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As Filed with the Securities and Exchange Commission on March 31, 1998
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
/x/ Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 1997.
/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to
________.
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Commission File Number 000-22091
GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Maryland 33-0724736
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
14 North Adger's Wharf, Charleston, South Carolina 29401; (843) 723-4653
(Address of principal executive offices) (Zip Code) (Telephone number)
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value American Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None.
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
On March 15, 1998 there were 7,631,694 common shares outstanding of the
registrant's only class of common stock. Based on the March 25, 1998 closing
price of $31.625 per share, the aggregate market value of the voting stock held
by nonaffiliates of the registrant was $237,193,983.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive Proxy Statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's 1997 fiscal year, are
incorporated by reference in Part III of this Form 10-K; and certain exhibits to
the Company's prior reports on Forms 10-Q and 8-K, Registration Statements of
Employee Stock Purchase Plan and Employee Stock Option Plans on Forms S-8 (nos.
333-46659 and 333-46657), and Registration Statements on Form S-11 (nos.
333-15965 and 333-36847) are incorporated by reference in Part IV hereof.
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TABLE OF CONTENTS
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) General Development of Business . . . . . . . . . . . . . . . 1
Company Overview. . . . . . . . . . . . . . . . . . . . . 1
Developments in Early 1997. . . . . . . . . . . . . . . . 4
Initial Public Offering and the Formation
Transactions . . . . . . . . . . . . . . . . . . 4
Recent Developments . . . . . . . . . . . . . . . . . . . 5
Participating Mortgage . . . . . . . . . . . . . . 5
Acquisitions . . . . . . . . . . . . . . . . . . . 6
Line of Credit . . . . . . . . . . . . . . . . . . 7
Loans to Officers. . . . . . . . . . . . . . . . . 8
Follow-On Public Offering. . . . . . . . . . . . . 8
(b) Financial Information About Industry Segment. . . . . . . . . 8
(c) Narrative Description of Business . . . . . . . . . . . . . . 8
Business Objective and Strategy . . . . . . . . . . . . . 8
Investment Criteria. . . . . . . . . . . . . . . . 9
Acquisition Strategy . . . . . . . . . . . . . . . 10
Internal Growth. . . . . . . . . . . . . . . . . . 12
Employees . . . . . . . . . . . . . . . . . . . . . . . . 13
Environmental Matters . . . . . . . . . . . . . . . . . 13
Tax Status . . . . . . . . . . . . . . . . . . . . . . . 14
Government Regulation . . . . . . . . . . . . . . . . . . 14
Software Deficiencies Could Adversely Affect the Company. 15
Competition . . . . . . . . . . . . . . . . . . . . . . . 15
The Golf Industry . . . . . . . . . . . . . . . . . . . . 15
Competitive Conditions . . . . . . . . . . . . . . 15
Demographics . . . . . . . . . . . . . . . . . . . 17
Seasonality. . . . . . . . . . . . . . . . . . . . 17
(d) Foreign Operations . . . . . . . . . . . . . . . . . . . . . 18
Item 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Resort Courses . . . . . . . . . . . . . . . . . . 22
High-End Daily Fee Courses . . . . . . . . . . . . 24
Private Club Courses . . . . . . . . . . . . . . . 25
The Participating Leases. . . . . . . . . . . . . . . . . 26
The Participating Mortgage. . . . . . . . . . . . . . . . 34
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . 38
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Market Information. . . . . . . . . . . . . . . . . . . . 39
Shareholder Information . . . . . . . . . . . . . . . . . 39
Dividends . . . . . . . . . . . . . . . . . . . . . . . . 39
Recent Sales of Unregistered Securities . . . . . . . . . . . . . 40
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Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . 41
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 43
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Results of Operations of the Company . . . . . . . . . . . . 45
Liquidity and Capital Resources of the Company . . . . . . . 45
Pro Forma Results of Operations of the Company . . . . . . . 46
Funds from Operations and Cash Available for Distribution. . 47
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . 48
Item 9. CHANGES IN THE COMPANY'S CERTIFYING PUBLIC ACCOUNTANT. . . . . . . 48
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . 49
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . 49
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Item 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS . . . . . . . . . . . . . 49
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Financial Statements. . . . . . . . . . . . . . . . . . . . 50
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 50
Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . 50
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PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
COMPANY OVERVIEW
Golf Trust of America, Inc. ("GTA") is a self-administered real estate
investment trust ("REIT") formed to capitalize upon consolidation
opportunities in the ownership of upscale golf courses throughout the United
States. GTA was incorporated in Maryland on November 8, 1996. GTA holds its
golf course interests through Golf Trust of America, L.P., a Delaware limited
partnership and in one instance, through a wholly-owned affiliate of Golf
Trust of America, L.P. (collectively, the "Operating Partnership"), controlled
by GTA. (In this Annual Report, the term "Company" generally includes GTA,
the Operating Partnership, and GTA's two wholly-owned subsidiaries.) As of
March 15, 1998, the Company holds participating interests in 28 golf courses
(the "Golf Courses"), 24 of which are owned and four of which serve as
collateral for a 30-year participating mortgage loan made by the Company to
the owner of the Westin Innisbrook Resort ("Participating Mortgage"). The
Golf Courses are located in Florida (9), South Carolina (6), Georgia (2),
Virginia (2), Alabama, California, Kansas, Kentucky, Michigan, Nebraska,
North Carolina, Ohio and Texas.
The Company's goal is to increase cash available for distribution per
share and to enhance stockholder value by becoming a leading owner of, and
participating in increased revenue from, nationally or regionally recognized
golf courses. The Company's principal business strategy is to acquire upscale
golf courses and thereafter lease the golf courses to qualified third party
operators, including affiliates of the sellers. The Company believes the
continuity of management provided by these experienced operators facilitates
the Company's growth and profitability.
In addition to the Company's ability to acquire golf courses for cash
and/or the assumption of indebtedness, the Company may acquire golf courses
through the issuance of units of limited partnership interest in the
Operating Partnership ("OP Units") which are redeemable for cash or, at the
Company's option, shares of the Company's common stock ("Common Stock") on a
one-for-one basis. When the Company acquires a golf course in exchange for
OP Units, the golf course seller generally may defer tax recognition of the
gain on the exchange until the seller redeems its OP Units.
The Company believes it holds a distinct competitive advantage in the
acquisition of upscale golf courses, including those which might not
otherwise be available for purchase, because of (i) its utilization of the
multiple independent lessee structure, (ii) management's substantial industry
knowledge, experience and relationships within the golf community, (iii) the
Company's strategic alliances with prominent golf course operators and (iv)
its ability to issue OP Units to golf course owners on a tax-deferred basis.
In February 1997, the Company raised net proceeds of approximately $73.0
million in its initial public offering of Common Stock (the"IPO") and
acquired ten Courses (the "Initial Courses") from their prior owners
(together with the prior owners of the Golf Courses acquired since the IPO,
the "Prior Owners"). Each of the Initial Courses was leased-back to an
affiliate of its Prior Owner. In November 1997, the Company raised net
proceeds of approximately $83.0 million in a follow-on public offering of
Common Stock. Since the IPO, the Company has acquired an interest in an
additional 18 Golf Courses.
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The Golf Courses which the Company owns are leased to multiple
independent third party lessees (the "Lessees") pursuant to leases
("Participating Leases") which provide for payments ("Lease Payments") of
fixed base rent ("Base Rent") and participating rent ("Participating Rent")
based on growth in revenue at the Golf Courses. The interest payment under
the Participating Mortgage is structured similarly to the Participating
Leases to provide the Company with base interest payments and additional
interest payments based on growth in revenue at the Westin Innisbrook Resort.
Neither the Company nor its executive officers owns any interest in, or
participates in the management of, the Lessees or the owner of the Westin
Innisbrook Resort, Golf Host Resorts, Inc. (the "Westin Innisbrook Resort
Owner").
The Company believes the Initial Courses and its investments since the
IPO are consistent with its goal of becoming a leading owner of, and
participating in increased revenue from, nationally or regionally recognized
upscale golf courses. The Golf Courses include a number of nationally
recognized golf courses. Legends of Stonehouse and Royal New Kent, each of
which was named the "Best New Upscale Course" by GOLF DIGEST in 1996 and
1997, respectively, and Oyster Bay Golf Links, which was named Best New
Resort Course in the United States in 1983 by GOLF DIGEST. The Copperhead
Course at the Westin Innisbrook Resort was ranked 43rd and the Emerald Dunes
Golf Course ("Emerald Dunes") was ranked 63rd in the 1996 survey by GOLF
MAGAZINE of the "Top 100 Courses You Can Play." The Island Course at the
Westin Innisbrook Resort was ranked as one of the "Top 75 Resort Courses" by
GOLF DIGEST in 1992. Heritage Golf Club was ranked in the Top 50 Public Golf
Courses by GOLF DIGEST and Sandpiper Golf Course was included in the "Top 75
Upscale Golf Courses" in the United States by GOLF DIGEST. See "The Golf
Courses." The Company believes that the quality of the Golf Courses is
further reflected in the average green fees at the Golf Courses, which
significantly exceed national industry averages.
The Company's executive offices are located at 14 North Adger's Wharf,
Charleston, South Carolina 29401 and its telephone number is (843) 723-GOLF
(4653).
SUBSIDIARIES AND THE OPERATING PARTNERSHIP
GTA has two wholly-owned subsidiaries, GTA GP, Inc. ("GTA GP") and GTA
LP, Inc. ("GTA LP"), each of which is a Maryland corporation (collectively,
the "Subsidiaries"). The Subsidiaries exist solely to hold the Company's
general and limited partnership interests in the Operating Partnership. The
board of directors of each Subsidiary is comprised of the executive officers
of GTA. The Operating Partnership was formed in Delaware in November 1996.
The Operating Partnership owns the Golf Courses that are subject to the
Participating Leases and holds the Participating Mortgage. In addition, the
Operating Partnership owns approximately 95% of the economic interest in a
taxable subsidiary formed to hold title to a 14-acre development site
adjacent to the Sandpiper Golf Course, with the balance owned by Mr. Blair,
President and Mr. Young, a director of the Company. GTA currently holds a
60.0% interest in the Operating Partnership, through its Subsidiaries. GTA
GP is the sole general partner of the Operating Partnership and GTA LP is a
limited partner of the Operating Partnership. The other limited partners
include the Westin Innisbrook Resort Owner and those Prior Owners who
received OP Units in exchange for the contribution of their Golf Courses.
The limited partners do not have day-to-day control over the Operating
Partnership. However, the limited partners are entitled to vote on certain
matters, including the sale of all or substantially all the Company's assets
or the merger or consolidation of the Operating Partnership, which decisions
require the approval of the holders of at least 66.7% of the interests in the
Operating Partnership (including GTA LP). Each of the limited partners
(other than GTA LP) may exercise Redemption Rights (as herein defined) for up
to 50% of its OP Units beginning one year after transfer of their property to
the
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Operating Partnership and the remaining 50% beginning two years after
completion of such transfer for cash or, at the election of the Company, for
shares of Common Stock on a one-for-one basis.
On February 1, 1998 the Partnership Agreement was amended in order to
(i) streamline the administrative process of creating additional classes or
series of OP Units; (ii) streamline the administrative process by which the
Operating Partnership commits to maintain indebtedness for the benefit of a
limited partner; (iii) clarify that the Subsidiaries receive a full
distribution on OP Units issued during the subject quarter (in order to
enable GTA to pay dividends on the corresponding shares of Common Stock);
(iv) clarify that the Redemption Right for newly-issued OP Units is not
exercisable until one year from the date of issuance; (v) create and
designate the terms and conditions of Class B Limited Partnership Interests;
(vi) commit the Partnership to maintaining certain indebtedness for the
benefit of the Prior Owner of Emerald Dunes; and (vii) provide a schedule of
the dates on which the limited partners' OP Units may first be redeemed.
Such amendment is filed as an exhibit to this Annual Report.
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The current relationship among GTA, its subsidiaries, the Operating
Partnership (including its wholly-owned affiliate), the limited partners
(including many Prior Owners and the Westin Innisbrook Resort Owner) and the
Operators is described in the following chart:
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-----------------
| Golf Trust of |
| America, Inc. |
-----------------
| |
| |
100% | | 100%
ownership | | ownership
| |
| |
-------------- --------------
| GTA GP, Inc. | | GTA LP, Inc. |
-------------- --------------
| |
| |
General | | 59.8%
Partner, | | Limited
with a 0.2% | | Partnership
Interest | | Interest
| |
| |
------------ 40.0% -------------------------------
| Prior | Limited | Golf Trust of America, L.P. |
| Owners, | Partnership | 28 Golf Courses |
| Operators | Interest | (the "Operating Partnership") |
| and |-------------- -------------------------------
| Management | | |
------------ | |
Participating | | Participating
Leases and | | Lease Payments
Participating | | and Participating
Mortgage | | Mortgage Payments
---------------
| Operators |
---------------
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DEVELOPMENTS IN EARLY 1997
INITIAL PUBLIC OFFERING AND THE FORMATION TRANSACTIONS
Upon completion of the IPO, the Company, the Operating Partnership, the
Prior Owners and the initial Lessees completed the transactions (the
"Formation Transactions") described below.
- On February 12, 1997 the Company, which was incorporated in Maryland in
November 1996, sold 3,910,000 shares of Common Stock in its initial
public offering and contributed all of the net proceeds thereof,
approximately $73.0 million, to the Operating Partnership in exchange
for an aggregate of 3,910,000 OP Units.
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- The Prior Owners of the Initial Golf Courses contributed each of the
Initial Courses to the Company in exchange for an aggregate of 4,106,606
OP Units, approximately $6.2 million in cash and the repayment of
approximately $47.5 million of existing mortgages and other indebtedness
at the Golf Courses as follows:
- The Company acquired seven Golf Courses from Legends Golf for an
aggregate of 3,738,556 OP Units, the assumption and repayment of
approximately $34.8 million in existing indebtedness and the
reimbursement of approximately $522,500 of out-of-pocket expenses
incurred in connection with the Formation Transactions.
- The Company acquired three Golf Courses from parties unaffiliated
with the Company or Legends Golf for an aggregate amount of 368,050
OP Units, $6.2 million in cash and the repayment of approximately
$12.7 million in existing indebtedness.
- The Company, as lessor, leased the Initial Courses to the initial
Lessees, which were newly-formed entities affiliated with the Prior
Owners, pursuant to Participating Leases for initial terms of 10 years
each, with each Lessee having the right to extend the term of its
Participating Lease for up to six renewal terms of five years each.
- Each initial Prior Owner was granted the right to receive additional OP
Units pursuant to the Lessee Performance Option. See "Narrative
Description of Business -- Business Objective and Strategy -- Internal
Growth." OP Units may be redeemed for cash or, at the Company's
election, Common Stock on a one-for-one basis, beginning one year after
the completion of the IPO.
- The Company entered into employment agreements with its executive
officers.
- The Company entered into the Option Agreement with Legends Golf pursuant
to which the Company was granted the option and right of first refusal
to acquire golf courses currently owned or subsequently acquired or
developed by Legends Golf.
RECENT DEVELOPMENTS
Since March 31, 1997, the filing date of the Company's annual report on
Form 10-K for the year ended December 31, 1996, the following developments
have occurred:
PARTICIPATING MORTGAGE
WESTIN INNISBROOK RESORT. On June 20, 1997, the Company entered into
and made an initial advance of $69.975 million under the $78.975 million
Participating Mortgage to Golf Host Resorts, Inc. (the "Westin Innisbrook
Resort Owner"), an affiliate of Starwood Capital Group LLC ("Starwood"). The
loan is secured by a first lien on the Westin Innisbrook Resort, located near
Tampa, Florida, and all other assets of the Westin Innisbrook Resort Owner.
The Westin Innisbrook Resort is a destination golf resort with 63 holes (plus
an additional nine holes currently under construction). The four Golf Courses
at the Westin Innisbrook Resort are operated by Troon Management Company, LLC
("Troon Golf"), an affiliate of Starwood. The Westin Innisbrook Resort also
features one of the largest hotel and conference facilities in Florida, which
facilities are operated by an affiliate of Westin Hotel Company ("Westin"),
an affiliate of Starwood, pursuant to a long-term management agreement.
Westin has agreed to pay up to $2.5 million per year to the Westin Innisbrook
Resort Owner to supplement results of operations with respect to the
operations at the Westin Innisbrook Resort for up to five years (the "Westin
Guaranty"). The
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Westin Innisbrook Resort Owner used a portion of the proceeds of the
Participating Mortgage to acquire from the Company 274,039 newly issued OP
Units and 159,326 newly issued shares of Common Stock, representing a current
combined ownership interest in GTA and the Operating Partnership of 3.41%.
ACQUISITIONS
TIBURON GOLF CLUB. On August 18, 1997, the Company acquired the 27-hole
Tiburon Golf Club ("Tiburon"), an upscale semi-private golf course in Omaha,
Nebraska, for an aggregate price of $6.0 million, including the issuance of
21,429 shares of Common Stock (valued at approximately $600,000 on such
date). Tiburon is leased to Granite Golf Group, Inc. (together with its
affiliates, "Granite Golf") under a Participating Lease. Granite Golf
currently manages over 25 golf courses throughout the United States.
RAINTREE COUNTRY CLUB. On September 2, 1997, the Company acquired the
Raintree Country Club ("Raintree"), an 18-hole upscale daily fee golf course
located near Akron, Ohio, for an aggregate price of $4.6 million, including
the issuance of 121,529 OP Units (valued at approximately $3.4 million based
on the price of the Common Stock on such date). Raintree is leased to its
Prior Owner, who has continuously managed the course since its construction
in 1991, under a Participating Lease.
EAGLE WATCH GOLF CLUB. On September 30, 1997, the Company acquired
Eagle Watch Golf Club ("Eagle Watch"), an 18-hole upscale daily fee golf
course located in Atlanta, Georgia, for an aggregate price of $6.4 million,
including the issuance of 70,158 OP Units (valued at approximately $1.9
million based on the price of the Common Stock on such date). The Prior
Owner of Eagle Watch is an affiliate of the Prior Owner of Olde Atlanta Golf
Club, a course that was acquired by the Company at the IPO. Eagle Watch is
leased to an affiliate of the Lessee of Olde Atlanta Golf Club under a
Participating Lease.
LOST OAKS OF INNISBROOK GOLF COURSE. On October 3, 1997, the Company
acquired the Lost Oaks of Innisbrook Golf Course ("Lost Oaks of Innisbrook"),
in Tampa, Florida located near the Westin Innisbrook Resort, for
approximately $5.9 million, including closing costs. Lost Oaks of Innisbrook
is leased to an affiliate of Starwood under a Participating Lease. The
Company has agreed to fund certain improvements at Lost Oaks of Innisbrook in
an amount not to exceed $1.25 million in exchange for an increased Lease
Payment.
THE CLUB OF THE COUNTRY. On October 17, 1997, the Company acquired The
Club of the Country, a private country club located in Louisburg, Kansas, for
an aggregate price of approximately $3.1 million, including the issuance of
approximately 19,231 OP Units (valued at approximately $500,000 based on the
price of the Common Stock on such date). The Club of the Country is leased
to an affiliate of its Prior Owner and managed by Granite Golf.
BLACK BEAR GOLF CLUB. On November 24, 1997, the Company acquired Black
Bear Golf Club ("Black Bear"), an 18-hole upscale golf course located near
Orlando, Florida, for an aggregate price of $4.75 million, including the
issuance of 24,424 OP Units (valued at approximately $650,000 based on the
price of the Common Stock on such date). The Company leases the golf course
to Granite Golf under a Participating Lease.
WILDEWOOD GOLF CLUB AND COUNTRY CLUB AT WOODCREEK FARMS. On December
19, 1997, the Company acquired Wildewood Golf Club ("Wildewood") and the
Country Club at Woodcreek Farms ("Woodcreek" and collectively, "Stonehenge
Golf") from Lyndell L. Young, Larry D. Young's brother, two 18-hole upscale
private golf facilities located near Columbia, South Carolina, for an
aggregate price
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of $10.5 million, including the issuance of 69,811 OP Units (valued at
approximately $4.5 million based on the price of the Common Stock on such
date). Each course is leased to the Prior Owner under a Participating Lease.
BONAVENTURE GOLF COURSE. On January 2, 1998, Company acquired the
Bonaventure Golf Course ("Bonaventure"), an upscale 36-hole resort golf
facility located near Fort Lauderdale, Florida for approximately $23.7
million, including closing costs. The course is leased to an affiliate of
the Prior Owner of Emerald Dunes under a Participating Lease.
MYSTIC CREEK GOLF COURSE. On January 19, 1998, the Company acquired
Mystic Creek Golf Course ("Mystic Creek"), an upscale 27-hole daily fee golf
facility located near Dearborn, Michigan for an aggregate price of $10
million, including the issuance of 52,724 OP Units (valued at approximately
$1.5 million based on the price of the Common Stock on such date). The
Company is a lessee under a long term ground lease expiring in 2046. The
course is subleased to an affiliate of its prior owner under a Participating
Lease.
EMERALD DUNES GOLF COURSE. Effective February 1, 1998, the Company
acquired Emerald Dunes ("Emerald Dunes"), an upscale daily fee 18-hole golf
course located in West Palm Beach, Florida for an aggregate price of
$22.4 million, including the issuance 227,347 OP Units (valued at approximately
$6.1 million based on the price of the Common Stock on such date). The
Company acquired Emerald Dunes subject to approximately $13.0 million of
mortgage indebtedness. The course is leased to an affiliate of its Prior
Owner under a Participating Lease.
SANDPIPER GOLF COURSE. On March 6, 1998, the Company acquired Sandpiper
Golf Course ("Sandpiper"), an upscale 18-hole daily fee golf course located
near Santa Barbara, California for $32.0 million and an adjacent 14-acre
development site valued at $4.5 million. The course is leased to a joint
venture consisting of one of the West Coast's largest golf course
contractors, Environmental Golf, and the owner of a planned 400 room,
five-star luxury hotel adjacent to the golf course. Mr. Blair and Mr. Young
hold an approximate 5% interest in the taxable subsidiary which holds the
development site.
PERSIMMON RIDGE GOLF COURSE. On March 9, 1998, the Company acquired
Persimmon Ridge Golf Course ("Persimmon Ridge"), an upscale 18-hole private
golf club located in Louisville, Kentucky for $7.5 million. The course is
leased to Granite Golf.
LETTERS OF INTENT. The Company has recently submitted non-binding
offers to acquire additional golf courses and is in various stages of
discussions to acquire additional golf courses. The Company is in various
stages of negotiation and due diligence review for each of these golf
courses. Completion of these transactions is subject to negotiation and
execution of definitive purchase and sale agreements, satisfactory completion
of the Company's due diligence review and certain other customary closing
conditions. No assurances can be given that the Company will continue to
pursue or complete the acquisition of any of these golf courses.
LINE OF CREDIT
On June 20, 1997, the Company closed a two-year, $100 million secured
revolving credit facility (the "Line of Credit") with a group of four
commercial banks led by NationsBank, N.A. On September 24, 1997, the Company
negotiated a reduction in the interest rate from LIBOR plus 2.0% to LIBOR
plus 1.75% (7.72% on December 31, 1997.)
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On February 27, 1998, NationsBank, N.A. and Bank of America NT & SA,
with a group of three commercial banks, amended and restated the Credit
Facility to increase the Credit Facility to $125 million on an unsecured
basis. Up to 20% of the Credit Facility may be used for working capital
needs. The Credit Facility availability is limited to an "unencumbered pool
calculation" as defined in the Credit Facility. Financial covenants include
minimum requirement for net worth, liquidity and cash flow. Non-financial
covenants include among others, restrictions on loans outstanding,
construction in progress, loans to officers and changes to the Board of
Directors. These covenants have been met.
The Company intends to draw upon the Line of Credit, or any successor
line of credit, to fund future acquisitions of additional golf courses.
There can be no assurance, however, that the Company will close any future
acquisitions or that the Company will continue to have access to sufficient
debt and equity financing to allow it successfully to pursue its acquisition
strategy.
LOANS TO OFFICERS
On September 19, 1997, the Company issued 70,000 restricted common
shares to officers of the Company under the 1997 Stock-Based Incentive Plan.
These shares were issued for $.01 when the market price was $26.1875. On
January 2, 1998, loans of approximately $525,000 were made to W. Bradley
Blair, II and David J. Dick, for the partial payment of related taxes. Mr.
Blair borrowed $286,000 at 6.02% interest per annum and Mr. Dick borrowed
$239,000 at 6.02% per annum. In addition, the Company has agreed to fund up
to approximately $937,000 over the next five years to pay additional taxes
related to the issuance of such shares. Such loans are secured by OP Units
and/or shares of Common Stock and are payable in full by December 31, 2002
with interest payable annually.
FOLLOW-ON PUBLIC OFFERING
On November 10, 1997, the Company raised net proceeds of approximately
$82.7 million in its follow-on public offering of 3,450,000 shares of Common
Stock underwritten by BancAmerica Robertson Stephens, A.G. Edwards & Sons,
Inc., Raymond James & Associates, Inc. and Wheat First Butcher Singer. The
proceeds were contributed to the Operating Partnership and used to repay
advances under the Line of Credit and for general corporate purposes,
including certain of the acquisitions described above.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT.
The Company's principal business strategy is to acquire upscale golf
courses and thereafter lease the golf courses to qualified third party
operators, including affiliates of sellers. See the Consolidated Financial
Statements and notes thereto included in Item 8 on this Form 10-K for certain
financial information required to be included in response to this Item 1.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
BUSINESS OBJECTIVE AND STRATEGY
The Company's primary objectives are to increase its cash available for
distribution per share to stockholders and to enhance stockholder value. The
Company's main strategies for such growth are to acquire additional golf
courses that meet the Company's investment criteria and to participate in
increased revenues at its Golf Courses (internal growth). The Company
believes market conditions today are favorable for the acquisition of golf
courses at attractive returns.
8
<PAGE>
When the Company acquires a golf course, the course is either leased
back to its prior owner or leased to another qualified operator. Under the
Company's standard Participating Lease, the Company receives fixed Base Rent
and Participating Rent based on increases in Gross Golf Revenues (as herein
defined) if any, at such Golf Course. Each Lessee joins the Company's Lessee
Advisory Association ("Advisory Association"), which provides marketing
information and opportunities and potential economic benefits to the Lessees,
such as bulk purchasing power for certain golf course supplies and equipment.
In certain instances, state and federal tax laws make purchase-leaseback
transactions prohibitively expensive. Accordingly, in such cases the Company
may provide financing to a particular golf course, provided the Company
receives a participating interest in revenues at the golf course on a basis
comparable to the Company's standard Participating Lease. The Company expects
that the Company's loan would be secured by a first-lien on the underlying
golf course asset and would include an option to purchase the course at the
end of the loan's term. In considering any financing transactions, including
the Participating Mortgage, the Company seeks to obtain economic terms
similar to the standard Participating Lease.
To fund acquisitions, the Company has access to a variety of debt and
equity financing sources, including the Line of Credit and the ability to
issue OP Units.
Described below are the Company's (i) investment criteria, (ii)
acquisition strategy and (iii) internal growth strategy.
INVESTMENT CRITERIA
The Company intends to concentrate its investment activities on golf
courses, including multi-course portfolios, available at attractive prices
that meet one or more of the following criteria:
- upscale Daily Fee (as herein defined) courses that target avid golfers,
who the Company believes are generally willing to pay the higher green
fees associated with upscale golf courses;
- private or semi-private golf courses with proven operating histories
that the Company believes have the potential for significant cash flow
growth;
- courses that offer superior facilities and service and attract a
relatively high number of affluent destination golfers;
- courses owned by multi-course owners and operators who have a strong
regional presence and afford the Company the opportunity to expand in a
particular region;
- newly developed, well-designed courses with high growth potential; and
- upscale, well-maintained golf courses with proven operating histories
located in areas where significant barriers to entry exist.
The Company will undertake an analysis with respect to golf courses to
be considered for acquisition, including an evaluation of the following:
- product and service differentiation;
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<PAGE>
- competitive position in market;
- barriers to entry in development of new golf courses such as scarcity of
land and long lead-times for course development;
- condition of the golf course and agronomy review;
- quantity, quality and cost of irrigation; and
- strength of the lodging industry, including hotels and condominiums, in
destination golf areas.
ACQUISITION STRATEGY
The Company believes it has a distinct competitive advantage in the
acquisition of upscale golf courses, including those which might not
otherwise be available for purchase, because of (i) management's substantial
industry knowledge, experience and relationships within the golf community,
(ii) the Company's ability to issue OP Units to golf course owners on a
tax-deferred basis, (iii) the Company's utilization of the multiple
independent lessee structure, and (iv) the Company's strategic alliances with
prominent golf course operators. Besides acquiring new courses, the Company
may also acquire expansion facilities at its existing courses.
MANAGEMENT'S KNOWLEDGE, EXPERIENCE AND RELATIONSHIPS. Prior to joining
the Company as its President, Chairman and Chief Executive Officer, W.
Bradley Blair, II served as Executive Vice President, Chief Operating Officer
and General Counsel of Legends Group, Ltd., a leading golf course owner,
developer and operator in the southeast and Mid-Atlantic regions of the
United States. As an officer of Legends Group Ltd., Mr. Blair was responsible
for all aspects of operations, including acquisitions, development and
marketing. Prior to joining the Legends Group Ltd., Mr. Blair had extensive
experience in the acquisition, disposition, development and financing of golf
courses and golf course development in his role as Managing Partner of
Blair, Conaway, Bograd and Martin, PA, attorneys at law. Prior to the IPO,
David J. Dick, the Company's Executive Vice President, worked with the Inland
Group, Inc. as a consultant specializing in real estate investment banking
and golf course finance. From 1983 to 1992 Mr. Dick served as Vice President
of Development and Asset/Portfolio Management for Thoner & Birmingham
Development Corporation, a golf and country club community developer. Larry
D. Young, a director of the Company, is the founder of Legends Golf.
Mr. Young has been involved in the golf business for more than 25 years and
has developed 10 golf courses during that time, four of which were rated the
best new course in their respective category in the year developed by GOLF
DIGEST.
ISSUANCE OF OP UNITS. The Company has the ability to issue units of
limited partnership interest in the Operating Partnership ("OP Units"). OP
Units may be issued to a prospective golf course seller in exchange for his
golf course. Holders of OP Units generally have the right (the "Redemption
Right") to cause the Company to redeem their OP Units after certain holding
periods for cash or, at the Company's option, for Common Stock on a
one-for-one basis. When the Company acquires a golf course in exchange for
OP Units, the golf course seller generally will not recognize taxable income
until it exercises the Redemption Right. Thus, the issuance of OP Units can
provide an attractive tax-deferred transaction for sellers of golf courses.
MULTIPLE INDEPENDENT LESSEE STRUCTURE. The Company believes many golf
course owners are single-business entrepreneurs who could benefit from
diversification but desire to remain involved in the
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<PAGE>
day-to-day operation of their courses. The Company believes such golf course
owners will continue to be attracted to the Company's multiple independent
lessee structure, in which the Company acquires a course and then leases it
back to an affiliate of the seller. Such structure satisfies the owner's
desire to remain involved in the day-to-day operation of his course, while
also satisfying his desire to obtain liquidity. Specifically the structure
offers prospective sellers: (i) the ability to retain control over the
operations of the golf course by leasing it back; (ii) the tax deferral and
increased liquidity associated with owning OP Units; (iii) the ability to
obtain additional OP Units through the Lessee Performance Option (as
described below); (iv) the marketing and purchasing economies of scale gained
from participation in the Lessee Advisory Association; and (v) the ability to
diversify the seller's investment by participating as an equity owner in the
Company's portfolio of golf courses.
RELATIONSHIPS WITH STARWOOD, TROON GOLF, GRANITE GOLF AND ENVIRONMENTAL
GOLF. Since its IPO, the Company has formed business relationships with
prominent golf and hospitality entities, including Starwood, Troon Golf,
Granite Golf and Environmental Golf. The Company believes Starwood is one of
the United States' leading golf course management, development and consulting
companies. Starwood operates or leases the Golf Courses at the Westin
Innisbrook Resort and Lost Oaks of Innisbrook. In addition, the golf and
conference facilities of the Westin Innisbrook Resort are owned by a Starwood
affiliate and the hotel and conference facilities are managed by Westin,
another Starwood affiliate. Troon Golf, an affiliate of Starwood, has the
exclusive right to operate golf courses at hotels owned by Westin. Troon
Golf leases or manages over 15 courses throughout the United States and is
recognized as one of the premier upscale golf course operators.
Tiburon Golf Course, Black Bear, The Club of the Country and Persimmon
Ridge are leased to or operated by affiliates of Granite Golf. Granite Golf
and its affiliates currently manage over 25 golf courses throughout the
United States.
An affiliate of Environmental Golf is managing Sandpiper Golf Course and
will be responsible for the planned redesign and renovation of the course.
Environmental Golf and its affiliates have been in the golf business for over
40 years, have built over 400 golf courses, and maintain over 25 golf
courses.
The Company believes that its existing relationships with Starwood,
Granite Golf and Environmental Golf will provide the Company with additional
acquisition opportunities throughout the United States.
EXPANSIONS, IMPROVEMENTS AND WORKING CAPITAL LINES. Under certain
circumstances, the Company agrees to make funds available to the Lessees to
fund significant capital improvements, to expand the existing golf facilities
and in limited circumstances to provide working capital. When significent
capital improvements are funded, the underlying Base Rent is increased.
Working capital lines are evidenced by promissory notes or set forth in the
lease agreement.
Currently, the Company has agreed to fund the construction of an
additional nine holes at Northgate Country Club ("Northgate") ($3.0 million),
purchase a clubhouse being constructed at The Woodlands ($750,000), fund the
construction at Lost Oaks of Innisbrook for renovations to the clubhouse and
golf course ($1.25 million), fund a working capital line at Tiburon
($150,000), fund the renovations to the conference facilities and
construction of an additional nine holes at the Westin Innisbrook Resort
($9.0 million), fund a working capital line at Bonaventure Golf Course
($750,000) and pay for renovations at that course ($3.15 million) and to fund
a working capital line at Sandpiper Golf Course ($5.0 million) and pay for
renovations at that course ($6.0 million).
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<PAGE>
INTERNAL GROWTH
In addition to acquiring new golf courses and new participating
interests, the Company seeks to increase revenue from its current assets
through internal growth.
Based on the experience of its management, the Company believes the Golf
Courses offer opportunities for revenue growth through effective marketing
and efficient operations. The Participating Leases and the Participating
Mortgage have been structured to provide the operators with incentives to
manage and maintain the Golf Courses in a manner designed to increase revenue
and, as a result, increase payments to the Company under the Participating
Leases and the Participating Mortgage. The Company believes that management
of the Lessees, as well as Troon Golf and Granite Golf, have demonstrated
expertise in the operation of the Golf Courses and that the Golf Courses are
positioned to benefit from favorable trends in the golf industry.
PARTICIPATING LEASES. The Participating Leases generally provide that
for any year, the Company will receive with respect to each leased Golf
Course, the greater of (a) Base Rent (as adjusted by the Base Rent Escalator
described below) or (b) Participating Rent. Participating Rent is generally
established to be an amount equal to the original (unescalated) Base Rent
plus 33 1/3% of the difference between that year's Gross Golf Revenue and
Gross Golf Revenue at the Golf Course in the year prior to the course's
acquisition, as adjusted in determining the original Base Rent. Base Rent
under each Participating Lease generally increases annually by the lesser of
(i) 3% or (ii) 200% of the change in the Consumer Price Index ("CPI") for the
prior year (the "Base Rent Escalator") during each of the first five years of
the Participating Lease and, if the Lessee Performance Option is exercised,
for an additional five years thereafter. Annual increases in Lease Payments
are generally limited to 5% during the first five years of the lease terms.
"Gross Golf Revenue" is generally defined as all revenues from a Golf Course
including green fees, golf cart rentals, range fees, membership dues, member
initiation fees and transfer fees, excluding, however, food and beverage and
merchandise revenue. In certain circumstances, the Company participates in
food and beverage revenue and merchandise revenue. In the acquisition of
golf courses that are not leased-back to affiliates of the Prior Owner, the
Company generally structures the Participating Rent component in a manner
which it believes maximizes the Participating Rent payable to the Company.
In these instances, the Company may establish different thresholds such that
Participating Rent increases as Gross Golf Revenue increases at a given
course, with the initial tier as low as 5% and the maximum tier at 50%, as
was done at Sandpiper Golf Course.
PARTICIPATING MORTGAGE. The $78.975 million Participating Mortgage is
structured similarly to the Participating Leases. The Company anticipates
that it will receive a return similar to the return it anticipates on the
Participating Leases. Under the Participating Mortgage, the Company has made
an initial advance of $69.975 million, which will be followed by additional
advances of up to $9.0 million to be used for a nine-hole expansion and other
improvements to the Westin Innisbrook Resort facilities currently underway.
The loan term is 30 years, with an initial Base Interest rate of 9.63% per
annum ("Base Interest") and an interest rate of 9.75% per annum on the amount
of the loan in excess of $69.975 million. The loan provides for minimum
increases in the aggregate annual payment of Base Interest of 5% per year for
the first five years and a participating interest feature throughout the term
based upon the growth in Gross Golf Revenues, as well as in other revenues,
at the Westin Innisbrook Resort over a 1996 base year. The annual increases
in the Mortgage Payment are limited to 7% during the first five years. Westin
has agreed to pay up to $2.5 million per year to the Westin Innisbrook Resort
Owner to supplement results of operations with respect to the operations at
the Westin Innisbrook Resort for up to five years.
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<PAGE>
LESSEE PERFORMANCE OPTION. The Participating Leases generally utilize
an incentive-based performance structure. This Performance Option structure
is designed to encourage the operators to seek aggressive growth in revenue
at the Golf Courses. The structure also is designed to attract potential
sellers of golf courses that the Company believes have high growth potential
and that might not otherwise be available for purchase. Generally leases
with third party operators do not contain a Lessee Performance Option. Under
the Performance Option for the Participating Leases, during years three
through five of each Participating Lease, the operator or its affiliate,
subject to certain qualifications and restrictions, may elect one time to
increase the Base Rent in order to receive additional OP Units or Common
Stock. The Prior Owner of Northgate will have an additional two-year period
to exercise the Performance Option upon completion of the planned nine-hole
expansion. The Performance Option for the Participating Leases may only be
exercised if the current-year net operating income of the operator of the
applicable Golf Course, inclusive of a capital replacement reserve, exceeds
113.5% of such Lessee's Lease Payment after taking into account the increased
amount of Base Rent. If the Performance Option is exercised, the Base Rent is
increased by an amount calculated to be accretive to the Company's Funds From
Operations on a per share basis. Following exercise of the Lessee Performance
Option, the adjusted Base Rent will be increased by the Base Rent Escalator
each year for a period of five years. An operator's ability to exercise the
Performance Option and the number of OP Units or Common Stock issuable to
such Prior Owner in connection therewith, will depend on future operating
results at the applicable Golf Course and therefore cannot be determined in
advance.
PERFORMANCE OPTION FOR THE PARTICIPATING MORTGAGE. The structure of the
Performance Option for the Participating Mortgage is similar to the
Performance Option for the Participating Leases. Under the Performance Option
for the Participating Mortgage, during years three and five of the
Participating Mortgage, the Westin Innisbrook Resort Owner, subject to
certain qualifications and restrictions, may elect one time to require the
Company to make an additional advance under the Participating Mortgage and
the Westin Innisbrook Resort Owner will be required to purchase additional OP
Units with that advance. The Performance Option for the Participating
Mortgage may be exercised only if the current-year net operating income of
the Westin Innisbrook Resort, inclusive of a capital replacement reserve,
exceeds 113.5% of such operator's Participating Mortgage obligation after
taking into account the increased amount of Base Interest. If the Performance
Advance is made, interest on the Performance Advance will be calculated to be
accretive to the Company's Funds From Operations on a per share basis.
