ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June ___, 1997, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 000 Xxxxxxxxxxx
Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("FGC"), XXXXXX XXXXXX with an address of 0
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000 ("Xxxxxx") and XXXXXX X. XXXXXXXXX
with an address of 0 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000 ("Xx.
Xxxxxxxxx") (Xxxxxx and Xxxxxxxxx collectively referred to herein as "Selling
Stockholders") 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 S E T H:
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WHEREAS, simultaneously with the execution hereof, Pinley Enterprises,
Ltd. ("PEL") FGC and Philadelphia Family Golf Centers, Inc., a newly-formed,
wholly-owned Delaware subsidiary of FGC ("Subsidiary"), are consummating the
transactions contemplated by the Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement"), among PEL, Subsidiary, FGC and the
Selling Stockholders, pursuant to which, among other things, PEL shall merge
with and into Subsidiary (the "Merger") in accordance with the laws of the
State of Delaware, so that, upon consummation of the Merger, PEL will cease to
exist and Subsidiary will be the Surviving Corporation;
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WHEREAS, pursuant to Section 1.6 of the Merger Agreement, 5,000 shares
(the "Escrowed Property") of common stock, par value $.01 per share (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 Merger Agreement; and
WHEREAS, this is the Escrow Agreement referred to in Sections 6.1 and
6.2 of the Merger Agreement. Capitalized terms used in this Escrow Agreement
and not otherwise defined herein shall have the respective meanings given to
them in the Merger Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Selling Stockholders 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 5,000 shares of FGC Common Stock pursuant to the Merger
Agreement.
(b) At any time prior to the first anniversary of the Closing Date,
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 Selling Stockholders), (i)
to the effect that there has been an event entitling FGC to indemnification
from the Selling Stockholders pursuant to the Merger Agreement, which notice
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shall specify the amounts owed by the Selling Stockholders pursuant to the
Merger Agreement, the calculation of such amounts and the basis therefore.
(c) Twenty days after the Escrow Agent has received a notice pursuant
to Section 1.02(a) (or, if not a business day, on the next business day
following such twentieth day) it shall deliver to FGC 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 Selling Stockholders shall have
notified the Escrow Agent (with a copy to FGC) in writing before such date that
they disagree with FGC's determination that FGC is entitled to receive Escrowed
Property with respect to the Merger 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
$20 per share, as adjusted
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for any stock split, stock dividend, combination or reclassification occurring
after the date of this Agreement.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under
Section 1.02(a) 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 escrow, together with all dividends and distributions received by
the Escrow Agent with respect thereto, shall be returned to the Selling
Stockholders on the first anniversary of the Closing Date.
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 Selling Stockholders.
II. DEPOSIT OF ESCROWED PROPERTY.
SECTION 2.01 DEPOSIT OF ESCROWED PROPERTY. As soon as reasonably
practicable following the Effective Time (as defined in the Merger Agreement),
FGC shall, as set forth in Section 1.02, deposit with the Escrow Agent 5,000
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)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
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If to FGC to:
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
(000) 000-0000
(000) 000-0000
If to Xxxxxx to:
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
If to Pinciotti to:
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
If to the Escrow Agent, to:
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
000-000-0000
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.
IV. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of the Selling Stockholders 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
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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 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
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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.
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 Selling Stockholders or at any
time may resign by giving written notice to
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such effect to FGC and the Selling Stockholders. 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 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
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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 shall pay the Escrow Agent fees determined in accordance
with the terms set forth on Exhibit B hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, FGC and the Selling
Stockholders agrees to reimburse the Escrow Agent for all reasonable expenses,
disbursements, and advances incurred or made by the Escrow Agent in performance
of its duties hereunder (including reasonable fees, expenses, and disbursements
of its counsel).
(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
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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 Delaware
(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 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:
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NAME:
TITLE:
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XXXXXX XXXXXX
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XXXXXX X. XXXXXXXXX
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
BY:
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NAME:
TITLE:
