STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 30, 1996, among FAMILY
GOLF CENTERS, INC., a Delaware corporation with executive offices at 000
Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("FGC") and KKL GOLF PARTNERSHIP.,
an Illinois general partnership with an address at c/o Kemper Sports
Management, 000 Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000 (the
"Seller").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, the Seller and
Carolina Springs Family Golf Centers, Inc., a wholly-owned Delaware subsidiary
of FGC ("Subsidiary"), are consummating the transactions contemplated by the
Purchase Agreement, dated as of September 30, 1996 (the "Purchase Agreement"),
among the Seller, and Subsidiary, pursuant to which, among other things,
Subsidiary shall purchase certain assets of Seller in exchange for (i)
$3,350,000.00 in cash and (ii) options to purchase up to 5,000 shares of the
common stock, par value $.01 per share, of FGC (the "Common Stock");
WHEREAS, this is the Stock Option Agreement referred to in Section 5
of the Purchase Agreement. Capitalized terms used in this Stock Option
Agreement and not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
X. XXXXX OF OPTION. FGC hereby grants to the Seller the following
irrevocable option (the "Option") to purchase, upon the terms and conditions
hereinafter set forth, an aggregate of 5,000 shares of Common Stock of FGC
(subject to adjustment as hereinafter provided), at the exercise price of
$40.00 per share (the "Exercise Price").
II. EXERCISE OF OPTION. Seller may exercise the option, in whole or in
part, at any time from the date hereof until September 30, 2001 (the "Exercise
Period").
III. MANNER OF EXERCISE. In the event the Seller wishes to exercise
the Option, the Seller shall send a written notice (the "Notice") to the Board
of Directors of FGC specifying: (i) the number of shares of Common Stock the
Seller will purchase pursuant to such exercise; and (ii) the place and date for
the closing of such purchase, which date shall be not less than three, nor more
than twenty, business days from the date of the delivery of the Notice ( each a
"Closing"). Each Closing shall take place at the principal executive offices of
FGC. At the Closing FGC shall deliver to Seller a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A.
IV. PAYMENT AND DELIVERY OF CERTIFICATES. At each Closing, (i) the
Seller will make payment to FGC of the aggregate Exercise Price per share for
the shares of Common Stock being purchased upon exercise of any Option by bank
cashier's or certified check, and (ii) FGC shall deliver to the Seller a
certificate or certificates representing the number of shares of Common Stock
so purchased in the denominations designated by the Seller. At any such
Closing, the Seller shall deliver a letter to FGC agreeing that the Seller is
purchasing the shares of Common Stock for investment purposes and not with a
view to distribution otherwise than in compliance with the Securities Act of
1933, as amended (the "Securities Act"), and agreeing not to offer to sell,
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sell or otherwise dispose of, any of such shares acquired by it pursuant to
this Agreement in violation of the Securities Act or any applicable state
securities laws.
V. CONVERSION RIGHT. In lieu of the payment of the Exercise Price, the
Holder shall have the right (but not the obligation), to require FGC to convert
this Option in whole into shares of Stock (the "Conversion Right") as provided
for in this Section V. Upon exercise of the Conversion Right, FGC shall deliver
to the Holder (without payment by the Holder of any of the Execrise Price) that
number of shares of Stock equal to the quotient obtained by dividing (x) the
value of the Option at the time the Conversion Right is exercised (determined
by subtracting the aggregate Exercise Price in effect immediately prior to the
exercise of the Conversion Right from the aggregate Market Price (as
hereinafter defined) for the shares of Stock issuable upon exercise of the
Option immediately prior to the exercise of the Conversion Right) by (y) the
Market Price of one share of Stock immediately prior to the exercise of the
Conversion Right. "Market Price" shall mean the Stock Price (as defined below)
obtained by taking the average over a period of thirty consecutive trading days
ending on the second trading day prior to the date of determination. As used in
this paragraph, the term Stock Price shall mean (A) the mean, on each such
trading day, between the high and low sale price of a share of Stock or if no
such sale takes place on any such trading day, the mean of the closing bid and
lowest closing asked prices therefor on any such trading day, in each case as
officially reported on all national securities exchanges on which the Stock is
then listed or admitted to trading, or (B) if the Stock is not then listed or
admitted to trading on any national securities exchange, the closing price of
the Stock on such date, or (C) if no closing price is available on any such
trading day, the mean between the highest and lowest
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closing bid prices thereof on any such trading date, in the over-the-counter
market as reported by NASDAQ, (D) if the Stock is not then quoted in such
system, the mean between the highest and lowest bid prices reported by the
market makers and dealers for the Stock listed as such by the National
Quotation Bureau, Incorporated or any similar successor organization, or (E)
the higher of the last bona fide sale made by FGC and the fair market value of
the Stock as determined by the Board of Directors in its good faith judgement.