Following exercise of the Performance Option for the Participating Mortgage,
the adjusted Base Interest will be increased by 3% per year for five years.
The Westin Innisbrook Resort Owner's ability to exercise the Performance
Option will depend on future operating results and therefore cannot be
determined in advance.
EMPLOYEES
The Company is self-administered and has 11 full-time employees, 5 of
which are devoted primarily to acquisitions.
ENVIRONMENTAL MATTERS
Operations of the Golf Courses involve the use and storage of various
hazardous materials such as herbicides, pesticides, fertilizers, motor oils
and gasoline. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real property may become liable for the
costs of removal or remediation of certain hazardous substances released on
or in its property. Such laws often impose such liability without regard to
whether the owner or operator knew of, or was responsible for, the release of
such hazardous substances. The presence of such substances, or the failure to
remediate
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<PAGE>
such substances properly when released, may adversely affect the owner's
ability to sell such real estate or to borrow using such real estate as
collateral. The Company has not been notified by any governmental authority
of any material non-compliance, liability or other claim in connection with
any of the Golf Courses. All of the Golf Courses have been subjected to a
Phase I environmental audit (which does not involve invasive procedures, such
as soil sampling or ground water analysis) by an independent environmental
consultant.
Based on the results of the Phase I environmental audits, the Company is
not aware of any existing environmental liabilities that the Company believes
would have a material adverse effect on the Company's business, assets,
results of operations or liquidity, nor is the Company aware of any such
liability. No assurance, however, can be given that these reports reveal all
potential environmental liabilities, that no prior or adjacent owner created
any material environmental condition not known to the Company or the
independent consultant or that future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulations) will
not result in imposition of environmental liability. The Participating Leases
provide that the Lessees will indemnify the Company for certain potential
environmental liabilities at the Golf Courses.
At Bonaventure Country Club, there was remediation work performed
respecting maintenance and facilities operations, including the construction
of a new maintenance area to remedy prior practices that resulted in low
level soils contamination at the property. In addition, underground storage
tanks at the property, which have subsequently been abandoned, have leaked,
resulting in localized soil contamination. The Company believes that the
completed remedial work and soil contamination will not have a material
adverse effect on the operation of the Company.
In addition, a significant portion of the Sandpiper Golf Course was
previously an operating oil field and there is significant residual oil
contamination on the property. In connection with the acquisition of the
property, the Company obtained an indemnification from Atlantic Richfield
Company ("ARCO") in a form and in an amount which the Company believes is
adequate to protect the Company from liability for such contamination.
Certain circumstances may require ARCO to enter the property and perform
remediation actions.
TAX STATUS
The Company intends to make an election to be taxed as a REIT under
Section 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"), for its taxable year ended December 31, 1997. If the Company
qualifies for taxation as a REIT, the Company generally will not be subject
to federal income tax to the extent it distributes at least 95% of its REIT
taxable income to its shareholders. If the Company fails to qualify as a
REIT in any taxable year, the Company will be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its
income and property and to federal income and excise taxes on its
undistributed income.
GOVERNMENT REGULATION
The Golf Courses are subject to the Americans with Disabilities Act of
1990, as amended (the "ADA"). The ADA has separate compliance requirements
for "public accommodations" and "commercial facilities" but generally
requires that public facilities such as clubhouses and recreation areas be
made accessible to people with disabilities. These requirements became
effective in 1992. Compliance with the
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<PAGE>
ADA requirements could require removal of access barriers and other capital
improvements at the Golf Courses.
Noncompliance could result in imposition of fines or an award of damages
to private litigants. Under the Participating Leases, the Lessees are
responsible for any costs associated with ADA compliance.
SOFTWARE DEFICIENCIES COULD ADVERSELY AFFECT THE COMPANY
The Company and the Lessees will rely upon a significant number of
computer software programs and operating systems in conducting their
operations. To the extent that these software applications contain source
code that is unable to appropriately interpret the upcoming calendar year
"2000," some level of modification or even possibly replacement of such
source code or applications will be necessary. Pursuant to the Leases, the
Lessees will bear the costs associated with determining whether their systems
are "Year 2000" compliant and the costs of any necessary modifying or
replacing its source code or application. Given the information known at
this time, the Company believes its systems are Year 2000 compliant.
However, the Company will be dependent upon the Lessees and other parties to
determine that their systems and applications are Year 2000 compliant.
COMPETITION
The Golf Courses are, and any additional golf courses and related
facilities acquired by the Company will be, subject to competition for
players and members from other golf courses located in the same geographic
areas. Changes in the number and quality of golf courses in a particular area
could have a material effect on the revenues of the Golf Courses. In
addition, the Company will be subject to competition for the acquisition of
golf courses and related facilities with other purchasers of golf courses,
including other golf course acquisition companies. See "--The Golf
Industry--Competitive Conditions" below.
THE GOLF INDUSTRY
UNLESS OTHERWISE NOTED, REFERENCES HEREIN TO NATIONAL INDUSTRY
STATISTICS AND AVERAGES ARE BASED ON REPORTS OF THE NATIONAL GOLF FOUNDATION
("NGF"), AN INDUSTRY TRADE ASSOCIATION NOT AFFILIATED WITH THE COMPANY.
The Company believes the United States golf industry is entering a
period of significant growth. This belief is based, in part, on the fact that
people over the age of 50 play more golf than younger people, and the
expectation that over the next several years the number of people age 50 and
older will increase significantly as the "baby boomers" age. The Company
expects that the aging population will contribute to an increase in the
number of rounds played and Gross Golf Revenues at the Golf Courses and any
golf courses subsequently acquired by the Company.
COMPETITIVE CONDITIONS
To its knowledge, the Company is one of two publicly traded REITs in the
United States focused exclusively on owning and acquiring golf courses.
Golf course ownership in the United States is highly fragmented. There
are approximately 16,000 golf courses (approximately 13,000 eighteen-hole
equivalents) in the United States that the Company
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believes are owned by approximately 13,000 different entities. The Company
believes there are relatively few owners of more than one course. The Company
believes that the 15 largest golf course owners in the United States
collectively own fewer than 5% of the total number of golf courses and that
fewer than 10 golf course owners own more than 10 golf courses. The Company
believes that this fragmented ownership provides it with an excellent
opportunity for consolidation of the ownership of upscale golf courses.
The Company believes the current fragmentation of golf course ownership
is a result of a variety of factors, including a scarcity of capital, the
entrepreneurial nature of many golf course owners and operators and their
associated pride of ownership. The Company believes that the economies of
scale in owning and operating multiple golf courses, the growing significance
of professional financial management in the operation of golf courses and the
desire for liquidity by golf course owners could lead to consolidation of
golf course ownership. In particular, the Company believes golf course owners
will be attracted to the Company's multiple independent lessee structure,
which permits the Company to acquire a course and then lease it back to an
affiliate of the seller. Such structure satisfies the owner's desire to
remain involved in the day-to-day operation of his course, while also
satisfying his desire to obtain liquidity. The Company further believes its
ability to issue OP Units in exchange for a golf course will attract
potential sellers, who generally can defer recognition of taxable gain on the
exchange until they exercise their Redemption Right. By offering golf course
owners the tax planning benefit of OP Units and the economic benefit of
participating in the independent lessee structure, including resulting
economies of scale in operating golf courses, the Company believes it is able
to acquire desirable upscale courses that may not otherwise be available for
purchase.
Largely in response to the popularity of golf, the construction of golf
courses in the United States has increased significantly in recent years. New
golf course openings from the mid-1970's through 1987 averaged approximately
150 golf courses per year. For the period 1987 through 1996 an average of
approximately 240 new golf courses were opened each year, with a high of 336
new golf course openings in 1995.
The emergence and popularity of younger professional golfers, including
Tiger Woods, Justin Leonard, Phil Mickelson and Karrie Webb, have increased
awareness and interest in golf. According to industry statistics, 19.4
million homes watched the final round of the four major golf championships in
1996. In 1997, television viewership of the final four rounds of the four
major golf championships increased 56 percent to 30.3 million. The Company
believes this resurgent interest will result in increasing golf
participation, including increasing participation by women and younger
golfers.
The golf industry generated approximately $15 billion in revenues in the
United States in 1996. The Company believes the game of golf has exhibited
strong growth in popularity in the past 16 years as illustrated below:
<TABLE>
<CAPTION>
1980 1996 % Change
---- ---- --------
<S> <C> <C> <C>
(millions)
Number of Golfers . . . . 15.0 24.7 65%
Rounds Played . . . . . . 358 477 33%
</TABLE>
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The following table illustrates the growth in demand in the United
States at Daily Fee and private country clubs, as compared to municipal
courses, which tend to be of lesser quality.
<TABLE>
<CAPTION>
Rounds Played (in Millions)
-----------------------------------
1986 1996 Percent Change
--------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Daily Fee . . . . 192.4 156.4 38.9% 40.3% 23.0%
Municipal . . . . 110.4 27.5% 121.3 25.4% 9.9%
Private . . . . . 135.1 33.6% 163.7 34.3% 21.2%
Total . . . . . . 401.9 100.0% 477.4 100.0% 18.8%
</TABLE>
The Company believes that upscale Daily Fee courses (including Resort
Courses), similar to those owned and targeted by the Company, are well
situated to take advantage of the changing demographics. As shown below, the
top 5% of Daily Fee golf courses were able to increase weekend green fees by
an annual rate in excess of 10% from 1993 to 1995.
<TABLE>
<CAPTION>
Daily Fee
Green Fees - Weekend
--------------------
Percent Annual
1993 1995 Change Change
---- ---- ------ ------
<S> <C> <C> <C> <C>
Median. . . . . . . . . . $18 $21 16.7% 8.0%
Top 25% . . . . . . . . . $25 $30 20.0% 9.5%
Top 5%. . . . . . . . . . $53 $65 22.6% 10.7%
</TABLE>
DEMOGRAPHICS
The Company believes the game of golf will benefit from favorable
demographic trends. The United States Census Bureau estimates that the
population age 50 and over will increase by 39% between 1996 and 2010, from
69.3 million to 96.3 million. The average number of rounds played per golfer
on an annual basis increases significantly as the golfer ages. Golfers in
their 50's play nearly twice as many rounds annually as golfers in their
30's, and golfers age 65 and older generally play three times as many rounds
annually as golfers in their 30's. The Company believes that the number of
golfers as well as the total number of rounds played will increase
significantly as the average age of the population continues to increase. The
Company believes that "baby boomers," the oldest of whom are now in their
early 50's, will contribute to the growth in total rounds played due to
growing wealth and leisure time as well as the suitability of golf as a sport
for an aging population. Since 1991, the number of senior golfers (golfers
age 50 and over) has grown 16%, or by nearly 1 million golfers.
SEASONALITY
The golf industry is seasonal in nature because of weather conditions
and the fewer available tee times during the rainy season and the winter
months. Each of the Lessees operating a daily fee course may vary green fees
based on changes in demand. The Company does not expect seasonal fluctations
in Lessee revenues to have a significant impact on the Company's operating
results. The Company's Leases require Base Rent to be paid ratably throughout
the year. The Company participates in the growth of Gross Golf Revenues at
the courses.
17
<PAGE>
(d) FOREIGN OPERATIONS
The Company does not engage in any foreign operations or derive any
revenue directly from foreign sources.
ITEM 2. PROPERTIES
The Company believes the Initial Courses and its investments since the
IPO are consistent with its goal of becoming a leading owner of, and
participating in increased revenue from, nationally or regionally recognized
upscale golf courses. The Golf Courses include a number of nationally
recognized golf courses. Legends of Stonehouse and Royal New Kent, each of
which was named the "Best New Upscale Course" by GOLF DIGEST in 1996 and
1997, respectively, and Oyster Bay, which was named Best New Resort Course in
the United States in 1983 by GOLF DIGEST. The Copperhead Course at the Westin
Innisbrook Resort was ranked 43rd and the Emerald Dunes Golf Course was
ranked 63rd in the 1996 survey by GOLF MAGAZINE of the "Top 100 Courses You
Can Play." The Island Course at the Westin Innisbrook Resort was ranked as
one of the "Top 75 Resort Courses" by GOLF DIGEST in 1992. Heritage Golf Club
was ranked in the Top 50 Public Golf Courses by GOLF DIGEST and Sandpiper
Golf Course was included in the "Top 75 Upscale Golf Courses" in the United
States by GOLF DIGEST. See "The Golf Courses." The Company believes that the
quality of the Golf Courses is further reflected in the average green fees at
the Golf Courses, which significantly exceed national industry averages.
The Golf Courses include 23 upscale Daily Fee courses (including 12
Resort Courses) and five private country clubs. "Daily Fee" courses are open
to the public and generate revenues principally through green fees, golf cart
rentals, food and beverage operations, merchandise sales and driving range
charges. "Resort Courses" are Daily Fee golf courses that attract a
significant percentage of players from outside the immediate area in which
the golf course is located and generate a significant amount of revenue from
golf vacation packages. The Company considers its Daily Fee and Resort
Courses to be high-end golf courses because of the quality and maintenance of
each golf course. Private country clubs generally are closed to the public
and derive revenues principally from membership dues, initiation fees,
transfer fees, golf cart rentals, guest fees, food and beverage operations
and merchandise sales.
The Company believes that the overall quality of the Golf Courses is
reflected in the green fees charged at each Golf Course, which significantly
exceed national averages. The Company believes its focus on upscale Daily Fee
golf courses and private country clubs, which attract golfers with attractive
demographic and economic profiles, will result in stronger and less cyclical
revenue growth in comparison to golf courses with lower green fees.
Five of the Golf Courses are located in the Myrtle Beach, South Carolina
vicinity, a popular year-round golf destination area. Myrtle Beach is
considered one of the nation's premier golf resort locations with nearly 100
golf courses and approximately 3.9 million rounds played in 1996, according
to the MYRTLE BEACH GOLF HOLIDAY.-TM- In addition to golf courses, Myrtle
Beach offers a mix of entertainment, shopping and dining, as well as
proximity to beaches. All of the Golf Courses located in the Myrtle Beach
vicinity were developed and contributed to the Company by Legends Golf, a
leading golf course owner, developer and operator in the southeast and
mid-Atlantic regions of the United States.
Five of the Golf Courses are located near Tampa, Florida. Of these, four
are located at the Westin Innisbrook Resort, a destination golf resort that
includes one of the largest hotel and conference facilities in the state. The
fifth course, Lost Oaks of Innisbrook, is located near the Westin Innisbrook
18
<PAGE>
Resort, and all five courses are near the Gulf of Mexico. Additionally, the
courses benefit from the millions of tourists annually that visit
Disneyworld-TM-, Busch Gardens-TM- and other regional recreational
attractions.
The Company owns a fee simple interest in each of the Golf Courses it
owns with the exception of Oyster Bay and Mystic Creek, which are subject to
long-term ground leases, and the four Golf Courses at the Westin Innisbrook
Resort, where the Company holds a first lien on the Golf Courses and all of
the related facilities (other than the separately-owned condominium units
comprising the hotel). The Company additionally holds an option to purchase
the Westin Innisbrook Resort and such facilities at the expiration of the
Participating Mortgage for the lesser of its fair market value or a
pre-determined number of shares of Common Stock.
Certain unaudited information regarding each of the Golf Courses owned
by the Company as of December 31, 1997, is set forth on the following page:
19
<PAGE>
THE GOLF COURSES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
Rounds
------
Name Location 1995 1996 1997
---- -------- ---- ---- ----
<S> <C> <C> <C> <C>
INITIAL COURSES:
Heritage Club Pawleys Island, SC 55,094 52,382 53,054
Legends Resort (5) Myrtle Beach, SC 145,466 148,727 145,193
Heathland
Moorland
Parkland
Oyster Bay (6) Sunset Beach, NC 62,141 57,856 60,208
Woodlands Gulf Shores, AL 43,464 41,744 47,004
Royal New Kent (7) Providence Forge, VA -- 5,743 14,984
Legends of Stonehouse (8) Williamsburg, VA -- 5,686 21,900
Olde Atlanta Atlanta, GA 41,195 41,053 47,004
Northgate Country Club (9) Houston, TX 46,6000 45,400 48,459
SUBSEQUENT ACQUISITIONS:
Tiburon Golf Club (10) Omaha, NE 56,496 53,160 56,817
Raintree Country Club Akron, OH 44,000 40,000 35,000
Eagle Watch Atlanta, GA 36,484 36,332 43,237
Lost Oaks of Innisbrook Tampa, FL 40,072 52,760 60,840
The Club of the Country Louisburg, KS 15,747 17,575 18,050
Stonehenge Golf (12) Columbia, SC N/A 25,755 27,863
-Wildewood
-Woodcreek(13)
Black Bear Golf Club (14) Orlando, FL 6,172 45,923 45,156
Westin Innisbrook Resort (6)(15) Tampa, FL 148,294 140,922 136,327
Copperhead
Island
Eagle's Watch (16)
Hawk's Run(16)
TOTAL
<CAPTION>
Revenue per Player (2)
----------------------
Name Location 1995 1996 1997
---- -------- ---- ---- ----
<S> <C> <C> <C> <C>
INITIAL COURSES:
Heritage Club Pawleys Island, SC $57.28 $59.96 $60.75
Legends Resort (5) Myrtle Beach, SC 165.05 162.92 55.95
Heathland
Moorland
Parkland
Oyster Bay (6) Sunset Beach, NC 55.66 56.83 56.64
Woodlands Gulf Shores, AL 32.88 34.86 36.62
Royal New Kent (7) Providence Forge, VA -- 60.60 74.35
Legends of Stonehouse (8) Williamsburg, VA -- 60.50 77.45
Olde Atlanta Atlanta, GA 37.53 41.39 41.47
Northgate Country Club (9) Houston, TX 59.40 64.27 66.14
SUBSEQUENT ACQUISITIONS:
Tiburon Golf Club (10) Omaha, NE 21.33 23.19 25.51
Raintree Country Club Akron, OH 19.25 20.38 25.15
Eagle Watch Atlanta, GA 38.67 39.23 34.49
Lost Oaks of Innisbrook Tampa, FL 31.87 29.64 27.04
The Club of the Country Louisburg, KS 43.69 43.93 40.84
Stonehenge Golf (12) Columbia, SC N/A 64.69 74.30
-Wildewood
-Woodcreek(13)
Black Bear Golf Club (14) Orlando, FL 36.98 33.71 34.15
Westin Innisbrook Resort (6)(15) Tampa, FL 95.35 101.23 83.76
Copperhead
Island
Eagle's Watch (16)
Hawk's Run(16)
TOTAL
<CAPTION>
Gross Golf Revenue (3)
----------------------
Initial Base
Name Location 1995 1996 1997 Rent (4)
---- -------- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
INITIAL COURSES:
Heritage Club Pawleys Island, SC $3,156,000 $3,141,000 $3,223,000 $1,825,000
Legends Resort (5) Myrtle Beach, SC 8,003,000 8,078,000 8,123,000 1,556,000(5)
Heathland
Moorland
Parkland
Oyster Bay (6) Sunset Beach, NC 3,459,000 3,288,000 3,410,000 1,856,000
Woodlands Gulf Shores, AL 1,429,000 1,455,000 1,721,000 679,000
Royal New Kent (7) Providence Forge, VA -- 348,000 1,114,000 1,817,000
Legends of Stonehouse (8) Williamsburg, VA -- 344,000 1,696,000 1,890,000
Olde Atlanta Atlanta, GA 1,546,000 1,699,000 1,949,000 845,000
Northgate Country Club (9) Houston, TX 2,768,000 2,918,000 3,205,000 1,407,000
SUBSEQUENT ACQUISITIONS:
Tiburon Golf Club (10) Omaha, NE 1,205,000 1,233,000 1,449,000 682,000
Raintree Country Club Akron, OH 847,000 815,000 880,000 520,000
Eagle Watch Atlanta, GA 1,411,000 1,425,000 1,491,000 703,000
Lost Oaks of Innisbrook Tampa, FL 1,277,000 1,564,000 1,645,000 625,000(11)
The Club of the Country Louisburg, KS 668,000 772,000 737,000 330,000
Stonehenge Golf (12) Columbia, SC N/A 1,666,000 2,070,000 1,196,000
-Wildewood
-Woodcreek(13)
Black Bear Golf Club (14) Orlando, FL 228,000 1,548,000 1,542,000 542,000
Westin Innisbrook Resort Tampa, FL 14,140,000 14,265,000 11,418,000 6,739,000
(6)(15)
Copperhead
Island
Eagle's Watch (16)
Hawk's Run(16)
TOTAL $39,909,000 $44,559,094 $45,673,000 $26,325,000
</TABLE>
- -------------------------------------------------
(1) Yardage is calculated from the championship tees.
(2) "Revenue Per Player" is calculated by dividing Gross Golf Revenue at the
applicable Golf Course by the number of rounds played at the applicable
Golf Course.
20
<PAGE>
(3) Gross Golf Revenue is defined as all revenues from a golf course,
including green fees, golf cart rentals, range fees, membership dues,
member initiation fees and transfer fees, but excluding food and
beverage and merchandise revenue. In the case of the Westin Innisbrook
Resort the amounts shown in the table include all revenue at the Westin
Innisbrook Resort, including golf and hotel revenue, and food, beverage
and merchandise sales, but exclude various taxes and net of rental
payments to individual condominium owners.
(4) In addition to Base Rent and Base Interest, Participating Rent may be
payable by the Lessees and Participating Interest may be payable by the
Westin Innisbrook Resort Owner. Participating Rent and Participating
Interest is generally calculated based on increases in the Gross Golf
Revenue from a base year, as adjusted. For the Westin Innisbrook Resort,
Base Rent shown corresponds to the Base Interest payment.
(5) Heathland, Moorland and Parkland are subject to a single Participating
Lease.
(6) The Company acquired or has a contract to acquire the fee simple
interest in each of the Golf Courses except Oyster Bay, which is subject
to a long-term ground lease with a lessor not affiliated with the Prior
Owner thereof, and the Westin Innisbrook Resort, which serves as
collateral under the Participating Mortgage.
(7) Opened in August 1996.
(8) Opened in June 1996.
(9) The Company has agreed to fund up to $3.0 million to construct an
additional nine holes located on land adjacent to this Golf Course. The
Company expects to acquire, upon completion, the additional nine holes.
Amounts shown for Northgate Country Club are for its fiscal year ended
December 20, 1995, 1996 and year ended December 31, 1997.
(10) Tiburon Golf Club consists of 27 holes. Eighteen holes were built in
1989 with an additional nine holes built in 1994. With the exception of
Initial Base Rent, numbers are 18-hole equivalents. Yardage and year
opened is for the White/Blue course.
(11) The Company has agreed to fund up to $1.25 million to pay for additional
improvements of the Lost Oaks of Innisbrook course. If this amount is
fully advanced, the Base Rent will be increased to $740,930.
(12) Information not available for 1995.
(13) Opened in 4th Quarter of 1997.
(14) Opened in 4th Quarter of 1995.
(15) The Company has a participating mortgage interest in the Westin
Innisbrook Resort. The facility currently has 63 holes with an
additional nine holes under construction. Under the terms of the
Participating Mortgage, the Company initially funded $69.975 million and
has agreed to fund an additional $9 million to fund certain improvements
at the Westin Innisbrook Resort, including the construction of the
additional nine holes. Upon funding of the entire $9 million, the Base
Interest will be increased to approximately $7.6 million.
(16) Eagle's Watch and Hawk's Run currently comprise the 27-hole Sandpiper
course at the Westin Innisbrook Resort. An additional nine holes are
under construction, which is scheduled for completion in 1998. Yardage
shown reflects 18-hole equivalents for Sandpiper.
21
<PAGE>
RESORT COURSES
Resort Courses are Daily Fee golf courses that draw a high percentage of
players from outside the immediate area in which the course is located and
generate a significant amount of revenue from golf vacation packages. Some
Resort Courses are semi-private, in that they offer membership packages that
allow members special privileges at the golf course, but also allow public
play.
THE GOLF COURSES -- RESORT COURSES
<TABLE>
<CAPTION>
No. of Year
Course Name City, State Holes Yardage Opened
----------- ----------- ----- ------- ------
<S> <C> <C> <C> <C>
Heathland. . . . . . . . . . . . . Myrtle Beach, South Carolina 18 6,785 1990
Parkland . . . . . . . . . . . . . Myrtle Beach, South Carolina 18 7,170 1992
Moorland . . . . . . . . . . . . . Myrtle Beach, South Carolina 18 6,799 1990
Heritage Golf Club . . . . . . . . Pawleys Island, South Carolina 18 7,040 1986
Oyster Bay . . . . . . . . . . . . Sunset Beach, North Carolina 18 6,685 1983
Woodlands . . . . . . . . . . . . Gulf Shores, Alabama 18 6,584 1994
Copperhead Course. . . . . . . . . Tampa, Florida 18 7,087 1972
Island Course . . . . . . . . . . Tampa, Florida 18 6,999 1970
Eagle's Watch (2). . . . . . . . . Tampa, Florida 18 6,245 1971
Hawk's Run (2) . . . . . . . . . . Tampa, Florida 18 6,245 1971
Emerald Dunes Golf Course (3). . . West Palm Beach, Florida 18 7,006 1990
Lost Oaks of Innisbrook . . . . . Tampa, Florida 18 6,450 1977
Bonaventure Golf Course. . . . . . Fort Lauderdale, Florida
East 18 7011 1970
West 18 6189 1978
<CAPTION>
Facilities and Services
-----------------------
Practice Cart Food & Pro
Course Name City, State Facilities Rental Clubhouse Beverage Shop
----------- ----------- ---------- ------ --------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Heathland. . . . . . . . . Myrtle Beach, South Carolina Yes Yes Yes Yes Yes
Parkland . . . . . . . . . Myrtle Beach, South Carolina Yes Yes Yes Yes Yes
Moorland . . . . . . . . . Myrtle Beach, South Carolina Yes Yes Yes Yes Yes
Heritage Golf Club . . . . Pawleys Island, South Carolina Yes Yes Yes Yes Yes
Oyster Bay . . . . . . . . Sunset Beach, North Carolina Yes Yes Yes Yes Yes
Woodlands . . . . . . . . Gulf Shores, Alabama Yes Yes Yes(1) Yes Yes
Copperhead Course. . . . . Tampa, Florida Yes Yes Yes Yes Yes
Island Course . . . . . . Tampa, Florida Yes Yes Yes Yes Yes
Eagle's Watch (2). . . . . Tampa, Florida Yes Yes Yes Yes Yes
Hawk's Run (2) . . . . . . Tampa, Florida Yes Yes Yes Yes Yes
Emerald Dunes Golf Course West Palm Beach, Florida Yes Yes Yes Yes Yes
(3) . . . . . . . . . . .
Lost Oaks of Innisbrook. . Tampa, Florida Yes Yes Yes(4) Yes Yes
Bonaventure Golf Course. . Fort Lauderdale, Florida
East Yes Yes Yes Yes Yes
West Yes Yes Yes Yes Yes
</TABLE>
(1) Woodlands has a temporary clubhouse and a permanent facility is under
construction.
22
<PAGE>
(2) Eagle's Watch and Hawk's Run currently comprise the 27-hole Sandpiper
Course. An additional nine holes are under construction, which is
scheduled for completion in 1998. Numbers shown are 18-hole equivalents
for Sandpiper.
(3) Emerald Dunes Golf Course is subject to a mortgage of approximately
$12.9 million.
(4) The Company has agreed to fund up to $1.25 million for improvements,
including the reconstruction and renovation of the existing clubhouse
after which the Base Rent payable by the Lessee will be increased.
23
<PAGE>
HIGH-END DAILY FEE COURSES
The Company considers its Daily Fee courses to be high-end courses,
reflected in the quality and maintenance standards of the golf courses, and
the green fees, which are generally higher than other golf courses in their
respective markets. Some high-end daily fee courses are semi-private, in that
they offer membership packages but also allow public play.
THE GOLF COURSES -- HIGH-END DAILY FEE COURSES
<TABLE>
<CAPTION>
Facilities and Services
----------------------------------------------
No. of Year Practice Cart Food & Pro
Course Name Location, City, State Holes Yardage Opened Facilities Rental Clubhouse Beverage Shop
----------- --------------------- ----- ------- ------ ---------- ------ --------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Royal New Kent . . . . . Providence Forge, Virginia 18 7,291 1996 Yes Yes Yes(1) Yes Yes
Legends of Stonehouse Williamsburg, Virginia 18 6,963 1996 Yes Yes Yes(1) Yes Yes
Olde Atlanta. . . . . . . Atlanta, Georgia 18 6,789 1993 Yes Yes Yes Yes Yes
Tiburon . . . . . . . . . Omaha, Nebraska 27 7,005 1989 Yes Yes Yes Yes Yes
Raintree. . . . . . . . . Akron, Ohio 18 6,886 1992 Yes Yes Yes Yes Yes
Eagle Watch . . . . . . . Atlanta, Georgia 18 6,896 1989 Yes Yes Yes(1) Yes Yes
Black Bear Golf Club. . . Orlando, Florida 18 7,002 1995 Yes Yes Yes Yes Yes
Mystic Creek Golf Course Dearborn, Michigan 27 6,802 1996 Yes Yes Yes Yes Yes
Sandpiper Golf Course (2) Santa Barbara, California 18 7,068 1972 Yes Yes Yes Yes Yes
</TABLE>
(1) These courses each have a temporary clubhouse and a permanent facility
under construction at the sole cost and expense of the applicable
Lessee.
(2) Concurrent with the acquisition of Sandpiper Golf Course, the Company
formed a taxable subsidiary to hold title to a 14-acre development site
adjacent to Sandpiper Golf Course. See the Company's 1998 Proxy
Statement -- Certain Relationships and Transactions -- Sandpiper
Transaction.
24
<PAGE>
PRIVATE CLUB COURSES
Private clubs are generally closed to the public and generate revenue
principally through initiation fees and membership dues, golf cart rentals
and guest green fees. Initiation fees and membership dues are determined
according to the particular market segment in which the club operates.
Revenue and cash flows of private country clubs generally are more
stable and predictable than those of public courses because the receipt of
membership dues generally is independent of the level of course utilization.
THE GOLF COURSES -- PRIVATE COUNTRY CLUB COURSES
<TABLE>
<CAPTION>
Facilities and Services
-----------------------------------------------
No. of Year Practice Cart Food & Pro
Course Name Location, City, State Holes Yardage Opened Facilities Rental Clubhouse Beverage Shop
----------- --------------------- ----- ------- ------ ---------- ------ --------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northgate Country Houston, Texas 18(1) 6,540 1984 Yes Yes Yes Yes Yes
Club. . . . . . . .
The Club of the Louisburg, Kansas 18 6,357 1979 Yes Yes Yes Yes Yes
Country . . . . . .
Stonehenge Golf
Wildewood
Country Club. . . Columbia, South Carolina 18 6,751 1974 Yes Yes Yes Yes Yes
Country Club at
Woodcreek Farms . Columbia, South Carolina 18 7,002 1997 Yes Yes Yes Yes Yes
Persimmon Ridge . . Louisville, Kentucky 18 7,129 1989 Yes Yes Yes Yes Yes
</TABLE>
(1) Nine additional holes are expected to open in 1998. The Company has
agreed to fund up to $3.0 million to construct an additional nine holes
located on land adjacent to this Golf Course. The Company has agreed to
acquire such additional holes subject to certain conditions, after which
the Base Rent payable by the Lessee will be increased.
25
<PAGE>
THE PARTICIPATING LEASES
THE FOLLOWING SUMMARY OF THE PARTICIPATING LEASES IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE PARTICIPATING LEASES, A FORM OF WHICH IS FILED
AS AN EXHIBIT. THE FOLLOWING DESCRIPTION OF THE PARTICIPATING LEASES DOES NOT
PURPORT TO BE COMPLETE BUT CONTAINS A SUMMARY OF THE MATERIAL PROVISIONS
THEREOF. PURSUANT TO THE COMPANY'S MULTIPLE INDEPENDENT LESSEE STRUCTURE,
LEASES ARE INDIVIDUALLY NEGOTIATED AND CONSEQUENTLY VARY FROM ONE ANOTHER, AT
TIMES IN MATERIAL WAYS.
All of the Participating Leases contain the same basic provisions
described below. The leases for any golf course properties acquired by the
Company in the future will contain such terms and conditions as are agreed
upon between the Lessee and the Company at the time of such acquisitions, and
such terms and conditions may vary from the terms and conditions described
below with respect to the Participating Leases. The Company anticipates that
each new lease will be with an existing Lessee, with an affiliate of the
seller or with an unaffiliated third party experienced in the operation of
similar courses.
LEASE TERM. Each Participating Lease was entered into upon the
conveyance to the Company of the underlying Golf Course. The Company's
interest in each leased Golf Course includes the land, buildings and
improvements, related easements and rights, and fixtures (collectively, the
"Leased Property"). Each Leased Property is leased to the respective Lessee
under a Participating Lease which has a primary term of 10 years (the "Fixed
Term"). The Fixed Terms for the Golf Courses acquired at the IPO end on
December 31, 2006 and the Fixed Terms for the Golf Courses acquired since the
IPO generally and 10 years after the Lease commenced. In addition, each
Lessee has an option to extend the term of its Participating Lease for up to
six terms of five years each (the "Extended Terms") subject to earlier
termination upon the occurrence of certain contingencies described in the
Participating Lease.
In addition, at the expiration of the Fixed Term and the Extended Terms,
the Lessee will have a right of first offer to continue to lease the Golf
Course on the terms and conditions pursuant to which the Company intends to
lease the Golf Course to a third party.
USE OF THE GOLF COURSES. Each Participating Lease permits the Lessee to
operate the Leased Property as a golf course, along with a clubhouse and
other activities customarily associated with or incidental to the operation
of a golf course and other facilities located at the golf course, including,
where applicable, swim and tennis operations. Operations may include sale or
rental of golf-related merchandise, sale of memberships, furnishing of
lessons, operation of practice facilities and sales of food and beverages.
26
<PAGE>
Base Rent; Participating Rent. The initial Base Rent for the 24 Golf
Courses that the Company owns is set forth below:
<TABLE>
<CAPTION>
Initial Base
Rent
Golf Course Per Year Percentage Rent
----------- -------- ---------------
<S> <C> <C>
Legends Resort $4,669,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
Heathland less increases attributable to the Base
Parkland Escalator.(1)(2)
Moorland
Heritage Golf Club $1,825,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)(2)
Oyster Bay $1,856,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)(2)
Royal New Kent $1,817,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)(2)
Legends of $1,890,000 33 1/3% of the increase in Gross Golf
Stonehouse Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)(2)
Olde Atlanta Golf $ 845,000 33 1/3% of the increase in Gross Golf
Club Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)(2)
Northgate Country $1,407,000 33 1/3% of the increase in Gross Golf
Club Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)(2)
The Woodlands $ 679,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Tiburon Golf Club $631,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Raintree Country $447,000 33 1/3% of the increase in Gross Golf
Club Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Initial Base
Rent
Golf Course Per Year Percentage Rent
----------- -------- ---------------
<S> <C> <C>
Eagle Watch Golf $653,000 33 1/3% of the increase in Gross Golf
Club Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Lost Oaks of $573,000 33 1/3% of the increase in Gross Golf
Innisbrook Golf Revenue over the Base Year, as adjusted,
Course less increases attributable to the Base
Escalator.(1)
The Club of the $315,000 33 1/3% of the increase in Gross Golf
Country Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Black Bear Golf $500,000 33 1/3% of the increase in Gross Golf
Club Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Stonehenge Golf $1,103,000 33 1/3% of the increase in Gross Golf
Revenue over the Base Year, as adjusted,
Wildewood less increases attributable to the Base
Country Club Escalator.(1)
The Country
Club at
Woodcreek
Farms
Bonaventure Golf $2,332,000 (i) The difference between (x) the sum
Course of 47.5% of Gross Golf Revenue, 12.5% of
Merchandise Revenue and 15% of Food and
East Beverage Revenue and (y) the Annual Base
Rent and (ii) for any Fiscal Year during
West the Extended Term, the difference
between (x) 50% of the Gross Golf
Revenue, 12.5% of the Merchandise
Revenue and 15% of Food and Beverage
Revenue for such Fiscal Year and (y) the
Annual Base Rent for such Fiscal Year.
Mystic Creek Golf $1,000,000 33 1/3% of the increase in Gross Golf
Club Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Emerald Dunes Golf $2,240,000 33 1/3% of the increase in Gross Golf
Course Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.(1)
Sandpiper Golf $2,970,000 The sum of Gross Golf Percentage Rent(3),
Course Food and Beverage Rent(4) and Merchandise
Percentage Rent.(5)
Persimmon Ridge $ 733,000 40% of the increase in Gross Golf
Golf Course ---------- Revenue over the Base Year, as adjusted,
less increases attributable to the Base
Escalator.
TOTAL $28,485,000
</TABLE>
28
<PAGE>
(1) Base Escalator generally means the amount Base Rent will increase, which
is the lesser of (i) three percent (3.0%) of the Annual Base Rent
payable for the immediately preceding year, or (ii) two hundred percent
(200%) of the change in CPI from the immediately preceding fiscal year.
(2) For the initial ten courses, the initial base rent includes the capital
expenditure reserve (generally 2%-5% of the base year's gross golf
revenue).
(3) Gross Golf Percentage Rent accrues after Gross Golf Revenue exceeds
$5,000,000 in a fiscal year. If Gross Golf Revenue for a fiscal year is
between $5,000,000 and $6,000,000, then Gross Golf Percentage Rent is 5%
of the positive difference between Gross Golf Revenue and $5,000,000.
If Gross Golf Revenue for a fiscal year is between $6,000,000 and
$7,000,000, then Gross Golf Percentage Rent is the sum of 20% of the
positive difference between Gross Golf Revenue and $6,000,000 plus
$50,000. If Gross Golf Revenue for a fiscal year is between $7,000,000
and $8,000,000, then Gross Golf Percentage Rent is the sum of 40% of the
positive difference between Gross Golf Revenue and $7,000,000 plus
$250,000. If Gross Golf Revenue for a fiscal year is above $8,000,000,
then Gross Golf Percentage Rent is the sum of 50% of the positive
difference between Gross Golf Revenue and $8,000,000 plus $650,000. For
example, if Gross Golf Revenue for a fiscal year was $8,500,000, Gross
Golf Percentage Rent would be $900,000.
(4) Food and Beverage percentage rent is derived from Food and Beverage
revenue. Food and Beverage Revenue is revenue received relating to the
operation of snack bars, restaurants, bars and catering functions. Food
and Beverage Percentage Rent is 10% of the positive difference between
Food and Beverage revenue for the year and $375,000.
(5) Merchandise Rent is derived from Merchandise Revenue. Merchandise
Revenue is all revenue received from the property relating to the sale
of merchandise and inventory on the property. Merchandise Percentage
Rent is 10% of the positive difference between Merchandise Revenue for
the year and $475,000.
The Participating Leases provide for the Company to receive, with
respect to each Golf Course, the greater of Base Rent or an amount equal to
Participating Rent plus the initial Base Rent payable under each
Participating Lease. Participating Rent is equal to 33 1/3% of any increase
in Gross Golf Revenue over Gross Golf Revenue for the base year, as adjusted
in determining the initial Base Rent, which base year will be reset to the
year immediately preceding the date on which the Prior Owner exercises the
Lessee Performance Option, if applicable. The base year is 1996 for the
courses acquired at the IPO and for Golf Courses acquired since the IPO is
either 1996 or the trailing 12-month period prior to the determination of the
Base Rent. Base Rent will generally be increased annually by the Base Rent
Escalator (generally, the lesser of (i) 3% or (ii) 200% of the change in CPI
for the prior year) during the first five years of each Participating Lease
term and, if the Lessee Performance Option is exercised, an additional five
years thereafter from the date of exercise. Annual increases in Lease
Payments are limited to 5% during the first five years of the initial lease
terms. "Gross Golf Revenue" generally is defined as all revenues from a Golf
Course including green fees, golf cart rentals, range fees, membership dues,
membership initiation fees and transfer fees, excluding, however, food and
beverage and merchandise revenue. For the two Virginia Golf Courses, which
recently opened, the base year Gross Golf Revenue is based on an estimate by
the Company and the Lessee of such courses, which estimate was also the basis
for the valuation of those Golf Courses. Base Rent is required to be paid in
twelve equal monthly installments in arrears on the first day of each
calendar month. Participating Rent is payable either monthly or quarterly in
arrears.
