the
proper officers and directors of Seller and Buyer shall take all such necessary
action.
(b) (i) Seller and Buyer shall give any notices to third parties,
and use all reasonable efforts to obtain any third party consents, necessary,
proper or advisable to consummate the transactions contemplated in this
Agreement.
(ii) In the event that either party shall fail to obtain
any third party consent described in subsection (b) (i) above, such party shall
use all reasonable efforts, and shall take any such actions reasonably
requested by the other party hereto, to minimize any adverse effect upon Seller
and GBGC and Buyer, their respective Subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to result after the
Closing Date, from the failure to obtain such consent.
(c) From and after the date of this Agreement until the Closing
Date, each party hereto shall promptly notify the others of (i) the occurrence,
or non-occurrence, of any event the occurrence, or non-occurrence, of which
would be likely to cause any condition to the obligations of any party to
effect the Sale and the other transactions contemplated by this Agreement not
to be satisfied, or (ii) the failure of Seller or Buyer, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would be likely to result
in any condition to the obligations of any party to effect the Sale and the
other transactions contemplated by this Agreement not to be satisfied;
provided, however, that the delivery of any notice pursuant hereto shall not
cure any breach of any representation or warranty requiring disclosure of such
matter prior to the date of this Agreement or otherwise limit or affect the
remedies available hereunder to the party receiving such notice.
Section 5.4 Inspection of Records. From the date hereof to the Closing
Date, Seller shall (a) allow all designated officers, attorneys, accountants
and other representatives of Buyer reasonable access at all reasonable times to
the offices, records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of Seller and
GBGC; (b) furnish to Buyer and its representatives such documents, agreements,
financial and operating data and other information as such persons may
reasonably request within two business days after such request; and (c)
instruct the employees, counsel and financial advisors of Seller to cooperate
with the Buyer and its representatives in its investigation of the business of
Seller and GBGC.
Section 5.5 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Closing Date of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Sale.
Section 5.6 Expenses. Whether or not the Sale is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall, except
27
as otherwise provided herein, be paid by Seller if incurred by Seller, and by
Buyer if incurred by Buyer; provided, however that in the event that this
Agreement is terminated pursuant to Section 7.1.7 hereof, Seller shall promptly
pay Buyer $2 million as liquidated damages, and reimburse Buyer for up to
$250,000 for out-of-pocket expenses and fees (including, without limitation,
fees and expenses payable to all governmental authorities, banks, investment
banking firms and other financial institutions, and their respective agents and
counsel, and all fees and expenses of counsel, accountants, financial printers,
proxy solicitors, exchange agents, experts and consultants), whether incurred
prior to, on or after the date hereof, in connection with the Sale and the
consummation of the transactions contemplated hereby.
Section 5.7 Survival of Representations and Warranties of Seller.
Notwithstanding any right of Buyer to investigate the affairs of Seller and
GBGC and notwithstanding any knowledge of facts determined or determinable by
Buyer pursuant to such investigation or right of investigation, Buyer has the
right to rely fully upon the representations, warranties, covenants and
agreement of Seller contained in this Agreement. All such representations,
warranties, covenants and agreements shall survive the execution and delivery
hereof and the consummation of the transactions contemplated hereby for 18
months after the Closing Date, except the representations warranties, covenants
and agreements set forth in Sections 4.4, the first sentence of 4.9(a), the
second sentence of 4.10(a), 4.16, 4.19 (as to pending actions, suits, labor
disputes or arbitrations, legal or administrative proceedings or investigations
only) and 4.27, which shall survive indefinitely, Sections 4.23 and 4.24 which
shall survive for the applicable statute of limitation and Section 5.14, which
shall survive for five (5) years. All representations, warranties, covenants
and agreements made herein by Buyer shall survive the execution and delivery
hereof and the consummation of the transactions contemplated hereby for two
years.
Section 5.8 Governmental Approvals. As promptly as practicable after the
execution of this Agreement, Buyer and Seller shall file notification reports
under the HSR Act (the "Act"), as applicable, and shall request early
termination of any applicable waiting periods under such Act and use their
commercially reasonable efforts to obtain clearance or authorization under the
Act of the Sale and the other transactions contemplated by this Agreement at
the earliest practical time.
Section 5.9 Public Announcements. Each party to this Agreement and their
respective Subsidiaries shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this
Agreement (including any filings under Securities laws) or any transaction
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other parties hereto (unless
required by law or the interdealer quotation system on which their securities
are traded), which consent shall not be unreasonably withheld, provided,
further, that no additional consent shall be required for any additional
statement which is not materially different from one already consented to.
Section 5.10 Real Estate and Other Consents. Seller shall take all
reasonable actions and do all things reasonably necessary to obtain the
consents described in, and satisfy the conditions of, Section 6.3(d) hereof.
