STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 21, 1996, among FAMILY GOLF
CENTERS, INC., a Delaware corporation, with executive offices at 000
Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("FGC") and MT. OLIVE GOLF CENTER,
INC., a New Jersey corporation, with executive offices located at 000 Xxxxx
000, Xxxxxxxx, Xxx Xxxxxx 00000 (the "Seller").
W I T N E S E T H:
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WHEREAS, simultaneously with the execution hereof, the Seller and Mt.
Olive Family Golf Centers, Inc., a wholly-owned Delaware subsidiary of FGC
("Subsidiary"), are consummating the transactions contemplated by the Purchase
Agreement, dated as of October __, 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) $3,000,000.00 in cash
and (ii) options to purchase up to 20,000 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 2 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. Subject to Article II hereof, FGC hereby grants to the
Seller the option (the "Option") to purchase, upon the terms and conditions
hereinafter set forth, up to an aggregate of 20,000 shares of Common Stock of
FGC (subject to adjustment as hereinafter provided), at the exercise price of
$31.00 per share (the "Exercise Price").
II. EXERCISE OF OPTION. Seller may exercise the option, in whole or in
part, at any time on or after October 21, 1997 until October 21, 2001 (the
"Exercise Period"), provided, however, that at any time prior to October 21,
1997, FGC shall have the right to revoke all or any portion of the Option
granted hereunder if an event, entitling the Subsidiary to indemnification
from the Seller pursuant to the Purchase Agreement, has occurred. Upon the
occurrence of such an event, FGC shall deliver a notice to the Seller, which
notice shall specify the event entitling the Subsidiary to indemnification,
the amount owed by the Seller to the Subsidiary, the calculation of such
amount and the basis therefore. The notice shall also state the number of
Options being revoked which shall be determined by dividing the amount owed by
the Seller to the Subsidiary by the Spread. The "Spread" shall mean the
Current Market Price (as hereinafter defined) per share less the Exercise
Price per share but in no event shall the Spread be less than $.01.
The "Current Market Price" per share of FGC Common Stock shall mean the
average of the daily closing sales price as reported on the NASDAQ Stock
Market for the five consecutive trading days immediately preceding the date of
determination.
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 the Company 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
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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,
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. 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
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
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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.
VI. 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 OR 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, including FGC's 1996 Stock
Option Plan. 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
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.
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(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 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
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
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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 FGC as follows:
(a) Seller is a corporation duly formed, validly existing and in good
standing under the laws of the State of New Jersey.
(b) Seller has all requisite power and authority to carry on its business
as it is now being conducted and has taken all necessary corporate action to
enter into this Agreement. Seller has all requisite corporate 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
Incorporation or any agreement or other instrument to which each Seller is a
party or by which it or its assets may be bound.
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 FGC
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or Subsidiary 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 FGC
or Subsidiary to Seller shall simultaneously be given in either manner
provided above to O'Donnell, Kennedy, Vespole, Piechta & Trifiolis, 000 Xxxxx
Xxxx Xxxxxx, Xxxx Xxxxxx, Xxx Xxxxxx 00000, Attention: Xxxx X'Xxxxxxx, 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.
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 and any such attempt to
transfer the same shall be void ab initio.
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(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:
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NAME:
TITLE:
MT. OLIVE GOLF
CENTERS, INC.
BY:
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NAME:
TITLE:
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