The Company believes that Gross Golf Revenue, and hence the amount of any
Participating Rent, will be favorably impacted by any significant capital
improvements undertaken by a Lessee, such as the planned clubhouses at
Woodlands, Legends of Stonehouse and Royal New Kent and the planned
renovations and improvements at Lost Oaks of Innisbrook, Eagle Watch and
Sandpiper.
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TRIPLE NET LEASES. The Participating Leases are structured as triple
net leases under which each Lessee is required to pay all real estate and
personal property taxes, insurance, utilities and services, golf course
maintenance and other operating expenses.
SECURITY DEPOSIT. As security for its affiliated Lessee's obligations
under its Participating Leases, each prior owner of each Golf Course
generally is obligated to pledge OP Units (or cash or other collateral
acceptable to the Company) with a value initially equal to 15% of the
purchase price for the applicable Golf Course. The security deposit generally
will not be released for two years. Beginning in the third year and any time
thereafter, one-third of pledged collateral will be released if the net
operating income to lease payment coverage ratio (the "Coverage Ratio") of
the Lessee for the two prior fiscal years equals or exceeds 120%, 130% and
140%, respectively. If the Coverage Ratio falls below 120% at any time
following the release of pledged collateral, then the Lessee shall be
required to retain and not distribute profits until such time as the Lessee
has retained cash equal to at least six-months of then-current Base Rent. In
addition, the Participating Leases with the Legends Lessees are
cross-collateralized and cross-defaulted.
The security deposit will be increased following the exercise of any
Lessee Performance Option to equal approximately 15% of the sum of the
initial purchase price of such Golf Course and the value of any additional OP
Units issued in connection with the exercise of the Lessee Performance
Option. If the Company acquires any Expansion Facility, the security deposit
also will be increased by an amount equal to approximately 15% of the
purchase price of the Expansion Facility.
In connection with the lease of Tiburon, Granite Golf pledged to the
Company Common Stock of the Company with a value equal to approximately
$600,000 and Common Stock of Granite Golf with a value equal to approximately
$1.2 million, each value determined at the time of the pledge. The Company's
Common Stock is released 50% upon attaining a 130% Coverage Ratio and 50%
upon attaining a 140% Coverage Ratio. The Granite Golf stock is released 50%
when certain post-closing payments totaling up to $600,000 are made by
Granite Golf to the Prior Owner, which payment is guaranteed by the Company
and 50% when a 120% Coverage Ratio is obtained. The three courses leased to
Granite Golf are cross collateralized.
The collateral for Lost Oaks of Innisbrook consists primarily of 70,980
shares of Common Stock of the Company valued at approximately $1.9 million on
the date of the pledge. It is anticipated that 59,302 of the shares will be
released when the Coverage Ratio reaches 113.5%, and the balance will be
released in three equal installments when the Coverage Ratio reaches 120%,
130%, and 140%, respectively. The collateral also includes a pledge of the
proceeds of the Option Shares (as defined herein), which will be released
when the Coverage Ratio reaches 113.5%.
The collateral for The Club of the Country lease, 19,231 OP Units and
$250,000 of value at the time of the pledge of pledged shares of common stock
of Granite Golf.
The collateral for Emerald Dunes Golf Course consists of 115,812 OP
Units (the "Minimum Pledged Units") and 90,823 additional OP Units (the
"Additional Pledged Units") valued collectively at approximately $5,995,000
on the date of the pledge. The collateral will not be released for two years.
Beginning in the third year and at any time thereafter, one-third of the
Minimum Pledged Units will be released if the Coverage Ratio for the Emerald
Dunes lessee equals or exceeds 120%, 130% and 140% respectively. The
Additional Pledged Units will be released if such lessee achieves net
operating income of $2,240,000 in any fiscal year. If the net operating
income of the property is between $2,240,000 and $1,930,000, a pro-rata
amount of the Additional Pledged Units shall be released.
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The collateral for Bonaventure Golf Course which is leased to an
affiliate of the Lessee of Emerald Dunes, consists of 17,234 Class B OP Units
with a value of $500,000 on the date of the pledge. Class B OP Units have
the same Redemption Rights as other OP Units but do not receive any
distributions or have any profit or loss allocated to their holders. These
units may be released after two consecutive fiscal years where the Coverage
Ratio equals or exceeds 140%.
The collateral for Sandpiper Golf Course consists of a payment guarantee
(the "Payment Guarantee") by Great Universal Capital Associates, L.P. in the
amount of $1,485,000 and a letter of credit (the "Letter of Credit") from
EGSB, LLC in the amount of $1,485,000. Both Great Universal Capital
Associates, L.P. and EGSB, LLC are affiliates of Environmental Golf.
Beginning in the third year and at any time thereafter, the amount of the
Payment Guarantee will be reduced by a third if the Coverage Ratio for the
Sandpiper Lessee equals or exceeds 120%, 130% and 140% respectively.
Beginning in the third year and at any time thereafter, the amount of the
Letter of Credit will be reduced by a third if the Coverage Ratio equals or
exceeds 120%, by one-half if the Coverage Ratio equals or exceeds 130% or
completely if the Coverage Ratio equals or exceeds 140%.
ADVISORY ASSOCIATION. Each Lessee is a member of the Advisory
Association, which participates in cross-marketing of the Golf Courses and
identified each Golf Course as owned by the Company, thereby increasing the
golfing consumer's brand name awareness of the Company. Membership in the
Advisory Association is designed to provide the Lessees, collectively,
greater purchasing power with vendors than each would have individually. The
Advisory Association attempts to ensure a consistent, high-quality product at
each member Golf Course. In conjunction with management of the Company, the
Advisory Association will review and analyze any disputes between the Company
and a Lessee concerning annual capital and operating budgets and in
conjunction with the Company also will confirm each Lessee's compliance with
its repair and maintenance obligations under each Participating Lease.
MAINTENANCE AND MODIFICATIONS. Each Lessee at its sole cost and
expense, is required, to maintain and operate its respective Leased Property
in good order, repair and appearance and to make such structural and
non-structural, interior and exterior foreseen and unforeseen, and ordinary
and extraordinary repairs as are necessary and appropriate to keep such
Leased Property in good order, repair and appearance. Each Lessee also must
maintain each Golf Course it leases in substantially the same condition it
was in at the commencement of the Participating Lease and otherwise in a
condition comparable to other comparable golf courses in its vicinity. If the
Company, in consultation with the Advisory Association, determines that a
Lessee has failed to comply with its maintenance and operation obligations,
then the Company shall provide a written list to the Lessee of remedial work
and/or steps to be performed. If the Lessee disputes the Company's
assertions, then the matter shall be handled by a committee composed of
members of the Advisory Association and representatives of the Company.
The Company has generally established and will maintain, through the
payment of additional rent, with respect to each Golf Course, a capital
replacement reserve (a "Capital Replacement Fund") in an amount equal to
between 2% and 5% of Gross Golf Revenue at such Golf Course, depending on
certain factors, including the condition of the structures and the age and
condition of the Golf Course. The Company and each Lessee will agree on the
use of funds in these reserves and the Company has the right to approve each
Lessee's annual and long-term capital expenditure budgets. Funds in the
Capital Replacement Fund shall be paid to a Lessee to reimburse such Lessee
for expenditures made in connection with approved capital replacements. The
Lessees generally are obligated to increase their lease payment each year in
an amount equal to the increase in the Capital Replacement Fund from the
prior year. Amounts in the Capital Replacement Fund will be deemed to accrue
interest at a money market
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rate. Any amounts in the Capital Replacement Fund at the expiration of the
applicable Participating Lease will be retained by the Company.
Except for its obligation to fund the Capital Replacement Fund and
except for certain improvements the Company has agreed to fund at Lost Oaks
of Innisbrook and Eagle Watch in exchange for an increase in the Base Rent,
the funding of the construction of a clubhouse at Woodlands and the funding
of renovations at Sandpiper, the Company is not required to build or rebuild
any improvements on any Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to any Leased Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, in connection with any
Participating Lease, or to maintain any Leased Property in any way. In the
event that the Company elects to fund additional capital improvements on a
Golf Course, the Company generally will condition such election on an
increase in minimum rent under the Participating Lease with respect to such
Golf Course to reflect such expenditures.
During the Fixed Term and each Extended Term, each Lessee, at its sole
cost and expense, may make alterations, additions, changes and/or
improvements ("Lessee Improvements") to each Leased Property, without the
Company's prior written consent, provided such alterations do not diminish
the value or appearance of the Golf Course. All such Lessee Improvements will
be subject to all the terms and provisions of each applicable Participating
Lease and will become the property of the Company upon termination of such
Participating Lease.
At the end of the Participating Lease, all remaining personal property
at each Leased Property will become the property of the Company.
INSURANCE. Each Lessee is required to maintain insurance on its Leased
Property under insurance policies providing for all-risk, liability, flood
(if carried by comparable golf course facilities in the area and otherwise
available at commercially reasonable rates) and worker's compensation
coverage, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Leased Property
located in the geographic area where the Leased Property is located. Each
insurance policy names the Company as additional insured or loss payee, as
applicable.
ASSIGNMENT AND SUBLETTING. A Lessee, without the prior written consent
of the Company (which consent may generally be withheld by the Company in its
sole discretion, except in limited instances), may not assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer any Participating Lease
or any interest therein, all or any part of the Leased Property or suffer or
permit any lease or the leasehold estate created thereby or any other rights
arising under any Participating Lease to be assigned, transferred, mortgaged,
pledged, hypothecated or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law. An assignment of a
Participating Lease will be deemed to include any change of control of such
Lessee, as if such change of control were an assignment of the Participating
Lease. However, each Lessee has the right to assign its Participating Lease
to its affiliates.
Each Prior Owner has retained the right to use the existing office
facilities in any clubhouse or other improvements on a Golf Course for its
continued business operations not associated with the Golf Course.
Each Lessee, with the Company's prior approval, which approval the
Company may withhold in its discretion, may be permitted to sublease portions
of any Leased Property to sublessees to operate
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portions (but not the entirety of the operations customarily associated with
or incidental to the operation of a golf course (e.g., driving range,
restaurant, etc.).
COMPANY'S RIGHT OF FIRST OFFER. In the event a Lessee desires to sell
its interest in its Participating Lease to an unaffiliated third party, it
must first offer the Company or its designee the right to purchase such
interest. The Lessee must give the Company written notice of its intent to
sell, which shall indicate the terms and conditions upon which such Lessee
intends to sell its interest in the Participating Lease. The Company or its
designee shall thereafter have a period of 60 days to elect to purchase the
leasehold interest on the terms and conditions at which such Lessee proposes
to sell its interest. If the Company or its designee elects not to purchase
the interest of the Lessee, then such Lessee shall be free to sell its
interest to a third party, subject to the Company's approval as described
above (see "-- Assignment and Subletting"). However, if the terms on which
the Lessee intends to sell its interest are reduced by 5% or more, then such
Lessee shall again offer the Company the right to acquire its interest,
provided the Company shall have only 15 days to accept such offer.
LESSEE'S RIGHT OF FIRST OFFER. The Company may sell a Golf Course, but
must first offer the Lessee of such course the right to purchase the Golf
Course. The Company must give the relevant Lessee written notice of its
intent to sell, which shall indicate the terms and conditions upon which the
Company intends to sell such Golf Course. Such Lessee shall thereafter have a
period of 60 days to elect to purchase the Golf Course on the terms and
conditions at which the Company proposes to sell the Golf Course. If such
Lessee elects not to purchase the Golf Course, then the Company shall be free
to sell the Golf Course to a third party. However, if the price at which the
Company intends to sell the Golf Course is reduced by 5% or more from the
price offered to the Lessee, then the Company again shall offer such Lessee
the right to acquire the Golf Course at the reduced price provided that such
Lessee shall have only 15 days to accept such offer.
DAMAGE TO, OR CONDEMNATION OF, A LEASED PROPERTY. In the event of
damage to or destruction of any Leased Property caused by an insured risk,
the Lessee will be obligated to diligently restore the Leased Property to
substantially the same condition as existed immediately prior to such damage
or destruction and, to the extent the insurance proceeds and the Capital
Replacement Fund are insufficient to do so, such Lessee will be obligated to
contribute the excess funds needed to restore the Leased Property. Any excess
insurance proceeds will be paid to the Company. Notwithstanding the
foregoing, in the event the damage or destruction of the Leased Property
renders the Leased Property unsuitable for use as a golf course for a period
of 12 months or more, the Lessee may terminate the Participating Lease.
INDEMNIFICATION GENERALLY. Under each Participating Lease, the Lessee
has agreed to indemnify, and hold harmless, the Company from and against all
liabilities, obligations, claims, actual or consequential damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees
and expenses) imposed upon or asserted against the Company as owner of the
applicable Leased Property on account of, among other things, (i) any
accident, injury to or death of a person or loss of or damage to property on
or about the Leased Property, (ii) any use, non-use or misuse by such Lessee
of the Leased Property, (iii) any impositions (which are the obligations of
the relevant Lessee to pay pursuant to the applicable provisions of such
Participating Lease) or the operations thereon, (iv) any failure on the part
of the Lessee to perform or comply with any of the terms of the Participating
Lease or any sublease, (v) any taxes levied against the Leased Property and
(vi) any liability the Company may incur or suffer as a result of any
permitted contest by the Lessee under any Participating Lease.
EVENTS OF DEFAULT. Events of Default are defined in each Participating
Lease generally to include, among others, the following:
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(i) if a Lessee fails to make a rent payment when such payment
becomes due and payable and such failure is not cured by such Lessee
within a period of 10 days after receipt of written notice thereof from
the Company;
(ii) if a Lessee fails to observe or perform any material term,
covenant or condition of a Participating Lease and such failure is not
cured by such Lessee within a period of 30 days after receipt by such
Lessee of written notice thereof from the Company, unless such failure
cannot be cured with due diligence within a period of 30 days, in which
case such failure will not constitute an Event of Default if such Lessee
proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof within 120 days;
(iii) if a Lessee: (a) admits in writing its inability to pay its
debts generally as they become due, (b) files a petition in bankruptcy
or a petition to take advantage of any insolvency act, (c) makes an
assignment for the benefit of its creditors, (d) is unable to pay its
debts as they mature, (e) consents to the appointment of a receiver for
itself or of the whole or any substantial part of its property or (f)
files a petition or answer seeking reorganization or arrangement under
the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof;
(iv) if the Lessee is liquidated or dissolved;
(v) if the Lessee voluntarily ceases operations on the Leased
Property, except as a result of damage, destruction or a partial or
complete condemnation or other unavoidable delays; or
(vi) if the Lessee or an affiliate thereof is in default under
any other Participating Lease with the Company.
If an Event of Default occurs and is continuing under a Participating
Lease, then the Company may terminate the Participating Lease by giving the
Lessee not less than 10 days notice (only if required by the Participating
Lease) of such termination and upon the expiration of such time, the Fixed or
Extended Term, as the case may be, will terminate and all rights of the
Lessee under the Participating Lease shall cease.
GOVERNING LAW. The Participating Leases will be governed by and
construed in accordance with the law of the state where the Golf Course is
located. Because the Golf Courses are located in various states, the
Participating Leases may be subject to restrictions imposed by applicable
local law.
THE PARTICIPATING MORTGAGE
THE FOLLOWING SUMMARY OF THE PARTICIPATING MORTGAGE BETWEEN THE COMPANY
AND THE WESTIN INNISBROOK RESORT OWNER IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PARTICIPATING MORTGAGE, A COPY OF WHICH IS FILED AS AN
EXHIBIT. THE WESTIN INNISBROOK RESORT OWNER CURRENTLY IS REQUIRED TO FILE
REPORTS AND OTHER INFORMATION WITH THE COMMISSION PURSUANT TO THE EXCHANGE
ACT.
The Participating Mortgage transaction was structured in a manner that
the Company believes provides the Company with returns similar to those from
the Participating Leases used in the Company's standard purchase/ leaseback
structure. Through the Participating Mortgage, the Company will participate
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in the growth in revenues at the Westin Innisbrook Resort through a
participating interest feature and will have the right to purchase the Westin
Innisbrook Resort at the expiration of the loan term.
AMOUNT. The maximum principal amount of the Participating Mortgage is
$78.975 million, $69.975 million of which has been funded. The Company is
obligated to make additional advances up to $9 million available to the
Westin Innisbrook Resort Owner to fund the construction of an additional
nine-holes and renovation of the conference and resort facility. The advance
for construction purposes is subject to review and approval rights
customarily granted to construction lenders, including review and approval of
plans and specifications.
In addition, the principal amount of the Participating Mortgage may be
increased by an amount calculated in a manner similar to the procedures for
the Lessee Performance Option. During years three through five of the
Participating Mortgage, the Westin Innisbrook Resort Owner has the one-time
right to require the Company to advance an additional amount under the
Participating Mortgage, subject to certain qualifications and requirements,
including attaining a coverage ratio of 113.5%, after taking into account the
increased amount of interest. If such Performance Advance is made, interest
on the Performance Advance will be calculated to be accretive to the
Company's Funds From Operations on a per share basis, and the Westin
Innisbrook Resort Owner will be required to purchase additional OP Units with
that advance.
MORTGAGE TERM. The Participating Mortgage has a term of 30 years. The
Westin Innisbrook Resort Owner has no right to prepay the Participating
Mortgage for the first 10 years of the Participating Mortgage, except upon a
Transfer Triggering Event (as herein defined). The Participating Mortgage is
prepayable on the tenth anniversary and thereafter at the end of each
five-year period. There are no extension rights associated with the
Participating Mortgage. Any prepayment will require a prepayment based on the
discounted value of payments under the Participating Mortgage, but in no
event less than 10% of the outstanding principal balance of the Participating
Mortgage. In addition, the Company will have the right to purchase the Westin
Innisbrook Resort upon a prepayment.
USE OF THE WESTIN INNISBROOK RESORT. The Westin Innisbrook Resort Owner
is obligated to use the Westin Innisbrook Resort for the operation of a golf
course and related hotel and conference facilities, and other uses incidental
or related thereto.
BASE INTEREST; PARTICIPATING INTEREST. Annual Base interest payable on
the Participating Mortgage on the initial $69,975,000 of principal is equal
to $6,739,063, or 9.63% per annum. Advances on the remaining $9 million bear
interest at 9.75% per annum. Base Interest is payable monthly in arrears.
Base Interest is subject to annual increases of 5% per year for five
years and, if the Performance Advance is funded, 3% a year for an additional
five years.
The Participating Mortgage provides for the Company to receive, in
addition to Base Interest, Participating Interest. Participating Interest is
equal to a percentage of gross revenues at the Westin Innisbrook Resort,
including golf, food, beverage and hotel room receipts, but excluding various
taxes and net of payments made to the condominium owners at the Westin
Innisbrook Resort, over a base year revenue of $40.0 million in 1996.
Participating Interest is payable in an amount equal to 17% of gross revenue
in excess of the base year's gross revenues up to $43 million, 20% of gross
revenue between $43 million and $50 million and 25% of gross revenue over $50
million (with the latter two thresholds subject to annual CPI increases).
Total annual increases in interest payments under the Participating Mortgage
are limited to of 7% for the first five years.
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PURCHASE OF STOCK, OP UNITS AND WARRANTS. The Westin Innisbrook Resort
Owner used $8,975,000 of the proceeds of the Participating Mortgage to
purchase 274,039 newly issued OP Units, 159,326 newly issued shares of Common
Stock and an option to purchase up to 150,000 shares of Common Stock at a
price of $26.00 per share (the "Option Shares").
The right to purchase the Option Shares is exercisable at any time until
December 31, 1998. If at the time of exercise the Company does not then have
an effective shelf registration statement, the Westin Innisbrook Resort Owner
can defer the date it purchases the Option Shares until the date 90 days
following the date the Company has an effective shelf registration statement.
If the Westin Innisbrook Resort Owner elects to defer such purchase, then (i)
it shall have the continuing right to rescind its exercise, in which case its
right to purchase the Option Shares shall terminate, and (ii) the purchase
price for the Option Shares shall be increased to reflect the increase in the
stock price of the Company from the date the Westin Innisbrook Resort Owner
exercises its right to purchase the Option Shares and the five-day average
trading price of the Company's stock for the period immediately preceding the
date the Option Shares are acquired.
COLLATERAL. Security for the Participating Mortgage consists of
"Primary Collateral" and "Additional Collateral." Primary Collateral is not
released and remains collateral for the Participating Mortgage throughout its
terms. Additional Collateral is subject to certain release provisions upon
the attainment of certain coverage ratios based on the net operating income
of the Westin Innisbrook Resort compared to the payments under the
Participating Mortgage.
The Primary Collateral consists of the Westin Innisbrook Resort which is
owned by the Westin Innisbrook Resort Owner. The hotel and conference
facilities at the Westin Innisbrook Resort consists of common areas
(generally the conference and restaurant areas) and the hotel rooms. The
hotel rooms are condominium units that are individually owned by third
parties (with the exception of three units owned by the Westin Innisbrook
Resort Owner). The third party owners participate in a rental pool program
whereby they lease their units to the hotel operator in return for a
percentage of the room revenues. As a result, the Company will not have any
direct security interest in the lodging facilities located at the Westin
Innisbrook Resort. The primary collateral will consist of the Golf Courses at
the Westin Innisbrook Resort and the common area facilities.
In addition to the Primary Collateral, the Company has a security
interest in the Additional Collateral, namely (i) excess land at the Westin
Innisbrook Resort which is used for residential and commercial development,
(ii) 79,663 shares of Common Stock and 274,039 OP Units owned by the Westin
Innisbrook Resort Owner (an approximate value of $9.1 million at the time of
the transaction) and (iii) a first mortgage and a third mortgage on the
Tamarron Golf Course and related facilities, an 18-hole destination golf and
resort facility owned by the Westin Innisbrook Resort Owner, located near
Durango, Colorado.
The security interest of the Company in the excess land at the Westin
Innisbrook Resort will be released by the Company at such time as the net
operating income for the Westin Innisbrook Resort equals or exceeds 113.5% of
the payment obligation (the "Participating Mortgage Coverage Ratio") under
the Participating Mortgage for any 12-month period.
The shares of Common Stock and OP Units pledged to the Company as
collateral for the Participating Mortgage will not be released for two years,
and in no event until the Westin Innisbrook Resort Owner's right to receive
the Performance Advance has terminated. Beginning in the third year and any
time thereafter, one-third of the pledged OP Units and Common Stock will be
released at such time
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as the Participating Mortgage Coverage Ratio exceeds 120%, 130% and 140%,
respectively, for the prior two fiscal years. If the Participating Mortgage
Coverage Ratio falls below 120% at any time following the release of such
pledged shares of Common Stock and OP Units, then the Westin Innisbrook
Resort Owner shall be required to retain and not distribute profits until
such time as the Westin Innisbrook Resort Owner has retained cash equal to
six-months of the then-current Base Interest.
PURCHASE OPTION. The Company shall have the right to purchase the
Westin Innisbrook Resort that is the collateral for the Participating
Mortgage at the expiration of the term of the Participating Mortgage,
including any early expiration resulting from a default by the borrower
thereunder. The purchase price shall equal the lesser of (i) the fair market
value of the Westin Innisbrook Resort (but in no event less than the
outstanding principal balance of the Participating Mortgage), as determined
by third party appraisal, or (ii) 400,000 shares (125,000 shares if a
"Transfer Triggering Event" has occurred) of the Company's Common Stock and
cancellation of the outstanding principal balance of the Participating
Mortgage.
A "Transfer Triggering Event" is (i) issuance of an interest in the
Westin Innisbrook Resort Owner, (ii) sale of all or substantially all of the
assets of the Westin Innisbrook Resort Owner, (iii) any transaction pursuant
to which the Westin Innisbrook Resort Owner is merged or consolidated into
another entity or (iv) any event that directly or indirectly results in the
transfer of 5% of the equity interest in the Westin Innisbrook Resort Owner
to a third party during the term of the Participating Mortgage, whether
voluntary or involuntary. Upon a Transfer Triggering Event, the Company will
accrue an additional amount of interest equal to $19 million, discounted to
present value on the date of the Transfer Triggering Event, using a discount
rate of 11.5% (the "Additional Interest Amount"). The Company will lend such
amount to the Borrower. As a result, the Company will be required to
recognize income equal to the Additional Interest Amount, but will not
receive any additional cash. Interest then accrues on such Additional
Interest Amount, but is not paid by the Borrower until the maturity of the
Participating Mortgage.
FIXED INTEREST RATE ESCALATION. The Company is required under GAAP to
report interest income from the Participating Mortgage on a straight-line
basis over the life of the Participating Mortgage. Based on the Company's
estimate of future revenue, the Company will report for GAAP purposes
interest revenue exclusive of the Participating Interest equal to
approximately 11.5% per year, which initially will exceed cash payments to
the Company under the Participating Mortgage.
TRANSFER RESTRICTIONS. Subject to the Company's purchase option and
right of first offer, the Westin Innisbrook Resort Owner generally has the
right to transfer the Westin Innisbrook Resort to a third party provided such
third party has the financial resources to permit it to satisfy the
obligations of the borrower under the Participating Mortgage.
CAPITAL EXPENDITURE RESERVE. The Westin Innisbrook Resort Owner is
obligated to maintain a capital replacement reserve which provides additional
collateral for the performance of the Westin Innisbrook Resort Owner's
obligations under the Participating Mortgage. The capital replacement reserve
is equal to $1,076,850 for 1997 (pro rated for the period the Participating
Mortgage is outstanding in 1997), $2 million in 1998, with such amount
increased by 3% per annum through 2001 and 4% per annum thereafter. The
Westin Innisbrook Resort Owner may use funds in such capital replacement
reserve to make capital repairs and improvements at the Westin Innisbrook
Resort, subject to certain review and approval rights of the Company. The
capital expenditure reserve will be held by Westin.
37
<PAGE>
WESTIN GUARANTY. Westin currently operates the Westin Innisbrook Resort
pursuant to a long-term management agreement. Westin has agreed to pay up to
$2.5 million per year to the Westin Innisbrook Resort Owner to supplement
results of operations with respect to the operations at the Westin Innisbrook
Resort. The Westin Guaranty, which is for a period of up to five years, is
released at such time as the operating payments to the Westin Innisbrook
Resort Owner exceed 1.14 times the minimum guaranteed payments. The Company
has agreed with Westin that in the event the Company forecloses its lien on
the Westin Innisbrook Resort, and provided Westin is not in default of its
obligations under the Westin management agreement, the Company will permit
Westin to continue to manage the Westin Innisbrook Resort.
RECIPROCAL RIGHT OF FIRST OFFER. The Company has a right of first offer
to acquire the Westin Innisbrook Resort if the Westin Innisbrook Resort Owner
elects to sell the same on generally the same terms and conditions as granted
the Company in connection with a transfer by any lessee of its rights under a
Participating Lease. In addition, the Westin Innisbrook Resort Owner has the
right of first offer to acquire the Participating Mortgage if the Company
elects to sell the same, generally on the same terms and conditions as the
right of first offer granted to the Lessees upon a sale by the Company of one
of the Golf Courses.
INSURANCE. The Westin Innisbrook Resort Owner is obligated to carry
comparable insurance to the insurance required to be carried by the Lessees
under the Participating Leases.
NON-RECOURSE. The Participating Mortgage is non-recourse to other
assets of the Westin Innisbrook Resort Owner and in general may only be
satisfied by the Company foreclosing its lien on the Westin Innisbrook Resort
and any other collateral then held by the Company.
RIGHT OF FIRST OFFER TO LEASE ADDITIONAL GOLF COURSES PROXIMATE TO THE
WESTIN INNISBROOK RESORT. While the Participating Mortgage is outstanding,
the Company may not own or finance any existing golf course located within a
25 mile radius of the Westin Innisbrook Resort without giving the Westin
Innisbrook Resort Owner a right of first offer to lease such golf course.
ITEM 3. LEGAL PROCEEDINGS
Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course,
including proceedings relating to personal injury and property damage. Such
proceedings are generally brought against the operator of a golf course, but
may also be brought against the owner. The Participating Leases provide that
each Lessee is responsible for claims based on personal injury and property
damage at the Golf Courses which are leased and require each Lessee to
maintain insurance for such purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the shareholders in the fourth quarter of
1997.
38
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's sole class of common stock is traded on the American Stock
Exchange (the "AMEX"). Trading of the Company's stock commenced on the AMEX
on February 7, 1997. Since then, and through March 25, 1998, the highest
reported sale price was $32.375, on March 20, 1998, and the lowest reported
sale price was $22.750, on February 7, 1997.
The following table sets forth for periods shown the high and low sales
price for the Company's Common Stock on AMEX and distributions declared.
<TABLE>
<CAPTION>
1997 High Low Distributions
---- ---- --- -------------
<S> <C> <C> <C>
Fourth Quarter 29 3/8 25 1/4 $0.41
Third Quarter 28 11/16 26 $0.41
Second Quarter 28 3/4 23 5/8 $0.41
First Quarter 26 1/8 22 3/4 $0.41
</TABLE>
SHAREHOLDER INFORMATION
As of March 15, 1998, the number of holders of record of Common Stock of
the Company was approximately 87 and there were 7,631,694 shares outstanding.
On that date a total of 12,726,313 OP Units were held by 21 entities,
including the Company's two subsidiaries.
DIVIDENDS
The Company intends to continue to make regular quarterly distributions
to its stockholders. The Board of Directors, in its sole discretion, will
determine the actual distribution rate based on the Company's actual results
of operations, economic conditions, tax considerations (including those
related to REITs) and other factors. The Company's distributions, for the
period from the completion of the IPO to December 31, 1997, was to equal
distribution of $1.03 per share of Common Stock, which, on an annualized
basis, represents a distribution rate of $1.64 per share. On January 26,
1998, the Board of Directors declared a quarterly dividend distribution of
$.41 per share for the quarter ended December 31, 1997 to stockholders of
record on February 8, 1998 which was paid on February 10, 1998. For the
period ended December 31, 1997, and including payments made for fourth
quarter, the distributions represent 88.0% of cash available for distribution.
Holders of OP Units will receive distributions on a per unit basis equal to
the per share distributions to owners of Common Stock, except that OP Units
issued since the prior record date to partners other that GTA GP or GTA LP
will receive a pro rata distribution based on duration of ownership.
The Company expects to maintain its initial distribution rate unless
actual results of operations, economic conditions or other factors differ
from the results for the twelve months ended December 31, 1997. The Company's
actual cash available for distribution will be affected by a number of
factors, including Gross Golf Revenues generated at the Golf Courses. The
Company anticipates that cash available for distribution will exceed earnings
and profits due to non-cash expenses, primarily depreciation and
amortization, to be incurred by the Company. Distributions by the Company to
the extent of its current or accumulated earnings and profits for federal
income tax purposes, other than capital gain dividends, will be taxable to
stockholders as ordinary dividend income. Any dividends designated by the
Company as capital gain dividends generally will give rise to capital gain
for stockholders. Distributions in excess of the Company's current or
accumulated earnings and profits generally will be treated as a non-taxable
reduction of a stockholder's basis in the Common Stock to the extent thereof,
and thereafter as capital gain. Distributions treated as non-taxable
reduction in basis will have the effect of deferring taxation until the sale
of a stockholder's Common Stock or future distributions in excess of the
stockholder's basis in the Common Stock. Based upon the total estimated cash
available for distribution, the Company estimates that none of the Company's
expected annual distribution would represent a return
39
<PAGE>
of capital for federal income tax purposes. If actual cash available for
distribution or taxable income vary from these amounts, or if the Company is
not treated as the owner of one or more of the Initial Courses, the
percentage of distributions which represents a return of capital may be
materially different.
In order to maintain its qualification as a REIT, the Company must make
annual distributions to its stockholders of at least 95 percent of its
taxable income (excluding net capital gains). Based on the Company's results
of operations for the period from February 12, 1997 through December 31,
1997, the Company was required to distribute approximately $5.2 million in
order to maintain its status as a REIT. Since the dividends paid during the
Company's fiscal year were less than the required distributions, the Company
is permitted to elect and will elect to treat approximately $1.0 million of
its fourth quarter 1997 distribution, which was paid in 1998, as having been
paid in 1997. Although the Company will claim a deduction for such amounts
in determining its 1997 taxable income, the Company's shareholders will not
be taxable on such amounts until 1998. Under certain circumstances, the
Company may be required to make distributions in excess of cash available in
order to meet such distribution requirements.
The Board of Directors, in its sole discretion, will determine the
actual distribution rate based on a number of factors, including the amount
of cash available for distribution, the Company's financial condition,
capital expenditure requirements for the Company's properties, the annual
distribution requirements under the REIT Provisions of the Code and such
other factors as the Board of Directors deems relevant.
RECENT SALES OF UNREGISTERED SECURITIES
On November 11, 1996, 1 share of Common Stock was issued by the Company
to C.A. Hooks, Jr. This issuance of Common Stock was effected in reliance
upon an exemption from registration under Section 4(2) of the Securities Act
as a transaction not involving a public offering. On November 11, 1996 (i)
12,500 OP Units were issued by the Operating Partnership to W. Bradley Blair,
II, (ii) 12,500 OP Units were issued to David J. Dick and (iii) 3,750 OP
Units were issued to James Hoppenrath. On February 12, 1997 the Operating
Partnership issued 4,135,356 OP Units to the Prior Owners in exchange for
their interests in the Initial Golf Courses. On June 23, 1997 the Company
sold 159,326 shares of Common Stock and the Operating Partnership sold
274,039 OP Units to Golf Hosts, Inc. On August 18, 1997 the company issued
21,429 shares of Common Stock to Granite Golf in connection with the
acquisition of Tiburon Golf Club. On September 2, 1997 the Operating
Partnership issued 121,529 OP Units to the Prior Owner of Raintree Country
Club in exchange for its interest in the Raintree Country Club. On October
17, 1997, the Operating Partnership issued 19,231 OP Units to the Prior Owner
of The Club of the Country in exchange for its interest in The Club of the
Country. On November 25, 1997, the Operating Partnership issued 24,424 OP
Units to the Prior Owner of Black Bear Golf Club for its interest in Black
Bear Golf Club. On December 19, 1997, the Operating Partnership issued
169,811 OP Units to the Prior Owner of Wildewood Golf Club and Country Club
at Woodcreek Farms for its interest in Wildewood Golf Club and Country Club
at Woodcreek Farms. On January 16, 1998, the Operating Partnership issued
52,724 OP Units to the Prior Owner of Mystic Creek Golf Club for its interest
in Mystic Creek Golf Club. On February 1, 1998, the Operating Partnership
issued 227,347 OP Units to the Prior Owner of Emerald Dunes Golf Course for
its interest in Emerald Dunes Golf Course. These issuances were effected in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act as a transaction not involving a public offering.
40
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth unaudited selected consolidated pro forma
financial information for the Company. The pro forma year ended December 31,
1997 is based on actual results of operations for February 12 through
December 31, 1997 and pro forma results of operations for January 1 through
February 11, 1997. The pro forma operating information for 1996 and 1995 is
presented as if the transactions completed at the IPO (the "Formation
Transactions") had occurred as of January 1, 1995, except for the Legends of
Stonehouse and Royal New Kent which are reflected for those periods in which
they were in operation. The pro forma information does not purport to
represent what the Company's or Initial Lessees' financial position or
results of operations actually would have been had the Formation
Transactions, in fact, occurred on such date or at the beginning of the
period indicated, or to project the Company's or the Initial Lessees'
financial position or results of operation at any future date or any future
period.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the period from For the year ended For the year ended For the year ended
February 12 to December 31, 1997 December 31, 1996 December 31, 1995
December 31, 1997
<S> <C> <C> <C> <C>
(Pro forma) (Pro forma) (Pro forma)
(Unaudited) (Unaudited) (Unaudited)
Participating lease revenue $ 14,409 $ 16,152 $ 13,142 $ 11,282
Participating mortgage interest 4,318 4,318 - -
------------------------------------------------------------------------
18,727 20,470 13,142 11,282
Depreciation and amortization 3,173 3,621 3,080 2,536
General and administrative 2,532 2,743 1,639 1,639
Interest income (624) (624) -- --
Interest expense 1,879 1,931 366 366
------------------------------------------------------------------------
Total expenses 6,960 7,671 5,085 4,541
Net income before minority interest 11,767 12,799 8,057 6,741
Income applicable to minority interest 5,798 6,328 3,988 3,202
------------------------------------------------------------------------
Net income applicable to common 5,969 6,471 4,069 3,539
shareholders
Earnings per common share - basic 1.32 1.47 1.04 0.91
Weighted average number of common shares - 4,535 4,401 3,910 3,910
basic
Earnings per common share - diluted 1.29 1.44 1.04 0.91
Weighted average number of common shares - 4,626 4,492 3,910 3,910
diluted
Distribution declared per share and unit 1.44 1.64 1.64 1.64
Funds from operations (1) 14,899 16,379 11,137 9,277
Funds from operations per share (1) 1.65 1.85 1.44 1.25
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
For the period from For the year ended For the year ended For the year ended
February 12 to December 31, 1997 December 31, 1996 December 31, 1995
December 31, 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Pro forma) (Pro forma) (Pro forma)
(Unaudited) (Unaudited) (Unaudited)
Cash flows provided by operating 13,644 16,379 11,137 9,277
activities
Cash flows used in investing activities 148,738 148,738 609 479
Cash flows provided by financing 15,062 15,062 13,074 8,821
activities
Cash available for distribution 13,652 15,012 10,528 8,798
Weighted average common stock and OP Units 9,030 8,842 7,746 7,447
</TABLE>
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
December 31
1997 1996
(Pro Forma)
-----------------------------------
<S> <C> <C>
Investments in Golf Courses $101,044 $62,876
Mortgage Notes Receivable $ 65,129 $ --
Total Assets $186,306 $86,684
-------- -------
Mortgages and Notes Payable $ 4,325 $ 4,325
Total Liabilities $ 7,354 $ 4,325
Minority Interest $ 54,625 $42,333
Stockholders' Equity $124,327 $40,126
Total Liabilities and Stockholders' Equity $186,306 $86,684
-------- -------
</TABLE>
(1) In accordance with the resolution adopted by the Board of Governors of
the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"), Funds From Operations represents net income (loss) (computed
in accordance with generally accepted accounting principles), excluding
gains of real property, and after adjustments or unconsolidated
partnerships and joint ventures. Funds From Operations should not be
considered as an alternative to net income or other measurements under
generally accepted accounting principles as an indicator of operating
performance or to cash flows from operating, investing or financial
activities as a measure of liquidity. Funds From Operation does not
reflect working capital changes, cash expenditures for capital
improvements or principal payments on indebtedness. The Company
believes that Funds From Operations is helpful to investors as a measure
of the performance of an equity REIT, because, along with cash flows
from operating activities, financing activities and investing
activities, it provides investors with an understanding of the ability
of the Company to incur and service debt and make capital expenditures.
Compliance with the NAREIT definition of Funds From Operations is
voluntary. Accordingly, the Company's calculation of Funds From
Operations in accordance with NAREIT definition may be different that
similarly titled measures used by other REITs.