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Section 5.11 Preparation of Closing Date Balance Sheet. Within 30 days
after the Closing Date, Seller shall prepare and deliver to Buyer a
consolidated balance sheet of GBGC as of the close of business on the Closing
Date (the "Closing Date Balance Sheet"). The Closing Date Balance Sheet shall
be prepared in accordance with GAAP applied on a basis consistent with that
used in, and in accordance with the same accounting principles applied in, the
preparation of the financial statements referred to in Section 4.7, and shall
be reviewed by Xxxxxx Xxxxxxxx ("AA"). AA shall also perform agreed upon
procedures to verify the accuracy of the calculation (the "Calculation") of
GBGC's Closing Date Liabilities and Working Capital Deficiency as defined in
Section 1.3 as of the Closing Date. Unless Buyer elects to forego such review,
Xxxxxxx X. Xxxxxx & Company LLP ("Xxxxxx") shall have 25 days to review the
Closing Date Balance Sheet and the Calculation. If Xxxxxx disagrees with the
amount of Closing Date Liabilities shown on the Closing Date Balance Sheet or
the Calculation, then it shall issue a report to such affect. AA and Xxxxxx
shall have 30 days after the date the Xxxxxx report is issued to come to an
agreement as to what the Closing Date Liabilities and Calculation should have
been. If they are unable to agree within such 30-day period, the two firms
shall appoint a third accounting firm of recognized national standing which
shall resolve the dispute (including, if necessary, auditing the Closing Date
Balance Sheet) within 60 days and whose decision shall be final and binding.
Promptly after the dispute is resolved (or if there is no dispute, promptly
after Xxxxxx has reviewed the Closing Date Balance Sheet and Calculation or
Buyer has foregone such review), any amount to which Buyer would have been
entitled shall be paid to Buyer by Seller including the interest, if any,
referred to in Section 1.1 and any amount to which Seller would have been
entitled shall be paid to Seller by Buyer. The expenses of the third accounting
firm shall be paid by Buyer or Seller, as the case may be, depending on whether
the Closing Date Liabilities and Calculation, as determined by such third party
accountants, is closer to the amount proposed by Xxxxxx than to the amount
proposed by AA.
Section 5.12 Estoppel Certificates.
(a) Seller shall use its best efforts to obtain, on or prior to
the Closing Date, from each landlord and any over landlord of each landlord and
over landlord of the Leased Real Estate, an estoppel certificate in form and
substance reasonably satisfactory to Buyer.
(b) With respect to the Owned Property and Leased Real Estate,
Seller shall use its best efforts to obtain, on or prior to the Closing Date,
from GBGC's lenders whose loan is secured by a mortgage or deed of trust
encumbering any of such properties (each a "Mortgage Lender"), a statement to
the effect that to its knowledge no default under its mortgage or deed of trust
exists nor is such lender aware of the occurrence or non-occurrence of any
event which, with notice or the passage of time, or both, would constitute such
a default.
Section 5.13 Name Change. Buyer shall cause GBGC to change its corporate
name to a name not to include "Golden Bear" promptly after the Closing and will
coordinate with Seller so that a Subsidiary of Seller can get such corporate
name.
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Section 5.14 Post-Closing Covenants. Buyer shall use reasonable efforts
to preserve and keep GBGC's books and records delivered hereunder for a period
of five (5) years from the Closing Date and shall, during such period, make
such books and records available to officers and directors of Seller or their
designees upon reasonable notice during business hours for any reasonable
purpose.
Section 5.15 Title Commitments. Buyer will order the commitments referred
to in Section 6.3(d) within the later of (a) five business days after receiving
a copy of each of the existing title policies from Seller or (b) five business
days after the date of this Agreement.
Section 5.16 Schedules and Documents. Seller hereby agrees to deliver to
Buyer the schedules to this Agreement (the "Schedules") and each document
contract, or agreement listed thereon or required to be delivered hereby no
later than the third day after the date hereof.
Section 5.17 Baltimore. Seller agrees that it shall not, for at least one
year after the Closing Date, directly or indirectly (including through a
franchise or license arrangement) solicit or initiate proposals or engage in
negotiations with respect to the lease, purchase, ownership or operation of the
site referred to in the agreement dated as of May 4, 1998 between Bare Hills
Associates and GBGC.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Obligation of Each Party to Effect the Sale.
The obligation of each party hereto to effect the Sale shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Seller or Newco, as the case may be, GBGC and OAI shall have
entered the License Agreement substantially in the form of Exhibit B hereto.
(b) All necessary regulatory and governmental approvals and
consents shall have been obtained.
(c) Any applicable waiting period under the Act, shall have
expired or been terminated.
(d) The parties hereto and the Escrow Agent shall have entered
into the Escrow Agreement substantially in the form of Exhibit A hereto.