VI. EXERCISE OF CONVERSION RIGHT. The conversion rights provided under
Section V hereof may be exercised in whole at any time and from time to time
while any Option remains outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to FGC, at its offices, this Stock Option
Agreement accompanied by a duly completed Notice of Conversion in the form
attached hereto as Exhibit B. The presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the shares of Stock issuable upon exercise of this
Option. This Stock Option Agreement shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
Stock Option Agreement for conversion in accordance with the foregoing
provisions. As promptly as practicable on or after the conversion date, FGC
shall issue and shall deliver to the Holder a certificate or certificates
representing the largest number of whole shares of Stock to which the Holder
shall be entitled as a result of the conversion. FGC shall not be required to
issue fractions of shares of Stock upon the exercise of the Conversion Right.
Any fractional shares to which the Seller shall be entitled shall be satisfied
by FGC in lawful money of the United States of America.
VII. ADJUSTMENTS. In case FGC shall (i) pay a dividend in Common Stock
of FGC or make a distribution in Common Stock, (ii) subdivide its outstanding
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Common Stock, (iii) combine its outstanding Common Stock into a smaller number
of shares of Common stock, or (iv) issue by reclassification of its Common
Stock other securities of FGC, the number of shares of Common Stock purchasable
upon exercise of the Option shall be adjusted so that Seller shall be entitled
to receive the kind and number of shares or other securities of FGC which it
would have owned or would have been entitled to receive after the happening of
any of the events described above had the Option been exercised immediately
prior to the happening of such event or any record date with respect thereto
and the Exercise Price shall also be adjusted to reflect the happening of any
of the events described above.
VIII. LEGEND. The Seller consents to the placement of any legend
required by applicable state securities laws and of the following legend on
each certificate representing the Common Stock:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED, EXCHANGED OR OTHERWISE DISPOSED OF UNLESS (1) A
REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT
THEREOF, (2) A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OF OTHER
COUNSEL FOR THE HOLDER REASONABLE ACCEPTABLE TO THE ISSUER HAS BEEN
OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED, OR (3) A
"NO ACTION" LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
SECURITIES EXCHANGE COMMISSION TO THE EFFECT THAT NO SUCH REGISTRATION
IS REQUIRED IN CONNECTION THEREWITH."
VII. TYPE OF OPTION. This Option is not an "incentive stock option",
as defined in Section 422A of the Internal Revenue Code of 1986, as amended,
and is not being issued pursuant to any plan of FGC. The Seller shall have no
rights as a stockholder of FGC with respect to shares of Common Stock covered
by this Option until payment for such shares shall have been made in full and
until the date of the issuance of a stock certificate for such shares.
VIII. REPRESENTATIONS AND WARRANTIES OF FGC. FGC hereby represents and
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warrants to the Seller as follows:
(a) FGC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. FGC is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties.
(b) FGC has all requisite corporate power and authority to own the
properties owned by it and to carry on its business as now conducted and has
taken all necessary corporate action to enter into this Agreement. FGC has all
requisite corporate power to grant the Options and to carry out and perform its
obligations under the terms of this Agreement, and all transactions
contemplated hereby.
(c) When issued and paid for or converted in accordance with the terms
of this Agreement, the shares of Common Stock underlying the Option will be
duly authorized, validly issued, fully paid and non-assessable.
(d) Upon delivery of the shares of Common Stock to the Seller upon the
exercise of the Options, the Seller will receive good and marketable title to
such shares free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind arising by, through or under FGC,
other than any restrictions on resales imposed by federal or state securities
laws.