42
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," and other sections of this report contain various
"forward-looking statements" which represent the Company's expectations
concerning future events including the following: statements regarding the
Company's continuing ability to target and acquire high quality golf courses;
the expected availability of the Line-of-Credit ("Credit Facility") and other
debt and equity financing; the Lessees' future cash flows, results of
operations and overall financial performance; the expected tax treatment of
the Company's operations; the Company's beliefs about continued growth in the
golf industry. Because of the foregoing factors, the actual results achieved
by the Company in the future may differ materially from the expected results
described in the forward-looking statements. The following discussion should
be read in conjunction with the accompanying Consolidated Financial
Statements appearing elsewhere herein.
OVERVIEW
Golf Trust of America, Inc. (the "Company") conducts business through
Golf Trust of America, LP (the "Operating Partnership"), of which the Company
owns a 61.3 percent interest through its two wholly owned subsidiaries and is
the general partner. Larry D. Young, a director of the Company, along with
his affiliates owns 30.1 percent of the Operating Partnership and is a
significant lessee. The remaining interest is the Operating Partnership is
held by operators of the golf courses, their affiliates and officers of the
Company.
The Company was formed to capitalize upon consolidation opportunities in
the ownership of upscale golf courses in the United States. The Company's
principal business strategy is to acquire upscale golf courses and then lease
the golf courses to qualified third party operators, including affiliates of
the sellers. In addition to the ability to acquire golf course(s) for cash
and/or the assumption of indebtedness, the Company has the ability to issue
units of limited partnership interest ("OP Units") in the Operating
Partnership. OP Units are redeemable by their holder for cash or, at the
election of the Company, for shares of Common Stock on a one-for-one basis
(their "Redemption Right"). When the Company acquires a golf course in
exchange for OP Units, in most instances the seller of the course does not
recognize taxable income gain until it exercises the Redemption Right. OP
Units can thus provide an attractive tax-deferred sale structure for golf
course sellers. The Company believes its has a distinct competitive
advantage in the acquisition of upscale golf courses, including those which
might not otherwise be available for purchases, because of (i) its
utilization of a multiple independent lessee structure (ii) management's
substantial industry knowledge, experience, and relationships within the golf
community, (iii) the Company's strategic alliances with prominent golf course
operators and (iv) its ability to issue OP Units to golf course owners on a
tax-deferred basis.
The Company commenced operations on February 12, 1997 with the
completion of its initial public stock offering (IPO) which raised net
proceeds of approximately $73.0 million through the sale of 3,910,000 shares
of common stock. The Company contributed the net proceeds in exchange for OP
Units representing a then 49 percent interest. Concurrent with the closing
of the IPO, the Operating Partnership acquired ten golf courses from their
prior owners for an aggregate of approximately $6.2
43
<PAGE>
million in cash, $47.5 million in repayment of mortgage and other
indebtedness, and 4.1 million Operating Partnership units representing
another 51.1 percent interest.
In November 1997, the Company completed a follow-on offering of
3,450,000 shares of common stock. The Company contributed the net proceeds
of approximately $82.7 million to the Operating Partnership in exchange for
additional OP Units. The Operating Partnership used the net proceeds to
repay approximately $60.6 million outstanding under the Credit Facility which
had been used primarily for golf course acquisitions.
Between the IPO and December 31, 1997, the Operating Partnership has
acquired an additional participating interest in 12 golf courses. Eight of
the courses were acquired for an aggregate of approximately $29.7 million in
cash and in repayment of mortgage indebtedness, and $11.5 million in OP Units
(approximately 679,000 Units) and shares (approximately 21,000 shares) of the
Company's common stock. The participating interest in the other four courses
was obtained through a participating mortgage agreement of approximately
$69.975 million.
Subsequent to December 31, 1997, the Company has acquired interests in
an additional six courses for an aggregate of approximately $79.6 million in
cash and in repayment of indebtedness and the assumption of $12.9 million in
mortgage indebtedness and $7.6 million in OP Units (approximately 280,000
Units).
The Company's primary sources of revenue are Lease Payments under the
Participating Leases and mortgage payments under the Participating Mortgage.
The Company generally participates in the increase in gross golf revenues
over the base year. Base Rent will increase each year by the Base Rent
Escalator during the first five years of the lease term. The Base Rent
Escalator generally equals the lesser of (i) 3% or (ii) 200% of the change in
the CPI over the prior year. Annual increases in Lease Payments are
generally limited to a maximum of 5% for the first five years of the lease
term.
Management believes the principal source of growth in Gross Golf
Revenues at the Golf Courses will be increased green fees, cart fees, and
other related fees (due to increases in rounds and/or rates). In order to
achieve higher revenues, management believes the Lessees will need to
continue to offer golfers a high quality golf experience as it relates to the
pace of play, condition of the Golf Course and overall quality of the
facilities and services.
44
<PAGE>
RESULTS OF OPERATIONS OF THE COMPANY
FOR THE PERIOD FROM FEBRUARY 12 TO DECEMBER 31, 1997
For the period from February 12 to December 31, 1997, the Company
received $18,727,000 in revenue from the Participating Leases and the
Mortgage Note Receivable. Included in revenue was $280,000 in Participating
Rent.
Expenses before minority interest, totaled $6,960,000 for the period
from February 12 to December 31, 1997, reflect depreciation and amortization,
general and administrative expenses, interest income and expense.
For the period from February 12 to December 31, 1997, net income before
minority interest was $11,767,000 and net income was $5,969,000.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash flow from operating activities for the period from February 12 to
December 31, 1997, was $13,644,000. This reflects net income before minority
interest, plus noncash charges to income for depreciation, loan cost
amortization and working capital changes. Cash flows used in investing
activities reflect increases in the mortgage receivable related to the
Innisbrook facility of $64,406,000 and golf course acquisitions of
$84,332,000. Cash flows provided by financing activities, totaling
$150,062,000 represents the borrowing net of loan costs of $2,877,000 under
the Credit Facility (discussed below) and offering proceeds of $150,720,000
less dividends and partner distributions totalling $8,535,000.
Concurrent with the closing of the IPO, the Company borrowed
approximately $4,325,000 that, together with the net proceeds of the IPO, was
used to retire mortgage indebtedness and other debt of the Prior Owners, to
fund the cash portion of the purchase of the Initial Courses and to provide
initial working capital. The Company has agreed to maintain approximately
$18,000,000 of indebtedness for up to 10 years to accommodate two Prior
Owners' efforts to seek to minimize certain adverse tax consequences from
their contribution of two courses to the Company.
On June 20, 1997, the Company entered into the Credit Facility to be
used primarily for the acquisition of additional golf courses, but a portion
of which may also be used for acquisition of expansion facilities, for
capital expenditures or for general working capital purposes. On February 27,
1998, the Company amended and restated the Credit Facility to increase the
amount available to $125 million on an unsecured basis. Up to 20% of the
Credit Facility may be used for working capital needs. The Credit Facility
availability is limited to "unencumbered pool calculation" as defined in the
Credit Facility. Financial covenants include, among others, net worth,
liquidity and cash flow covenants. Non-financial covenants include
restrictions on loans outstanding, construction in progress, loans to
officers and changes to Board of Directors. At the present time, these
covenants have
45
<PAGE>
been met. Prior to amendment, the Company had a $100 million secured
revolving Credit Facility carried a floating interest rate of LIBOR plus
1.75% (7.72% at December 31, 1997.)
The Company intends to invest in additional golf courses as suitable
opportunities arise, but the Company will not undertake investments unless
adequate sources of financing are available. The Company anticipates that
future acquisitions would be funded with debt financing provided by the
Credit Facility, the issuance of OP Units or with proceeds of additional
equity offerings. In the future, the Company may negotiate additional credit
facilities or issue corporate debt instruments. Any debt issued or incurred
by the Company may be secured or unsecured, long-term or short-term, fixed or
variable interest rate and may be subject to such other terms, as the Board
of Directors deems prudent. The Company currently has no binding agreement
to acquire any additional golf courses. The Company is in active
negotiations regarding the acquisition of additional golf courses, although
there can be no assurance that the Company will acquire any of these golf
courses.
The Company's acquisition capabilities are enhanced by its existing
capital structure. The Company intends to maintain a capital structure with
consolidated indebtedness representing no more than 50% of its total market
capitalization.
Except for the courses where the Company has agreed in advance to expand
or improve the course, the Participating Leases generally require the Company
to reserve annually between 2.0% and 5.0% of the Gross Golf Revenues of the
Golf Courses in the Capital Replacement Fund. The Capital Replacement Fund
is funded by the payment of additional rent from the Lessees. The Lessees
will fund any capital expenditures in excess of such amounts. For the year
ended December 31, 1997, the Company had reserved $524,000.
Currently, the Company has agreed to fund the construction of an
additional nine holes at Northgate Country Club ("Northgate") ($3.0 million),
purchase a clubhouse being constructed at Woodlands ($750,000), fund the
construction at Lost Oaks of Innisbrook for renovations to the clubhouse and
golf course ($1.25 million), fund a working capital line at Tiburon Golf
Course ($150,000), fund the renovations to the conference facilities and
construction of an additional nine holes at the Westin Innisbrook Resort
($9.0 million), fund a working capital line at Bonaventure Golf Course
($750,000) and pay for renovations at that course ($3.15 million) and to fund
a working capital line at Sandpiper Golf Course ($5.0 million) and pay for
renovations at that course ($6.0 million).
PRO FORMA RESULTS OF OPERATIONS OF THE COMPANY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
On a pro forma basis for the years ended December 31, 1997 and 1996, the
Company would have received $20,470,000 and $13,142,000 in revenue from the
Participating Leases and the Mortgage Note Receivable. Included in revenue
was $280,000 in Participating Rent for 1997. The 1997 pro forma results have
been computed using actual results for 1997 and projected results for the
period from January
46
<PAGE>
1 to February 12, while the 1996 pro forma results have been computed as if
the initial ten courses were purchased on January 1, 1996.
Pro forma expenses before minority interest, would have totaled
$7,671,000 and $5,085,000 for the years ended December 31, 1997 and 1996.
The $2,586,000 increase is due primarily to additional depreciation
($541,000), additional general and administrative costs ($1,104,000 - the
majority of which is related to salary and bonus amounts), interest income
($624,000 resulting from investment of temporary cash balances) and
additional interest expense ($1,565,000 for the purchase of golf courses).
Pro forma net income for the years ended December 31, 1997 and 1996
would have been $6,471,000 and $4,069,000.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Funds From Operations and Cash Available for Distribution are calculated
as follows:
<TABLE>
<CAPTION>
Period From
February 12, Year Ended Year Ended
1997 December 31, December 31,
(Inception of 1997 (Pro 1996 (Pro
Operations) forma) forma)
through Dec.
31, 1997
<S> <C> <C> <C>
Income before minority interest. . $ 11,767 $ 12,799 $ 8,057
Depreciation and amortization
for real estate assets . . . . . . 3,132 3,580 3,080
-------- -------- --------
Funds From Operations. . . . . . . 14,899 16,379 11,137
-------- -------- --------
-------- -------- --------
Adjustments:
Noncash mortgage interest. . . . . (723) (723) --
Capital expenditure reserve. . . . (524) (644) (609)
-------- -------- --------
Cash Available for Distribution. . $ 13,652 $ 15,012 $ 10,528
-------- -------- --------
-------- -------- --------
</TABLE>
Noncash mortgage interest represents the difference between interest
revenue on the Participating Mortgage reported by the Company in according
with GAAP and the actual cash payment to be received by the Company. Subject
to certain exceptions, the Participating Leases generally require the Company
to reserve annually between 2.0% and 5.0% of the Gross Golf Revenues of the
Golf Courses in the Capital Replacement Fund which is funded by the payment
of additional rent. The Lessees will fund any capital expenditures in excess
of such amounts.
47
<PAGE>
In accordance with the resolution adopted by the Board of Governors of
the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"),
Funds From Operations represents net income (loss) (computed in accordance
with generally accepted accounting principles ("GAAP")), excluding gains (or
losses) from debt restructuring or sales of property, plus depreciation of
real property, and after adjustments for unconsolidated partnership and joint
ventures. Funds From Operations should not be considered as an alternative
to net income or other measurements under GAAP as an indicator of operating
performance or to cash flows from operating investing or financial activities
as a measure of liquidity. Funds From Operations does not reflect working
capital changes, cash expenditures for capital improvements or principal
payments on indebtedness. The Company believes that Funds From Operations is
helpful to investors as a measure of the performance of an equity REIT,
because along with cash flows from operating activities, financing activities
and investing activities, it provides investors with an understanding of the
ability of the Company to incur and service debt and make capital
expenditures. Compliance with the NAREIT definition of Funds From Operations
is voluntary. Accordingly, the Company's calculation of funds from
operations in accordance with the NAREIT definition may be different than
similarly titled measures used by other REITs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation
S-X are included in this Annual Report on Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN THE COMPANY'S CERTIFYING PUBLIC ACCOUNTANT
On February 26, 1997, the Company dismissed Price Waterhouse LLP as
independent accountants. Effective February 28, 1997, the Company engaged BDO
Seidman, LLP as principal accountants. The decision to change accountants was
approved by the Audit Committee and ratified by the Board of Directors of the
Company.
The Company was formed on November 8, 1996. Its balance sheet as of
November 8, 1996 was audited by Price Waterhouse LLP. The balance sheet and
the report of Price Waterhouse LLP thereon were included in the Company's
Form S-11 which was declared effective by the Securities and Exchange
Commission on February 6, 1997. In connection with Price Waterhouse LLP's
audit of the November 8, 1996 balance sheet and through February 26, 1997,
there were no disagreements between the Company and Price Waterhouse LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Price Waterhouse LLP would have caused them
to make reference thereto in their report on the November 8, 1996 balance
sheet and there were no reportable events (as defined in Regulation S-K Item
304(a)(1)(v)).
48
<PAGE>
The report of Price Waterhouse LLP on the Registrant's November 8, 1996
balance sheet did not contain an adverse opinion or a disclaimer of opinion
and the report was not qualified or modified as to uncertainty, audit scope
or accounting principles.
PART III
CERTAIN INFORMATION REQUIRED IN PART III IS OMITTED FROM THIS REPORT BUT
WILL BE INCLUDED IN A DEFINITIVE PROXY STATEMENT WHICH THE COMPANY WILL FILE
WITHIN 120 DAYS OF THE END OF ITS FISCAL YEAR PURSUANT TO REGULATION 14A FOR
ITS ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN MAY 1998 (THE "PROXY
STATEMENT").
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Election of Directors" is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Executive Compensation" is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the Proxy Statement under the caption
"Security Ownership of Management and Certain Beneficial Owners" is
incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Certain Relationships and Transactions" is incorporated herein by this
reference.
49
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a)
1) FINANCIAL STATEMENTS
The financial statements filed as part of this Annual Report
on Form 10-K are listed on page F-1
2) FINANCIAL STATEMENT SCHEDULES
Schedule III - Real Estate and Accumulated Depreciation
(see page S-1)
Schedule IV - Mortgage Loans on Real Estate (see page S-2)
3) EXHIBITS
The exhibits filed as part of this Annual Report on Form 10-K
are listed in the Exhibit Index which follows the financial
statements.
b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the 4th Quarter of
1997.
50
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this Annual Report for the year
ended December 31, 1997 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Charleston, South Carolina, on March 26, 1998.
GOLF TRUST OF AMERICA, INC.
By: /S/ W. Bradley Blair, II
-----------------------------------
W. Bradley Blair, II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and directors of Golf Trust of America,
Inc., do hereby constitute and appoint W. Bradley Blair, II and David J.
Dick, and each of them, our true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments to this report, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby, ratifying and
confirming all that each of said attorneys-in-fact and agents, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ W. Bradley Blair President, Chief March 26, 1998
- ------------------------ Executive Officer and ------------------
W. Bradley Blair, II Chairman of the Board
of Directors
/S/ David J. Dick Executive Vice March 26, 1998
- ------------------------ President and Director ------------------
David J. Dick
/S/ Scott D. Peters Senior Vice President March 26, 1998
- ------------------------ and Chief Financial ------------------
Scott D. Peters Officer
/S/ Larry D. Young Director March 26, 1998
- ------------------------ ------------------
Larry D. Young
/S/ Roy C. Chapman Director March 26, 1998
- ------------------------ ------------------
Roy C. Chapman
/S/ Raymond V. Jones Director March 26, 1998
- ------------------------ ------------------
Raymond V. Jones
/S/ Fred W. Reams Director March 26, 1998
- ------------------------ ------------------
Fred W. Reams
/S/ Edward L. Wax Director March 26, 1998
- ------------------------ ------------------
Edward L. Wax
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
GOLF TRUST OF AMERICA, INC.
<S> <C>
Report of Management . . . . . . . . . . . . . . . . . . . . . F-1
Report of Independent Certified Public Accountants . . . . . . F-2
Consolidated Balance Sheets as of December 31,
1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Income for the Period from
February 12, 1997 through December 31, 1997 . . . . . . . . . F-4
Consolidated Statement of Stockholders' Equity from
February 12, 1997 through December 31, 1997 . . . . . . . . . F-5
Consolidated Statement of Cash Flows from
February 12, 1997 through December 31, 1997 . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . F-7
LEGENDS GOLF
Report of Independent Certified Public Accountants . . . . . . F-17
Analysis of Legends Golf Financial Information . . . . . . . . F-18
Combined Balance Sheets--December 31, 1996 and 1997. . . . . . F-21
Combined Statements of Operations--Years Ended
December 31, 1995, 1996, and 1997 . . . . . . . . . . . . . . F-22
Combined Statements of Owners' Equity--Years Ended
December 31, 1995, 1996, and 1997 . . . . . . . . . . . . . . F-23
Combined Statements of Cash Flows--Years Ended
December 31, 1995, 1996, and 1997 . . . . . . . . . . . . . . F-24
Notes to Combined Financial Statements . . . . . . . . . . . . F-25
</TABLE>
<PAGE>
REPORT OF MANAGEMENT
The consolidated financial statements and other financial information of
Golf Trust of America, Inc. in this report were prepared by management which is
responsible for their contents. They reflect amounts based upon management's
best estimates and informed judgments. In management's opinion, the financial
statements present fairly the financial position, results of operations and cash
flows of the company in conformity with generally accepted accounting
principles.
The Company maintains a system of internal accounting controls and
procedures which is intended, consistent with reasonable cost, to provide
reasonable assurance that transactions are executed as authorized, that they are
included in the financial records in all material respects, and that
accountability for assets is maintained. The accounting controls and procedures
are supported by careful selection and training of personnel and a continuing
management commitment to the integrity of the system.
The financial statements have been audited to the extent required by
generally accepted auditing standards by BDO Seidman, LLP independent auditors.
The independent auditors have evaluated the Company's internal control structure
and performed tests of procedures and accounting records in connection with the
issuance of their report on the fairness of the financial statements.
The Board of Directors has appointed an Audit Committee composed
entirely of directors who are not employees of the company. The Audit Committee
meets with representatives of management and the independent auditors, both
separately and jointly. The Committee discusses with the independent auditors
and approves in advance the scope of the audit, reviews with the independent
auditors the financial statements and their auditors' report, consults with and
reviews management's administration of the system of internal accounting
controls. The Committee reports to the Board on its activities and findings.
W. Bradley Blair Scott D. Peters
Chairman, President and CEO Senior Vice President and CFO
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Directors and Stockholders of Golf Trust of America, Inc.
We have audited the accompanying consolidated balance sheets of Golf Trust
of America, Inc. and subsidiaries as of December 31, 1996 and 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
for the period from February 12, 1997 (inception) through December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Golf Trust
of America, Inc. at December 31, 1996 and 1997, and the results of its
operations and its cash flows for the period from February 12, 1997 through
December 31, 1997, in conformity with generally accepted accounting principles.
March 9, 1998
Charlotte, North Carolina BDO Seidman, LLP
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
---------------------------
<S> <C> <C>
ASSETS
Property and equipment: (Notes 3 and 6)
Land . . . . . . . . . . . . . . . . . . . . . . $ - $ 25,796
Golf course improvements . . . . . . . . . . . . - 58,494
Buildings. . . . . . . . . . . . . . . . . . . . - 22,199
Furniture, fixtures, and equipment . . . . . . . - 8,556
---- --------
Total property and equipment . . . . . . . . . . . - 115,045
Less accumulated depreciation. . . . . . . . . . - 14,001
---- --------
Property and equipment, net. . . . . . . . . . . . - 101,044
---- --------
Mortgage notes receivable (Note 4) . . . . . . . . - 65,129
Cash and cash equivalents . . . . . . . . . . . . - 14,968
Receivable from affiliates (Note 8) . . . . . . . - 1,004
Other assets . . . . . . . . . . . . . . . . . . . - 4,161
---- --------
Total assets . . . . . . . . . . . . . . . . . . . $ - $186,306
---- --------
---- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable (Note 6) . . . . . . . . . . . . . . $ - $ 4,325
Accounts payable and other liabilities . . . . . . - 3,029
---- --------
Total liabilities. . . . . . . . . . . . . . . . . - 7,354
---- --------
Minority interest. . . . . . . . . . . . . . . . . - 54,625
---- --------
Commitments (Note 5)
Stockholders' equity (Note 7):
Preferred stock, $.01 par value, 10,000,000
shares authorized, no shares issued. . . . . . - -
Common stock, $.01 par value, 90,000,000 shares
authorized, 7,610,755 shares issued and
outstanding. . . . . . . . . . . . . . . . . . - 76
Additional paid-in capital . . . . . . . . . . . - 127,488
Retained earnings. . . . . . . . . . . . . . . . - 1,774
Unamortized restricted stock compensation. . . . - (1,713)
Note receivable from stock sale (Note 4) . . . . - (3,298)
---- --------
Stockholders' equity . . . . . . . . . . . . . . . - 124,327
---- --------
Total liabilities and stockholders' equity . . . . $ - $186,306
---- --------
---- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
THROUGH
DECEMBER 31,
1997
------------
<S> <C>
REVENUES:
Rent from affiliates (Note 8). . . . . . . . . . $ 10,802
Rent . . . . . . . . . . . . . . . . . . . . . . 3,607
Mortgage interest (Note 4) . . . . . . . . . . . 4,318
--------
Total revenues . . . . . . . . . . . . . . . . . . 18,727
--------
EXPENSES:
Depreciation and amortization. . . . . . . . . . 3,173
General and administrative . . . . . . . . . . . 2,532
--------
Total expenses . . . . . . . . . . . . . . . . . . 5,705
--------
Operating income . . . . . . . . . . . . . . . . . 13,022
--------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . 624
Interest expense . . . . . . . . . . . . . . . . (1,879)
--------
Total other income (expense) . . . . . . . . . . . (1,255)
--------
Net income before minority interest. . . . . . . . 11,767
Income applicable to minority interest . . . . . . 5,798
--------
Net income . . . . . . . . . . . . . . . . . . . . $ 5,969
--------
--------
Basic earnings per share . . . . . . . . . . . . . $ 1.32
--------
--------
Weighted average number of shares. . . . . . . . . 4,535
--------
--------
Diluted earnings per share . . . . . . . . . . . . $ 1.29
--------
--------
Weighted average number of shares. . . . . . . . . 4,626
--------
--------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
--------------------- PAID-IN RETAINED UNEARNED FROM STOCK STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS COMPENSATION SALE EQUITY
------ ------ ---------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 12, 1997 . . . . - $- $ - $ - $ - $ - $ -
Proceeds from Initial
Public Offering. . . . . . . . . 3,910 39 82,071 - - - 82,110
Payment of underwriters discount
and initial offering costs . . . - - (9,055) - - - (9,055)
Adjustment for minority
interest in operating
partnership. . . . . . . . . . . - - (33,882) - - - (33,882)
Issuance of shares in exchange
for note . . . . . . . . . . . . 159 2 3,296 - - (3,298) -
Issuance of shares for
acquisition. . . . . . . . . . . 22 - 600 - - - 600
Issuance of restricted stock . . . 70 1 1,827 - (1,828) - -
Proceeds from follow-on
offering . . . . . . . . . . . . 3,450 34 88,372 - - - 88,406
Payment of underwriters
discount and costs . . . . . . . - - (5,741) - - - (5,741)
Amortization of restricted
stock compensation . . . . . . . - - - - 115 - 115
Dividends. . . . . . . . . . . . . - - - (4,195) - - (4,195)
Net income . . . . . . . . . . . . - - - 5,969 - - 5,969
----- ---- -------- ------ ------- ------- --------
BALANCE, December 31, 1997 . . . . 7,611 $ 76 $127,488 $1,774 $(1,713) $(3,298) $124,327
----- ---- -------- ------ ------- ------- --------
----- ---- -------- ------ ------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
THROUGH
DECEMBER 31,
1997
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . 3,173
Loan cost amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 280
Straight-line interest . . . . . . . . . . . . . . . . . . . . . . . . . . (723)
Amortization of restricted stock
compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Income applicable to minority interest . . . . . . . . . . . . . . . . . . 5,798
Increase in receivable from affiliates . . . . . . . . . . . . . . . . . . (1,004)
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . (2,993)
Increase in accounts payable and other
liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,029
--------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . 13,644
--------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements. . . . . . . . . . . . . . . . . . (84,332)
Increase in mortgage notes receivable. . . . . . . . . . . . . . . . . . . . (64,406)
--------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . (148,738)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit . . . . . . . . . . . . . . . . . . . . . . 4,325
Loan costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,448)
Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . 155,720
Distributions to partners. . . . . . . . . . . . . . . . . . . . . . . . . . (4,340)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,195)
--------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . 150,062
--------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,968
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . -
--------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . $ 14,968
--------
--------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period. . . . . . . . . . . . . . . . . . . . . . . $ 1,829
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Net assets of Legends golf transferred to
the Company (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 981
OP Units issued in golf course acquisitions. . . . . . . . . . . . . . . . . $ 18,304
Common stock issued in golf course acquisition . . . . . . . . . . . . . . . $ 600
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Golf Trust of America, Inc. (the "Company") was incorporated in Maryland on
November 8, 1996. The Company is a self-administered real estate investment
trust ("REIT") formed to capitalize upon consolidation opportunities in the
ownership of upscale golf courses in the United States. The principal business
strategy of the Company is to acquire upscale golf courses and to lease the golf
courses pursuant to long-term triple net leases to qualified third party
operators, including affiliates of the sellers. Title to the acquired courses
is held by Golf Trust of America, L.P., a Delaware limited partnership (the
"Operating Partnership"). Golf Trust of America, Inc., through its wholly owned
subsidiaries GTA GP, Inc. ("GTA GP") and GTA LP, Inc. ("GTA LP"), holds a 60.0%
interest in the Operating Partnership. GTA GP is the sole general partner of
the Operating Partnership and owns a 0.2% interest therein. GTA LP is a limited
partner in the Operating Partnership and owns a 59.8% interest therein.
The Company commenced operations on February 12, 1997 with the
completion of its initial public stock offering ("IPO") which raised net
proceeds of approximately $73.0 million through the sale of 3,910,000 shares
of common stock. The Company contributed the net proceeds of the IPO to the
Operating Partnership in exchange for a then 48.6% interest in the Operating
Partnership. Concurrently with the closing of the IPO, the Operating
Partnership acquired ten golf courses.
Seven of the courses were acquired from Legends Golf in exchange for
3,738,556 OP Units which represents 30.1% of OP Units outstanding at December
31, 1997 and the repayment of debt. Legends Golf is a group of companies
controlled by Larry D. Young, a director of the Company, and is a lessee.
In November 1997, the Company completed a follow-on equity offering of
3,450,000 shares of common stock. The Company contributed the net proceeds of
approximately $82.7 million to the Operating Partnership to repay approximately
$60.6 million under the line of credit which has been used primarily for golf
course acquisitions.
An OP Unit and share of Common Stock of the Company have the same economic
characteristics inasmuch as they effectively share equally in the net income or
loss and any distributions of the Operating Partnership. OP Unit holders have
the right subject to certain terms and conditions, to convert their OP Units to
shares of Common Stock or to cash at the discretion of the Company. In 1998,
2,407,274 of the OP Units will become convertible.
In order for the Company to maintain its qualification as a REIT, not more
than 50% in value of its Common Stock may be owned, directly or constructively,
by five or fewer individuals. For the purpose of preserving the Company's REIT
qualification, the Certificate of Incorporation prohibits direct or constructive
ownership of more than 9.8% of the Common Stock by any person. Thus, although
an OP Unit is convertible into a share of Common Stock, the conversion of the
majority of the OP Units owned by affiliates of Larry D. Young is restricted by
the Company and the ownership limitations in order to preserve its REIT status.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly owned subsidiaries, and the Operating Partnership. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Minority interest represents the OP Units not held by GTA GP and GTA LP.
Minority interest is adjusted for the OP Unit holders proportionate share of net
income or distributions.
F-7
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company has cash and cash equivalents in a financial institution which
is insured by the Federal Deposit Insurance Corporation (FDIC) for amounts up to
$100,000 per institution. At December 31, 1997, the Company had amounts in
excess of FDIC limits. The Company limits its risk by placing its cash and cash
equivalents in a high quality financial institution. Rents and interest
receivable from the Company's lessees and mortgagee, payable in arrears for the
preceding month, were collected subsequent to the issuance of this report.
Concentration of credit risk with respect to the Company's portfolio of 22
golf courses:
<TABLE>
<CAPTION>
REVENUE
AMOUNTS
(IN THOUSANDS) PERCENTAGE
-------------- ----------
<S> <C> <C>
Myrtle Beach, SC Area (1) $ 7,526 40%
Florida 4,510 24%
Virginia (1) 3,276 17%
Other 3,415 19%
-------- ---
$ 18,727 100%
-------- ---
-------- ---
</TABLE>
(1) The courses located in Myrtle Beach and Virginia are operated by
Legends Golf.
The Company mitigates concentration of credit risk with respect to its
leases by requiring collateral up to 15% of the initial purchase price.
The Company is also subject to a concentration of credit risk from the
participating mortgage. The Company has evaluated the credit worthiness of the
borrower and its affiliates and has obtained a security interest in the property
and equipment of the borrower. The Company has also obtained a limited
guarantee of the debt service from the operator of the resort.
PROPERTY AND EQUIPMENT
Property and equipment is carried at the lower of cost or net realizable
value except for the golf courses acquired from Legends Golf which are carried
at the prior basis of Legends Golf. Cost includes purchase price, closing costs
and other direct costs associated with the purchase. Depreciation is computed
on a straight-line basis over the estimated useful lives of the assets as
follows:
<TABLE>
<CAPTION>
<S> <C>
Golf course improvements 15 years
Buildings and improvements 30 years
Furniture, fixtures, and
equipment 3-8 years
</TABLE>
The leases presently provide that at the end or termination of the existing
leases, all improvements and fixtures placed on the rental property become
property of the Company. In addition, the leases provide for a capital
replacement reserve to be established by the Company for each property. The
Company will approve disbursements from this fund for capital improvements to
the properties and the acquisition of equipment.
F-8
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
The Company assesses whether there has been a permanent impairment in the
value of rental property by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's ability
to perform its duties and pay rent under the terms of the lease. If the
property was leased at a significantly lower rent, the Company may recognize a
permanent impairment of loss if the income stream were not sufficient to recover
its investment. Such a loss would be determined as the difference between the
carrying value and the fair value of the property. Management believes no
permanent impairment has occurred in its net property carrying values.
INCOME TAXES
The Company qualifies as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"). A REIT will generally
not be subject to federal income taxation to the extent that it distributes at
least 95% of its taxable income to its stockholders and complies with other
requirements. The Company paid distributions to stockholders of $1.03 per share
in 1997, all of which is ordinary income.
LOAN COSTS
Loan costs, included in other assets, are amortized over the contractual
term of the agreement. Accumulated amortization of these costs at December 31,
1997 was approximately $280,000.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In 1997, the Company adopted the disclosure provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The Company retained the "intrinsic value" method of accounting
for its plan in accordance with Accounting Principle Board (APB) Opinion No. 25,
and, therefore, recognized no compensation expense for stock opinions. For
disclosure purposes only, the Black-Scholes option pricing model was used to
calculate the "fair values" of stock options.
REVENUE RECOGNITION
The Company recognizes rental revenue on an accrual basis over the terms of
the leases. The Company recognizes interest income ratably over the term of the
loan.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company calculates the fair value of financial instruments and includes
this additional information in the notes to the consolidated financial
statements when the fair value is different than the carrying value of those
financial instruments. When the fair value reasonably approximates the carrying
value, no additional disclosure is made. The estimated fair value amounts have
been determined by the Company, using available market information and
appropriate valuation methodologies. However, considerable judgement is
required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
F-9
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, EARNINGS
PER SHARE. SFAS No. 128 supersedes and simplifies the existing computational
guidelines under Accounting Principles Board ("APB") Opinion No. 15, EARNINGS
PER SHARE. It is effective for financial statements issued for periods
ending after December 15, 1997. Among other changes, SFAS No. 128 eliminates
the presentation of primary earnings per share and replaces it with basic
earnings per share for which common stock equivalents are not considered in
the computation. It also revises the computation of diluted earnings per
share. Adoption of SFAS No. 128 did not have a material impact on the
Company's earnings per share, financial condition, or results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting
from investments by owners and distributions to owners. Among other
disclosure, SFAS 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 is effective for
financial statements for beginning after December 15, 1997, and require
comparative information for earlier years to be restated. Management has
been unable to fully evaluate the impact, if any, the standard may have on
future financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of this standard.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. This statement provides guidelines for
disclosure of financial performance data for identifiable business units and is
effective for fiscal years beginning after December 15, 1997, and when adopted,
will not affect the Company's current disclosures.
In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURES
ABOUT PENSION AND OTHER POSTRETIREMENT BENEFITS. This statement standardizes
the disclosure requirements for pensions and other postretirement benefits and
is effective for years beginning after December 15, 1997, and when adopted, will
not affect the Company's current disclosures.
3. ACQUISITION OF GOLF COURSES
On February 12, 1997, concurrent with the initial public offering of the
Company's stock, the Company acquired ten initial golf courses in exchange for
the issuance of 4.1 million OP units, the repayment of $47.5 million of notes
payable and affiliate debt, and $6.2 million cash. The seven golf courses
acquired from Legends Golf have been accounted for at a carryover basis as
Legends Golf is considered the accounting acquirer under APB Opinion No. 16.
The value of the OP Units issued and debt assumed was approximately
$73.7 million greater than the carryover basis of Legends Golf.
During 1997, the Company purchased an additional 8 golf courses for an
aggregate initial investment of approximately $41.2 million including OP Unit
value. The aforementioned golf courses are leased to third party operators
pursuant to long-term triple net leases.
F-10
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITION OF GOLF COURSES (CONTINUED)
The following is a summary of the acquisitions for 1997:
<TABLE>
<CAPTION>
ACQUISITION COURSE NAME LOCATION COST
DATE (IN THOUSANDS)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
02/12/97 Heathland, Parkland, Moorland Myrtle Beach, SC $18,816
02/12/97 The Heritage Club Pawleys Island, SC 4,800
02/12/97 Legends of Stonehouse Williamsburg, VA 10,571
02/12/97 Olde Atlanta Golf Club Atlanta, GA 7,569
02/12/97 Oyster Bay Golf Links Sunset Beach, NC 2,016
02/12/97 Royal New Kent Providence Forge, VA 10,945
02/12/97 The Woodlands Golf Course Gulf Shores, AL 6,047
02/13/97 Northgate Country Club Houston, TX 12,610
08/19/97 Tiburon Golf Club Omaha, NE 6,003
09/02/97 Raintree Country Club Akron, OH 4,563
09/30/97 Eagle Watch Golf Club Atlanta, GA 6,400
10/02/97 Lost Oaks of Innisbrook Tampa, FL 5,876
10/17/97 The Club of the Country Overland Park, KS 3,083
11/25/97 Black Bear Golf Club Orlando, FL 4,784
12/19/97 Wildewood Country Club Columbia, SC 4,000
12/19/97 Country Club at Woodcreek Columbia, SC 6,521
Farms --------
$114,604
--------
--------
</TABLE>
4. MORTGAGE NOTES RECEIVABLE
On June 23, 1997, the Operating Partnership closed and funded an initial
$69.975 million participating loan to Golf Host Resorts, Inc. ("Golf Host
Resorts"), which is affiliated with Starwood Capital Group LLC. The loan is
secured by the Westin Innisbrook Resort, a 63-hole destination golf and
conference facility located near Tampa, Florida. Additional collateral
includes excess land at the Westin Innisbrook Resort and a first and third
mortgage on the Tamarron Golf Course. Except for the Westin Innisbrook
Resort, the collateral may be released upon the achievement of certain
performance levels. The operator of the resort, Westin, has guaranteed up to
$2.5 million of debt service for each of the first five years.
The initial loan of $69.975 million is being followed by a $9 million
loan, which is being used for a nine-hole expansion and other improvements to
the Westin Innisbrook Resort facilities. The loan term is 30 years, with an
initial base interest rate of 9.63% per annum, annual increases (of at least
5% but no more than 7%) in the interest payment for the first five years, and
a participating interest feature throughout the term based upon the growth in
revenues, if any, over the base year. No participating interest was received
for the period ended December 31, 1997.
Golf Host Resorts used $8,975,000 of the proceeds of the loan to purchase
274,039 OP Units, 159,326 shares of common stock of the Company and an option to
purchase an additional 150,000 shares of common stock of the Company at a price
(subject to certain adjustments) of $26 per share, exercisable before December
31, 1998 (subject to extension in certain circumstances). The $5,677,000 used
to purchase the OP Units has been recorded as an adjustment to minority interest
and the $3,298,000 used to purchase common stock has been recorded as a
reduction of stockholders' equity. The OP Units and 79,663 shares are pledged
as collateral against the loan.
The Company recognizes interest income on a straight-line basis. Interest
income for this mortgage recognized was approximately $723,000 in excess of the
cash received for the period from February 12 to December 31, 1997.
F-11
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COMMITMENTS
LEASES
Typically, the Company leases its golf courses to affiliates of the
prior owners and other qualified operators under non-cancelable lease
agreements for an initial period of ten years with options to extend the term
of each lease six consecutive times for a period of 5 years. From the
minimum lease payments, the Company is generally required to make available a
reserve of 2%-5% of the annual gross golf revenue of each course for capital
expenditure reimbursement to the lessee subject to approval by the Company.
The capital replacement reserve is funded by additional rent from the lessee.
At December 31, 1997, the amount reserved was $524,000.
Scheduled future minimum rents to be received by the Company under the
Leases are as follows for the year ending:
<TABLE>
AMOUNT
----------
IN
(THOUSANDS)
<S> <C>
1998 . . . . . . . . . . . . . . . . $ 19,916
1999 . . . . . . . . . . . . . . . . 19,916
2000 . . . . . . . . . . . . . . . . 19,916
2001 . . . . . . . . . . . . . . . . 19,916
2002 . . . . . . . . . . . . . . . . 19,916
Thereafter . . . . . . . . . . . . . 65,185
---------
$ 164,763
---------
---------
</TABLE>
The non-cancelable leases provide for the Company to receive the greater of
the Base Rent Escalation or an amount equal to Participating Rent plus the Base
Rent Escalation payable under each non-cancelable lease. Participating rent
will generally be paid to the Company each year in the amount, if any, by which
the sum of 33 1/3% of Gross Golf Revenue exceeds the cumulative Base Rent
Escalation since the commencement date of such Leases. Participating rent was
$280,000 for the period ended December 31, 1997. The base rent will generally
be increased each year by the lesser of (i) 3% or (ii) 200% of the annual
percentage increase in the Consumer Price Index ("CPI"). Annual increases in
lease payments are generally limited to 5% to 7% during the first five years of
the initial lease term.
COURSE EXPANSIONS
The Company has agreed to fund certain improvements and expansions for
approximately $14.0 million. The Company charges a market interest rate for
construction loans. Base rents will be increased as improvements are funded.
Additional commitments of approximately $5.9 million will be available for
working capital needs during periods of construction. In addition, the
Company has a remaining commitment to provide an additional $6.0 million
under the Participating Mortgage.