(e) No action shall have been taken, and no statute, rule,
regulation, executive order, judgment, decree, or injunction (other than a
temporary restraining order) shall have been enacted, entered, promulgated or
enforced (and not repealed, superseded, lifted or otherwise made inapplicable),
by any court of competent jurisdiction or governmental authority which
restrains, enjoins or otherwise prohibits the consummation of the transactions
contemplated hereby.
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(f) The parties hereto shall have entered into the Visa Agreement
substantially in the form of Exhibit C hereto and the Marketing Agreement
substantially in the form of Exhibit D hereto.
Section 6.2 Conditions to Obligation of Seller to Effect the Sale. The
obligation of Seller to effect the Sale shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) Buyer shall have performed, in all material respects, all of
its agreements contained herein that are required to be performed by Buyer on
or prior to the Closing Date, and Seller shall have received a certificate of
the President or Senior Vice President of Parent dated the Closing Date,
certifying to such effect.
(b) The representations and warranties of Buyer contained in this
Agreement and in any document delivered in connection herewith shall be true
and correct in all material respects as of the Closing, and Seller shall have
received a certificate of the President or Vice President of Buyer, dated the
Closing Date, certifying to such effect.
(c) Seller shall have been released from its obligation to
guarantee the obligations listed on Schedule 6.2(c).
Section 6.3 Conditions to Obligation of Buyer to Effect the Sale. The
obligations of Buyer to effect the Sale shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Seller contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct in all material respects as of the Closing, and Buyer shall
have received a certificate of the President or Senior Vice President of
Seller, dated the Closing Date, certifying to such effect.
(b) Seller shall have performed, in all material respects, all of
its agreements contained herein that are required to be performed by Seller on
or prior to the Closing Date, and Buyer shall have received a certificate of
the President or a Vice President of Seller, dated the Closing Date, certifying
to such effect.
(c) Buyer shall have received an opinion from Seller's counsel in
form and substance reasonably satisfactory to Buyer as to the matters set forth
in Sections 4.1, 4.2, 4.3, 4.4, 4.5 and 4.19 and such other matters as Buyer
shall reasonably request, and, if requested by the underwriter's of the public
offering of Buyer's common stock currently contemplated by Buyer, such opinion
shall have been received (with appropriate modification) at the closing of such
public offering even if such closing occurs earlier than the Closing Date.
31
(d) Buyer shall have received from the title company or companies
it selects to report the condition of the title to the Owned Property and
Leased Real Estate located in the United States commitments for title insurance
with premiums at ordinary rates showing that the condition of title is such as
represented by GBGC under Sections 4.10(a) or 4.10(b) hereof. On Schedule
6.3(d)(iii) Seller (a) lists the Owned Property and Leased Real Property for
which it obtained title insurance or a commitment for title insurance, (b)
identifies the particular title insurance company that issued such policy or
commitment and (c) describes the policy or commitment by its date and number.
Buyer, when selecting the title insurance company to report the condition of
title to the Owned Property and Leased Real Property, shall use the title
insurance company that issued each such policy or commitment to update same.
With respect to the Leased Real Estate and Owned Property,
Seller shall provide Buyer with consents to a change of control contemplated by
the consummation of the Arrangement from (A) each landlord and any over
landlord of each landlord whose consent to the Arrangement is required by any
Lease, and (B) each Mortgage Lender whose consent to the Arrangement is
required by applicable loan documents or whose loan would be in default as a
result of the Arrangement.
(e) Seller shall have delivered written resignations of such
officers and directors of GBGC and IMG as Buyer shall have requested.
(f) Seller shall have obtained from the appropriate party
written releases of GBGC as a guarantor of the obligations of any entity other
than IMG.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Sale
contemplated hereby may be abandoned, by written notice promptly given to the
other parties hereto, at any time prior to the Closing Date, whether prior to
or after approval by their respective stockholders or members:
Section 7.1.1 By mutual written consent of Buyer and Seller;
Section 7.1.2 By either Buyer or Seller, if a court of
competent jurisdiction or a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
32
Section 7.1.3 By Buyer, if Seller fails to perform in all
material respects its obligations under this Agreement, or there has been a
material violation or breach by Seller of any representation, warranty or
agreement contained herein and such failure, violation or breach has not been
cured within five business days after notice thereof has been given;
Section 7.1.4 By Buyer, if there shall have occurred a Seller
or GBGC Material Adverse Effect since the date of this Agreement;
Section 7.1.5 By Seller, if Buyer fails to perform in all
material respects its obligations under this Agreement, or there has been a