(e) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice or
the lapse of time, or both, (i) violate the Certificate of Incorporation or
By-Laws of FGC, (ii) conflict with or result in a breach of any terms or
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provisions of, or constitute a default or give rise to a right of acceleration
or termination under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of FGC under any indenture,
mortgage, loan agreement or other instrument to which FGC is a party or by
which any of its property is bound, or (iii) violate or require governmental,
judicial or regulatory consent under any existing applicable, law, rule,
regulation, judgment, order or decree of any governmental instrumentality or
court having jurisdiction over FGC or any of its property.
IX. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to the Seller as follows:
(a) Seller is a partnership duly formed, validly existing and in good
standing under the laws of the State of Illinois.
(b) Seller has all requisite power and authority to carry on its
business as it is now being conducted and has taken all necessary partnership
action to enter into this Agreement. Seller has all requisite partnership power
to carry out and perform its obligations under the terms of this Agreement, and
all transactions contemplated hereby.
(c) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice or
the lapse of time, or both, (i) violate any provision of any law, rule or
regulation to which Seller is subject; (ii) violate any order, judgment or
decree applicable to Seller; or (iii) conflict with or result in a breach of or
a default under any term or condition of Seller's certificate of limited
partnership or partnership agreement or any agreement or other instrument to
which Seller is a party or by which it or its assets may be bound.
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X. NOTICES. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Seller to Purchaser shall simultaneously be given in either manner provided
above to Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxx, Esq. A copy of any Notice
given by Purchaser to Seller shall simultaneously be given in either manner
provided above to X'Xxxxxx & Xxxxxx, 00 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxx X. Xxxxx, Esq. or Xxxxxxx X.
Xxxxxxxx, Esq. Notices given in the manner aforesaid shall be deemed to have
been given three (3) business days after the day so mailed, the day after
delivery to any overnight express carrier and on the day so delivered by hand.
Either party shall have the right to change its address(es) for the receipt of
Notices by giving Notice to the other party in either manner aforesaid. Any
Notice required or permitted to be given by either party may be given by that
party's attorney.
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XI. MISCELLANEOUS.
(a) BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the parties hereto and their respective successors
and assigns, heirs, administrators, and representatives, and shall not be
enforceable by, or inure to the benefit of, any other third party.
(b) NONTRANSFERABLE. The Option granted hereunder may not be
transferred, assigned or otherwise disposed of by the Seller (other than to a
partner of the Seller) and any such attempt to transfer the same shall be void
ab initio.
(c) CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
(d) MODIFICATION. This Agreement may only be modified by a writing
signed by each of the parties hereto.
(e) HEADINGS. The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:
------------------------------------
NAME:
TITLE:
KKL GOLF PARTNERSHIP
BY: XXXXXX SPORTS MANAGEMENT,
INC., GENERAL PARTNER
BY: /s/ XXXXXX X. XXXXXXX
------------------------------------
NAME: XXXXXX X. XXXXXXX
TITLE: CHIEF FINANCIAL OFFICER
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY: /s/ XXXXXX X. XXXXXX
------------------------------------
NAME: XXXXXX X. XXXXXX
TITLE: VICE PRESIDENT
KKL GOLF PARTNERSHIP
BY: XXXXXX SPORTS MANAGEMENT,
INC., GENERAL PARTNER
BY:
------------------------------------
NAME:
TITLE:
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151512-1.
EXHIBIT B
CASHLESS EXERCISE FORM
(To be executed upon exercise of Option pursuant to Section VI)
The undersigned hereby irrevocably elects to surrender its
Option for such shares of Stock pursuant to the cashless exercise provisions of
the within the Stock Option Agreement, as provided for in Section V of such
Stock Option Agreement.
Please issue a certificate or certificates for such Stock
in the name of, and pay cash for fractional shares pursuant to Section VI of
the Stock Option Agreement.
Name
--------------------------------------
(Please Print Name, Address and
Social Security No.)
Address
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Social
Security No.
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Signature
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NOTE: The above signature should
correspond exactly with the name
on the first page of the Stock
Option Agreement.
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