6. NOTE PAYABLE
Under the terms of the Purchase and Contribution Agreement with one of the
prior owners, the Company is required to maintain a minimum loan balance of
$4,325,000, which is guaranteed by the prior owner.
Prior to amendment and restatement as discussed below, the Company had
available an $100 million secured revolving Credit Facility which carried a
floating interest rate of LIBOR plus 1.75% (7.72% at December 31, 1997.)
F-12
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTE PAYABLE (CONTINUED)
On February 27, 1998, a consortium of banks, co-led by NationsBank, N.A.
and Bank of America NT & SA, amended and restated the Credit Facility to
increase the amount available to $125 million on an unsecured basis. Up to
20% of the Credit Facility may be used for working capital needs. The Credit
Facility availability is limited to the unencumbered pool calculation as
defined in the Credit Facility. Financial covenants include minimum
requirement for net worth, liquidity and cash flow. Non-financial covenants
include, among others, restrictions on loans outstanding, construction in
progress, loans to officers and changes to the Board of Directors. These
covenants have been met.
7. STOCK OPTIONS AND AWARDS
The Company issues stock options and restricted stock to employees under
plans subject to approved by stockholders. Options are generally awarded with
the exercise price equal to the market price at the date of grant and become
exercisable in three years.
In February 1997, the Company adopted the 1997 Stock Incentive Plan (the
"Stock Incentive Plan"). Under the Stock Incentive Plan, the Compensation
Committee of the Board of Directors may grant stock awards relating to 500,000
shares of Common Stock. Option grants, under the Stock Incentive Plan, vest
ratably over a period of three years from the date of grant and expire ten years
from the date of grant. All 500,000 shares have been granted during 1997.
In February 1997, the Company adopted the 1997 Non-Employee Directors' Plan
(the "Directors' Plan"). Under the Directors' Plan, the Compensation Committee
is authorized to grant stock awards to purchase up to 100,000 shares of the
Company's common stock at prices equal to the fair value of the stock on the
date of grant. Under the Directors' Plan, 20,000 options which vest
immediately, have been granted leaving 80,000 available for future grants.
In May 1997, the Company adopted the 1997 Stock-Based Incentive Plan
(the "New 1997 Plan"). Under the New 1997 Plan, the Compensation Committee of
the Board of Directors is authorized to grant awards totaling 600,000 shares
of the Company's common stock. Option grants generally vest ratably over a
period of three years from the date of grant and expire ten years from the
date of grant. Restricted stock grants vest 25% per year from the date of
grant. At December 31, 1997, 110,000 shares remain available for options and
restricted stock grants. Subsequent to year-end, an additional 50,000 options
were granted to a new employee.
The New 1997 Plan provides that the Company may grant stock options or
restricted stock to executive officers and other key employees. Restricted
stock is subject to restrictions determined by the Company's Compensation
Committee. The Compensation Committee, comprised of Directors who are not
officers of the Company, determines compensation, including awards under the
Stock Incentive Plan, for the Company's executive officers. The shares of
restricted stock will be sold at a purchase price equal to $0.01 and will vest
over four-year period. Restricted stock has the same dividend and voting rights
as other common stock and is considered to be currently issued and outstanding.
Compensation expense is determined by reference to the market value on the date
of grant and is being amortized on a straight-line basis over the four-year
vesting period. Such expense amounted to approximately $115,000 for the period
ended 1997.
On September 19, 1997, the Company issued 70,000 restricted common
shares to officers of the Company under the New 1997 Plan. These shares were
issued for $.01 when the market price was $26.1875. Subsequent to year end,
loans of approximately $525,000, secured by shares or OP Units, were made to
two officers for the payment of related taxes. On January 1, 1998 the
Company issued 20,939 restricted common shares to officers of the Company
under the New 1997 Plan. These shares were issued for $0.01 when the market
price was $29.00.
F-13
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK OPTIONS AND AWARDS (CONTINUED)
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Option Shares Shares Average
- ------------- ------- --------
<S> <C> <C>
Outstanding at February 12, 1997 . . . . - $ -
Granted. . . . . . . . . . . . . . . . . 940,000 23.88
Exercised. . . . . . . . . . . . . . . . - -
Expired and/or canceled. . . . . . . . . - -
------- ------
Outstanding at December 31, 1997 . . . . 940,000 $23.88
------- ------
------- ------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
RANGE OF REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE OPTIONS EXERCISABLE
PRICE SHARES LIFE (years) PRICE SHARES PRICE
------------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C>
$21 335,000 9.1 $21.00 20,000 $21.00
$24 - $26 605,000 9.3 $25.48 - -
</TABLE>
Pro forma net income and earnings per share, as if the fair value method in
SFAS No. 123 had been used to account for stock-based compensation, and the
assumptions used, are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
THROUGH
DECEMBER 31,
1997
- -------------------------------------------------------------------------------
<S> <C>
Basic earnings per share
As reported $1.32
Pro forma $1.03
Diluted earnings per share
As reported $1.29
Pro forma $1.01
Black-Scholes assumptions*
Risk-free interest rate 6.00%
Dividend yield 5.66%
Stock volatility 17.14%
Expected option life 3 years
*Weighted-averages
</TABLE>
F-14
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK OPTIONS AND AWARDS (CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
Effective March 1, 1998, the Company adopted an Employee Stock Purchase
Plan to provide substantially all employees an opportunity to purchase shares of
its common stock through payroll deduction, up to 10% of eligible compensation
with a $25,000 maximum deferral. Semi-annually, participant account balances
will be used to purchase shares of stock at the lesser of 85 percent of the fair
market value of shares on grant date or exercise date. The Employee Stock
Purchase Plan expires on February 28, 2008. A total of 250,000 shares will be
available for purchase under this plan.
401(k) AND PROFIT SHARING PLAN
Effective November 1, 1997, the Company adopted the Golf Trust of America,
LP 401(k) Profit Sharing Plan & Trust available to all employees who are at
least 21 years of age. Participants may contribute from 1% to 12% of their
earnings, in whole percentages, on a before-tax basis. The Company contributes
to participants' accounts based on the amount the participant elects to defer
and a matching contribution equal to $0.50 on each dollar contributed by a
participant up to 6% of the participant's gross pay. The Company may also make
a discretionary profit-sharing contribution. No discretionary contributions
were made in 1997.
8. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE
Legends Golf is a significant lessee of the golf courses in the
Company's portfolio. Legends Golf is a golf course management group
consisting of eight companies affiliated through common ownership that
operates a portfolio of golf courses owned by the Company. Legends Golf
manages and operates the golf courses as a lessee under triple net leases.
Legends Golf derives revenues from the operation of golf courses principally
through receipt of greens fees, membership fees, golf cart rentals and sales
of food, beverage and merchandise.
The following table sets forth certain combined condensed financial
information for Legends Golf.
<TABLE>
<CAPTION>
December 31
-------------------
(IN THOUSANDS) 1997 1996
------- -------
<S> <C> <C>
Current Assets $ 2,454 $ 2,633
Non-current assets 19,765 47,171
------- -------
Total assets $22,219 $49,804
------- -------
------- -------
Payable to Golf Trust of America, I.P. 1,004 $ -
Other current liabilities 1,721 2,150
Total long-term liabilities 10,897 13,783
Total owners' equity 8,597 7,174
------- -------
Total liabilities and owners' equity $22,219 $49,804
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31
-------------------------------
(IN THOUSANDS) 1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Total revenues $22,588 $19,413 $18,442
Operating income (loss) (4,784) $ 3,457 $ 6,329
Net income (loss) $ (244) $ 1,868 $ 5,312
</TABLE>
9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for the year ended December 31, 1997 is
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Quarter Ended
March 31* June 30 September 30 December 31
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 2,042 $ 3,998 $ 6,065 $ 6,622
Operating income $ 1,383 $ 2,598 $ 4,216 $ 4,825
Net income $ 716 $ 1,292 $ 1,615 $ 2,346
Basic earnings per share $ .19 $ .33 $ .40 $ .40
Diluted earnings per share $ .18 $ .32 $ .39 $ .39
</TABLE>
*Period from February 12 to March 31, 1997
10. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial information set forth below is presented as if the
1997 acquisitions (Note 3) had been consummated as of January 1, 1997. The pro
forma financial information is not necessarily indicative of what actual results
of operations of the Company would have been assuming the acquisitions had been
consummated as of January 1, 1997 nor does it purport to represent the results
of operations for future periods (in thousands, except per share amounts).
<TABLE>
<CAPTION>
For the year
ended
December 31, 1997
- ---------------------------------------------------------------
<S> <C>
Revenues $ 28,220
Net income $ 10,057
Basic earnings per share $ 1.33
Diluted earnings per share $ 1.32
</TABLE>
F-15
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
The pro forma financial information includes the following adjustments: (i)
an increase in depreciation and amortization expense; (ii) an increase in
general and administrative expenses to reflect a whole year of operations (iii)
an increase in interest income; (iv) a decrease in interest expense; and (v) an
increase in income applicable to minority interest.
11. SUBSEQUENT EVENTS
DECLARATION OF DIVIDENDS
On January 26, 1998, the Board of Directors declared a quarterly dividend
distribution of $.41 per share for the quarter ended December 31, 1997, to
stockholders of record on February 5, 1998, which was paid on February 19, 1998.
ACQUISITIONS
On January 2, 1998, the Company acquired Bonaventure Golf Courses,
comprised of two 18-hole golf courses located in Ft. Lauderdale, Florida for
$23.7 million in cash and repayment of mortgage indebtedness including
closing costs. The Company leases the golf courses to an affiliate of
Emerald Dunes Golf Course under a Participating Lease.
On January 16, 1998, the Company acquired Mystic Creek Golf Club and
Banquet Center, an 18-hole semi-private country club located near Dearborn,
Michigan for $8.5 million in cash and OP Units valued at approximately $1.5
million.
Effective February 1, 1998, the Company acquired Emerald Dunes Golf
Course, an 18-hole daily fee golf facility located in West Palm Beach,
Florida for a total purchase price of $22.4 million, which includes
$6.1 million in OP Units. The Company acquired the course subject to an
existing first lien of approximately $12.9 million.
On March 6, 1998, the Company acquired Sandpiper Golf Course, an 18-hole
upscale daily fee golf facility near Santa Barbara, California. The purchase
price paid for the golf facility, long-term management rights and additional
land was $36.5 million. The additional land valued at $4.5 million is held
by a taxable subsidiary of the Company to comply with certain restrictions on
the Company's operations as a REIT. Mr. Blair, President and Mr. Young hold an
approximate 5% interest in this taxable subsidiary. The course is leased to
a joint venture consisting of an affiliate of Environmental Golf and an
affiliate of the adjacent Santa Barbara Club Resort and Spa which is
currently under development.
On March 9, 1998, the Company acquired Persimmon Ridge, an 18-hole upscale
private golf facility located near Louisville, Kentucky for $7.5 million.
The course will be leased to an affiliate of Granite Golf Group.
F-16
<PAGE>
ANALYSIS OF LEGENDS GOLF FINANCIAL INFORMATION
The following discussion should be read in conjunction with the
accompanying Legends Golf Combined Financial Statements and Notes thereto.
The forward-looking statements included in the Analysis of Legends Golf
Financial Information relating to certain matters involve risks and
uncertainties, including anticipated perfomance and other similar matters,
which reflect management's best judgement based on factors currently known,
actual results and experience expressed in the Legends Golf forward-looking
statements as result of a number of factors including but not limited to
those discussed in Analysis of Legends Golf Financial Information.
Pursuant to the Formation Transactions of Golf Trust of America, Inc.
(Golf Trust), Legends Golf contributed in exchange for ownership units in the
partnership seven Golf Courses from The Legends Group: Heritage Golf Club,
Heathland, Moorland, Parkland, Oyster Bay, Royal New Kent and Legends of
Stonehouse. These seven Golf Courses are operated by four Legends Lessees.
The Legends Resort Courses: Heathland, Moorland and Parkland share a common
clubhouse, driving range, golf carts and other facilities and will be leased
by a single Legends Lessee pursuant to a single Participating Lease. The
Virginia courses--Royal New Kent and Legends at Stonehouse--leased by a
single Legends Lessee pursuant to separate Participating Leases. Each of the
two other Legends Golf Courses is leased by a separate Legends Lessee.
Legends Golf markets its courses through media advertising (primarily in
golf publications) and various other promotional arrangements (generally
discounted green fees) provided to guests of local hotels in the markets where
its Golf Courses are located. In addition, in 1995, affiliated entities began
constructing, selling and managing the rental golf villas as part of a
resort/residential development at the Legends Resort, site of the Legends Resort
Courses, Heathland, Moorland and Parkland. This development eventually is
expected to include 196 golf villas with over 780 beds. The Company believes
that this resort/residential development helped contribute to the number of
rounds played at the Legends Resort Courses in 1996 and 1997 and is expected to
continue to be a source of rounds played as the development is completed.
For purposes of financial presentations, the term "Legends Golf" refers to
the combined operations of all seven Golf Courses being contributed by The
Legends Group, and the term "Golf Legends" refers to operations of the three
Golf Courses located at the Legends Resort.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 AND 1996
Revenue from golf operations increased 15.8% from $15,199,000 to
$17,565,000 while the revenue per player increased from $56.21 to $59.48,
while the total rounds played increased 9.2% from 270,400 to 295,300. The
increase in total number of rounds is due to the opening of the two Virginia
courses in mid-1996. The Virginia courses accounted for increased rounds of
26,400 and a total revenue increase of $2,117,000.
The number of rounds played significantly influences other revenue sources,
including food and beverage and merchandise sales. While the number of rounds
increased 9.2% other revenue increased 19.1% to $5,018,000 from $4,214,000
principally due to a 17.6% increase in food and beverage sales resulting from
additional demand created by occupants of the newly constructed golf villas at
the Legends Resort and sales at the Virginia courses as well as a 12.7% increase
in pro shops sales resulting principally from Virginia courses sales. Other
income increased as a result of reinstituting the course photography.
Operating expenses increased 71.5% to $27,367,000 from $15,956,000.
Principal components of the $11,411,000 increase were (i) operating costs
exclusive of lease payments to Golf Trust and depreciation expense of
approximately $1,122,000 associated with the two Virginia courses opened in
mid-1996; (ii) lease payments to Golf Trust, land lease payments to the prior
owner and depreciation expense totaling $11,790,000 for 1997 compared to
$3,126,000 for 1996 (increase $8,644,000) when there were no lease payments to
Golf Trust; (iii) equipment lease payments for golf carts, maintenance
equipment, and a global positioning system, increased $929,000; (iv) $321,000
attributable to clubhouse repairs at Heritage Golf Club and Oyster Bay along
with the addition of several maintenance personnel to improve the quality of the
course maintenance, and (v) increased costs of the food and beverage operations
consistent with the increase in sales.
F-17
<PAGE>
Interest expense decreased 78.2% to $346,000 from $1,589,000 as a result of
lower borrowings outstanding related to debt for the courses which was
transferred in connection with the Formation Transaction's retirement of debt.
Equity in earnings results from limited partnership interest in Golf Trust
of America, L.P.
Net income decreased $2,112,000 from $1,868,000 to a deficit of $244,000
primarily as a result of the increased operating expenses from the two new
courses and lease payments to Golf Trust.
YEAR ENDED DECEMBER 31, 1996 AND 1995
Revenue from golf operations increased 4.0% from $14,619,000 to
$15,199,000 as well as the revenue per player (principally as a result of
increased green fees and gulf cart rentals) fr.. $55.65 to $56.21, while the
total rounds played increased 2.9% from 262,700 to 270,400. The increase in
total number of rounds is primarily due to the opening of the two Legends of
Virginia courses in mid-1996. The increase in total revenues in 1996 due to
the two new courses approximated $690,000. In January and February 1996,
management reduced available tee times and increased green and cart fees over
the prior period's winter rates in an effort to enhance the quality of the
golf experience during the slower time of the year. The Company believes
that the late, harsh winter of 1996 in the Midwest and northeastern United
States reduced vacation golfers' travel from these areas and contributed to
the decrease in the number of rounds played. Rounds player were also
adversely affected by two hurricanes during the summer of 1996 that resulted
in minimal damage to the Golf Courses but reduced vacation golf travel to the
area.
Other revenue sources, including food and beverage and merchandise sales
are significantly influenced by the number of rounds played. While the number
of rounds increased 2.9%, the revenue increased 10.2% to $4,214,000 from
$3,823,000 principally due to a 22.6% increase in food and beverage sales
resulting from additional demand created by occupants of the newly constructed
golf villas at the Legends Resort. The rental units recently opened and
additional units are being developed. Management is unable to estimate the
future impact on food and beverage sales. However, food and beverage revenues
are not included in the calculation of Gross Golf Revenue and therefore do not
affect Participating Rent payments.
Operating expenses increased 31.7% to $15,956,000 from $12,113,000.
Principal components of the $3,843,000 increase were (i) initial operating costs
of approximately $3,178,000 associated with the two Legends of Virginia courses
opened in mid-1996, (ii) a one-time increase in chemical. and fertilizer expense
of approximately $90,000, (iii) periodic resurfacing of cart paths totaling
$50,000, (iv) food and beverage operations of approximately $352,000 attributed
to an increase in revenue, and (v) an increase in repairs and maintenance
expense.
Interest expense increased 56.2% to $1,589,000 from $1,017,000 as a result
of higher borrowings incurred in connection with the completion and pre-opening
costs of the two recently opened Initial Courses.
Net income decreased 64.8% from $5,312,000 to $1,868,000 primarily as a
result of additional $3,178,000 of expenses associated with the two recently
opened Initial Courses.
YEAR ENDED DECEMBER 31, 1995 AND 1994
Revenue from golf operations increased 1.7% to $14,619,000 from
$14,371,000. The increase resulted primarily from a 9.5% increase in revenue
per player (principally as a result of increased green fees and golf cart
rentals) from $50.82 to $55.65. During this same period rounds played decreased
7.1% from 282,800 to 262,700 as a result of the Company's focus on increasing
green fees.
F-18
<PAGE>
Other revenue decreased 19.1% from $4,725,000 to $3,823,000 principally due
to a contribution of land totaling $1,000,000 which was partially offset by
increased food and beverage and merchandise sales as a result of improved
merchandising efforts in the pro shop.
Operating expenses increased 1.7% to $12,113,000 from $11,913,000,
primarily as a result of normal wage and other operating cost increases,
Interest expense increased 1.9% to $1,017,000 from $998,000 primarily due
to financing costs incurred in connection with the purchase of maintenance
equipment.
Net income decreased 14.1% to $5,312,000 from $6,185,000.
F-19
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Legends Golf
Myrtle Beach, South Carolina
We have audited the accompanying combined balance sheets of LEGENDS GOLF
(as defined in Note 1) as of December 31, 1996 and 1997, and the related
combined statements of operations, owners' equity, and cash flows for each of
the three years in the period ended December 31, 1997. These combined financial
statements are the responsibility of LEGENDS GOLF'S management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully described in the notes to the combined financial statements,
LEGENDS GOLF has material transactions with its majority stockholder and
affiliates.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of LEGENDS GOLF at
December 31, 1996 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
February 17, 1998 BDO Seidman, LLP
Charlotte, North Carolina
F-20
<PAGE>
LEGENDS GOLF
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
<S> <C> <C>
ASSETS
CURRENT: . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . $ 841 $ 569
Accounts receivable (Note 3):. . . . . . . . . .
Golf packages . . . . . . . . . . . . . . . . . 984 810
Related parties . . . . . . . . . . . . . . . . 246 95
Other . . . . . . . . . . . . . . . . . . . . . 60 527
Inventories. . . . . . . . . . . . . . . . . . . 498 453
------- -------
Total current assets . . . . . . . . . . . . 2,629 2,454
------- -------
Property and equipment, less accumulated
depreciation and amortization
(Notes 4, 6, and 7). . . . . . . . . . . . . . . 35,060 3,630
Other assets:
Advances to affiliates (Note 3). . . . . . . . . 11,673 13,148
Investment in Golf Trust (Note 2). . . . . . . . - 2,940
Other. . . . . . . . . . . . . . . . . . . . . . 442 47
------- -------
Total other assets . . . . . . . . . . . . . 12,115 16,135
$49,804 $22,219
------- -------
------- -------
LIABILITIES AND OWNERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . $ 1,417 $ 873
Accrued expenses:
Rent. . . . . . . . . . . . . . . . . . . . . . 5 1,034
Other . . . . . . . . . . . . . . . . . . . . . 728 448
Current maturities of long-term debt (Note 6). . 26,697 370
------- -------
Total current liabilities. . . . . . . . . . 28,847 2,725
------- -------
------- -------
Advances from affiliates (Note 3). . . . . . . . . 13,167 9,661
Long-term debt, less current maturities (Note 6) . 616 1,236
------- -------
Total liabilities. . . . . . . . . . . . . . 42,630 13,622
------- -------
------- -------
Commitments and contingencies (Note 7)
Owners' equity:
Common stock, $1 par--shares authorized,
300,000; outstanding, 1,000. . . . . . . . . . . 3 3
Members' contributions . . . . . . . . . . . . . 1 7
Additional paid-in capital . . . . . . . . . . . 300 3,832
Members' accumulated deficit . . . . . . . . . . (1,970) (5,332)
Retained earnings. . . . . . . . . . . . . . . . 8,840 10,077
------- -------
Total owners' equity . . . . . . . . . . . . 7,174 8,597
------- -------
. . . . . . . . . . . . . . . . . . . . . . . $49,804 $22,219
------- -------
------- -------
</TABLE>
See accompanying notes to combined financial statements
F-21
<PAGE>
LEGENDS GOLF
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
<S> <C> <C> <C>
REVENUES:
Green fees . . . . . . . . . . . . . . . . . . . $10,147 $10,476 $12,081
Cart rentals . . . . . . . . . . . . . . . . . . 4,373 4,564 5,335
Membership dues. . . . . . . . . . . . . . . . . 99 159 149
Food and beverage sales. . . . . . . . . . . . . 1,708 2,095 2,464
Pro shop merchandise sales . . . . . . . . . . . 2,021 2,089 2,355
Other income . . . . . . . . . . . . . . . . . . 94 30 199
------- ------- -------
Total revenues . . . . . . . . . . . . . . . 18,442 19,413 22,583
------- ------- -------
COSTS AND EXPENSES:
General and administrative (Note 3). . . . . . . 3,998 4,767 5,511
Repairs and maintenance. . . . . . . . . . . . . 2,386 4,046 5,667
Depreciation and amortization. . . . . . . . . . 1,791 2,400 958
Cost of merchandise sold . . . . . . . . . . . . 983 1,053 1,154
Rents (Note 7) . . . . . . . . . . . . . . . . . 982 1,098 11,068
Pro shop operations. . . . . . . . . . . . . . . 857 1,107 1,231
Cost of food and beverage sold . . . . . . . . . 604 817 1,024
Food and beverage operations . . . . . . . . . . 512 668 754
------- ------- -------
Total costs and expenses . . . . . . . . . . 12,113 15,956 27,367
------- ------- -------
Operating income (loss). . . . . . . . . . . . . . 6,329 3,457 (4,784)
------- ------- -------
OTHER INCOME EXPENSES:
Equity interest in earnings of
Golf Trust (Note 2) . . . . . . . . . . . . . . - - 4,887
Interest expense . . . . . . . . . . . . . . . . (1,017) (1,589) (347)
------- ------- -------
Total other income (expense) . . . . . . . . (1,017) (1,589) 4,540
------- ------- -------
Net income (loss). . . . . . . . . . . . . . . . . $ 5,312 $ 1,868 $ (244)
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to combined financial statements
F-22
<PAGE>
LEGENDS GOLF
COMBINED STATEMENTS OF OWNERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
MEMBERS' PAID-IN RETAINED ACCUMULATED
SHARES AMOUNT CONTRIBUTIONS CAPITAL EARNINGS DEFICIT
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995 . . . . . 3 $ 3 $ 1 $300 $2,468 1,000
Net income (loss). . . . . . . . . - - - - 5,357 (44)
Cash dividends . . . . . . . . . . - - - - (2,757) -
------ ------ ----- ----- ------ ------
BALANCE, December 31, 1995 . . . . 3 3 1 300 5,068 956
Net income (loss). . . . . . . . . - - - - 4,794 (2,926)
Cash dividends . . . . . . . . . . - - - - (1,022) -
------ ------ ----- ----- ------ ------
BALANCE, December 31, 1996 . . . . 3 3 1 300 8,840 (1,970)
Capital contributions: . . . . . .
Cash . . . . . . . . . . . . . . - - 6 - - -
Land (Note 2). . . . . . . . . . - - - 3,532 - -
Net income (loss). . . . . . . . . - - - - 3,108 (3,352)
Cash dividends . . . . . . . . . . - - - - (1,871) -
------ ------ ----- ----- ------ ------
BALANCE, December 31, 1997 . . . . 3 $ 3 $ 7 $3,832 $10,077 $(5,322)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements
F-23
<PAGE>
LEGENDS GOLF
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . $5,312 $1,868 $ (244)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . 1,791 2,400 958
Loss on disposal of property and equipment . . . . 5 78 -
Equity earnings in Golf Trust. . . . . . . . . . . - - (4,887)
Decrease (increase) in:
Accounts receivable . . . . . . . . . . . . . . . (135) (627) 171
Inventories . . . . . . . . . . . . . . . . . . . 135 (204) 45
Prepaid expenses and other assets . . . . . . . . 7 (182) (157)
Increase (decrease) in:
Accounts payable. . . . . . . . . . . . . . . . . (87) 987 (544)
Accrued expenses. . . . . . . . . . . . . . . . . (458) 355 791
-------- ------ -------
Net cash provided by (used in) operating activities. . 6,570 4,675 (3,867)
-------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions . . . . . . . . . . (12,213) (5,271) (2,014)
Proceeds from sale of property and equipment . . . . 124 612 -
Proceeds from transfer to Golf Trust . . . . . . . . - - 523
Distributions from Golf Trust. . . . . . . . . . . . - - 3,851
Increase in advances to affiliates . . . . . . . . . (4,843) (3,920) (988)
-------- ------ -------
Net cash provided by (used in) investing activities. . (16,932) (8,579) 1,372
-------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends. . . . . . . . . . . . . . . . (2,757) (1,021) (1,871)
Capital contribution . . . . . . . . . . . . . . . . - - 6
Proceeds from long-term debt . . . . . . . . . . . . 11,448 2,497 1,086
Payments on long-term debt . . . . . . . . . . . . . (812) (1,560) (226)
Increase (decrease) in advances from affiliates. . . 2,903 4,429 3,228
Decrease in advances from stockholder. . . . . . . . (525) - -
-------- ------ -------
Net cash provided by financing activities. . . . . . . 10,257 4,345 2,223
-------- ------ -------
Net increase (decrease) in cash. . . . . . . . . . . . (105) 441 (272)
-------- ------ -------
Cash, beginning of period. . . . . . . . . . . . . . . 505 400 841
Cash, end of period. . . . . . . . . . . . . . . . . . $ 400 $ 841 $ 569
---------------------------
---------------------------
</TABLE>
See accompanying notes to combined financial statements
F-24
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The accompanying 1996 combined financial statements include the accounts of
three S-Corporations (Seaside Resorts, Ltd. d/b/a Oyster Bay Golf Club; Heritage
Golf Club, Ltd.; and Golf Legends, Ltd.) and one limited liability company
(Legends of Virginia, LC). The 1997 combined financial statements also include
the accounts of four newly formed limited liability companies (Legends Golf
Management, LLC; Heritage Golf Management, LLC; Oyster Bay Golf Management, LLC;
and Virginia Legends Golf Management, LLC). The entities, referred to
collectively as Legends Golf (the Company), are engaged in the operation of golf
courses in North Carolina, South Carolina, and Virginia.
The operations of the companies listed above are being presented on a
combined basis, as under the terms of the operating leases, the lease
obligations are cross-collateralized among all four Legends lessees. This
presentation better presents the ability of the lessees to service the leases.
All significant intercompany balances and transactions have been
eliminated. Additionally, certain classifications may vary from those of the
individual companies' financial statements.
INVENTORIES
Inventories are valued at the lower-of-cost (first-in, first-out) or market
and consist primarily of food, beverages, golf equipment, and clothing.
REVENUE RECOGNITION
Revenue from green fees, cart rentals, food and beverage sales, merchandise
sales, and range income are generally recognized at the time of sale.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
INVESTMENT IN PARTNERSHIP
Legends Golf accounts for its investments in Golf Trust of America, LP
(GTA, LP) under the equity method of accounting. Under this method, equity
earnings (losses) are recorded as increases (decreases) to the investment
account and dividend distributions, to the extent they do not lower the
investment below zero, are recorded as reductions in the investments.
F-25
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets using straight-line methods for
financial reporting and accelerated methods for income tax purposes.
Estimated useful lives for major asset categories approximate:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------- -----
<S> <C>
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . 40
Machinery and equipment . . . . . . . . . . . . . . . . . . 3-8
Furniture . . . . . . . . . . . . . . . . . . . . . . . . . 8
Golf carts. . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
Major renewals and betterments are capitalized. Maintenance, repairs and
minor renewals are expensed as incurred. When properties are retired or
otherwise disposed of, related cost and accumulated depreciation are removed
from the accounts. Tenant improvements, to the extent they are not reimbursed
by the Landlord, are amortized over the lesser of their useful lives or the
related lease term.
INCOME TAXES
For the S-Corporations, the absence of a provision for income taxes is due
to the election by the companies, and consent by their sole stockholder, to
include the taxable income or loss of the companies in his individual tax
returns. As a result, no federal or state income taxes are imposed on the
companies. For the limited liability companies, no provision has been made for
income taxes or related credits as under the Internal Revenue Code as a limited
liability company is treated as a partnership for income tax purposes.
Therefore, the results of operations are includable in the income tax returns of
the members.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles required management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject Legends Golf to
concentration of credit risk consist primarily of trade receivables.
Concentration of credit risk with respect to trade receivables, which
consists primarily of golf packages from hotels and charges, is limited due to
the large number of hotels comprising Legends Golf's customer base. The trade
receivables are billed and due monthly, and all probable bad debt losses have
been appropriately considered in establishing an allowance for doubtful
accounts. As of December 31, 1995, 1996, and 1997, Legends Golf had no
significant concentration of credit risk.
F-26
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting
from investments by owners and distributions to owners. Among other
disclosure, SFAS 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 is effective for
financial statements for beginning after December 15, 1997, and require
comparative information for earlier years to be restated. Management has
been unable to fully evaluate the impact, if any, the standard may have on
future financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of this standard.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. This statement provides guidelines for
disclosure of financial performance data for identifiable business units and is
effective for fiscal years beginning after December 15, 1997, and when adopted,
will not affect the Company's current disclosures.
In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURES
ABOUT PENSION AND OTHER POSTRETIREMENT BENEFITS. This statement standardizes
the disclosure requirements for pensions and other postretirement benefits and
is effective for years beginning after December 15, 1997, and when adopted, will
not affect the Company's current disclosures.
ADVERTISING
Legends Golf expenses advertising costs as incurred. Advertising costs
included in general and administrative costs in the amounts of $403, $672, and
$626 for December 31, 1995, 1996, and 1997, respectively.
2. TRANSFER OF ASSETS AND INVESTMENT IN GOLF TRUST
On February 12, 1997, Legends Golf transferred land and improvements,
buildings and certain equipment with a net book value of $36.3 million net of
related debt of $34.8 million to Golf Trust of America, LP Golf Trust for
approximately 3.7 million OP Units and reimbursement of approximately $522,500
of out-of-pocket expenses. Immediately prior to the transfer, the Company's
sole stockholder (majority member) contributed land, previously leased to
Legends Golf, at a value of $3.5 million. The transfer was concurrent with an
initial public offering of the common stock of Golf Trust of America, Inc. (GTA,
Inc.), its general partner. Legends Golf OP Units are convertible, subject to
certain limitations as defined in the transfer agreement, to common shares of
GTA, Inc. At December 31, 1997, the common stock equivalent value of the OP
Units was approximately $108 million.
In addition, with the contribution of assets, the operations of the golf
courses were transferred to four newly formed management companies. These
companies entered into lease agreements with Golf Trust more fully described in
Note 7. Legends Golf is also committed to construct two clubhouses, currently
under construction in Virginia, with an estimated cost at completion of $2
million. Upon completion, the assets will be transferred to Golf Trust.
F-27
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
3. RELATED PARTY TRANSACTIONS
Legends Golf sole stockholder (majority member) owns and operates Marsh
Harbour, Ltd.; Heritage Plantation, Ltd.; Legends Golf Development, Ltd.; The
Legends Group, Ltd.; Legends Scottish Village, LLC; Legends Properties, LLC;
Legends Golf Resorts, LLC; and other related businesses.
The Legends Group, Ltd. provides various management and administrative
services including reservations, advertising, accounting, payroll and related
benefits, and telephone for all affiliated companies. These expenses are
allocated to the businesses using procedures deemed appropriate to the nature of
the expenses involved. The procedures utilize various allocation bases such as
relative investment and number of employees and direct effort expended. Interest
on allocated external debt is charged as incurred. Legends Golf's management
believes the allocations are reasonable, but they are not necessarily indicative
of the costs that would have been incurred if the businesses had operated as
separate companies. Administrative fees paid by the Legends Golf for such
services are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,065
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,185
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,506
</TABLE>
During 1996 and 1997, Legends Golf recognized golf course revenue of $1,051
and $1,744, respectively, under golf packages with an affiliated company.
Advances to and from affiliated companies, as shown on the combined balance
sheets, have no fixed payment/repayment provisions. Interest income and expense
on advances to and from affiliates is not recorded for financial statement
purposes.
During 1996, Legends Golf paid an affiliate approximately $18,221 for
construction of two golf courses which represented cost plus 7 percent.
4. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
<S> <C> <C>
Land. . . . . . . . . . . . . . . . . . . . . $ 1,000 $ -
Golf course improvements. . . . . . . . . . . 36,005 -
Buildings . . . . . . . . . . . . . . . . . . 4,789 539
Machinery and equipment . . . . . . . . . . . 2,830 58
Furniture . . . . . . . . . . . . . . . . . . 558 288
Golf carts. . . . . . . . . . . . . . . . . . 1,373 1,111
Construction-in-progress. . . . . . . . . . . 332 -
Assets subject to transfer (Notes 2 and 7): .
Equipment . . . . . . . . . . . . . . . . . - 201
Leasehold improvements. . . . . . . . . . . - 802
Construction-in-progress. . . . . . . . . . - 1,302
------- ------
45,888 4,301
Less accumulated depreciation . . . . . . . . 10,828 671
------- ------
Net property and equipment. . . . . . . . . . $35,060 $3,630
--------------------
--------------------
</TABLE>
5. RETIREMENT PLAN
F-28
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
During 1995 and 1996, the Legends Group, Ltd. sponsored a
defined-contribution retirement plan for all eligible employees of Legends Golf
and other affiliated companies including officers. The plan provided for
contributions by Legends Golf equal to the level funding amount as calculated
and defined in the plan agreement.
During February 1997, Legends Golf converted the defined-contribution
retirement plan to a 401(k) profit sharing plan for all eligible employees of
Legends Golf and other affiliated companies including officers. Legends Group,
Ltd. may annually elect to make matching contributions as defined in the plan.
Expenses under the plans were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1995. . . . . . . . . . . . . . . . . . . . . $71
1996. . . . . . . . . . . . . . . . . . . . . $99
1997. . . . . . . . . . . . . . . . . . . . . $-
</TABLE>
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
<S> <C> <C>
Payable to bank, under a $6 million loan agreement
that Legends Golf participates in, along with Marsh
Harbour, Ltd., an affiliated company. The note bears
interest at the 30-day LIBOR rate (5.72% at December
31, 1997) plus 1/4%. The outstanding balance for
Legends Golf and Marsh Harbour, Ltd. is payable in
graduated principal payments, beginning June 1997, of
$83 plus accrued interest; balance due May 2002. The
aforementioned companies are jointly liable for the
debt and the sole stockholder has guaranteed the
loans . . . . . . . . . . . . . . . . . . . . . . . $ - $ 990
Payable to bank, due in monthly installments of
principal and interest of $20, calculated by multiplying
the capitalized cost by a rental factor, which is
adjusted by a percentage of each basis point change in
the 30-day LIBOR rate; due in 2000; collateralized by
golf carts having a net book value of $778 at December
31, 1997 . . . . . . . . . . . . . . . . . . . . . . 781 579
Other . . . . . . . . . . . . . . . . . . . . . . . 78 37
. . . . . . . . . . . . . . . . . . . . . . . . . .
Paid or transferred to Golf Trust in 1997 . . . . . 26,454 -
------- -------
27,313 1,606
Less current maturities . . . . . . . . . . . . . . 26,697 370
------- -------
$ 616 $ 1,236
------------------
------------------
</TABLE>
F-29
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
6. LONG-TERM DEBT (CONTINUED)
The $6 million loan agreement provides, among other covenants, restrictions
on certain financial ratios, capital expenditures, indebtedness, liens, changes
in the nature of the business and significant other limitations as to the use of
funds. The Company has obtained a waiver of certain of the covenants as of
December 31, 1997.
Total debt of all affiliated entities of which the Company is jointly
liable is approximately $12,708 at December 31, 1997.
The aggregate annual maturities for the above mortgage notes payable at
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
<C> <C>
1998 . . . . . . . . . . . . . . . . . . . . . . $370
1999 . . . . . . . . . . . . . . . . . . . . . . 455
2000 . . . . . . . . . . . . . . . . . . . . . . 429
2001 . . . . . . . . . . . . . . . . . . . . . . 308
2002 . . . . . . . . . . . . . . . . . . . . . . 44
Total. . . . . . . . . . . . . . . . . . . . . . $1,606
------
------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
LEASES
Concurrent with the transfer of assets, as described in Note 3, Legends
Golf entered into four lease agreements with GTA, LP. The leases provide for
initial annual payments aggregating approximately $12 million with annual
adjustments equal to the lesser of 3 percent or 200 percent of the consumer
price index. In addition, the leases provide for percentage rents based on one
third of the increase in gross golf revenues, as defined in the agreement, over
the base year of 1996. The leases, which have an initial term ending December
31, 2006, may be renewed for six additional periods of five years each. In
addition, the leases provide for reimbursements, subject to landlord approval,
up to 2% of gross golf revenues, to certain qualified capital expenditures, as
defined in the lease agreements. Legends Golf records these expenditures as
leasehold improvements or equipment as applicable until they are reimbursed by
the Lessor. As of December 31, 1997, the Lessor had approximately $351
available to Legends Golf under these lease agreements.
Legends Golf also leases land from a third party under an agreement which
expires in 2032. The lease requires rental payments of 10 percent of monthly
green fees as defined in the lease agreement.
During 1996 and prior to the transfer of assets on February 12, 1997,
Legends Golf leased land from the sole stockholder.
Total rental expense approximated the following:
<TABLE>
<CAPTION>
STOCKHOLDER THIRD GOLF TRUST
YEAR ENDED DECEMBER 31, ----------- PARTY ----------
-----
<S> <C> <C> <C>
1995 . . . . . . . . . . . $734 $248 $ -
1996 . . . . . . . . . . . 726 $231 $ -
1997 . . . . . . . . . . . $ 25 $236 $10,807
</TABLE>
Legends Golf also leases certain equipment under noncancelable operating leases.
Total equipment lease expense approximated $0, $162, $1,000 for 1995, 1996, and
1997, respectively.