material violation or breach by Buyer of any representation, warranty or
agreement contained herein and such failure, violation or breach has not been
cured within five business days after notice thereof has been given;
Section 7.1.6 By Buyer, in its sole and absolute discretion,
during the period commencing on the date that Seller has delivered the
schedules, documents, contracts and agreements in accordance with Section 5.16
and ending on the 10th day (or next succeeding business day if such 10th day is
not a business day) thereafter (the "Due Diligence Period"), provided that such
Due Diligence Period, and the right to terminate during it, shall in no event
be extended to more than 15 days after the date hereof;
Section 7.1.7 By Seller, if, prior to the Closing Date, any
Third Party has made a bona fide fully financed written offer relating to an
Alternative Proposal, and Seller's Board of Directors determines in good faith
(i) after consultation with its financial advisors, and that such transaction
constitutes an Alternative Proposal superior to the Sale and (ii) after having
received the written opinion of outside legal counsel to Seller, that the
failure to engage in such negotiations or discussions or provide such
information could result in a breach of the fiduciary duties of the Board of
Directors of Seller under applicable law;
Section 7.1.8 At the option of Buyer or Seller, if the Closing
Date shall not have occurred on or before September 30, 1998 (or such later
date as may be mutually agreed to by Buyer and Seller), by written notice to
the other party, provided that the failure of the Closing to occur by such date
is not due to the failure of the party (or any of its affiliates) seeking to
terminate this Agreement to perform or fulfill its obligations hereunder;
Section 7.1.9 At the option of Buyer, if after three business
days after the date hereof, Xxxx Xxxxxxxx shall not have entered into an
agreement to vote such stock, if necessary, in favor of the Sale and against
any Alternative Proposal; and
Section 7.1.10 By Buyer, if Seller shall not have timely
delivered the Schedules pursuant to Section 5.16 in form and substance
satisfactory to Buyer or, if after such delivery, Buyer shall determine within
five business days after such delivery that such Schedules are not satisfactory
to Buyer in form and substance.
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Section 7.2 Effect of Termination. In the event of the termination
of this Agreement and abandonment of the Sale as provided in Section 7.1
hereof, this Agreement shall forthwith become void and there shall be no
liability on the part of Buyer or Seller, except as set forth in this Section
hereof, Section 5.6 hereof, and except to the extent that such termination
results from the willful breach of a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnity. Subject to the limitations set forth herein,
Buyer and its assignees shall be defended and held harmless by Seller from and
against any losses, liabilities, damages or deficiencies (including interest,
penalties and reasonable attorneys' fees and disbursements) ("Losses") based
upon or arising out of (i) the breach of any representation, warranty, covenant
or agreement of Seller contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement, (ii) the assets which are part of
the Spin-Off, including without limitation, obligations related to any of the
Seller's franchise or license operations (other than the license to Buyer), and
any liabilities related to the Spin-Off, including, without limitation, any Tax
liabilities therefrom or (iii) all liabilities, losses, costs or expenses
arising under the consulting agreement with Public Country Clubs, Inc. referred
to on Schedule 4.13. Subject to the limitations set forth herein, Seller and
its assignees shall be defended and held harmless by Buyer from and against any
Losses based upon or arising out of the breach of any representation, warranty,
covenant or agreement of Buyer contained in this Agreement or in any document
or other writing delivered pursuant to this Agreement.
Section 8.2 Limitations. Notwithstanding any provisions contained in
this Agreement to the contrary, in determining the extent of any losses
suffered by a party entitled to indemnification hereunder appropriate
deductions shall be made for any insurance proceeds which inure to the benefit
of such party (net of any increase or reasonably expected increase in the
premiums for such insurance resulting therefrom) and (i) there shall be no
indemnification for any punitive or consequential damages, (except to the
extent payable to a third party claimant), (ii) in determining the extent of
any Losses suffered by a party entitled to indemnification thereunder, the
indemnifying party shall receive credit for any tax benefit received by the
indemnified party as a result of any payments made in connection with
indemnification, (iii) Buyer shall not be entitled to indemnification until all
claims for indemnification hereunder against Seller exceed in the aggregate
$75,000 in which case Buyer shall be entitled to indemnification only to the
extent such claims exceed $75,000, provided that such $75,000 limitation shall
not apply to claims made under Sections 8.1(ii) or 8.1(iii) and (iv) the
maximum liability Seller shall have hereunder shall be the amount received by
Seller as purchase price, provided further that claims made under Section
8.1(ii) or
34
Section 8.1(iii) shall not count in any calculation of such maximum liability
and may be made even if such maximum liability is exceeded.
