Global Edition

Merger creates world’s largest golf course company

12.10am 3rd April 2002 - Corporate

National Golf Properties, Inc. (“National Golf”) (NYSE:TEE) has announced that its board of directors has approved a definitive merger agreement with its primary tenant, American Golf Corporation (“American Golf”) and certain of American Golf’s affiliates, including Golf Enterprises, Inc. and European Golf, LLC.

National Golf Properties is the largest publicly traded company in the United States specializing in the ownership of golf course properties with 131 golf courses geographically diversified among 22 states.

American Golf is the largest operator of golf facilities in the world. The company (including its affiliates) employs over 20,000 men and women and operates more than 300 private, resort and daily fee golf courses and practice centres in the United States, United Kingdom, Australia and Japan.

The companies today:

Operate 246 properties in the United States, with a strong presence in Southern California and other highly desirable golf markets including the San Francisco Bay area, New York City, Atlanta, Hilton Head Island, Chicago and Las Vegas

Operate 27 properties in the United Kingdom, Japan and Australia

Own 124 of the above-mentioned properties

Have over 50,000 members at 78 private country clubs

Have nearly 100,000 active paid members of a golf frequency reward program offered at more than 150 of the new company’s public courses

Have over 20,000 employees and

Have combined revenues in excess of $700 million 

Upon completion of the merger, the new company will become the largest owner and operator of golf courses worldwide.

Under the terms of the agreement, National Golf and American Golf and its designated affiliates will become subsidiaries of a newly-formed corporation, incorporated in Delaware, to be named at a later date. All issued and outstanding shares of National Golf will be converted tax-free on a one-for-one basis into an equal number of shares of common stock in the new company. In addition, all common limited partnership interests in National Golf Operating Partnership, L.P. (other than those held by affiliates that will be owned by the new company) will be converted on a one-for-one basis into an equal number of shares of common stock in the new company. Upon consummation of the merger, National Golf will no longer be a real estate investment trust. In full, there are currently 20.5 million outstanding National Golf shares and common units that will be converted, representing a total of 20.5 million votes in the newly combined company.

Shareholders of American Golf and its affiliates will receive total consideration of up to 100,000 shares of Class C preferred stock in the new company, 156,005 shares of common stock in the new company (which is equivalent to 156,005 common limited partnership units in National Golf Operating Partnership, L.P. currently held by entities controlled by David Price that are being contributed to the new company) and $10,000 cash. Each of the shares of Class C preferred stock may be converted at any time within seven years into a number of shares of common stock in the new company equal to 22.8 multiplied by the current market price of the common stock minus $15.00, then divided by the current market price. This Class C preferred stock carries no dividend, has no put rights, represents a total of 230,000 votes, has a liquidation preference of $1 million and may, at the new company’s option, be redeemed for $1 million at any time after the twentieth anniversary of the closing of the transaction.

After the merger is completed, current National Golf shareholders and National Golf Operating Partnership, L.P. common unit holders together will own 100 percent of the new company’s common shares.

The new company will achieve a $6 million benefit due to the cancellation of net debt owed to David Price and his related entities.

As of December 31, 2001, American Golf and its related entities had unaffiliated third-party debt of $126 million. National Golf had unaffiliated third-party debt of $484 million and cash on hand in the amount of $63 million at year-end 2001. Upon consummation of the transaction, each company and its related entities would remain subject to their debt obligations unless such debt obligations are refinanced.

The transaction is subject to approval by National Golf shareholders, lenders to National Golf and American Golf and common and preferred unit holders of National Golf Operating Partnership, L.P., as well as customary regulatory approvals and certain other conditions described in the merger agreement. The companies currently anticipate that the transaction will close by the end of the third quarter of 2002. In the event that the transaction is not completed or is materially delayed, there may be serious adverse consequences on the financial condition and operations of both National Golf and American Golf. There can be no assurance as to whether or when these conditions will be satisfied.

Charles S. Paul, chairman of the Independent Committee and interim chief executive officer of National Golf, stated, “The Independent Committee has evaluated the alternatives available to us, and we have concluded that a merger with American Golf is in the best interests of all our stakeholders. This transaction aligns the interests of shareholders and puts the assets of the combined company under a unified management structure with common goals and a focused execution strategy. We are working closely with the lenders of both National Golf and American Golf to extend our near-term debt maturities. As the next step in this process, we are pursuing new debt and equity financing.”

David G. Price, founder of National Golf and American Golf, stated, “Through today’s transaction, I have invested the Price-related assets of American Golf into National Golf. This firmly aligns my interests with those of National Golf shareholders, positioning the combined company for future growth and success. I look forward to working with the Independent Committee to help ensure a smooth and productive transition and merger.”

Upon the signing of the merger agreement, American Golf and its affiliates became bound by certain covenants that allow the Independent Committee of National Golf oversight into the day-to-day operations at American Golf. In addition, the independent directors will be responsible for the integration of the companies during the transition period, the negotiation and approval of a new equity investment and determination of the management of the new company.

The board of directors of the new company will be comprised of the five members who currently sit on the board of National Golf and will include David Price. The majority of the board is and will continue to be independent. It is possible that the board of directors will be modified as part of discussions with new equity investors.

The Independent Committee’s plan undertakes to strengthen the company’s balance sheet while also stabilizing and enhancing the value of the new company’s leading property portfolio through selective investments, the continuation of a strategic acquisition and divestiture program and the roll-out of new membership products and services. The Independent Committee believes this transaction would enhance value for shareholders while further reducing debt.

On March 29, 2002, National Golf entered into an agreement with certain of its lenders on account of defaults under its $300,000,000 unsecured credit facility, extending the term of the existing forbearance agreement with these lenders until April 30, 2002 and extending the maturity of the revolver portion of the facility from March 29, 2002 until April 30, 2002.

National Golf noted that American Golf has paid in full its rent obligations for March 2002 and has paid year-to-date approximately one-half of its rent obligations. With the approach of the high demand season, the company expects American Golf to be current with its rent obligations on a monthly basis going forward.

Lazard served as investment banker to the Independent Committee and Wachtell, Lipton, Rosen & Katz served as legal advisors.

National Golf www.nationalgolfproperties.com

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