F-30
<PAGE>
LEGENDS GOLF
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASES (CONTINUED)
Minimum lease commitments for noncancelable operating leases at December
31, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31. AMOUNT
------------------------ ------
<S> <C>
1998 . . . . . . . . . . . . . . . . . . . . . . $13,161
1999 . . . . . . . . . . . . . . . . . . . . . . 13,159
2000 . . . . . . . . . . . . . . . . . . . . . . 12,719
2001 . . . . . . . . . . . . . . . . . . . . . . 12,545
2002 . . . . . . . . . . . . . . . . . . . . . . 12,068
Thereafter . . . . . . . . . . . . . . . . . . . 60,285
--------
Total. . . . . . . . . . . . . . . . . . . . . . $123,937
--------
--------
</TABLE>
SELF-INSURANCE
Legends Golf along with its affiliates maintain a self-insurance program
for that portion of health care costs not covered by insurance. Legends Golf is
liable for claims up to $15 per employee annually with an annual aggregate
maximum liability under the program for all companies of $336. Cumulative
amounts estimated to be payable by Legends Golf with respect to pending and
potential claims have been accrued as liabilities.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . $ 1,574
1996 . . . . . . . . . . . . . . . . . . . . . . $ 2,012
1997 . . . . . . . . . . . . . . . . . . . . . . $ 578
</TABLE>
During 1996, equipment having a net book value of $711 and cash of $399 was
exchanged for similar new equipment having a value of $1,110.
During 1997, the Company transferred assets and related debt to Golf
Trust (see Note 3).
F-31
<PAGE>
SCHEDULE III
GOLF TRUST OF AMERICA, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
BUILDING &
PROPERTY/LOCATION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS OTHER LAND
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Healthland, Parkland, and Moorland--Myrtle Beach, SC - 3,207 15,609 - - $3,207
Heritage Golf Club--Pawleys Island, SC - 325 4,475 - - 325
Royal New Kent--Williamsburg, VA - 500 10,445 - - 500
Olde Atlanta Golf Club--Atlanta, GA - 3,242 4,327 - - 3,242
Oyster Bay Golf Links--Sunset Beach, NC - - 2,016 - - -
Legends of Stonehouse--Williamsburg, VA - 500 10,071 - - 500
The Woodlands Golf Course--Gulf Shores, AL - 1,001 5,046 - - 1,001
Northgate Country Club--Houston, TX - 2,626 9,984 - - 2,626
Tiburon Golf Club--Omaha, NE - 800 5,203 - - 800
Raintree Country Club--Akron, OH - 1,080 3,483 - - 1,080
Eagle Watch Golf Club--Atlanta, GA - 3,603 2,797 - - 3,603
Lost Oaks of Innisbrook--Tampa, FL - 2,641 3,235 - - 2,641
The Club of the Country--Kansas City, KS - 1,220 1,863 - - 1,220
Black Bear Golf Club--Orlando, FL - 851 3,933 - - 851
Wildewood Country Club and Country Club
at Woodcreek Farm--Columbia, SC - 4,200 6,322 - - 4,200
--------
W/O corporate assets $25,796
--------
--------
<CAPTION>
BUILDING & ACCUMULATED DATE OF DATE
PROPERTY/LOCATION IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Healthland, Parkland, and Moorland--Myrtle Beach, SC $15,609 $18,816 $6,959 1990-1992 2/12/97
Heritage Golf Club--Pawleys Island, SC 4,475 4,800 2,856 1986 2/12/97
Royal New Kent--Williamsburg, VA 10,445 10,945 942 1996 2/12/97
Olde Atlanta Golf Club--Atlanta, GA 4,327 7,569 154 1993 2/12/97
Oyster Bay Golf Links--Sunset Beach, NC 2,016 2,016 1,327 1983 2/12/97
Legends of Stonehouse--Williamsburg, VA 10,071 10,571 891 1996 2/12/97
The Woodlands Golf Course--Gulf Shores, AL 5,046 6,047 102 1994 2/12/97
Northgate Country Club--Houston, TX 9,984 12,610 415 1984 2/13/97
Tiburon Golf Club--Omaha, NE 5,203 6,003 144 6/11/05 8/19/97
Raintree Country Club--Akron, OH 3,483 4,563 55 6/13/05 9/2/97
Eagle Watch Golf Club--Atlanta, GA 2,797 6,400 39 6/11/05 9/30/97
Lost Oaks of Innisbrook--Tampa, FL 3,235 5,876 38 5/28/05 10/2/97
The Club of the Country--Kansas City, KS 1,863 3,083 16 6/1/05 10/17/97
Black Bear Golf Club--Orlando, FL 3,933 4,784 22 6/17/05 11/25/97
Wildewood Country Club and Country Club
at Woodcreek Farm--Columbia, SC 6,322 10,522 - 1974,1997 12/19/97
------------------------------------
W/O corporate assets $88,808 $114,604 $13,959
------------------------------------
------------------------------------
</TABLE>
S-1
<PAGE>
SCHEDULE IV
GOLF TRUST OF AMERICA, INC.
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 30, 1997
<TABLE>
<CAPTION>
FINAL
INTEREST MATURITY
DESCRIPTION RATE DATE PERIOD PAYMENT TERMS
<S> <C> <C> <C>
Golf Hosts Resorts, Inc. 9.63%-9.75% 6/20/27 Note payable interest only of $561,589 monthly with 5% increases beginning
in year two and continuing until year five. Amounts drawn on $9M Tranche
II, at $3,024,000 at December 31, 1997, loan bears interest at 9.75%
<CAPTION>
PRINCIPAL AMOUNT OF
CARRYING LOANS SUBJECT TO
PRIOR FACE AMOUNT AMOUNTS OF DELINQUENT PRINCIPAL
LIENS OF MORTGAGE MORTGAGE OF INTEREST
<S> <C> <C> <C>
$-- $63,051,000 $65,129,000 $--
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.
The following exhibits are part of this Annual Report on Form 10-K for
fiscal year 1997 (and are numbered in accordance with Item 601 of Regulation
S-K). Items marked with an asterisk (*) are filed herewith.
Exhibit No. Description
- ----------- -----------
3.1 Articles of Amendment and Restatement of the Company, as filed
with the State Department of Assessments and Taxation of Maryland
on January 31, 1997, (previously filed as Exhibit 3.1A to the
Company's Registration Statement on Form S-11 (Commission File
No. 333-15965) Amendment No. 2 (filed January 30, 1997) and
incorporated herein by reference).
3.2 Bylaws of the Company as currently in effect (previously filed as
Exhibit 3.2 to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 1 (filed January
15, 1997) and incorporated herein by reference).
10.1.0 First Amended and Restated Agreement of Limited Partnership of
the Operating Partnership (the "Partnership
Agreement")(previously filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K (Commission File No. 000-22091), filed
May 15, 1997, and incorporated herein by reference).
10.1.1* Exhibit A to the Partnership Agreement, as revised through March
25, 1998.
10.1.2* First Amendment to the Partnership Agreement, dated as of
February 1, 1998.
10.2.0 Form of Participating Lease between the Operating Partnership and
the Lessees relating to the Initial Courses (previously filed as
Exhibit 10.2 to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 1 (filed January
15, 1997) and incorporated herein by reference).
10.2.1 Schedule of material differences among the Participating Leases
for the Initial Courses (included in lieu of the full text of
each lease pursuant to Instruction 2 to Item 601 of Regulation
S-K)(previously filed as Exhibit 10.2.1 to the Company's Annual
Report on Form 10-K (Commission File No. 000-22091), filed May
15, 1997, and incorporated herein by reference).
10.2.2* Lease, dated October 3, 1997, by and between Golf Trust of
America, L.P., as landlord, and Lost Oaks, L.P., as tenant.
<PAGE>
10.2.3* Lease, dated October 17, 1997, by and between Golf Trust of
America, L.P., as landlord, and Golf Properties of the Country,
L.L.C., as tenant.
10.2.4* Lease, dated November 25, 1997, by and between Golf Trust of
America, L.P., as landlord, and Granite Subsidiary, Inc., as
tenant.
10.2.5* Lease, dated September 26, 1997, by and between Golf Trust of
America, L.P., as landlord, and E.W.G.C., LLC, as tenant.
10.2.6* Lease, dated December 19, 1997, by and between Golf Trust of
America, L.P., as landlord, and Stonehenge Golf Development, LLC,
as tenant.
10.2.7* Lease, dated January 1, 1998, by and between Golf Trust of
America, L.P., as landlord, and Emerald Dunes - Bonaventure,
Inc., as tenant.
10.2.8* Lease, dated January 16, 1998, by and between Golf Trust of
America, L.P., as landlord, and Mystic Creek Golf Club, Limited
Partnership, as tenant.
10.2.9* Lease, dated February 1, 1988, by and between Golf Trust of
America, L.P., as landlord, and Emerald Dunes - West Palm Beach,
Inc., as tenant.
10.2.10* Lease, dated March 6, 1998, by and between Sandpiper-Golf Trust,
LLC, as landlord, and Sandpiper at SBCR, LLC, as tenant.
10.2.11* Lease, dated March 9, 1998, by and between Golf Trust of America,
L.P., as landlord, and Granite Ridge, Inc., as tenant.
10.2.12* Lease, dated August 18, 1997, by and between Golf Trust of
America, L.P., as landlord, and Granite Tiburon, Inc., as tenant.
10.2.13* Lease, dated August 29, 1997, by and between Golf Trust of
America, L.P., as landlord, and Raintree Country Club, Inc., as
tenant.
10.3.0 Option to Purchase and Right of First Refusal Agreement between
(i) the Company and the Operating Partnership and (ii) Larry D.
Young dated as of February 12, 1997 (previously filed as Exhibit
10.3 to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 2 (filed January
30, 1997) and incorporated herein by reference).
10.4.0 Form of Contribution and Leaseback Agreement between the
Operating Partnership and the Prior Owners relating to the
Initial Courses (previously filed as Exhibit 10.4 to the
Company's Registration Statement on Form S-11 (Commission File
No. 333-15965) (filed November 12, 1996) and incorporated herein
by reference).
<PAGE>
10.4.1 Schedule of material differences among the Contribution and
Leaseback Agreements relating to the Initial Courses (included in
lieu of the full text of each agreement pursuant to Instruction 2
to Item 601 of Regulation S-K)(previously filed as Exhibit 10.4.1
to the Company's Annual Report on Form 10-K (Commission File No.
000-22091), filed May 15, 1997, and incorporated herein by
reference).
10.4.2 Contribution and Leaseback Agreement, dated as of August 29,
1997, by and among John J. Rainieri, Sr., Betty Rainieri and
Raintree Country Club, Inc. and Golf Trust of America, L.P.
10.4.3 Purchase and Sale Agreement, dated as of May 19, 1997, by and
between Tiburon Limited Partnership, as seller, and Granite Golf
Group, Inc., as buyer.
10.4.4 Assignment and Assumption of Purchase and Sale Agreement, dated
as of August 18, 1997, by and among Granite Golf Group, Inc., as
assignor, and Golf Trust of America, L.P., as assignee.
10.4.5* Purchase and Sale Agreement, dated August 31, 1997, by and
between Meghan Associates, LLC, as Seller, and Golf Trust of
America, L.P., as buyer.
10.4.6* Contribution and Leaseback Agreement, dated September 18, 1997,
by and between Eagle Watch Golf Club Limited Partnership, as
transferor and Golf Trust of America, L.P., as transferee.
10.4.7* Contribution and Leaseback Agreement, dated October 17, 1997, by
and between Properties of the Country, Inc., as transferor, and
Golf Trust of America, L.P., as transferee.
10.4.8* Purchase Agreement, dated November 5, 1997, by and between Black
Bear Golf Club Ltd., as seller, and Granite Golf Group, Inc., as
buyer.
10.4.9* Assignment and Assumption of Purchase and Sale Agreement dated
November 19, 1997, by and between Granite Golf Group, Inc., as
Assignor, and Golf Trust of America, L.P., as Assignee.
10.4.10* Purchase and Sale Agreement, dated November 26, 1997, by and
between Bonaventure Country Club Associates, as seller, and Golf
Trust of America, L.P. as buyer.
10.4.11* Contribution and Leaseback Agreement, dated December 5, 1997, by
and between Mystic Creek Golf Club, L.P., as transferor, and Golf
Trust of America, L.P., as transferee.
<PAGE>
10.4.12* Contribution and Leaseback Agreement, dated December 18, 1997, by
and between Stonehenge Golf Development, LLC, as transferor, and
Golf Trust of America, L.P., as transferee.
10.4.13* Real Property Purchase and Sale Agreement and Escrow
Instructions, dated January 9, 1998, by and between Aradon
Corporation, as seller, and Golf Trust of America, L.P., as
buyer.
10.4.14* Contribution and Leaseback Agreement, dated January 23, 1998, by
and between Okeechobee Championship Golf, Inc., as transferor,
and Golf Trust of America, L.P., as transferee.
10.4.15* Purchase and Sale Agreement, dated February 26, 1998 by and
between Persimmon Ridge Golf Group, L.P., as seller, and Golf
Trust of America, L.P., as buyer.
10.5 Credit Agreement, dated as of June 20, 1997, by and among Golf
Trust of America, L.P., as Borrower, Golf Trust of America, Inc.,
GTA GP, Inc. and GTA LP, Inc., as Guarantors, the Lenders
referred to therein, and NationsBank N.A., as Agent (previously
filed as Exhibit 10.1 to the Company's Current Report on Form
8-K, dated June 20, 1997 and filed August 12, 1997, and
incorporated herein by reference).
10.6 Loan Agreement, dated as of June 20, 1997, by and between Golf
Host Resorts, Inc., as Borrower, and Golf Trust of America, L.P.,
as Lender (previously filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, dated June 20, 1997 and filed August
12, 1997, and incorporated herein by reference).
10.7 1997 Non-Employee Directors' Plan (previously filed as Exhibit
10.7 to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 1 (filed January
15, 1997) and incorporated herein by reference).
10.8 Golf Trust of America, Inc. 1997 Stock Incentive Plan of the
Company (previously filed as Exhibit 10.6 to the Company's
Registration Statement on Form S-11 (Commission File No.
333-15965) Amendment No. 1 (filed January 15, 1997) and
incorporated herein by reference).
10.9 Golf Trust of America, Inc. 1997 Stock-Based Incentive Plan (the
"New Stock Incentive Plan") (previously filed as Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q (Commission File No.
000-22091), filed August 15, 1997, and incorporated herein by
reference).
10.10 Form of Nonqualified Stock Option Agreement for use under the New
Stock Incentive Plan (previously filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q (Commission File No.
000-22091), filed August 15, 1997, and incorporated herein by
reference).
<PAGE>
10.11 Form of Employee Incentive Stock Option Agreement for use under
the New Stock Incentive Plan (previously filed as Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q (Commission File No.
000-22091), filed August 15, 1997, and incorporated herein by
reference).
10.12 General Provisions Applicable to Restricted Stock Awards Granted
Under the New Stock Incentive Plan.
10.13 Form of Restricted Stock Award Agreement for use under the New
Stock Incentive Plan.
10.14 Employment Agreement between the Company and W. Bradley Blair, II
dated February 7, 1997 (previously filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K (Commission File No.
000-22091), filed May 15, 1997, and incorporated herein by
reference).
10.15 Amended and Restated Employment Agreement between the Company and
David J. Dick, dated July 25, 1997.
10.16 Amended and Restated Employment Agreement between the Company and
Scott D. Peters, dated July 25, 1997.
16.1 Letter of Price Waterhouse LLP, former independent accountants of
the Company (previously filed as Exhibit 16.1 to the Company's
amended Current Report on Form 8-K dated February 26, 1997 (filed
March 17, 1997) and incorporated herein by reference).
21.1* List of Subsidiaries of the Company.
23.1* Consent of BDO Seidman LLP.
24.1* Powers of Attorney (included under the caption "Signatures")
<PAGE>
EXHIBIT A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS AND
THE AGREED VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Value of non-cash Approximate
Date capital Partnership Percentage
Admitted Name and address of partners contribution units issued Interests
-------- ---------------------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
2/12/97 Golf Legends Ltd., Inc. $ 30,647,030 1,532,352 12.04%
1500 Legends Drive
Myrtle Beach, SC 29577
2/12/97 Seaside Resorts Ltd., Inc. $ 16,129,118 806,456 6.34%
1500 Legends Drive
Myrtle Beach, SC 29577
2/12/97 Heritage Golf Club, Ltd., Inc. $ 16,031,230 801,561 6.30%
1500 Legends Drive
Myrtle Beach, SC 29577
2/12/97 Legends of Virginia LC $ 11,963,738 598,187 4.70%
1500 Legends Drive
Myrtle Beach, SC 29577
2/12/97 Northgate $ 3,797,071 189,854 1.49%
16450 Northgate Forest Drive
Houston, TX 77068
2/12/97 Olde Atlanta Golf Club Limited Partnership $ 1,444,926 72,246 0.57%
c/o The Crescent Company
1580 S. Milwaukee Ave., Suite 208
Libertyville, IL 60048
2/12/97 Bright's Creek Development Company, LLC $ 2,119,005 105,950 0.83%
104 Cotton Creek Drive
Gulf Shores, AL 36542
10/31/96 David J. Dick 0 12,500 0.10%
14 North Adger's Wharf
Charleston, SC 29401
2/04/97 W. Bradley Blair, II 0 12,500 0.10%
14 North Adger's Wharf
Charleston, SC 29401
2/04/97 James Hoppenrath 0 3,750 0.03%
109 E. Bay Street
Charleston, SC 29401
6/20/97 Golf Host Resorts, Inc. 0 274,039 2.15%
c/o Starwood Capital Group, L.P.
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Value of non-cash Approximate
Date capital Partnership Percentage
Admitted Name and address of partners contribution units issued Interests
-------- ---------------------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
9/02/97 John J. Rainieri, Sr. $ 3,198,168 114,237 .90%
Betty Rainieri
4350 Mayfair Road
Uniontown, Ohio 44685
9/02/97 Raintree Country Club, Inc. $ 204,138 7,292 .06%
4350 Mayfair Road
Uniontown, Ohio 44685
9/30/97 Eagle Watch Golf Club Limited Partnership $ 1,890,682 70,158 .55%
c/o E. Neal Trogdon
The Crescent Company
1580 South Milwaukee Avenue, Suite 208
Libertyville, Illinois 60048
10/17/97 Properties of the Country, Inc. $ 500,000 19,231 .15%
P.O. Box 7030
Shawnee Mission, Kansas 66207
11/25/97 Granite Golf Group, Inc. $ 650,000 24,424 .19%
15170 N. Hayden Road, Suite 6
Scottsdale, AZ 85254
12/19/97 Stonehenge Golf Development, LLC $ 4,500,000 169,811 1.33%
90 Mallet Hill Road
Columbia, South Carolina 29223
1/16/98 Mystic Creek Golf Club, Limited Partnership $ 1,500,000 52,724 .41%
32605 West 12 Mile Road, Suite 350
Farmington Hills, MI 48334
2/18/98 Okeechobee Championship Golf, Inc. $ 6,138,369 227,347 (1) 1.79%
2100 Emerald Dunes Drive
West Palm Beach, FL 33411
2/04/97 GTA LP, Inc. 0 7,606,241 59.77%
14 North Adger's Wharf
Charleston, SC 29401
2/04/97 GTA GP, Inc. 0 25,453 0.20%
14 North Adger's Wharf
Charleston, SC 29401
Total Partnership Units 12,726,313 100.00%
</TABLE>
- -------------------------
(1) Includes 218,088 Class A Partnership Units issued with a valuation of
$5,888,376 and 9,259 Class B Partnership Units issued with a valuation of
$249,993.
<PAGE>
FIRST AMENDMENT
TO THE
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
GOLF TRUST OF AMERICA, L.P.
February 1, 1998
This First Amendment to the First Amended and Restated Agreement of
Limited Partnership of Golf Trust of America, L.P. (this "First Amendment")
is dated as of February 1, 1998 and amends the First Amended and Restated
Agreement of Limited Partnership of Golf Trust of America, L.P., dated as of
February 12, 1997 (the "Partnership Agreement") by and among GTA GP, Inc., a
Maryland corporation (in its capacity as general partner, the "General
Partner"), and each of the Limited Partners signatory thereto. The General
Partner, with the consent of the Limited Partners signatory hereto (together
with the General Partner, the "Parties"), issues this First Amendment
pursuant to Section 11.01 of the Partnership Agreement. Capitalized terms
used, but not defined, in this First Amendment shall have the meanings set
forth in the Partnership Agreement.
THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts,
understandings and intentions:
(i) As of the dated hereof, there are 4,867,272 Partnership Units
("OP Units") outstanding held by Limited Partners other than GTA LP.
(ii) The Limited Partners signatory hereto hold in the aggregate
3,738,556 OP Units, which number is at least two-thirds (2/3) of the
outstanding OP Units referred to in paragraph (i), above.
(iii) The Parties desire to amend the Partnership Agreement to clarify
the date on which Redemption Right of newly issued OP Units is first
exercisable, to simplify the creation of additional classes of OP Units, to
simplify the process by which the Partnership commits to maintain
indebtedness for the benefit of certain Limited Partners, and to clarify the
distributions payable to GTA GP and GTA LP on newly issued OP Units.
NOW THEREFORE WITNESSETH, the Parties do hereby agree as follows:
SECTION A. ADDITIONAL CLASSES OF OP UNITS. Section 4.02 of the
Partnership Agreement is hereby amended by adding the following Section
4.02(a)(iii):
1
<PAGE>
(iii) Description of Additional Classes or Series. The General
Partner shall record on EXHIBIT D the name of any additional class or
series of Partnership Interests together with the terms and
conditions, designations, preferences and relative, participating,
optional or other special rights, powers and duties (collectively,
together with all associated provisions, "Rights and Duties") of the
holders thereof. In the event of any conflict between (A) the Rights
and Duties of an additional class of Partnership Interests
established pursuant to this Section 4.02 and recorded in EXHIBIT D
and (B) the Rights and Duties of Limited Partners generally under
this Agreement, EXHIBIT D shall govern the Rights and Duties of such
additional class of Limited Partner.
SECTION B. MAINTENANCE OF INDEBTEDNESS. Section 6.11 of the Partnership
Agreement is hereby amended in its entirety to read as follows:
6.11 MAINTENANCE OF INDEBTEDNESS. The General Partner may
commit the Partnership to maintain such amount of indebtedness for
such period of time for the benefit of any Limited Partner as it
shall determine in its sole and absolute discretion without the
consent of any Limited Partner. The General Partner may record such
commitment on EXHIBIT E or in a separate agreement and may provide
that such commitment may not be amended or rescinded without the
consent of the Limited Partner for whose benefit the commitment is
made.
SECTION C. DISTRIBUTIONS TO GTA GP AND GTA LP ON CERTAIN NEWLY ACQUIRED
PARTNERSHIP UNITS. Section 5.02 of the Partnership Agreement is hereby amended
by adding the following Section 5.02(c):
(c) Notwithstanding the proviso of Section 5.02(a), the
cash distribution payable to GTA GP and GTA LP in respect of
Partnership Interests corresponding to newly issued REIT Shares (as
contemplated by to Section 4.02(a)(ii)) shall not be reduced if such
reduction would cause the distribution on such Partnership Interests
to be less than the aggregate dividends payable by the Company on
such REIT Shares.
SECTION D. EXERCISE OF REDEMPTION RIGHTS.
1. The first sentence of Section 8.05 of the Partnership Agreement is
hereby amended in its entirety to read as follows:
(a) Subject to Sections 8.05(b)-(h), on or after the
date which is the later of (i) one (1) year after the Effective Date
with respect to such Partnership Units or (ii) such date as shall be
agreed to by such
2
<PAGE>
Limited Partner prior to the issuance of such Partnership Units and set
forth by the General Partner on EXHIBIT F, each Limited Partner (other
than GTA LP) shall have the right (the "Redemption Right") to require
the Partnership to redeem on a Specified Redemption Date all or a
portion of the Partnership Units held by such Limited Partner at a
redemption price equal to and in the form of the Redemption Amount;
provided that if any REIT Shares are to be issued, either their issuance
shall have been registered pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended (the "Securities
Act") or their resale by such Limited Partner shall have been registered
pursuant to such a registration statement.
2. The definition of "Effective Date" in Article I of the Partnership
Agreement is hereby amended in its entirety to read as follows:
"EFFECTIVE DATE", for purposes of Section 8.05 only, means for
any given Partnership Unit the date on which such Partnership Unit
was initially issued by the Partnership, and otherwise means the date
of the closing of the Initial Offering.
SECTION E. EXHIBITS. The Partnership Agreement is hereby amended by
adding the following exhibits after Exhibit C:
1. Exhibit D, entitled "Additional Classes and Series of Partnership
Interest." Exhibit D shall initially include the following entry:
a. ADDITIONAL CLASS OF PARTNERSHIP INTERESTS. There is hereby
created Class B Limited Partnership Interests in the Partnership.
The Class B Limited Partnership Interests shall have the same
redemption rights as set forth in Section 8.05 of the Partnership
Agreement. Class B Limited Partnership Units shall not be entitled
to any distributions of cash as set forth in Section 5.02 of the
Partnership Agreement. No income or losses shall be allocated to the
holders of the Class B Limited Partnership Units.
2. Exhibit E, entitled "Maintenance of Indebtedness." Exhibit E shall
initially include the following entry:
1. NORTHGATE. In addition to any other indebtedness
outstanding pursuant to Section 6.11 of this Agreement, for a period
of ten years following February 12, 1997, the Partnership shall
maintain indebtedness (the "Required Northgate Indebtedness") in an
amount equal to the lesser of approximately: (A) $4,300,000 or (B)
the aggregate negative capital account balances of the contributor of
Northgate Country
3
<PAGE>
Club (the "Northgate Partner") at the time of the contribution of such
Golf Course (the "Initial Northgate Negative Capital Account"); and the
Northgate Partner shall be permitted to guaranty such indebtedness. The
Required Northgate Indebtedness shall be reduced to the extent that the
Northgate Partner (or its partners, if the Northgate Partner distributes
its Partnership Units to its partners) redeem in whole or in part, their
Partnership Units in exchange for REIT Shares, redeem their Partnership
Units in full for cash or otherwise dispose of their Partnership Units
or dies (the Partnership Units that are so redeemed, disposed of, or
held by transferees of deceased holders are referred to as "Northgate
Stepped-Up Basis Units"). In such a case, the Required Northgate
Indebtedness shall be reduced by an amount equal to the original
Required Northgate Indebtedness prior to any reduction multiplied by a
fraction equal to (i) the Initial Northgate Negative Capital Account,
minus the aggregate negative capital account balances associated with
the Northgate Stepped-Up Basis Units redeemed or transferred immediately
prior to the reduction of the Required Northgate Indebtedness, divided
by (ii) the Initial Northgate Negative Capital Account. If the
Partnership fails to maintain such level of debt, then the Partnership
shall pay to the Northgate Partner (or its partners, if the Northgate
Partner distributes its Partnership Units to its partners) the amount of
federal and state income taxes (together with interest and penalties) of
that Partner, which are associated with the reduction in debt. To the
extent at the end of the ten (10) year period the Partnership has debt
not otherwise guaranteed, the Partnership, to the extent permitted by
the lender, will permit the Northgate Partner (or its partners, if the
Northgate Partner distributes its Partnership Units to its partners) to
guarantee such debt (or to enter into reimbursement agreements with the
Partnership or any Affiliate of the Partnership to whom such debt is
recourse, if any); provided, however, that nothing contained herein
shall prevent the Partnership or any such affiliate from incurring,
retiring, repaying, or prepaying such debt at any time after such ten
year period.
2. EMERALD DUNES. In addition to any other indebtedness
outstanding pursuant to Section 6.11 of the Agreement, for a period
of ten years following February 1, 1998, the Partnership shall
maintain indebtedness (the "Required Emerald Dunes Indebtedness") in
an amount equal to the lesser of approximately: (A) $13,000,000 or
(B) the aggregate negative capital account balances of the
contributor of Emerald Dunes (the "Emerald Dunes Partner") at the
time of the contribution of such Golf Course (the "Initial Emerald
Dunes Negative Capital Account"). The Required Emerald Dunes
Indebtedness may be reduced to the extent that: (i) such reduction is
required pursuant to the terms of the loan documents evidencing the
Required Emerald Dunes Indebtedness as of February 1,
4
<PAGE>
1998; or (ii) the Emerald Dunes Partner redeems in whole or in part, its
Partnership Units in exchange for REIT Shares, redeems its Partnership
Units or otherwise disposes of its Partnership Units (the Partnership
Units that are so redeemed, or disposed of are referred to as "Emerald
Dunes Stepped-Up Basis Units"). In such a case, the Required Emerald
Dunes Indebtedness may be reduced by an amount equal to the original
Required Emerald Dunes Indebtedness prior to any reduction multiplied by
a fraction equal to (i) the Initial Emerald Dunes Negative Capital
Account, minus the aggregate negative capital account balances
associated with the Emerald Dunes Stepped-Up Basis Units redeemed or
transferred immediately prior to the reduction of the Required Emerald
Dunes Indebtedness, divided by (ii) the Initial Emerald Dunes Negative
Capital Account. The Partnership shall also take no action which would
cause the Required Emerald Dunes Indebtedness to be recharacterized as a
"recourse liability" (rather than a "nonrecourse liability") pursuant to
Section 752 of the Code and the Treasury Regulations promulgated
thereunder. If the Partnership fails to maintain such level of the
Required Emerald Dunes Indebtedness or causes such debt to be
recharacterized as a recourse liability, as aforesaid, then the
Partnership shall pay to the Emerald Dunes Partner the amount of federal
and state income taxes (together with interest and penalties) of that
Partner, which are associated with such reduction or recharacterization
or the Required Emerald Dunes Indebtedness. To the extent that, at the
end of the ten (10) year period the Partnership has debt not otherwise
guaranteed, the Partnership, to the extent permitted by the lender, will
permit the Emerald Dunes Partner (at its option) to guarantee such debt
(or to enter into reimbursement agreements with the Partnership or any
Affiliate of the Partnership to whom such debt is recourse, if any);
provided, however, that nothing contained herein shall prevent the
Partnership or any such affiliate from incurring, retiring, repaying or
prepaying the Required Emerald Dunes Indebtedness at any time after such
ten year period.
3. Exhibit F, entitled "Schedule of Dates on which Certain Limited
Partners may first exercise their Redemption Right of certain Partnership
Units." Exhibit F shall initially include the following entries:
<TABLE>
<CAPTION>
Name and address of partners Partnership units issued Redemption Date
---------------------------- ------------------------ ---------------
<S> <C> <C>
Golf Legends Ltd., Inc. 1,532,352 2/12/98*
Seaside Resorts Ltd., Inc. 806,456 2/12/98*
Heritage Golf Club, Ltd., Inc. 801,561 2/12/98*
Legends of Virginia LC 598,187 2/12/98*
Northgate 189,854 2/12/98
Olde Atlanta Golf Club
Limited Partnership 72,246 2/12/98
5
<PAGE>
Bright's Creek
Development Company, LLC 105,950 2/12/98
David J. Dick 12,500 2/12/98*
W. Bradley Blair, II 12,500 2/12/98*
James Hoppenrath 3,750 2/12/98
Golf Host Resorts, Inc. 274,039 2/12/98
John J. Rainieri, Sr.
Betty Rainieri
Raintree Country Club, Inc. 121,529 2/12/98
Eagle Watch Golf Club
Limited Partnership 70,158 9/30/98
Properties of the Country, Inc. 19,231 10/17/98
Granite Golf Group, Inc. 24,424 11/25/98
Stonehenge Golf Development, LLC 169,811 12/19/98
Mystic Creek Golf Club,
Limited Partnership 52,724 1/16/99
Okeechobee Championship Golf, Inc. 227,526 2/1/99
</TABLE>
* Additionally, at the IPO, Messrs. Young, Blair and Dick entered
into lock-Up agreements with the underwriters to the effect that
neither they, nor any of their affiliates, may dispose of any
securities "convertible into, exercisable for or exchangeable for
shares of Common Stock" without the prior written consent of
Robertson, Stephens & Company LLC for 30 months after February 6,
1997; PROVIDED that up to 50% of such securities may be disposed of
beginning 18 months after February 6, 1997.
4. Each such exhibit may be revised by the General Partner according to
the terms of the Partnership Agreement, as amended. Notwithstanding the
foregoing, none of such exhibits may be amended with respect to a Limited
Partner (e.g. by changing the date on which a Limited Partner's OP Units may be
redeemed pursuant to EXHIBIT F or changing the Partnership's commitment to
maintain a certain level of indebtedness pursuant to EXHIBIT E) absent the
written consent of such Limited Partner.
SECTION F. MISCELLANEOUS. This First Amendment may be executed in one or
more counterparts, each of which shall, for all purposes, be deemed an original
and all of such counterparts, taken together, shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the Parties have caused this First Amendment to be
executed as of the date first written above.
General Partner
GTA GP, INC.,
A MARYLAND CORPORATION
[signature page follows]
6
<PAGE>
By: /s/ W. Bradley Blair, II
-----------------------------------
Its: President and CEO
Limited Partners
GOLF LEGENDS, LTD.,
A SOUTH CAROLINA CORPORATION
By: /s/ Larry D. Young
-----------------------------------
Name: Larry D. Young
---------------------------------
Its: President
----------------------------------
HERITAGE GOLF CLUB, LTD.,
A SOUTH CAROLINA CORPORATION
By: /s/ Larry D. Young
-----------------------------------
Name: Larry D. Young
---------------------------------
Its: President
----------------------------------
SEASIDE RESORTS, LTD.,
A NORTH CAROLINA CORPORATION
By: /s/ Larry D. Young
-----------------------------------
Name: Larry D. Young
---------------------------------
Its: President
----------------------------------
LEGENDS OF VIRGINIA, LC
A VIRGINIA LIMITED LIABILITY COMPANY
By: /s/ Larry D. Young
-----------------------------------
Name: Larry D. Young
---------------------------------
Its: Manager
----------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
LOST OAKS, L.P., A DELAWARE LIMITED PARTNERSHIP
TENANT
DATED AS OF OCTOBER 3, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 2
2.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 INITIAL TERM. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 EXTENSION OPTIONS . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 RIGHT OF FIRST OFFER TO LEASE . . . . . . . . . . . . . . . . . 15
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 INCREASE IN INITIAL BASE RENT . . . . . . . . . . . . . . . . . 16
4.3 PERCENTAGE RENT . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. . . . . . . . . . . . 17
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE . . . . . . . . 17
4.6 RECORD-KEEPING. . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 ADDITIONAL CHARGES. . . . . . . . . . . . . . . . . . . . . . . 17
4.8 LATE PAYMENT OF RENT. . . . . . . . . . . . . . . . . . . . . . 18
4.9 NET LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.10 ALLOCATION OF REVENUES. . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 PLEDGE OF STOCK OPTIONS, STOCK AND OWNERS SHARES. . . . . . . . 19
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. . . . . . . . . . . . . . 19
5.3 PLEDGE OF STOCK FOR CONDOMINIUMS. . . . . . . . . . . . . . . . 19
5.4 LANDLORD'S LIEN . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 RENTAL POOL . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 PARTIAL RELEASE . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 PAYMENT OF IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . 20
6.2 INFORMATION AND REPORTING . . . . . . . . . . . . . . . . . . . 20
6.3 REFUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
6.4 UTILITY CHARGES . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 ASSESSMENT DISTRICTS. . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 NO TERMINATION, ABATEMENT, ETC. . . . . . . . . . . . . . . . . 21
7.2 CONDITION OF THE PROPERTY . . . . . . . . . . . . . . . . . . . 22
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . 23
8.1 PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 TENANT'S PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . 24
8.3 TENANT'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . 24
8.4 LANDLORD'S WAIVERS. . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 SPECIFIC PROHIBITED USES. . . . . . . . . . . . . . . . . . . . 25
9.3 MEMBERSHIP SALES. . . . . . . . . . . . . . . . . . . . . . . . 25
9.4 LANDLORD TO GRANT EASEMENTS, ETC. . . . . . . . . . . . . . . . 25
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. . . . . . . . . . . . 26
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . 26
10.2 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . 26
10.3 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . 26
10.4 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . 26
10.5 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . 26
10.6 REMEDIATION . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. . . . . . . . . . . . . . 27
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS . . . . . . . . . . . . 28
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF LEASE. 28
10.10 ENVIRONMENTAL STATEMENTS. . . . . . . . . . . . . . . . . . . . 28
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 TENANT'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . 28
11.2 WAIVER OF STATUTORY OBLIGATIONS . . . . . . . . . . . . . . . . 29
11.3 MECHANIC'S LIENS. . . . . . . . . . . . . . . . . . . . . . . . 30
11.4 SURRENDER OF PROPERTY . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(ii)
<PAGE>
12.1 TENANT'S RIGHT TO CONSTRUCT . . . . . . . . . . . . . . . . . . 30
12.2 SCOPE OF RIGHT. . . . . . . . . . . . . . . . . . . . . . . . . 31
12.3 COOPERATION OF LANDLORD . . . . . . . . . . . . . . . . . . . . 31
12.4 CAPITAL REPLACEMENT FUND. . . . . . . . . . . . . . . . . . . . 32
12.5 RIGHTS IN TENANT IMPROVEMENTS . . . . . . . . . . . . . . . . . 32
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE . . 33
12.7 ANNUAL BUDGET . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.8 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . 35
12.9 LANDLORD IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . 36
13.1 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . 37
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.1 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.2 INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . . . . . . 39
ARTICLE 15
INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.1 GENERAL INSURANCE REQUIREMENTS. . . . . . . . . . . . . . . . . 39
15.2 OTHER INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 40
15.3 REPLACEMENT COST. . . . . . . . . . . . . . . . . . . . . . . . 40
15.4 WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . 41
15.5 FORM SATISFACTORY, ETC. . . . . . . . . . . . . . . . . . . . . 41
15.6 CHANGE IN LIMITS. . . . . . . . . . . . . . . . . . . . . . . . 41
15.7 BLANKET POLICY. . . . . . . . . . . . . . . . . . . . . . . . . 42
15.8 INSURANCE PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . 42
15.9 DISBURSEMENT OF PROCEEDS. . . . . . . . . . . . . . . . . . . . 42
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS . . . . . . . . . . . . 43
15.11 RECONSTRUCTION COVERED BY INSURANCE . . . . . . . . . . . . . . 44
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE . . . . . . . . . . . . 44
15.13 NO ABATEMENT OF RENT. . . . . . . . . . . . . . . . . . . . . . 44
15.14 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.15 DAMAGE NEAR END OF TERM . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.1 TOTAL TAKING. . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.3 RESTORATION . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.4 AWARD-DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . 46
16.5 TEMPORARY TAKING. . . . . . . . . . . . . . . . . . . . . . . . 46
(iii)
<PAGE>
17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 46
17.2 PAYMENT OF COSTS. . . . . . . . . . . . . . . . . . . . . . . . 48
17.3 CERTAIN REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . 48
17.4 DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.5 ADDITIONAL REMEDIES . . . . . . . . . . . . . . . . . . . . . . 50
17.6 APPOINTMENT OF RECEIVER . . . . . . . . . . . . . . . . . . . . 50
17.7 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
17.8 APPLICATION OF FUNDS. . . . . . . . . . . . . . . . . . . . . . 50
17.9 IMPOUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . 50
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. . . . . . . . . . . . . . 52
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. . . . . . . . . . . . . . 53
22.3 MECHANICS OF INDEMNIFICATION. . . . . . . . . . . . . . . . . . 53
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS;
AVAILABLE INSURANCE PROCEEDS. . . . . . . . . . . . . . . . . . 54
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 54
23.1 PROHIBITION AGAINST ASSIGNMENT. . . . . . . . . . . . . . . . . 54
23.2 SUBLEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
23.3 TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
23.4 REIT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . 56
23.5 RIGHT OF FIRST . . . . . . . . . . . . . . . . . . . . . . . . 56
23.6 BANKRUPTCY LIMITATIONS. . . . . . . . . . . . . . . . . . . . . 57
23.7 MANAGEMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . 59
24.1 OFFICER'S CERTIFICATES. . . . . . . . . . . . . . . . . . . . . 59
24.2 ENVIRONMENTAL STATEMENTS. . . . . . . . . . . . . . . . . . . . 59
(iv)
<PAGE>
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
25.1 LANDLORD MAY GRANT LIENS. . . . . . . . . . . . . . . . . . . . 60
25.2 TENANT'S NON-DISTURBANCE RIGHTS . . . . . . . . . . . . . . . . 60
25.3 FACILITY MORTGAGE PROTECTION. . . . . . . . . . . . . . . . . . 60
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
26.1 RIGHT OF FIRST OFFER TO PURCHASE. . . . . . . . . . . . . . . . 61
26.2 CONVEYANCE BY LANDLORD. . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
27.1 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 62
27.2 ARBITRATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.1 LANDLORD'S RIGHT TO INSPECT . . . . . . . . . . . . . . . . . . 62
28.2 BREACH BY LANDLORD. . . . . . . . . . . . . . . . . . . . . . . 63
28.3 COMPETITION BETWEEN LANDLORD AND TENANT . . . . . . . . . . . . 63
28.4 NO WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.5 REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . 63
28.6 ACCEPTANCE OF SURRENDER . . . . . . . . . . . . . . . . . . . . 63
28.7 NO MERGER OF TITLE. . . . . . . . . . . . . . . . . . . . . . . 64
28.8 QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . 64
28.9 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.10 SURVIVAL OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . 65
28.11 INVALIDITY OF TERMS OR PROVISIONS . . . . . . . . . . . . . . . 65
28.12 PROHIBITION AGAINST USURY . . . . . . . . . . . . . . . . . . . 65
28.13 AMENDMENTS TO LEASE . . . . . . . . . . . . . . . . . . . . . . 65
28.14 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . 65
28.15 TITLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.16 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.17 MEMORANDUM OF LEASE . . . . . . . . . . . . . . . . . . . . . . 65
28.18 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . 65
28.19 NON-RECOURSE AS TO LANDLORD AND TENANT. . . . . . . . . . . . . 66
28.20 NO RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . 67
28.21 RELETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
28.22 LANDLORD'S DETERMINATION OF FACTS . . . . . . . . . . . . . . . 67
28.23 TIME IS OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
(v)
<PAGE>
Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Pledge Agreement
Exhibit E - Intentionally Deleted
Exhibit F - Calculation of Gross Golf Revenue for the Base Year by Quarter
Exhibit G - Stock Options Pledge Agreement
Exhibit H - Disbursement Procedures
Exhibit I - Additional Pledge Agreement
Exhibit J - Tarpon Woods Capital Improvement Budget
Exhibit K - Contingent Contribution Formula
(vi)
<PAGE>
LEASE
THIS LEASE (this "Lease"), dated as of October 3, 1997, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and LOST OAKS, L.P., a Delaware limited partnership ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement (the
"Agreement") dated as of August 31, 1997 by and between Landlord and Lost Oaks,
L.P., a Delaware limited partnership ("Transferor"), Transferor transferred to
Landlord all of its right, title and interest in and to the Property (as
hereafter defined); and
B. Tenant, desires to lease the Property from Landlord, and Landlord
desires to lease the Property to Tenant, on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord the following real
property, improvements, personal property and related rights (collectively the
"Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of Landlord's
right, title and interest, if any, in and to all mineral and water rights and
all easements, rights-of-way and other appurtenances used or connected with the
beneficial use or enjoyment of the Land and the Improvements;
(d) the Tangible Personal Property; and
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(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL COLLATERAL" means the Pledged Stock Options, the Pledged
Owners Shares, if any, and the cash held by Landlord from the rental pool from
the Innisbrook Condominiums owned by Tenant or any Affiliate of Tenant.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADDITIONAL PLEDGE AGREEMENT" means that certain pledge agreement, by
and between Golf Hosts, Inc. and Landlord, in the form attached hereto as
Exhibit I.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all material licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
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"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BANKRUPTCY EVENT OF DEFAULT" means any Event of Default described in
Section 17.1(c), (d) or (e).