Section 8.3 Procedure. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement
is referred to herein as the "Indemnifying Party" and the other party or
parties claiming indemnity is referred to as the "Indemnified Party." An
Indemnified Party under this Agreement shall, with respect to claims asserted
against such party by any third party, give written notice to each Indemnifying
Party of any liability which must give rise to a claim for indemnity under this
Agreement promptly (and in any event within sixty (60) business days) upon the
receipt of any written claim from any such third party, and with respect to
other matters for which the Indemnified Party may seek indemnification, give
prompt written notice to each Indemnifying Party of any liability or loss which
might give rise to a claim for indemnity; provided, however that any failure to
give such notice on a timely basis will not waive any rights of the Indemnified
Party except to the extent the rights of the Indemnifying Party are materially
prejudiced. As to any claim, action, suit or proceeding by a third party, the
Indemnifying Party may assume the defense of such matter, including the
employment of counsel satisfactory to the Indemnified Party and the payment of
all expenses relating thereto. The Indemnifying Party shall give written notice
to each Indemnified Party of its assumption of the defense of any action, suit
or proceeding within thirty (30) days of receipt of notice from the Indemnified
Party with respect to such matter. The Indemnified Party shall have the right
to employ its or their own counsel in any such matter, but the fees and
expenses of such counsel shall be the responsibility of such Indemnified Party
unless (i) the Indemnifying Party shall not have reasonably promptly employed
counsel satisfactory to such Indemnified Party or (ii) the Indemnified Party
shall have reasonably concluded that the conduct of such proceeding by the
Indemnifying Party and counsel of its choosing will prejudice the rights of the
Indemnified Party. The Indemnified Party shall provide such cooperation and
such access to its books, records and properties as the Indemnifying Party
shall reasonably request with respect to such matter; and the parties hereto
agree to cooperate with each other in order to ensure the proper and adequate
defense thereof.
An Indemnifying Party shall not make any settlement of any claim without
the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a settlement involving
consideration or relief other than the payment of money. After settlement and
payment thereof, the Indemnifying Party shall have no right to dispute or
object to the amount of the settlement or a claim for indemnification based
thereon.
With regard to claims of third parties for such indemnification is payable
hereunder, such indemnification shall be paid by the Indemnifying Party upon
the earlier to occur of: (i) the entry of a judgment against the Indemnified
Party and the expiration of any applicable appeal period, or if earlier, five
days prior to the date that the judgment creditor has the right to execute the
judgment; (ii) the entry of an unappealable judgment or final appellate
decision against the Indemnified Party; (iii) a settlement of the claim; or
(iv) with respect to indemnities for liabilities relating to Taxes, upon the
issuance of any resolution by a taxation authority. Notwithstanding the
foregoing, provided that
35
there is no dispute as to the applicability of indemnification, expenses of
counsel to the Indemnified Party shall be reimbursed on a current basis by the
Indemnifying Party if such expenses are a liability of the Indemnifying Party.
With regard to other claims of which identification is payable hereunder, such
indemnification shall be paid promptly by the Indemnifying Party upon demand by
the Indemnified Party.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns. In the case of Tax Returns filed after the
Closing Date, to the extent requested by Buyer, Seller will make available to
Buyer all portions of Tax Returns, and any amendments thereto, filed by or on
behalf of GBGC and IMG (or with respect to its assets or businesses) for all
taxable years or applicable periods ending on or prior to the Closing Date.
Section 9.2 Pre-Closing Taxes.
(a) GBGC and IMG shall continue to be included for all taxable
periods (or portions thereof) ending on or before the Closing Date in the
consolidated Federal income Tax Return and any required state or local
consolidated or combined income or franchise Tax Returns of any affiliated
group of which GBGC and IMG are members (each of which is herein referred to as
a "Selling Affiliated Group") which Tax Returns include GBGC or IMG (all such
Tax Returns including taxable periods (or portions thereof) of GBGC or IMG
ending on or before the Closing Date are hereinafter referred to, collectively,
as "Pre-Closing Consolidated Returns"). Seller shall cause the Selling
Affiliated Groups to timely prepare and file (or cause to be prepared and
filed) all Pre-Closing Consolidated Returns and shall timely pay all Taxes
shown as due and payable on Pre-Closing Consolidated Returns (including any
Taxes with respect to any deferred income triggered into income by Treasury
Regulations ss. 1.1502-13 and Treasury Regulations ss. 1.1502-14 (or under
similar provisions of any state or local jurisdiction) and any excess loss
accounts taken into income under Treasury Regulations ss. 1.1502-19 (or under
similar provisions of any state or local jurisdiction).
(b) Seller shall timely prepare (or cause to be so prepared) all
other Tax Returns of GBGC and IMG that are required by law for all taxable
periods ending on or before the Closing Date ("Pre-Closing Non-Consolidated
Returns"). All Pre-Closing Non-Consolidated Returns shall be prepared in a
manner consistent with prior practice and shall properly include and reflect
the income, activities, operations and transactions of GBGC and IMG, as
applicable. Seller shall timely file (or cause to be so filed) all Pre-Closing
Non-Consolidated Returns which are due on or before the Closing Date and shall
pay (or cause GBGC or IMG to pay) all Taxes due thereon. Seller shall also pay
(or cause GBGC or IMG to pay) the full amount of any Tax which is payable by
GBGC or IMG without the filing of a Tax Return ("Non-Return Taxes"), payment of
which is due on or before the Closing Date. With respect to each Pre-Closing
Non-Consolidated Return due after the Closing
36
Date, Seller shall deliver (or cause to be so delivered) each such Pre-Closing
Non-Consolidated Return to Buyer at least 15 days prior to the due date of such
Tax Return, together with a payment in an amount equal to the amount of Tax
shown as due and payable on such Pre-Closing Non- Consolidated Return (after
giving effect (i) to any credits for the amount of Tax, if any, paid on or
prior to the Closing Date as shown on such Tax Return) and (ii) current
liabilities in respect of sales tax, franchise tax and property tax accrued on
the Closing Date Balance Sheet (the "Net Pre-Closing Tax"). Subject to the
foregoing, Buyer shall cause GBGC or IMG to file all such Pre-Closing Non-
Consolidated Returns that are due after the Closing Date and to pay the amount
of Net Pre-Closing Tax shown as due and payable thereon.
