ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of October 30, 1996, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 000 Xxxxxxxxxxx
Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("FGC"), XXXXXX XXXX, having an address at 00
Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the "Seller") and CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, incorporated under the laws of the United States of
America with executive offices at 0 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
"Escrow Agent").
W I T N E S E T H:
WHEREAS, simultaneously with the execution hereof, the Seller, FGC and
The Seven Iron, Inc. a Colorado corporation (the "Acquired Corporation"), are
consummating the transactions contemplated by the Stock Purchase Agreement,
dated as of October __, 1996 (the "Purchase Agreement"), among the Seller, FGC
and Acquired Corporation, pursuant to which, among other things, FGC shall
purchase all of the outstanding stock of Acquired Corporation from Seller in
exchange for (i) $4,000,000.00 in cash, (ii) 75,000 shares of common stock, par
value $.01 per share (the "FGC Common Stock") and (iii) the payment of certain
debt.
WHEREAS, pursuant to Section 2.1 of the Purchase Agreement, 10,000
shares (the
"Escrowed Property") of the FGC Common Stock are required to be
placed into an escrow account (the "Escrow Account") to be maintained by the
Escrow Agent against any claims for indemnity under the Purchase Agreement; and
WHEREAS, this is the Escrow Agreement referred to in Section 2 of the
Purchase Agreement. Capitalized terms used in this Escrow 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:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Seller and FGC hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to serve, as
Escrow Agent in accordance with, and pursuant to, this Agreement.
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) As soon as reasonably practicable following the Effective
Time, FGC shall deposit, in accordance with Section 1.03 hereof, into the
Escrow Account an aggregate of 10,000 shares of FGC Common Stock pursuant to
the Purchase Agreement.
(b) At any time prior to October 30, 1997, FGC shall be
entitled to give a notice to the Escrow Agent, signed by its President or any
Vice President (with a copy to the Seller), to the effect that there has been
an event entitling FGC to indemnification from the Seller pursuant to the
Purchase Agreement, which notice shall specify the amounts owed by the Seller
pursuant to the Purchase Agreement, the calculation of such amounts and, in
reasonable detail, the basis therefore.
(c) Twenty days after the Escrow Agent has received a
notice pursuant to Section
1.02(b) (or, if not a business day, on the next business day following such
twentieth day) it shall deliver to FGC the Escrowed Property (the "Escrowed
Property") to be valued as set forth in Section 1.02(e) in the amounts specified
in such notice unless the Seller shall have notified the Escrow Agent (with a
copy to FGC) in writing before such date that it disagrees with the Subsidiary's
determination that it is entitled to indemnification with respect to the
Purchase Agreement, which notice shall be set forth in reasonable detail the
basis for such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership, or right of possession of the Escrowed Property, the Escrow Agent,
as more fully set forth in Section IV(xi), is authorized and directed to retain
in its possession without liability to anyone all or any part of the Escrowed
Property until such dispute shall have been settled either by mutual agreement
by the parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction in the United States of America and time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Property with a court of competent
jurisdiction in the United States of America which is hearing such dispute.
(e) For purposes of this Agreement, the value of each share
of FGC Common Stock which is part of the Escrowed Property shall be deemed
equal to $25.00 per share.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under
Section 1.02(b) has been given and Escrowed Property in satisfaction of such
notice has not been delivered to FGC, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Property or such portion of it as at the time
remains in
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escrow, together with all dividends and distributions received by
the Escrow Agent with respect thereto, shall be returned to the Seller on
October 30, 1997.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the shares of FGC Common Stock contained therein shall be
distributed as set forth above.
SECTION 1.05 VOTING. The shares of FGC Common Stock held in the Escrow
Account shall be voted by the Seller or his designee.
II. DEPOSIT OF ESCROWED PROPERTY.
SECTION 2.01 DEPOSIT OF ESCROWED PROPERTY. As soon as reasonably
practicable following the Closing Date (as defined in the Purchase Agreement),
FGC shall, as set forth in Section 1.02, deposit with the Escrow Agent 10,000
shares of FGC Common Stock.
III. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b) sent by
certified mail return receipt requested, with proper postage prepaid, or (c)
sent by over-night delivery and addressed as follows:
If to FGC to:
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
(000) 000-0000
If to Seller to:
Xxxxxx Xxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
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If to the Escrow Agent, to:
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received or refused.
IV. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of the Seller and FGC that:
(i) The Escrow Agent shall not be under any duty to give the
Escrowed Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
(ii) This Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Agreement.