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period from July 1, 1996
through June 30, 1997; provided, however, that the Base Year shall refer to the
calendar year immediately preceding the Conversion Date if the Base Rent is
increased as provided in Section 4.5. A quarter-by-quarter calculation of Gross
Golf Revenue in the Base Year is attached hereto as EXHIBIT F.
"BORROWER" means the Borrower under the Innisbrook Loan Agreement.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" means expenditures that are properly
capitalized under GAAP.
"CAPITAL REPLACEMENT FUND" means the amount of the Capital Replacement
Reserve, together with interest thereon as provided in Section 12.4, less
amounts withdrawn from the Capital Replacement Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means an amount equal to the greater of
$52,494 or 3% of each Fiscal Quarter's Gross Golf Revenue, to be accrued
quarterly by Landlord commencing on October 1, 1998 as part of the Capital
Replacement Fund, as provided in Section 12.4 hereof, based on the Officer's
Certificate.
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any stockholder
or partner of Tenant of a Controlling interest in Tenant to a Person other than
to a Person that is an Affiliate of Tenant as of the date hereof which shall
include spouses and lineal descendants of any stockholder of Tenant as well as
any trusts created for estate planning purposes when such stockholder and/or
spouses and lineal descendants are beneficiaries;
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(b) the sale, conveyance or other transfer of all or substantially all
of the assets of Tenant (whether by operation of law or otherwise) other than to
a Person who is an Affiliate of Tenant;
(c) any other transaction, or series of transactions, which results in
the shareholders or partners who control Tenant as of the date hereof no longer
having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled by
an Affiliate of Tenant), and Tenant is not the surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred for purposes of this Lease if the shareholders or partners who
Control Tenant as of the date hereof remain in Control of Tenant through an
agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means October 3, 1997.
"COMPANY" means GTA, Inc. and any subsidiaries thereof, including,
without limitation, GTA LP and GTA GP.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT CONSIDERATION" shall have the meaning set forth in
Exhibit K hereto.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERSION DATE" shall have the same meaning set forth in Exhibit K
hereto.
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"CONVERSION OPTION" means Tenant's option to elect to receive, in
exchange for the Contingent Consideration, an additional number of Owner's
Shares in the Partnership, as computed in accordance with EXHIBIT K.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"DEBT SERVICE" means all interest and principal payable under the
Innisbrook Loan and all Rent payable under this Lease.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2007, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
5
<PAGE>
"FISCAL YEAR" means the twelve (12) month period from January 1 to
December 31 of each year; provided that for purposes of the Lease Term and the
Pledge Agreement, the first Fiscal Year shall be deemed to include the period
from the Commencement Date to December 31, 1997.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees, (ii) periodic membership dues, (iii)
greens fees, (iv) fees to reserve a tee time, (v) guest fees, (vi) golf cart
rentals, (vii) parking lot fees, (viii) locker rentals, (ix) fees for golf club
storage, (x) fees for the use of swim, tennis or other facilities, (xi) charges
for range balls, range fees or other fees for golf practice facilities, (xii)
fees or other charges paid for golf or tennis lessons (except where retained by
or paid to a USTA or PGA professional in accordance with historical practice at
the Property), (xiii) fees or other charges for fitness centers, (xiv) forfeited
deposits with respect to any membership application, (xv) transfer fees imposed
on any member in connection with the transfer of any membership interest, (xvi)
6
<PAGE>
fees or other charges paid to Tenant by sponsors of golf tournaments at the
Property, (xvii) advertising or placement fees paid by vendors in exchange for
exclusive use or name rights at the Property, and (xviii) fees received in
connection with any golf package sponsored by any hotel group, condominium
group, golf association, travel agency, tourist or travel association or similar
payments; PROVIDED, HOWEVER, that Gross Golf Revenue shall not include:
(a) Other Revenue;
(b) The amount of all taxes, assessments, Impositions and other
governmental charges and assessments of every kind and nature, including,
without limitation the amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Revenue, which is
both added to or incorporated in the selling price and paid to the taxing
authority by Tenant;
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in connection
with Tenant's operation of the Property.
(d) Interest or other income derived from the investment of surplus
funds or reserves;
(e) Any amounts recovered in any litigation against third parties
except for amounts awarded to compensate for lost revenues otherwise includable
in Gross Revenues;
(f) Any condemnation or taking proceeds, whether or not such proceeds
are characterized as compensation for lost rent;
(g) Insurance proceeds, unless (and except to the extent that) such
proceeds are characterized as business interruption and/or loss of "rental
value" insurance proceeds (except for such proceeds attributable to a Lease if
(and for so long as) the tenant thereunder has the right to terminate such Lease
as a result of the casualty in question);
(h) Any proceeds resulting from the sale, exchange, transfer,
financing or refinancing of all or any part of the Real Property;
(i) Any capital or equity contributions or other infusions of capital
or equity to the Tenant or the sale of any Property, Collateral or Landlord's
Shares;
(j) Any proceeds of any other indebtedness of the Tenant;
7
<PAGE>
(k) Forfeited security deposits and other security deposits received
or surrender or termination payment made or other amounts received from tenants
or guests to compensate for damage to or loss of all or portions of the Real
Property or Tangible Personal Property; and
(l) Gratuities to employees if separately itemized on customers' bills
or checks.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA, INC." means Golf Trust of America, Inc., a Maryland corporation,
an affiliate of Landlord.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad valorem,
sales and use, Florida State Sales/Lease Tax, single business, gross receipts,
transaction privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not to be completed within the Term);
(c) excises;
8
<PAGE>
(d) fees (including license, permit, inspection, authorization and
similar fees); and
(e) all other governmental charges; in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Property and/or the Rent or Additional Charges
(including all interest and penalties thereon due to any failure in payment by
Tenant), which at any time during or in respect of the Term hereof may be
assessed or imposed on or in respect of or be a lien upon (i) Landlord or
Landlord's interest in the Property; (ii) the Property or any part thereof or
any therefrom or any estate, right, title or interest therein; or (iii) any
operation, use or possession of, or sales from or activity conducted on or in
connection with the Property or the leasing or use of the Property or any part
thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any other
Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant; or
(cc) any tax imposed with respect to any principal or interest
on any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means Five Hundred Seventy Two Thousand Eight
Hundred Thirteen Dollars ($572,813) per year.
"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2007.
"INNISBROOK LOAN" means that certain loan evidenced by and referred to
in that certain Loan Agreement between Landlord and Golf Host Resorts, Inc.,
dated June 20, 1997 (the "Innisbrook Loan Agreement").
9
<PAGE>
"INNISBROOK PROPERTY" means the property securing the Innisbrook Loan
as such may be modified pursuant hereto and the Innisbrook Agreement.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LANDLORD IMPROVEMENTS" shall have the meaning set forth in Section
12.9
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all material federal, state, county,
municipal and other governmental statutes, laws (including the Americans with
Disabilities Act and any Environmental Laws), rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting either the Property or
the construction, use or alteration thereof, whether now or hereafter enacted
and in force, including any which may (i) require repairs, modifications, or
alterations in or to the Property; (ii) in any way adversely affect the use and
enjoyment thereof, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments,
10
<PAGE>
either of record or known to Tenant (other than encumbrances created by Landlord
without the consent of Tenant), at any time in force affecting the Property; or
(iii) require the cleanup or other treatment of any Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (33 1/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, prorated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
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<PAGE>
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from Tenant or
an Affiliate of Tenant its resort and related operations located at or adjacent
to the Property, and provided such entity (i) is not generally recognized in the
community as being of ill-repute or as being in any other manner a Person with
whom or with which a prudent business person would not wish to associate in a
commercial venture and (ii) shall have the financial resources sufficient to
enable it to satisfy the obligations of Tenant under this Lease (provided for
purposes of this subsection (ii) such entity shall not be required to have
financial resources in excess of those of Tenant at the time of such transfer);
and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement, by and between
Transferor and Landlord, in the form attached hereto as EXHIBIT D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Pledge Agreement, and the Stock of GTA, Inc., pledged pursuant to the
Additional Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by Citibank, N.A., or its successor entity, to be its prime
rate or, if the prime rate is discontinued, the base rate for 90-day unsecured
loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
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"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"STOCK OPTIONS" means options to purchase Stock as defined in the
Stock Options Pledge Agreement.
"STOCK OPTIONS PLEDGE AGREEMENT" means that certain pledge agreement,
dated as of the date of this Lease, by and between Transferor and Landlord, in
the form attached hereto as EXHIBIT G.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith, with the exception of golf carts.
"TENANT" means Lost Oaks, L.P. and any successor thereto, or assignee
thereof, as permitted by the terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
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"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the reasonable control of the
party responsible for performing an obligation hereunder, PROVIDED THAT lack of
funds shall not be deemed a cause beyond the control of either party hereto
unless such lack of funds is caused by the failure of the other party hereto to
perform any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease nor
shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Lease and have participated in the preparation of
this Lease, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Lease or any exhibits
hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2007.
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3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease six (6) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant's option for
an Extended Term shall be deemed to have been exercised, unless Tenant gives
written notice to Landlord at least one hundred eighty (180) days prior to the
termination of the then-current term that Tenant elects not to extend the
current term. Tenant shall be entitled to exercise these options only if at the
time of the commencement of the applicable Term or Extended Term no Event of
Default shall then exist. During the Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect, as the same
may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the Lease
Term and provided that Tenant has exercised each Extended Term and no Event of
Default then exists beyond any applicable notice and cure period, Tenant shall
have a right of first offer ("Tenant's Right of First Offer to Lease") to lease
the Property upon the same terms and conditions as Landlord, at its election,
intends to offer to lease the Property to a third party. Tenant shall be
entitled to exercise Tenant's Right of First Offer to Lease only if at the time
of the giving of such notice no Event of Default shall then exist and only if
Landlord elects to lease the Property at the expiration of the Lease Term. Not
more than nine (9) months and not less than three (3) months prior to the
expiration of the Lease Term, Landlord shall, if applicable, give Tenant written
notice of its intent to lease the Property and shall indicate the terms and
conditions upon which Landlord intends to lease the Property. Tenant shall
thereafter have a period of thirty (30) days to elect by unequivocal written
notice to Landlord to lease the Property on the same terms and conditions as
Landlord intends to offer to a third party; provided prior to Tenant's
acceptance Landlord shall retain the right to elect not to lease the Property by
giving Tenant written notice thereof. If Tenant elects not to lease the
Property, then Landlord shall be free to lease the Property to a third party.
However, if the Base Rent for such proposed lease is reduced by five percent
(5%) or more as compared to the Base Rent included in the lease that Tenant
rejected, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.9 or at such other place
or to
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such other Person as Landlord from time to time may designate in writing. The
first monthly installment shall be prorated as to any partial month. If any
payment owing hereunder shall otherwise be due on a day that is not a Business
Day, such payment shall be due on the next succeeding Business Day. No payment
in addition to the payment of Rent shall be required in order to require
Landlord to accrue the Capital Replacement Fund as provided in Section 12.4.
Tenant shall receive a credit against Rent (or be paid directly, at Landlord's
option) for any operating expense credits or operating revenues credited to
Landlord pursuant to the Agreement which are applicable to any period in the
Lease Term (E.G., credit for real property taxes, membership dues, sublease
rents, etc.) and conversely Tenant shall reimburse Landlord for any operating
expenses paid for by Landlord pursuant to the Agreement which are the
responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1, 1998 and
on each January 1 thereafter through and including January 1, 2003, the Annual
Base Rent will increase by five percent (5%) of the Annual Base Rent payable for
the immediately preceding year, provided the January 1, 1998 increase shall be
pro rated for the number of days in the Lease Term in 1997 divided by 365 and
multiplied by the applicable Base Rent Escalator. In addition, if the Annual
Base Rent is increased as provided in Section 4.5, then the Annual Base Rent
shall be increased by three percent (3%) of the Annual Base Rent payable for the
immediate preceding year for each of the five (5) years commencing January 1,
2003, with the increase effective on the anniversary of the increase in Base
Rent as provided in Section 4.5 in lieu of increases on January of each year.
In addition to the foregoing, on the first day of each month following any
disbursement by Landlord pursuant to Section 12.9, the Annual Base Rent will
increase further for the remainder of the Initial Term and any Extended Term, by
(i) 9.25% TIMES (ii) the sum the Landlord delivered to the Tenant as
reimbursement of Landlord Improvements pursuant to Section 12.9 in the prior
month.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and any Extended Term, Tenant shall
calculate the Gross Golf Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If the Gross Golf Revenue for that
Fiscal Quarter (or shorter period, if applicable) is greater than the Gross Golf
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the Fiscal Quarter ending March 31, on a year-to-date
basis), on a pro-rata basis then Tenant shall pay to Landlord the Percentage
Rent upon submittal of the Officer's Certificate. During any period in
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which the Percentage Rent is subject to a ceiling, such ceiling shall apply to
each of the Percentage Rent payments due during any Fiscal Quarter. The
Percentage Rent payable in any period in any Fiscal Year shall be adjusted to
reflect the Percentage Rent paid on a year-to-date cumulative basis for the
Fiscal Year (pro rated for any partial periods) and the limits set forth in the
next two sentences on a pro rated basis. The increase in Rent resulting from
the payment of Percentage Rent (together with any increase in Base Rent pursuant
to Section 4.2) payable, if any, during each of the first five (5) full calendar
years of the Initial Term shall be limited to five percent (5%) of the Rent
payable for the prior calendar year, or in the case of 1997, of the Initial Base
Rent prorated. Tenant shall receive a credit against the payment of Percentage
Rent in an amount equal to the increase in the Base Rent over the Initial Base
Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Golf Revenue. If the Percentage Rent for such
Fiscal Year exceeds the sum of the quarterly payments of Percentage Rent
previously paid by Tenant, Tenant shall pay such deficiency to Landlord along
with such Officer's Certificate. If the Percentage Rent for such Fiscal Year is
less than the amount of Percentage Rent previously paid by Tenant, Landlord
shall, at Landlord's option, either (i) remit to Tenant its check in an amount
equal to such difference, or (ii) grant Tenant a credit against the payment of
Rent next coming due. Landlord shall have the right to audit all of Tenant's
business operations at the Property so as to determine the calculation of
Percentage Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the Fiscal
Year in which the Conversion Date occurs, the Annual Base Rent shall be
increased, effective as of the date the additional Owner's Shares are issued to
the Tenant, to an amount equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Golf Revenue.
Tenant shall retain all accounting records for each Fiscal Year conforming to
such accounting system until at least five (5) years after the expiration of
such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and Percentage
Rent, (a) Tenant shall also pay and discharge when
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due and payable all other amounts, liabilities, obligations and Impositions
which Tenant assumes or agrees to pay under this Lease, and (b) in the event of
any failure on the part of Tenant to pay any of those items referred to in
clause (a) above, Tenant shall also pay and discharge every fine, penalty,
interest and cost which may be added for non-payment or late payment of such
items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"). Except as otherwise provided
in this Lease, all Additional Charges shall become due and payable at the
earlier of (i) thirty (30) days after either Landlord or the applicable third
party delivery of an invoice to Tenant, or (ii) the date of delinquency with
respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Accordingly, if any installment of Base Rent,
Percentage Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after the date such payment is due, Tenant will pay Landlord on demand, as
Additional Charges, a late charge equal to the lesser of five percent (5%) of
such installment or $1,000. The parties agree that this late charge represents
a fair and reasonable estimate of the costs that Landlord will incur by reason
of late payment by Tenant and is not a penalty. In addition, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within five (5) days after the due date with respect to Base Rent or Percentage
Rent or delivery of an invoice to Tenant with respect to the Additional Charge,
the amount unpaid shall bear interest, from such due date to the date of payment
thereof, computed at the Overdue Rate on the amount of such installment, and
Tenant will pay such interest to Landlord as Additional Charges. The acceptance
of any late charge or interest shall not constitute a waiver of, nor excuse or
cure, any default under this Lease, nor prevent Landlord from exercising any
other rights and remedies available to Landlord.
4.9 NET LEASE. This Lease shall be a triple net lease and Rent
shall be payable to Landlord without notice or demand and without set-off,
counterclaim, recoupment, abatement, suspension, determent, deduction or
defense, except as expressly provided herein, so that this Lease shall yield to
Landlord the full amount of the installments of Base Rent, Percentage Rent and
Additional Charges throughout the Term.
4.10 ALLOCATION OF REVENUES. In the event that individuals or groups
purchase for a single price items which are both included and excluded from
Gross Golf Revenue (e.g., green
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fees and dinner), then Tenant agrees that revenues shall be allocated to Gross
Golf Revenue in a reasonable manner consistent with the historical allocation of
such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF STOCK OPTIONS, STOCK AND OWNERS SHARES. On or prior
to the Commencement Date, Tenant shall cause the Pledge Agreement, the
Additional Pledge Agreement and the Stock Option Pledge Agreement to be executed
for the benefit of Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. If the ratio of (1) the
Net Operating Income (after payment of any required deposit into the Capital
Replacement Fund) for the Landlord Property and the Innisbrook Property to
(b) Debt Service falls below 1.20 to 1.00, at any time following the release
of any Pledged Shares or Pledged Stock Options (or securities held by
Landlord in Lieu thereof), then Tenant shall thereafter retain, and not make
dividends or distributions (except as may be necessary to pay any applicable
taxes attributable to the income or Tenant) to its shareholders, partners, or
members, as applicable, until such time as Tenant has accumulated six (6)
months of Base Interest at the then current level. Such accumulated Base
Rent shall be maintained at all times until Tenant has again maintained such
coverage ratios for two (2) consecutive Fiscal Years. Tenant shall provide
Landlord with such documentation, including Officer's Certificates, within
forty-five (45) days after the end of each Fiscal Quarter as are necessary to
establish Tenant's compliance with the foregoing requirements.
5.3 PLEDGE OF STOCK FOR CONDOMINIUMS. On or before December 1, 1997,
Tenant shall cause the three condominiums owned by Tenant or Tenant's Affiliates
at the Innisbrook Property (the "Innisbrook Condos") to be transferred to a new
single purpose corporate entity ("Condocorp") and to pledge to Landlord eighty
nine and one-tenth percent (89.1%) of the shares of Condocorp as collateral for
Tenant's obligation under the Lease. Such pledge shall be in a form acceptable
to Landlord with a partial release clause substantially similar to paragraph 1
of Exhibit L-1, and a covenant not to incur any debt, acquire any other assets
or engage in any other business except to own the Innisbrook Condos. On or
before April 1, 1998, Lessee shall cause the refurbishment and improvement of
the Innisbrook Condos at a cost not less than Twenty Thousand Dollars ($20,000).
5.4 LANDLORD'S LIEN. To the fullest extent permitted by applicable
law, Landlord is granted a lien and security interest on all of Tenant's
personal property now or hereafter located on the Property, and such lien and
security interest shall remain attached to Tenant's personal property until
payment in full of all Rent and satisfaction of all of Tenant's
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obligations hereunder; provided, however, Landlord shall subordinate its lien
and security interest only to that of any third party lender or seller which
finances Tenant's personal property, the terms and conditions of such
subordination to be satisfactory to Landlord in its reasonable discretion.
Tenant shall, upon the request of Landlord, execute such financing statements or
other documents or instruments reasonably requested by Landlord to perfect the
lien and security interests herein granted.
5.5 RENTAL POOL. On the first day of the month following the
commencement Date and on the first day of each month thereafter, Tenant shall
deliver to Landlord as a portion of the Additional Collateral all cash proceeds
from the rental pool of the condominiums owned by Tenant or Tenant's Affiliates
at the Innisbrook Property, less expenses directly related to said condominiums.
5.6 PARTIAL RELEASE. The Additional Collateral shall be released
and shall no longer secure Tenant's or Tenant's Affiliates' obligations under
this Lease, on the date that the audited financial statements delivered pursuant
to Section 12.8(c) demonstrate that the ratio of the Net Operating Income of
both the Property and the Innisbrook Property during such year (after required
funding of the Capital Replacement Fund) to Debt Service, is equal to or greater
than 1.135 to 1.00 on a trailing twelve (12) months basis, and Tenant has
provided an Officer's Certificate to Landlord certifying to that effect (such
date, the "RELEASE DATE."
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Section 6.3 or Article 14. Upon request, Tenant shall promptly furnish to
Landlord copies of official receipts, if available, or other satisfactory proof
evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice to
Tenant of all Impositions payable by Tenant hereunder of which Landlord at any
time has actual knowledge, but Landlord's failure to give any such notice shall
in no way diminish Tenant's obligations hereunder to pay such Impositions.
Landlord and Tenant shall, upon reasonable request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Property as may be necessary
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to prepare any required returns and reports. In the event any applicable
governmental authorities classify any property covered by this Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it must legally so file. Each party, to the extent it
possesses the same, will provide the other party, upon reasonable request, with
cost and depreciation records necessary for filing returns for any property so
classified as personal property.
6.3 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.4 UTILITY CHARGES. Tenant shall pay or cause to be paid prior to
delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.5 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent to
or agree in writing to (i) any special assessment or (ii) the inclusion of any
material portion of the Leased Property into a special assessment district or
other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or delayed or unless Landlord agrees
to pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any
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portion thereof, the interference with such use by any Person, or by reason
of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or by
reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of the
foregoing other than a discharge of Tenant from any such obligations as a
matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR
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WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv)
LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii)
LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii)
DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE EXISTENCE OF ANY
HAZARDOUS MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING
ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE
PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS
BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT
OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT, AS
BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2 HAVE
BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED TO BE A
COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING
OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) to Tenant's knowledge, fee simple title, except where the
Property is held under a ground lease, (both legal and equitable) is in
Landlord, (B) Tenant has only the leasehold right of possession and use of the
Property as provided herein, (C) to Tenant's knowledge, the Improvements conform
to all material Legal Requirements and all material Insurance Requirements, (D)
to Tenant's knowledge all easements necessary or appropriate for the use or
operation of the Property have been obtained, (E) all contractors and
subcontractors retained by Tenant who have performed work on or supplied
materials to the Property have been fully paid, and all materials to the
Property have been fully paid for, (F) the Improvements constructed by Tenant or
any Affiliate of Tenant have been completed in all material respects in a
workmanlike manner of first class quality, and (G) to Tenant's knowledge all
equipment necessary or appropriate for the use or operation of the Property has
been installed and is presently operative in all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the property
of Landlord and (iii) that Tenant has only the right to the use of such Property
during the Term of and upon the terms and conditions of this Lease.
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8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of the
Property, whether initially included in the Lease or thereafter acquired by
Landlord or Tenant, in good condition and repair, normal wear and tear excepted.
Upon the loss, destruction or obsolescence of any Tangible Personal Property,
Tenant shall replace such property with replacements of the same type and
quality as initially in place, which such property will be owned by Tenant
except to the extent acquired with funds from the Capital Replacement Fund
("Tenant's Personal Property"). Upon the expiration or sooner termination of
this Lease, the Tenant's Personal Property shall transfer to Landlord without
requirement of any bill of sale or assignment; provided Landlord, at its
election, may require Tenant to execute such documentation as Landlord may
require to evidence such transfer. Tenant shall not remove any Tangible
Personal Property from the Property upon termination of the Lease. If any of
such Tangible Personal Property is stored away from the Property, Tenant will
provide Landlord with proper access to the storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, and (c) such other reasonable requirements imposed by
Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use and shall operate the Property to maximize its long term
value. Tenant shall not use the Property or any portion thereof for any other
use without the prior written consent of Landlord, in Landlord's absolute
discretion. No use shall be made or permitted to be made of the Property, and
no acts shall be done, which will cause the cancellation of any insurance policy
covering the Property or any part thereof, nor shall Tenant sell or otherwise
provide to patrons, or permit to be kept, used or sold in or about the Property
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance
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policies required to be carried hereunder, or fire underwriters regulations.
Tenant shall, at its sole cost, comply with all of the requirements pertaining
to the Property or other improvements of any insurance board, association,
organization or company necessary for the maintenance of insurance, as herein
provided, covering the Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
12, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under the Property, or any adjacent property,
or incorporated in the Property or any improvements thereon except in compliance
with applicable law (including any Environmental Laws). Tenant shall not allow
the Property to be used as a landfill or a waste disposal site, or a
manufacturing, distribution or disposal facility for any Hazardous Materials.
Tenant shall neither suffer nor permit the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees or other charges which results in
a reduction in the individual membership dues payable by members at the Property
without the consent of the Landlord, which consent shall not be unreasonably
withheld or delayed. In addition, Tenant shall not materially increase the
number of golfing memberships in any calendar year at the Property if such sales
would diminish the long-term value of the Property.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time to
time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense: (i) grant easements and
other rights in the nature of easements; (ii) release existing easements or
other rights in the nature of easements which are for the benefit of the
Property; (iii) dedicate or transfer unimproved portions of the Property for
road, highway or other public purposes; (iv) execute petitions to have the
Property annexed to any municipal corporation or utility district; (v) execute
amendments to any covenants and restrictions affecting the Property; and (vi)
execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and
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transfers (to the extent of its interest in the Property), but only upon
delivery to Landlord of an Officer's Certificate (which Officer's Certificate,
if contested by Landlord, shall not be binding on Landlord) stating that such
grant, release, dedication, transfer, petition or amendment is not detrimental
to the proper conduct of the business of Tenant on the Property and does not
materially reduce its value or usefulness for the Primary Intended Use.
Landlord shall not grant, release, dedicate or execute any of the foregoing
items in this Section 9.4 without obtaining Tenant's approval, which approval
shall not be unreasonably withheld or delayed; provided no such approvals shall
be required by Landlord for Landlord to grant at Tenant's request easements in
the normal course of operations which do not materially adversely affect the
value of the Property.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the reasonable activities of such
association; (b) at its election, engage in reasonable cross-marketing endeavors
with the members of the Advisory Association.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including all Extended
Terms, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Tenant hereby represents, warrants, and covenants to Landlord as
follows:
10.1 Intentionally Deleted.
10.2 Intentionally Deleted.
10.3 Intentionally Deleted.
10.4 Intentionally Deleted.
10.5 Intentionally Deleted.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to
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require remediation or reporting under any Environmental Law in, on or under the
Property or if Tenant, Landlord, or the Property becomes subject to any order of
any federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant shall,
at its sole expense, but subject to the last sentence of Section 10.7, carry out
and complete any required investigation, removal, remediation, repair, closure,
detoxification, decontamination or other cleanup of the Property. If Tenant
fails to implement and diligently pursue any such repair, closure,
detoxification, decontamination or other cleanup of the Property in a timely
manner, Landlord shall have the right, but not the obligation, to carry out such
action and to recover its costs and expenses therefor from Tenant as Additional
Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any Environmental
Law, (c) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity, or (d) by reason of a breach of a representation or warranty in
Sections 10.1 through 10.5 of this Lease. Notwithstanding the foregoing or any
other provision of this Lease (including, without limitation, Section 7.2,
Section 10.9 and Article 23), Tenant shall not be liable, or otherwise be
required to indemnify Landlord or the Company or any Affiliates of the Company
for (i) any matters or events that arise after the Commencement Date that are
not caused by any act or omission on the part of Tenant, or (ii) any matters or
events that arise after the Commencement Date
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that are directly caused by a breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF LEASE.
Notwithstanding any other provision of this Lease (except the last sentence of
Section 10.7), if, at a time when the Term would otherwise terminate or expire,
a violation of any Environmental Law has been asserted by Landlord and has not
been resolved in a manner reasonably satisfactory to Landlord, or has been
acknowledged by Tenant to exist or has been found to exist at the Property or
has been asserted by any governmental authority and Tenant's failure to have
completed all action required to correct, abate or remediate such a violation of
any Environmental Law materially impairs the leasability of the Property upon
the expiration of the Term, then, at the option of Landlord, the Term shall be
automatically extended with respect to the Property beyond the date of
termination or expiration and this Lease shall remain in full force and effect
under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
10.10 ENVIRONMENTAL STATEMENTS. Promptly upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property. Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate and
maintain the Property in good order, repair and
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appearance (whether or not the need for such repairs occurs as a result of
Tenant's use, any prior use, the elements or the age of the Property or any
portion thereof) and in accordance with any applicable Legal Requirements, and,
except as otherwise provided in Article 15, with reasonable promptness, make all
necessary and appropriate repairs thereto of every kind and nature, whether
interior or exterior, structural or non-structural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing prior to the
Commencement Date (concealed or otherwise). Tenant shall operate and maintain
the Property in accordance with the maintenance practices of the Property at the
Commencement Date and otherwise in a manner comparable to other comparable golf
courses (including the related resort and conference facilities) in the vicinity
of the Property. Landlord may consult with the Advisory Association from time
to time with respect to Tenant's compliance with its maintenance and operation
obligations under this Section 11.1, and Landlord and representatives of
Advisory Association shall have the right from time to time to enter the
Property for the purpose of inspecting the Property. If Landlord, in
consultation with the Advisory Association, determines that Tenant has failed to
comply with its maintenance and operation obligations under this Section 11.1,
Landlord shall provide written notice to Tenant setting forth a list of remedial
work and/or steps to be performed by Tenant. Tenant shall promptly and
diligently perform such remedial work and/or steps as recommended by Landlord,
provided if Tenant objects to one or more of the remedial obligations proposed
by Landlord, then the matter shall be submitted to the dispute resolution
procedure set forth in Section 12.7. Tenant will not take or omit to take any
action the taking or omission of which could reasonably be expected to impair
the value or the usefulness of the Property or any part thereof for its Primary
Intended Use. In no event shall Tenant be deemed to be in violation of this
Section 11.1 if Tenant has requested that Landlord disburse available funds from
the Capital Replacement Reserve to cure such default by making capital repairs,
improvements or replacements and Landlord has not consented to such
disbursement.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Property in any way. Tenant hereby waives, to the extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
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11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no action
or inaction by Landlord shall be construed as (i) constituting the consent or
request of Landlord expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in good condition (subject to the obligation of Tenant to maintain
the Property in good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements"),
provided any Landlord Improvements costing $100,000 or less shall not require
approval of Landlord. Except as set forth in Section 12.9 below, any such
Tenant Improvement shall be made at Tenant's sole expense and shall become the
property of Landlord upon termination of this Lease. Unless made on an
emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed and withheld
or delayed and shall not be withheld so long as such alterations, additions,
changes and/or improvements do not have a material adverse affect on the value
of the Property or the Innisbrook Property.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and any
other necessary private approvals (E.G., ground lessor, mortgagee, etc.)
relating to the construction of any Tenant Improvement; and
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(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens exceeding
One Hundred Thousand Dollars ($100,000) in the aggregate at any one time to
exist against the Property (and with respect to such liens will cause them
to be removed of record or bonded over not less than thirty (30) days prior
to scheduled foreclosure pursuant to such lien or suffer or permit any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant deems
desirable; and
(c) engage in any other lawful activities that Tenant determines are
necessary or desirable for the development of the Property in accordance
with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
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Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Tenant shall be obligated to pay to
Landlord, and Tenant shall be obligated to accrue, the Capital Replacement
Reserve. Amounts in the Capital Replacement Fund shall be and remain the
property of Tenant, shall be subject to the rights of Landlord as herein
provided, and shall be additional security for Tenant's obligations hereunder.
The Capital Replacement Reserve shall be paid to Landlord by Tenant on the last
day of each Fiscal Quarter of Tenant. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Landlord for
Capital Expenditures. Tenant shall have no rights with respect to any amounts
in the Capital Replacement Fund except as provided herein. Subject to
Landlord's approval of the Capital Expenditures (which approval shall not be
unreasonably withheld and which shall be granted provided such improvements are
reasonably expected to increase the long-term value of the Property), Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts or invoices;
(c) Such expenditures are included in the Capital Budget
submitted to and approved by Landlord in accordance with Section 12.7
or will enhance the long-term value of the Property; and
(d) If from time to time Tenant shall expend monies beyond
the balance in the Capital Replacement Fund, then Tenant shall be
afforded the opportunity to present such paid invoices for
reimbursement at later dates when the Tenant's reserve balance shall
be replenished to a level that can support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall be
the property of Landlord. However, Tenant shall be entitled to all federal and
state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts
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credited to the Capital Replacement Fund, as to which Landlord shall be entitled
all income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
for a period of five (5) years form Receipt of such Officer's Certificate and in
connection with such audits to examine Tenant's book and records with respect
thereto (including supporting data, sales tax returns and Tenant's work papers).
If any such audit discloses a deficiency in the payment of Percentage Rent,
Tenant shall forthwith pay to Landlord the amount of the deficiency as finally
agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof;
PROVIDED, HOWEVER, that as to any audit that is commenced more than twelve (12)
months after the date Gross Golf Revenue for any Fiscal Year is reported by
Tenant to Landlord in the Officer's Certificate, the deficiency, if any, with
respect to such Gross Golf Revenue shall bear interest as permitted herein only
from the date such determination of deficiency is made unless such deficiency is
the result of gross negligence or willful misconduct on the part of Tenant. If
any such audit discloses that the Gross Golf Revenue actually received by Tenant
for any Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay all
reasonable costs of such audit and examination; provided Tenant shall have the
right to submit the audit determination to arbitration in accordance with the
procedures set forth in Article 28. Landlord shall also have the right to
review and audit from time to time Tenant's business operations including all
books, records and financial statements of Tenant. Tenant shall promptly
provide to Landlord copies of all such books, records, financial statements or
any other documentation of Tenant's business operations reasonably requested by
Landlord. Landlord shall keep confidential the contents of such books, records,
financial statements and other documentations, provided Landlord shall be
permitted to disclose the foregoing to its attorneys, accountants and advisors
who agree to maintain the confidentiality of such information, and shall also be
permitted to disclose the foregoing as may be necessary or appropriate in any
public filings of the Company or GTA, Inc. or in any litigation proceedings.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to the
commencement of each Fiscal Year, Tenant shall prepare and submit to Landlord an
operating budget (the "Operating Budget") and a capital budget (the "Capital
Budget") prepared in accordance with the requirements of this Section 12.7. The
Operating Budget and the Capital Budget (together, the "Annual Budget") shall be
prepared in a form approved by Landlord
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for use throughout the Lease Term and show by quarter and for the year as a
whole the following:
(a) Tenant's reasonable estimate of Gross Revenue and Gross Expenses
itemized on schedules on a quarterly basis as approved by Landlord and Tenant,
together with assumptions, in narrative form, forming the basis of such
schedules.
(b) An estimate of any amounts Landlord will be requested to provide
for Capital Expenditures during the next two Fiscal Years, subject to the
limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget,
which approval shall not be withheld so long as such Annual Budget is reasonably
designed to enhance the long-term value of the Property. If the parties are not
able to reach agreement on the Annual Budget for any Fiscal Year during
Landlord's thirty (30) day review period, the parties shall attempt in good
faith during the subsequent thirty (30) day period to resolve any disputes,
which attempts shall include, if requested by either party, at least one (1)
meeting of executive-level officers of Landlord and Tenant and one (1) meeting
with the directors of the Advisory Association. In the event the parties are
still not able to reach agreement on the Annual Budget for any particular Fiscal
Year after complying with the foregoing requirements of this Section 12.7, the
parties shall adopt such portions of the Operating Budget and the Capital Budget
as they may have agreed upon, and any matters not agreed upon shall be referred
to a dispute resolution committee composed of three (3) members of the Advisory
Association unaffiliated with Tenant and two (2) members of the board of
directors of the Company. Such committee shall be responsible for resolving any
such disagreement and the parties agree that the determination of such dispute
resolution committee shall be binding on the parties. In resolving such dispute
the committee shall base its determination on whether the Annual Budget is
reasonably designed to enhance the long-term value of the Property. Pending the
results of such resolution or the earlier agreement of the parties, (i) if the
Operating Budget has not been agreed upon, the Property will be operated in a
manner consistent with the
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prior year's Operating Budget until a new Operating Budget is adopted, and (ii)
if the Capital Budget has not been agreed upon, no Capital Expenditures shall be
made unless the same are set forth in a previously approved Capital Budget or
are specifically required by Landlord or are otherwise required to comply with
Legal Requirements or Insurance Requirements. Tenant shall operate the Property
in a manner reasonably consistent with the Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property shall be kept either at the Property or at Tenant's
offices in Greenwich, Connecticut, or Scottsdale, Arizona. Such books and
records shall be available to Landlord and its representatives for examination,
audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of the
end of each Fiscal Quarter (i) unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
(except as provided for in clause (ii)) shall be at Landlord's expense. Each
quarterly report shall also include a narrative explaining any deviation in any
major revenue or expense category or operating expenses (by category) of more
than ten percent (10%) from the amounts set forth on the Annual Budget, together
with, if appropriate a revised Annual Budget, which budget shall be subject to
Landlord's review and approval as provided in Section 12.7. Each quarterly
report shall also forecast any projected Percentage Rent payable for the
following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
seventy five (75) days of the end of such Fiscal Year financial statements
prepared in accordance with GAAP and audited by any nationally recognized
independent accounting firm licensed to practice before the Securities and
Exchange Commission.