Section 9.3 Transfer Taxes. All sales, use, transfer, stamp, value
added, duty, excise, stock transfer, real property transfer, recording, gains
and other similar taxes and fees arising out of or in connection with the
transactions contemplated by this Agreement shall be paid by Seller.
Section 9.4 Post-Closing Taxes. Buyer shall timely prepare and file (or
cause to be so prepared and filed) all Tax Returns required by law for all
Taxes, covering solely GBGC and IMG, for taxable periods ending after the
Closing Date ("Post-Closing Returns"). Buyer shall timely pay or cause to be
paid all Taxes relating to Post-Closing Returns ("Post-Closing Taxes"). Seller
shall reimburse Buyer for (i) the amount of Post-Closing Taxes reported as
payable on each Post-Closing Return that is attributable to the portion of the
period covered by such Tax Return ending on the close of business on the
Closing Date (the "Pre-Closing Tax Period"), determined by treating the close
of business on the Closing Date as the last date of the taxable period, and
(ii) the amount of any Non-Return Tax payable after the Closing Date that is
attributable to the portion of the period covered by such payment which ends on
or before the close of business on the Closing Date as determined under clause
(i) or, if relevant, such as in the case of property Taxes (pro rata based upon
the number of days covered by such payment), in each case after giving effect
to (A) any credits for the amount of such Post-Closing Tax or such Non-Return
Tax, if any, paid on or prior to the Closing Date by Seller, GBGC or IMG or any
of their predecessors or affiliates, and (B) current liabilities in respect of
sales tax, franchise tax and property tax accrued on the Closing Date Balance
Sheet. Such reimbursements shall be made on or before the later of the date on
which such return is filed or 15 days after receipt of a copy of such return or
evidence of such payment and Buyer shall provide Seller with copies of work
papers which will permit Seller to review and substantiate the accuracy of such
return or such payment.
Section 9.5 Tax Cooperation. The parties shall cooperate with each other
in connection with any Tax Return preparation, Tax investigation, audit or
other proceeding.
Section 9.6 Notification of Proceedings, Control; Refunds.
(a) In the event that Buyer, GBGC or IMG receives notice, whether
orally or in writing, of any pending or threatened United States Federal,
state, local, municipal or foreign tax examinations, claims, settlements,
proposed adjustments, assessments or reassessments or related matters with
respect to Taxes that could affect Seller or its Subsidiaries (or GBGC or IMG
with
37
respect to taxable periods or portions thereof ending on or before the Closing
Date), or if Seller or any of its Subsidiaries receive notice of any such tax
matter that could affect Buyer (or GBGC or IMG), the party receiving notice
shall notify in writing the potentially affected party within 10 calendar days
thereof. The failure of any party to give the notice required by this Section
9.6(a) shall not impair that party's rights under this Agreement except to the
extent that the other party demonstrates that it has been damaged thereby.
(b) Each of Seller and Buyer shall have the right to control any
audit or examination by any taxing authority, initiate any claim for refund,
file any amended return, contest, resolve and defend against any assessment,
notice of deficiency or other adjustment or proposed adjustment relating or
with respect to any Taxes, the ultimate liability for which is the
responsibility of that party or its affiliates under this Agreement, and each
of Seller and Buyer shall be entitled to, and to the extent received by the
other shall be promptly paid by the other, all refunds with respect to any such
Taxes. Seller and Buyer shall jointly control, defend and resolve any tax
matter as to which they are both liable (in whole or in part).
Section 9.7 Indemnification.
(a) After the Closing Date, Seller shall indemnify and hold
harmless Buyer, GBGC, IMG and each of their respective successors and assigns
from and against any Tax liability of GBGC or IMG with respect to the period
ending on or before the Closing Date on any Pre-Closing Non-Consolidated Return
or on a Post-Closing Return (determined by treating the Closing Date as the
last date of the taxable period) and with respect to any Non-Return Taxes
attributable to the portion of the period covered by any payment of such Taxes
which ends on or before the Closing Date, in each case, to the extent such
amount exceeds any amounts reserved for current liabilities in respect of sales
tax, franchise tax and property tax accrued on the Closing Date Balance Sheet.