(iii) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct, and, except with respect to claims
based upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent, the other parties hereto shall
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jointly and severally indemnify and hold harmless the Escrow Agent (and any
successor Escrow Agent) from and against any and all losses, liabilities,
claims, actions, damages, and expenses, including reasonable attorneys' fees
and disbursements, arising out of, and in connection with, this Agreement.
Without limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from gross negligence
or willful misconduct) in the investment or reinvestment of the Escrowed Funds,
or any loss of interest incident to any such delays.
(iv) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument, or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act in reliance upon any instrument
or signature believed by it in good faith to be genuine and may assume, if in
good faith, that any person purporting to give notice or receipt or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
(v) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Escrow Agreement and shall
not be liable for any action taken or omitted in good faith and in accordance
with such advice.
(vi) The Escrow Agent does not have any interest in the
Escrowed Funds deposited hereunder, but is serving as escrow holder only. Any
payments of income from the Escrow Account shall be subject to withholding
regulations then in force with respect to United States taxes.
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This paragraph (vi) and paragraph (iii) of this Article V shall
survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the
validity, value, genuineness, or the collectibility of any security or other
documents or instrument held by, or delivered to, it.
(viii) The Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property deposited
hereunder.
(ix) The Escrow Agent (and any successor escrow agent) at any
time may be discharged from its duties and obligations hereunder by the
delivery to it of notice of termination signed by FGC and the Seller or at any
time may resign by giving written notice to such effect to FGC and the Seller.
Upon any such termination or resignation, the Escrow Agent shall deliver the
Escrowed Property to any successor escrow agent jointly designated by the other
parties hereto in writing, or to any court of competent jurisdiction if no such
successor escrow agent is agreed upon, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of the Escrow Agent
shall take effect on the earlier of (A) the appointment of a successor
(including a court of competent jurisdiction) or (B) the day that is 30 days
after the date of delivery: (1) to the Escrow Agent of the other parties'
notice of termination or (2) to the other parties hereto of the Escrow Agent's
written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed
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Property safe until receipt of a designation of successor escrow agent or a
joint written disposition instruction by the other parties hereto or an
enforceable order of a court of competent jurisdiction.
(x) The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
(xi) In the event of any disagreement among or between the
other parties hereto resulting in adverse claims or demands being made in
connection with the Escrowed Property, or in the event that the Escrow Agent in
good faith is in doubt as to what action it should take hereunder, the Escrow
Agent shall be entitled to retain the Escrowed Property until the Escrow Agent
shall have received (A) a final and non-appealable order of a court of
competent jurisdiction directing delivery of the Escrowed Property or (B) a
written agreement executed by the other parties hereto directing delivery of
the Escrowed Property, in which event the Escrow Agent shall disburse the
Escrowed Property in accordance with such order or agreement. Any court order
referred to in (A) above shall be accompanied by a legal opinion by counsel for
the presenting party satisfactory to the Escrow Agent to the effect that said
court order is final and non-appealable. The Escrow Agent shall act on such
court order and legal opinions without further question.
(xii) As consideration for its agreement to act as Escrow
Agent as herein described, FGC, on the one hand, and the Seller, on the other
hand, agrees to share equally the Escrow Agent fees determined in accordance
with the terms set forth on Exhibit A hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, FGC and the Seller agree to
reimburse the Escrow Agent for all reasonable expenses, disbursements, and
advances incurred or made by the
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Escrow Agent in performance of its duties hereunder (including reasonable fees,
expenses, and disbursements of its counsel) and to share equally the costs
thereof.
(xiii) No publicly distributed material or other matter in
any language (including, without limitation, notices and reports) which
mentions the Escrow Agent's name or the rights, powers, or duties of the Escrow
Agent shall be issued by the other parties hereto or on such parties' behalf
unless the Escrow Agent shall first have given its specific written consent
thereto.
V. MISCELLANEOUS.
SECTION 5.01 BINDING EFFECT. This Escrow 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, except as provided in paragraph (ix) of Article V with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or
obligations under this Agreement without the written consent of the other
parties.
SECTION 5.02 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).
SECTION 5.03 MODIFICATION. This Agreement may only be modified by a
writing signed by all of the parties hereto.
SECTION 5.04 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
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to Sections and Articles, respectively, contained herein.
SECTION 5.05 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 Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:________________________________
NAME:
TITLE:
___________________________________
XXXXXX XXXX
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
BY: ________________________________
NAME:
TITLE:
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EXHIBIT A
ESCROW AGENT FEES: $100.00 PER MONTH
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