Global Edition

Irate stockholders act against golf course owner

10.00am 6th March 2002 - Corporate

National Golf Properties has executed a letter of intent to enter into a business combination with American Golf Corporation, its primary tenant, and certain of American Golf’s affiliates including, among others, Golf Enterprises Inc and European Golf, LLC. Upon completion of the proposed transaction the combined company would be the largest publicly traded company in the world specialising in the ownership and operation of golf courses and related facilities, with a combined portfolio of more than 300 public, private and resort golf properties in the United States, United Kingdom, Japan and Australia.

The announcement came a few days after shares in National Golf Properties Inc had dropped 17% in a single day after the company said that it was suspending dividends on its stock while it continued to study financial restructuring options.

Many analysts in the US had warned of a cut in the annual $1.84 dividend after the Santa Monica based real estate investment trust said in November that its largest tenant, American Golf Corporation, might not be able to make timely rent payments. American Golf operates the vast majority of the 136 courses owned by National Golf in 23 states while David Price who is Chairman of National Golf, and one of that company’s largest shareholders, is also the controlling shareholder of American Golf, which is a private company.

National Golf’s share price had previously suffered large falls in August and November 2001. It was on 14th November that National Golf announced that American Golf, which had lost $8.7 million in the first six months of 2001, might not be able to make its lease payments to National Golf for six months.

Speaking of the proposed business combination, David Price said, “This powerful combination allows National Golf and American Golf the opportunity to maximise the multiple strengths of all the combined companies on an international basis with the goal of creating and growing the finest and most successful golf company in the world.”

“After a review of our alternatives, the Independent Committee of National Golf determined that the proposed transaction offers the best value for maximising value for National Golf stakeholders,” stated Charles S Paul, Chairman of the Independent Committee and Interim CEO of National Golf. “We are fortunate to be in a position to combine these companies and enhance our competitive position while achieving significant operating synergies. Our combined strength should enable us to capitalise on the consolidation opportunities presented in an industry that has suffered from overbuilding and generally poor economic conditions. As part of the proposed transaction, we will promptly pursue a significant new equity investment in the combined company. This process will be managed by the Independent Committee. The Independent Committee has engaged Lazard Freres & Co as its investment banker and Wachtell, Lipton, Rosen and Katz as special counsel in connection with the proposed transaction.”

While the definitive terms and structures of the proposed transaction have not been finalised, National Golf anticipates that, in the proposed business combination, current equity holders of American Golf and certain of their affiliates will receive shares in a class of non-dividend yielding preferred stock. During the period between execution of definitive agreements and consummation of the proposed transaction, the conduct of business of American Golf will be subject to customary restrictions, including cash containment and limitations on material transactions as well as affiliate transactions. National Golf has agreed to defer temporarily the current rental obligations of American Golf.

At least some National Golf stockholders have now decided that the law offers them a better chance of recovering the value of their investment than the proposed combination of the two businesses. Several lawsuits seeking class action status have been filed in the US District Court for the Central district of California on behalf of persons who purchased the common stock of National Golf Properties between 1st April 1999 and 14th November 2001, the “class-period”.

The Complaint alleges that National Golf and two of its top corporate officers misled the investing public during the Class Period regarding National Golf’s financial condition. The Complaint alleges National Golf failed to reveal that American Golf was under such severe financial stress that the Company was in danger of violating its line of credit.

American Golf www.americangolf.com

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