Seller shall pay such amounts as it is obligated to pay to Buyer within 10
calendar days after payment of any applicable Tax liability by Buyer. Seller
shall indemnify and hold harmless Buyer, GBGC, IMG and each of their respective
affiliates, successors and assigns, from and against (i) any Tax liability for
all periods prior to the Closing Date (including any period which includes the
Closing Date) resulting from GBGC or IMG being severally liable for any Taxes
of any consolidated group of which GBGC or IMG is or was a member pursuant to
Treasury Regulations ss. 1.1502-6 or any analogous state or local tax provision
(including, without limitation, any Tax liability with respect to any
Pre-Closing Consolidated Return), and (ii) any Tax liability resulting from
GBGC or IMG ceasing to be a member of any Selling Affiliated Group filing
consolidated or combined Tax Returns.
(b) After the Closing Date, Buyer, GBGC and IMG, jointly and
severally shall indemnify and hold harmless Seller and its affiliates,
successors and assigns from and against any Tax liability with respect to the
taxable period or portion thereof beginning after the Closing Date. Buyer shall
hold Seller harmless and be liable and pay for any and all Taxes not incurred
in the ordinary course of business attributable to the acts or omissions of
Buyer, its affiliates or GBGC or IMG occurring after the Closing but on the
Closing Date other than acts specifically contemplated
38
by this document. Buyer shall cause GBGC or IMG to pay such amounts within 10
calendar days after payment of any such Tax liability by Seller.
(c) To the extent permitted by law, the parties agree to treat
indemnity payments under this letter agreement as adjustments to the
consideration paid for GBGC and IMG.
Section 9.8 Section 338(h)(10) Election. Seller will join with the Buyer
in making an election under Sections 338(g) and 338(h)(10) of the Code (and, at
Buyer's request, any corresponding elections under state or local tax law)
(collectively a "Section 338(h)(10) Election") with respect to the purchase and
sale of the stock of GBGC hereunder and with respect to the stock of IMG.
Seller will pay any Tax attributable to the making of the Section 338(h)(10)
Election and will indemnify the Buyer, GBGC and IMG against any adverse
consequences arising out of any failure to pay such Tax. Buyer and Seller will
cooperate with each other to prepare and file all necessary documents in
connection with such election, including without limitation, an allocation of
the Purchase Price. Prior to the Closing Date, GBGC, IMG and Seller will adopt
a plan of liquidation for Federal income tax purposes to allow GBGC and IMG to
distribute the assets referred to in Section 1.5.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission or by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Buyer: If to Seller:
Family Golf Centers, Inc. Golden Bear Golf, Inc.
000 Xxxxxxxxxxx Xxxx 000000 X.X. Xxxxxxx One
Melville, New York 11747 Xxxxx Xxxx Xxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxxx Xxxxx, President Attn: Xxxxxxx Xxxxxxxxx
With copies to: With copies to:
Squadron, Ellenoff, Plesent & Xxxxxxx Xxxxxx Xxxxxx Xxxxxxx, Xxxxx & Xxxx
Xxxxxxxxx, LLP Xxxxxxxx Xxxxxxxx & Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 000
000 Xxxxx Xxxxxx 000 Xxxx Flagler 000 Xxxxx Xxxx Xxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxx Xxxxx, Xxxxx 0000 Xxxx Xxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxx Attn: Xxxxxx Xxxxxx Attn: Xxxxx Xxxx
39
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
Section 10.2 Assignment, Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
Section 10.3 Entire Agreement. This Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
Section 10.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to its rules of conflict of laws.
Section 10.6 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
Section 10.7 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
Section 10.8 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
Section 10.9 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
40
Section 10.10 Incorporation of Schedules and Exhibits. The Schedules and
Exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
Section 10.11 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
Section 10.12 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which they are entitled at law or in equity.
Section 10.13 Knowledge. As used herein, the phrase "to the knowledge of
GBGC or Seller" or similar phrases shall mean the knowledge of the executive
officers and directors of each such entity.
41
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
FAMILY GOLF CENTERS, INC.
By:
-----------------------------
Name:
Title:
GOLDEN BEAR GOLF, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
42
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
FAMILY GOLF CENTERS, INC.
By:/s/ Krishnan X. Xxxxxx
-----------------------------
Name: Krishnan X. Xxxxxx
Title: President
GOLDEN BEAR GOLF, INC.
By:
-----------------------------
Name:
Title:
42
Amendment
Reference is made to the agreement (the "Agreement"), dated as of
June 16, 1998 between Family Golf Centers, Inc. and Golden Bear Golf Inc. All
terms not otherwise defined herein shall have their defined meanings from the
Agreement.
1. Section 7.1.6 of the Agreement is hereby amended to read in its
entirety as follows:
"By Buyer, in its sole and absolute discretion, at any time up to and
including Monday, July 6, 1998;"
2. Except as amended hereby, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have signed this amendment as of this
29th day of June, 1998.
FAMILY GOLF CENTERS, INC.
By: /s/ Xxxxxxx Xxxxx
-----------------------------
GOLDEN BEAR GOLF, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Amendment
Reference is made to the agreement (the "Agreement"), dated as of
June 16, 1998 between Family Golf Centers, Inc. and Golden Bear Golf Inc. All
terms not otherwise defined herein shall have their defined meanings from the
Agreement.
1. Section 7.1.6 of the Agreement is hereby amended to read in its
entirety as follows:
"By Buyer, in its sole and absolute discretion, at any time up to and
including 1:00 a.m., Tuesday, July 7, 1998;"
2. Except as amended hereby, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have signed this amendment as of this
6th day of July, 1998.
FAMILY GOLF CENTERS, INC.
By: /s/ Xxxxxxx Xxxxx
-----------------------------
GOLDEN BEAR GOLF, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Amendment
Reference is made to the agreement (the "Agreement"), dated as of
June 16, 1998 between Family Golf Centers, Inc. and Golden Bear Golf Inc. All
terms not otherwise defined herein shall have their defined meanings from the
Agreement.
1. Section 7.1.6 of the Agreement is hereby amended to read in its
entirety as follows:
"By Buyer, in its sole and absolute discretion, at any time up to and
including 2:00 a.m., Tuesday, July 7, 1998;"
2. Except as amended hereby, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have signed this amendment as of this
6th day of July, 1998.
FAMILY GOLF CENTERS, INC.
By: /s/ Xxxxxxx Xxxxx
-----------------------------
GOLDEN BEAR GOLF, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Amendment Number 2
Reference is made to the agreement (the "Agreement"), dated as of
June 16, 1998, between Family Golf Centers, Inc. ("Buyer") and Golden Bear Golf
Inc. ("Seller"). All terms not otherwise defined herein shall have their
defined meanings from the Agreement.
The parties hereto agree as follows:
1. In addition to the other adjustments to be made to the purchase
price for GBGC pursuant to the Agreement, the purchase price shall be reduced
by $250,000.
2. In addition to the other indemnification provided by Article VIII
of the Agreement, Buyer and its assignees shall be defended and held harmless
by Seller from and against any Losses based upon or arising out of (i) the
Acquisition and Development Agreement between GBGC and Highlander Bear Ltd.,
(ii) the Profit Participation Agreement, dated December 31, 1996, between GBGC
and Xxxxx Xxxxx; (iii) any commitment or alledged commitment to any third party
from whom GBGC acquired any property or facility to make any capital
improvements to any such property or facility, (iv) any difference between any
agreement, contract, instrument or document required to be furnished by
Seller to Buyer as of the date hereof and such agreement, contract,
instrument or document in the form actually in effect which in any way
adversly affects the Buyer, (v) Seller's failure to deliver to Buyer any
agreement, contract, instrument or document which was required to have been
delivered by Seller to Buyer, and which was not furnished as of the date hereof
which in any way adversly affects the Buyer and (vi) defaults not otherwise
disclosed in the Agreement or the schedules thereto under leases or subleases
with respect to the Owned Properties and the Leased Real Estate as to which
Buyer has not received an estoppel certificate from the landlord or sublandlord
as of the Closing Date. Notwithstanding the foregoing, Seller shall not be
required to indemnify against Losses which are included in GBGC's Closing Date
Liabilities on the Closing Date Balance Sheet.
3. The indemnification provided for herein shall be subject to the
limitations and procedures set forth in Sections 8.2 and 8.3 of the Agreement
provided that the $75,000 limitation referred to in Section 8.2(iii) shall not
apply to indemnification pursuant to Section 2(i), (ii) or (iii) of this
Amendment and that claims made for indemnification pursuant to Section 2(i),
(ii), (iii), (iv), (v) or (vi) of this Amendment shall not count in any
calculation of the maximum liability under Section 8.2(iv) and may be made even
if such maximum liability is exceeded.
4. Notwithstanding anything to the contrary contained in Section 5.7,
the right to indemnification provided in Article VIII of the Agreement for any
breach of any representation and warranty referred to in Section 5.7 shall
survive if the claim therefor is made within the period set forth in Section
5.7 and the right to indemnification for the matters referred to in Section
8.1(ii) and (iii) of the Agreement and Section 2 of this Amendment shall
survive indefinitely, provided that such right under Section 2(iv), (v) and
(vi) of this Amendment shall only survive for 18 months after Closing to the
extent relating to matters other than the leases, subleases and agreements
signed in connection therwith with respect to the Owned Properties and the
Lease Real Estate.
5. Except as amended hereby and by the Amendment dated June 29, 1998,
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have signed this amendment as of this
6th day of July, 1998.
FAMILY GOLF CENTERS, INC.
By: /s/ Xxxxxxx Xxxxx
-----------------------------
GOLDEN BEAR GOLF, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