(d) If requested by Landlord, Tenant will make available to Landlord
and the Company and their respective
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lenders, underwriters, counsel, accountants and advisors such additional
information and financial statements with respect to Tenant and the Property as
Landlord may reasonably request without any additional cost to Tenant, and
Tenant agrees to reasonably cooperate with Landlord and the Company in effecting
public or private debt or equity financings by the Landlord or the Company,
without any additional cost to Tenant, modifications to this Lease or the
requirement of additional collateral from Tenant.
12.9 LANDLORD IMPROVEMENTS. Landlord agrees to make those certain
Tenant Improvements set forth on Exhibit J hereto in an amount not to exceed One
Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the "Landlord
Improvements") in accordance with the time periods set forth on Exhibit J, but
in no event to exceed one (1) year from the Closing Date (the "Improvement
Period"). Landlord appoints Tenant as its agent to make the Landlord
Improvements, and Tenant indemnifies and holds Landlord harmless from and
against all costs, damages and liabilities (including legal fees) arising from
the making of the Landlord Improvements by Tenant. On a monthly basis during
the Improvement Period, upon Tenant's completion of all or any portion of the
Landlord Improvements, upon Tenant's written request with the support
documentation described in Exhibit H hereto, Landlord will reimburse Tenant for
the cost of such portion of Landlord Improvements.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease and any liens permitted by this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
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(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as such liens are in the process of being
contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or vendors
for sums either disputed (PROVIDED THAT such liens are in the process of
being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25 or any other liens arising through or under
Landlord.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord, the
Company and Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment and in such case, in
the event of an adverse final determination, either (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Landlord or Tenant; or (ii) make such changes in the Improvements,
and take such other actions, as Tenant in the good faith exercise of its
judgment deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or encroachment. Tenant's
obligation under this Section 13.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and Tenant
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shall be entitled to a credit for any sums recovered by Landlord under any such
policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
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(d) no such contest shall interfere in any material respect with the
use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or Tenant,
Tenant shall, as Additional Charges due hereunder, promptly pay the amount
required to be paid, together with all interest and penalties accrued
thereon, or comply with the applicable Legal Requirement or Insurance
Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss payee,
as applicable. Losses shall be payable to Landlord and/or Tenant as provided in
this Article 15. In addition, the policies shall name as a loss payee any
Facility Mortgagee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment in excess of $100,000 shall require the
written consent of Landlord, Tenant, and each Facility Mortgagee, if any.
Evidence of insurance shall be deposited with Landlord and, if requested, with
any Facility Mortgagee(s). The policies on the Property, including the
Improvements, Fixtures, Tangible and Intangible Personal Property and any Tenant
Improvements, shall insure against the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including, but
not limited to, fire, vandalism, malicious mischief and extended coverages,
including sprinkler leakage, in an amount not less than 100% of the then
Full Replacement Cost thereof covering all structures built on the Property
and all Tangible Personal Property; and further
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provided the Tangible Personal Property may be insured at its fair market
value.
(b) LIABILITY. Claims for personal injury or property damage under
a policy of comprehensive general public liability insurance with amounts
(including an applicable umbrella policy) not less than five million
dollars ($5,000,000) per occurrence and in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation insurance
coverage for all Persons employed by Tenant on the Property in accordance
with the requirements of applicable federal, state and local laws. Tenant
shall have the option to self-insure up to five thousand dollars ($5,000)
of the amount of insurance required in the event State law permits such
self-insurance, subject to the approval of Landlord, in Landlord's sole and
absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection with
any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
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15.4 WAIVER OF SUBROGATION. All insurance policies carried by either
party covering the Property including contents, fire and casualty insurance,
shall expressly waive any right of subrogation on the part of the insurer
against the other party (including any Facility Mortgagee). The parties hereto
agree that their policies will include such waiver clause or endorsement so long
as the same are obtainable without extra cost, and in the event of such an extra
charge the other party, at its election, may pay the same, but shall not be
obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than B+, XI
by A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies
of insurance referred to in Sections 15.1 and 15.2 and shall deliver
certificates thereof to Landlord prior to their effective date (and with respect
to any renewal policy, at least ten (10) days prior to the expiration of the
existing policy). In the event Tenant fails to satisfy its obligations under
this Article 15, Landlord shall be entitled, but shall have no obligation, to
effect such insurance and pay the premiums therefor, which premiums shall be
repayable to Landlord upon written demand as Additional Charges. Each insurer
issuing policies pursuant to this Article 15 shall agree, by endorsement on the
policy or policies issued by it, or by independent instrument furnished to
Landlord, that it will give to Landlord thirty (30) days' written notice before
the policy or policies in question shall be altered, allowed to expire or
cancelled. Each such policy shall also provide that any loss otherwise payable
thereunder shall be payable notwithstanding (i) any act or omission of Landlord
or Tenant which might, absent such provision, result in a forfeiture of all or a
part of such insurance payment, (ii) the occupation or use of the Property for
purposes more hazardous than those permitted by the provisions of such policy,
(iii) any foreclosure or other action or proceeding taken by any Facility
Mortgagee pursuant to any provision of a mortgage, note, assignment or other
document evidencing or securing a loan upon the happening of an event of default
therein or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any time
reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as
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Tenant can reasonably demonstrate its ability to satisfy such deductible or
amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Other Leased Properties, which amount shall be not less
than the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by reason
of any loss or damage to the Property, or any portion thereof, and insured under
any policy of insurance required by this Article 15 shall (i) if greater than
$100,000, be paid to Landlord and held by Landlord and (ii) if less than such
amount, be paid to Tenant and held by Tenant. All such proceeds shall be held
in trust deposited in an interest bearing account and shall be made available
together with any interest for reconstruction or repair, as the case may be, of
any damage to or destruction of the Property, or any portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
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(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction of the Property (or in the event neither Landlord nor Tenant is
required to or elects to repair and restore) shall be paid to Tenant. All
salvage resulting from any risk covered by insurance shall belong to Tenant.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant shall be
entitled to withdraw from the Capital Replacement Fund an amount necessary to
cover some or all of such excess; provided any amount so withdrawn must be
restored by Tenant to the Capital Replacement Fund within two (2) years of such
withdrawal.
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15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY USE.
If during the term the Property is totally or partially destroyed from a
risk covered by the insurance described in Article 15 and the Property
thereby is rendered Unsuitable For Its Primary Intended Use, Tenant shall,
at its election, either (i) diligently restore the Property to
substantially the same condition as existed immediately before the damage
or destruction, or (ii) terminate the Lease as provided in Section 21.2 and
assign all of its rights to any insurance proceeds required under this
Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term, the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15, but the Real
Property is not thereby rendered Unsuitable For Its Primary Intended Use,
Tenant shall diligently restore the Property to substantially the same
condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant shall not be required to restore certain Tangible
Personal Property and/or any Tenant Improvements if failure to do so does
not adversely affect the amount of Rent payable hereunder or the Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18)
months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the
Term, the Property is totally or materially destroyed from a risk not covered by
the insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this
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Lease shall remain unabated during the period required for repair and
restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other
provision to the contrary in this Article 15, if damage to or destruction of the
Property occurs during the last twenty-four (24) months of the Lease Term, and
if such damage or destruction cannot reasonably be expected by Landlord to be
fully repaired or restored prior to the date that is twelve (12) months prior to
the end of the then-applicable Term, then either Landlord or Tenant shall have
the right to terminate the Lease on thirty (30) days' prior notice to the other
by giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
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16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled in the event Tenant restores the Property to receive
from the Award disbursements in the same manner as the disbursement of insurance
proceeds pursuant to Section 15.9. If and to the extent such Award specifically
includes such items, Tenant shall also be entitled to disbursements, a sum
attributable to the value, if any, of: (i) the loss of Tenant's business during
the remaining term, (ii) any Tenant Improvements and (iii) the leasehold
interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with no abatement of rent payable by Tenant hereunder.
In the event of any such temporary taking, the entire amount of any such Award
made for such temporary taking allocable to the Lease Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
as soon as reasonably practicable following receipt of notice from Landlord
of the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER,
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that the cure period shall not extend beyond thirty (30) days as otherwise
provided by this Section 17.1(b) if the facts or circumstances giving rise
to the default are creating a further harm to Landlord or the Property and
Landlord makes a good faith determination that Tenant is not undertaking
remedial steps that Landlord would cause to be taken if this Lease were
then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts
as they become due,
(ii) file a petition in bankruptcy or a petition to
take advantage of any insolvency act,
(iii) make an assignment for the benefit of its
creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any part
thereof shall be levied upon or attached in any proceeding and the same
shall not be vacated or discharged within the later of ninety (90) days
after commencement thereof or thirty (30) days after receipt by
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Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation, Tenant voluntarily ceases operations on the
Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect and the same has not been cured
or remedied within a period of thirty (30) days after receipt by Tenant of
notice thereof from Landlord; or
(i) an "Event of Default" (as defined in any such loan or lease) by
Tenant or any Affiliate of Tenant in any loan or lease by and between such
party and Landlord or any Affiliate of Landlord, or an "Event of Default"
under the Pledge Agreement or the Stock Option Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's breach
of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by law,
pay as Additional Charges all costs and expenses incurred by or on behalf of
Landlord, including reasonable attorneys' fees and expenses, as a result of any
Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section
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17.1, (b) the repossession of the Property, (c) the failure of Landlord,
notwithstanding reasonable good faith efforts, to relet the Property, (d) the
reletting of all or any portion thereof, nor (e) the failure of Landlord to
collect or receive any rentals due upon any such reletting. In the event of any
such termination, Tenant shall forthwith pay to Landlord all Rent due and
payable with respect to the Property to, and including, the date of such
termination. Thereafter, Tenant shall forthwith pay to Landlord, at Landlord's
option, as and for liquidated and agreed current damages for Tenant's default,
and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent
which had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided, and
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
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17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
17.9 IMPOUNDS. Landlord shall have the right during the continuance
of an Event of Default to require Tenant to pay to Landlord an additional
monthly sum (each an "Impound Payment") sufficient to pay the Impound Charges
(as hereinafter defined) as they become due. As used herein, "Impound Charges"
shall mean real estate taxes on the Property or payments in lieu thereof and
premiums on any insurance required by this Lease. Landlord shall determine the
amount of the Impound Charges and of each Impound Payment. The Impound Payments
shall be held in a separate account and shall not be commingled with other funds
of Landlord and interest thereon shall be held for the account of Tenant.
Landlord shall apply the Impound Payments to the payment of the Impound Charges
in such order or priority as Landlord shall determine or as required by law. If
at any time the Impound Payments theretofore paid to Landlord shall be
insufficient for the payment of the Impound Charges, Tenant, within ten
(10) days after Landlord's demand therefor, shall pay the amount of the
deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but
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shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Tenant. Landlord may, to
the extent permitted by law, enter upon the Property for such purpose and take
all such action thereon as, in Landlord's opinion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of Tenant. All
sums so paid by Landlord and all costs and expenses (including reasonable
attorneys' fees and expenses, to the extent permitted by law) so incurred,
together with a late charge thereon at the Overdue Rate from the date on which
such sums or expenses are paid or incurred by Landlord, shall be paid by Tenant
to Landlord on demand. The obligations of Tenant and rights of Landlord
contained in this Article 18 shall survive the expiration or earlier termination
of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any party thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all Additional Charges accruing during the
month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
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ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual damages (but excluding consequential damages),
penalties, causes of action, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against Landlord, the Company or Affiliates of the Company by reason
of:
(a) any accident, injury to or death of persons or loss of or damage
to property occurring on or about the Property or adjoining property,
including, but not limited to, any accident, injury to or death of Person
or loss of or damage to property resulting from golf balls, golf clubs,
golf shoes, lawn mowers or other equipment, pesticides, fertilizers or
other substances, golf carts, tractors or other motorized vehicles present
on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with any
of the terms of this Lease;
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(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect to
the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's gross
negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably practicable
after receipt by the indemnified party of notice of any liability or claim
incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the indemnified party may at all times participate in such defense
at its expense, and PROVIDED FURTHER, HOWEVER, that the indemnifying party shall
not, in defense of any such claim, except with the prior written consent of the
indemnified party, consent to the entry of any judgment or to enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff in question to the indemnified party and its
affiliates a release of all liabilities in respect of such claims, or that does
not result only in the payment of money damages by the indemnifying party. If
the indemnifying party shall fail to undertake such defense within thirty (30)
days after such notice, or within such shorter time as may be reasonable under
the
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circumstances, then the indemnified party shall have the right to undertake the
defense, compromise or settlement of such liability or claim on behalf of and
for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
reasonable discretion, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer (except to an Affiliate of Tenant or a Permitted Assignee)
the Lease or any interest therein, all or any part of the Property, whether
voluntarily, involuntarily or by operation of law. For purposes of this Article
23, a Change in Control of the Tenant shall constitute an assignment of this
Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. In no event shall Tenant sublease all or
any portion of the Property (except to an Affiliate of Tenant or a
Permitted Assignee) in a manner which is inconsistent with Tenant's
obligation to enhance the long-term value of the Property, nor shall
Landlord withhold its consent to any assignment or sublease of the Property
which is consistent with such obligations. Tenant's proposed sublease or
any of the following transfers shall require Landlord's prior written
consent, which consent Landlord may withhold in its reasonable discretion
provided Landlord determines that such sublease or transfer is inconsistent
with Tenant's obligation to enhance the long-term value of the Property.
(i) Sublease or license to operate golf courses;
(ii) Sublease or license to operate golf professionals' shops;
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(iii) Sublease or license to operate golf driving ranges;
(iv) Sublease or license to operate hotel and conference
facilities; and
(v) lease or license to operate any other portions (but not
the entirety) of the Property customarily associated with or
incidental to the operation of the golf course which provide for an
annual lease or license payment of in excess of $25,000 (which amount
shall be increased by increases in the CPI from the Commencement
Date).
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to
any proposed assignment or sublease, deliver to Landlord written notice of
its intent to assign or sublease, which notice shall identify the intended
assignee or sublessee by name and address, shall specify the effective date
of the intended assignment or sublease, and shall be accompanied by an
exact copy of the proposed assignment or sublease. Tenant shall provide
Landlord with such additional information or documents reasonably requested
by Landlord with respect to the proposed transaction and the proposed
assignee or subtenant, and an opportunity to meet and interview the
proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for performance
of its obligations under this Lease, Tenant hereby grants, conveys and
assigns to Landlord all right, title and interest of Tenant in and to all
subleases now in existence or hereinafter entered into for any or all of
the Property, and all extensions, modifications and renewals thereof and
all rents, issues and profits therefrom. Landlord hereby grants to Tenant
a license to collect and enjoy all rents and other sums of money payable
under any sublease of any of the Property; provided, however, that Landlord
shall have the absolute right at any time after the occurrence and
continuance of an Event of Default upon notice to Tenant and any subtenants
to revoke said license and to collect such rents and sums of money and to
retain the same. Tenant shall not (i) consent to, cause or allow any
material modification or alteration of any of the terms,
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conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property
which is inconsistent with Tenant's obligation to maximize the long-term value
of the Property, nor shall Landlord withhold its consent to any assignment or
sublease of the Property which is consistent with such obligation.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1,
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Landlord or its designee shall have, for a period of thirty (30) days following
receipt of the written notice of Tenant's intent to assign its interest in the
Lease to a third party unaffiliated with Tenant who is not an Affiliate of
Tenant or a Permitted Assignee (and in which management of the Tenant shall have
no continuing management or ownership interest), the right to elect to purchase
the leasehold interest on the terms and conditions at which Tenant proposes to
sell or assign its interest. If Landlord or its designee elects not to purchase
such interest of Tenant, then Tenant shall be free to sell its interest to a
third party, subject to Landlord's prior written consent as provided in Section
23.1. However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within two hundred seventy (270) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only thirty
(30) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of nonresidential
real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request
any extension of time to assume or reject this Lease or to perform any
obligations of this Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have
made a bona fide offer to accept an assignment of this Lease or a
subletting on terms acceptable to the Trustee, the Trustee shall give
Landlord, and lessors and mortgagees of Landlord of which Tenant has
notice, written notice setting forth the name and address of such person
and the terms and conditions of such offer, no later than twenty (20) days
after receipt of such offer, but in any event no later than ten (10) days
prior to the date on which the Trustee makes application to the bankruptcy
court for authority and approval to enter into such assumption and
assignment or subletting. Landlord shall have the prior right and option,
to be exercised by written notice to the Trustee given at any time prior to
the effective date of such proposed assignment or subletting, to receive
and assignment of this Lease or subletting of the Property to Landlord or
Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be
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paid by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any
Event of Default then existing or provides adequate assurance that the
Trustee will promptly compensate Landlord for any actual pecuniary loss
incurred by Landlord as a result of Tenant's default under this Lease; and
(c) provides adequate assurance of future performance under this Lease.
Adequate assurance of future performance by the proposed assignee shall
include, as a minimum, that: (i) any proposed assignee of this Lease shall
provide to Landlord an audited financial statement, dated no later than six
(6) months prior to the effective date of such proposed assignment or
sublease, with no material change therein as of the effective date, which
financial statement shall show the proposed assignee to have a net worth
equal to at least One Million Dollars ($1,000,000) or, in the alternative,
the proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited
financial statement meeting the requirements of (i) above and shall execute
and deliver to Landlord a guaranty agreement in form and substance
acceptable to Landlord; and (ii) any proposed assignee shall grant to
Landlord a security interest in favor of Landlord in all furniture,
fixtures, and other personal property to be used by such proposed assignee
in the Property. All payments required of Tenant under this Lease, whether
or not expressly denominated as such in this Lease, shall constitute rent
for the purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance
that the Trustee will "promptly" cure defaults and compensate Landlord for
actual pecuniary loss, the word "promptly" shall mean that cure of defaults
and compensation will occur no later than sixty (60) days following the
filing of any motion or application to assume this Lease; and (b) the
obligation of the Trustee to compensate or to provide adequate assurance
that the Trustee will promptly compensate Landlord for "actual pecuniary
loss", (the term "actual pecuniary loss" shall mean, in addition to any
other provisions contained herein relating to Landlord's damages upon
default obligations of Tenant to pay money under this Lease and all
attorneys' fees and related costs of Landlord incurred in connection with
any default of Tenant in connection with Tenant's bankruptcy proceedings).
(e) Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed, without further act
or deed, to have assumed all of the obligations arising under this Lease
and each of the conditions and provisions hereof on and after the date of
such assignment. Any such assignee shall, upon the request of
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Landlord, forthwith execute and deliver to Landlord an instrument, in form
and substance acceptable to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord, which shall not be unreasonably withheld or delayed.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time upon
Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that
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any Hazardous Material in a quantity sufficient to require remediation or
reporting under applicable law is located in, on or under the Property or any
adjacent property, Tenant shall notify Landlord in writing of (a) the existence
of any such Hazardous Material; (b) any enforcement, cleanup, removal, or other
governmental or regulatory action instituted, completed or threatened; (c) any
claim made or threatened by any Person against Tenant or the Property relating
to damage, contribution, cost recovery, compensation, loss, or injury resulting
from or claimed to result from any Hazardous Material; and (d) any reports made
to any federal, state or local environmental agency arising out of or in
connection with any Hazardous Material in or removed from the Property,
including any complaints, notices, warnings or asserted violations in connection
therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without the
consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance, provided the holder of
any such subsequently executed ground or underlying leases, mortgages, trust
deeds or like encumbrances executes a subordination non-disturbance agreement
acknowledging and agreeing to be bound by Section 25.2 below, and agreeing to
recognize Tenant as tenant under this Lease in accordance with the terms and
provisions hereof. This clause shall be self-operative and no further
instrument of subordination shall be required by any ground or underlying lessor
or by any mortgagee or beneficiary, affecting any lease or the Property. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Landlord may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder of
any Landlord Encumbrance shall have no duty, liability or obligation to perform
any of the obligations of
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Landlord under this Lease, but that in the event of Landlord's default with
respect to any such obligation, Tenant will give any such holder whose name and
address have been furnished Tenant in writing for such purpose notice of
Landlord's default and allow such holder thirty (30) days following receipt of
such notice for the cure of said default before invoking any remedies Tenant may
have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have thirty (30) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party
for a period of Two Hundred Seventy (270) Days. However, if the price at which
Landlord intends to sell the Property to a third party is less than 95% of the
price set forth in the notice provided by Landlord to Tenant or are otherwise on
terms which are materially more favorable than the terms and conditions set
forth in the notice, then Landlord shall again offer Tenant the right to acquire
the Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future liabilities
and obligations under this Lease arising or accruing from and after the date of
such conveyance or other transfer as to the Property. All such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
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27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant
except as otherwise specified above in this Section 27.2. Unless otherwise
agreed in writing by the parties or required by the arbitrator or AAA, if
applicable, arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Landlord and Tenant
regarding the Property during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
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28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or subject to Section 28.19, permit Tenant to offset any Rent due and
owing hereunder or otherwise excuse Tenant from any of its obligations
hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Subject to Section 16.24 of the Loan Agreement, Landlord may acquire
or own golf courses or golf resorts that may be geographically proximate to one
or more golf courses that Tenant or Affiliates of Tenant may own, manage or
lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this Lease
or of the Property or any part thereof, or of any interest therein, shall be
valid or effective unless
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agreed to and accepted in writing by Landlord and no act by Landlord or any
representative or agent of Landlord, other than such a written acceptance by
Landlord, shall constitute an acceptance of any such surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances not prohibited by this Lease.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Telephone No.: (803) 723-4653
Facsimile No.: (803) 723-0479
Attn: W. Bradley Blair, II
With a copy to: O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street
San Francisco, California 94111
Attn: Peter W. Healy, Esq.
Telephone No.: (415) 984-8833
Facsimile No.: (415) 984-8701
If to Tenant: Mr. John Sauter
Starwood Capital Group, LLC
c/o Troon Golf
8711 E. Pinnacle Road
Scottsdale, Arizona 85255
Telephone No.: (602) 585-7360
Facsimile No.: (602) 585-9111
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With a copy to: James B. Carlson, Esq.
Mayer, Brown & Platt
1675 Broadway, Suite 1900
New York, New York 10019
Telephone No.: (212) 506-2515
Facsimile No.: (212) 262-1910
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties hereto.
All permitted assignees or sublessees shall be subject to the terms and
provisions of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and
construed in accordance with the laws of the State (but not including its
conflict of laws rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly
upon the request of either, enter into a short form memorandum of this Lease, in
form and substance reasonably satisfactory to Landlord and suitable for
recording under the State, in which reference to this Lease, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such Memorandum of Lease.
28.18 ATTORNEYS' FEES. For the purpose of this Lease, the terms
"attorneys' fees" and "attorneys' fees and
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costs" shall each mean the fees and expenses of counsel to the parties hereto,
which may include printing, photostating, duplicating and other expenses, air
freight charges, and fees billed for law clerks, paralegals, librarians and
others not admitted to the bar but performing services under the supervision of
an attorney. The terms "attorneys' fees" and "attorneys' fees and costs" shall
also each include all such fees and expenses incurred with respect to appeals,
arbitrations and bankruptcy proceedings, and whether or not any action or
proceeding is brought with respect to the matter for which said fees and
expenses were incurred and shall also include all such fees and expenses
incurred in enforcing any judgement. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NON-RECOURSE AS TO LANDLORD AND TENANT. (a) Anything
contained herein to the contrary notwithstanding, any claim based on or in
respect of any liability of Landlord under this Lease shall be enforced only
against the Property and not against any other assets, properties or funds of
(i) Landlord, (ii) any director, officer, general partner, limited partner,
employee or agent of Landlord, or any general partner of Landlord, any of their
respective general partners or stockholders (or any legal representative, heir,
estate, successor or assign of any thereof), (iii) any predecessor or successor
partnership or corporation (or other entity) of Landlord, or any of their
respective general partners, either directly or through either Landlord or their
respective general partners or any predecessor or successor partnership or
corporation or their stockholders, officers, directors, employees or agents (or
other entity), or (iv) any other Person affiliated with any of the foregoing, or
any director, officer, employee or agent of any thereof. Tenant shall have the
right of setoff against payments due under the Lease following a judicial
determination of a court of competent jurisdiction of Landlord's liability for
the breach of one or more of its obligations hereunder.
(b) Except as expressly set forth below, the recourse of Landlord
with respect to its obligations under this Lease shall be solely to the
Property. Notwithstanding the foregoing, nothing shall be deemed in any way to
impair, limit or prejudice the rights of Landlord:
(i) in lease termination proceedings or in any ancillary
proceedings brought to facilitate the termination of this Lease or the
ejection of Tenant or the Pledged Stock Options or the Pledged
Landlord's Shares or any portion thereof, provided such exception
shall not expand Landlord's ability to seek recourse
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against Tenant or assets in which it has no security interest;
(ii) to recover from Tenant any condemnation or insurance
proceeds attributable to the Property which were not paid to Landlord
or used to restore the Property in accordance with the terms of this
Agreement;
(iii) to recover from Tenant any rents, profits, security
deposits, advances, rebates, prepaid rents, room or other hotel or
golf course revenues or other similar sums attributable to the
Property collected by or for Tenant following an Event of Default and
not properly applied to the reasonable fixed and operating expenses of
the Property, including payments of the Loan; and
(iv) to recover any damages as a result of any fraud or
misrepresentation by Tenant in connection with the Property of this
Lease.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed
for any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect in a manner which attempts to
minimize any disruption to Tenant's operations.
28.22 LANDLORD'S DETERMINATION OF FACTS. Landlord shall at all
times be free to hire such independent consultants as it deems reasonably
necessary to independently establish the existence or nonexistence of any fact
or facts, the existence or nonexistence of which is a condition of this
Agreement or of any disbursement for Landlord Improvements hereunder. The costs
of such consultants are to be paid by Tenant, provided such consultants are
hired in the ordinary course of Landlord's business and similar consultants are
generally engaged to review all properties in which Landlord owns a fee,
leasehold or mortgagee's interest. Provided no Event of Default then exists (in
which case the foregoing limitation shall not apply) the annual cost of
Landlord's regular consultants shall not exceed on average Two Thousand Five
Hundred Dollars ($2,500) per year,
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which amount shall be increased to reflect increases in the CPI form the date
hereof.
28.23 TIME IS OF THE ESSENCE. Time is of the essence in this
Agreement.
LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ David Dick
----------------------------------------------
Its: Exec. Vice President
---------------------------------------------
By: /s/ Scott Peters
----------------------------------------------
Its: Chief Financial Officer
---------------------------------------------
TENANT: LOST OAKS, L.P.,
a Delaware limited partnership
By: LOST OAKS, Inc., a Delaware corporation
Its: General Partner
By: /s/ Jerome C. Silvey
----------------------------------------------
Its: Senior Vice President
---------------------------------------------
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Club of the Country
Louisburg, Kansas
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
GOLF PROPERTIES OF THE COUNTRY, L.L.C.
TENANT
DATED AS OF OCTOBER 17, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . .. . . . . 13
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 14
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . .. . . . . 14
3.2 Extension Options . . . . . . . . . . . . . . . . . . .. . . . . 14
3.3 Right of First Offer to Lease . . . . . . . . . . . . .. . . . . 14
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 15
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 15
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . .. . . . . 15
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . .. . . . . 15
4.4 Annual Reconciliation of Percentage Rent . . . . . . . .. . . . . 16
4.5 Increase in Base Rent Following Conversion Date. . . . .. . . . . 16
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . .. . . . . 16
4.7 Additional Charges . . . . . . . . . . . . . . . . . . .. . . . . 16
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . .. . . . . 17
4.9 Net Lease; Capital Replacement Reserve . . . . . . . . .. . . . . 17
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . .. . . . . 17
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 18
5.1 Pledge of Owner's Shares . . . . . . . . . . . . . . . .. . . . . 18
5.2 Obligation to Withhold Distributions . . . . . . . . . .. . . . . 18
5.3 Cross-Collateral . . . . . . . . . . . . . . . . . . . .. . . . . 18
5.4 Landlord's Lien. . . . . . . . . . . . . . . . . . . . .. . . . . 18
5.5 Termination Payment. . . . . . . . . . . . . . . . . . .. . . . . 18
(i)
<PAGE>
ARTICLE 6
IMPOSITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Payment of Impositions .. . . . . . . . . . . . . . . . . . . . . 19
6.2 Information and Reporting.. . . . . . . . . . . . . . . . . . . . 19
6.3 Prorations .. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Refunds.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Utility Charges.. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Assessment Districts .. . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 No Termination, Abatement, Etc.. . . . . . . . . . . . . . . . . 20
7.2 Condition of the Property. . . . . . . . . . . . . . . . . . . . 21
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . 23
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . . 23
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . . 24
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Landlord to Grant Easements, Etc.. . . . . . . . . . . . . . . . 25
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . . 25
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . . 25
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 27
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . 27
10.9 Environmental Violations at Expiration
or Termination of Lease. . . . . . . . . . . . . . . . . . . . . 28
(ii)
<PAGE>
ARTICLE 11
MAINTENANCE AND REPAIR . . . .. . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 Tenant's Obligations. . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . 29
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . . 30
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . 30
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . 31
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . 31
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . 32
12.6 Landlord's Right to Audit
Calculation of Gross Golf Revenue. . . . . . . . . . . . 32
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . 35
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 35
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . 36
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.1 Authorization. . . . . . . . . . . . . . . . . . . .. . . . . . . 36
14.2 Indemnification of Landlord. . . . . . . . . . . . .. . . . . . . 38
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . 38
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . 39
15.5 Form Satisfactory, Etc.. . . . . . . . . . . . . . . . . . . . . 40
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . 40
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 41
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . 41
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . . 42
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . . 43
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . . 43
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . 43
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . . 44
(iii)
<PAGE>
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . 45
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 45
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . 48
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . 49
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . 49
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . 49
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . .. . . . . . . . . . . . . . . 50
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 51
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . 52
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . 52
22.4 Survival of Indemnification Obligations; Available Insurance
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(iv)
<PAGE>
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . 53
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . 55
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . 56
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . 56
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . .. 58
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . .. . . 58
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . .. . . 58
24.2 Environmental Statements . . . . . . . . . . . . . . . . . .. . . 59
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 59
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . .. . . 59
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . .. . . 59
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . .. . . 60
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
26.1 Right of First Offer to Purchase . . . .. . . . . . . . . . . . . 60
26.2 Conveyance by Landlord . . . . . . . . .. . . . . . . . . . . . . 60
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 61
27.1 Arbitration. . . . . . . . . . . . . . .. . . . . . . . . . . . . 61
27.2 Arbitration Procedures . . . . . . . . .. . . . . . . . . . . . . 61
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 61
28.1 Landlord's Right to Inspect. . . . . . .. . . . . . . . . . . . . 61
28.2 Breach by Landlord . . . . . . . . . . .. . . . . . . . . . . . . 62
28.3 Competition Between Landlord and Tenant.. . . . . . . . . . . . . 62
28.4 No Waiver. . . . . . . . . . . . . . . .. . . . . . . . . . . . . 62
28.5 Remedies Cumulative. . . . . . . . . . .. . . . . . . . . . . . . 62
28.6 Acceptance of Surrender. . . . . . . . .. . . . . . . . . . . . . 62
28.7 No Merger of Title . . . . . . . . . . .. . . . . . . . . . . . . 63
28.8 Quiet Enjoyment. . . . . . . . . . . . .. . . . . . . . . . . . . 63
28.9 Notices. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 63
28.10 Survival of Claims . . . . . . . . . . .. . . . . . . . . . . . . 63
28.11 Invalidity of Terms or Provisions. . . .. . . . . . . . . . . . . 64
28.12 Prohibition Against Usury. . . . . . . .. . . . . . . . . . . . . 64
28.13 Amendments to Lease. . . . . . . . . . .. . . . . . . . . . . . . 64
28.14 Successors and Assigns . . . . . . . . .. . . . . . . . . . . . . 64
28.15 Titles . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 64
(v)
<PAGE>
28.16 Governing Law. . . . . . . . . . . . . .. . . . . . . . . . . . . 64
28.17 Memorandum of Lease. . . . . . . . . . .. . . . . . . . . . . . . 64
28.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.19 Non-Recourse as to Landlord . . . . . . . . . . . . . . . . . . . 64
28.20 No Relationship . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.21 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Pledge Agreement
Exhibit E - Adjustments to Gross Golf Revenue for Private Clubs
Exhibit F - Calculation of Gross Golf Revenue for the Base Year by Quarter
Exhibit G - Granite Shares Pledge Agreement
(vi)
<PAGE>
Club of the Country
Louisburg, Kansas
LEASE
THIS LEASE (this "Lease"), dated as of October 17, 1997, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and Golf Properties of the Country, L.L.C., a Kansas limited
liability company ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback Agreement
(the "Agreement") dated as of October 17, 1997 by and between Landlord and
Properties of the Country, Inc., ("Transferor"), Transferor transferred to
Landlord all of its right, title and interest in and to the Property (as
hereafter defined); and
B. Tenant, an Affiliate of Transferor, desires to lease the Property
from Landlord, and Landlord desires to lease the Property to Tenant, on the
terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
rights and interest (to the extent acquired from Transferor) in and to the
following real property, improvements, personal property and related rights
(collectively the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or
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connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
If Landlord conveys the North Outparcel and the Driving Range Parcel
(both as defined in the Agreement) to Transferor pursuant to Section 2.4 of the
Agreement, the North Outparcel and the Driving Range Parcel shall no longer be
deemed part of the Property for purposes of this Lease. If Transferor conveys
the New Driving Range Parcel (as defined in the Agreement) to Landlord pursuant
to Section 2.4 of the Agreement, the new Driving Range Parcel shall
automatically be deemed part of the Property for purposes of this Lease.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in
Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental
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agency, body or officer for the ownership, operation and use of the Property or
any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on July 1,
1996, and ending on June 30, 1997; provided, however, that the Base Year shall
refer to the calendar year immediately preceding the Conversion Date if the Base
Rent is increased as provided in Section 4.5. A quarter-by-quarter calculation
of Gross Golf Revenue in the Base Year is attached hereto as EXHIBIT F.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the amount of the Capital Replacement
Reserve, together with interest thereon as provided in Section 12.4, less
amounts withdrawn from the Capital Replacement Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means, on an annual basis, the greater
of (i) an amount equal to 3% of each Fiscal Quarter's Gross Golf Revenue, to be
accrued quarterly by Landlord as part of the Capital Replacement Fund, as
provided in Section 12.4 hereof, based on the Officer's Certificate, or (ii)
Twenty-Five Thousand Dollars ($25,000).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
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(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who control Tenant as of
the date hereof no longer having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the later of (i) October __, 1997, or (ii)
the date on which Landlord acquires fee simple title to the Property.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes of
Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
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"CONVERSION DATE" means the earlier of (i) the date Transferor elects
to receive additional Owner's Shares in the Partnership as a Contingent Purchase
Price for the contribution of the Property, (ii) the date on which Transferor
elects in writing to waive its right to receive additional Owner's Shares, or
(iii) April 30, 2003.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2007, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
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"FISCAL YEAR" means the twelve (12) month period from July 1 to June
30 of each year; provided that for purposes of the Lease Term and the Owner's
Shares Pledge Agreement, the first Fiscal Year shall be deemed to include the
period from the Commencement Date to December 31, 1997.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GRANITE SHARES" means common stock of Granite Golf Group, Inc., a
Nevada corporation, par value $0.01 per share.
"GRANITE SHARES PLEDGE AGREEMENT" means that certain pledge agreement
dated as of the date of this Lease by and between Granite and Landlord, in the
form attached hereto as Exhibit G.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT E
attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv) fees to
reserve a tee time, (v) guest fees, (vi) golf cart rentals, (vii) parking lot
fees, (viii) locker rentals, (ix) fees for golf club storage, (x) fees for the
use of swim, tennis or other facilities, (xi) charges for range balls, range
fees or other fees for golf practice facilities, (xii) fees or other charges
paid for golf or tennis lessons (except where retained by or paid to a USTA or
PGA
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professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with respect
to any membership application, (xv) transfer fees imposed on any member in
connection with the transfer of any membership interest, (xvi) fees or other
charges paid to Tenant by sponsors of golf tournaments at the Property (unless
the terms under which Tenant is paid by such sponsor do not comply with Section
23.4, in which event the gross revenues received from such sponsor for the
tournament shall be excluded from Gross Golf Revenue and further provided that
Tenant shall use commercially reasonable efforts to structure such payment to
comply with Section 23.4), (xvii) advertising or placement fees paid by vendors
in exchange for exclusive use or name rights at the Property, and (xviii) fees
received in connection with any golf package sponsored by any hotel group,
condominium group, golf association, travel agency, tourist or travel
association or similar payments; PROVIDED, HOWEVER, that Gross Golf Revenue
shall not include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
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"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization and
similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any
other Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
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"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $315,000 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2007.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all
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permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property; or (iii) require the cleanup or other treatment of any
Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"OWNER'S SHARES PLEDGE AGREEMENT" means that certain Owner's Shares
Pledge Agreement dated as of the date of this Lease, by and between Transferor
and Landlord, in the form attached hereto as EXHIBIT D.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (331/3%) of the
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positive difference, if any, between the current year's Gross Golf Revenue
and the Gross Golf Revenue for the Base Year, pro rated for any partial
periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Owner's Shares Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
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"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"SUBLEASE" means that certain Sublease Agreement dated as of October
___, 1997, by and between Granite Golf Group, Inc., Granite Golf Management,
Inc., Tenant and Transferor
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith, with the exception of golf carts.
"TENANT" means Golf Properties of the Country, L.L.C., a Kansas
limited liability company and any successor thereto, or assignee thereof, as
permitted by the terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one-half percent (113.5%) of the Rent and the Net Operating Income for the prior
Fiscal Year, divided by ten and one-half percent (10.5%).
"TRANSFEROR" has the meaning provided in Recital A.
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"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
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3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2007.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease four (4) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-current term.
Tenant shall be entitled to exercise these options only if at the time of the
giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord, at
its election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if at
the time of the giving of such notice and at the time of the commencement of the
applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
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4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.9 or at such other place
or to such other Person as Landlord from time to time may designate in writing.
The first monthly installment shall be prorated as to any partial month. If any
payment owing hereunder shall otherwise be due on a day that is not a Business
Day, such payment shall be due on the next succeeding Business Day. Tenant
shall receive a credit against Rent (or be paid directly, at Landlord's option)
for any operating expense credits or operating revenues credited to Landlord
pursuant to the Agreement which are applicable to any period in the Lease Term
(E.G., credit for real property taxes, membership dues, sublease rents, etc.)
and conversely Tenant shall reimburse Landlord for any operating expenses paid
for by Landlord pursuant to the Agreement which are the responsibility of Tenant
hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1, 1999
and on each January 1 thereafter through and including January 1, 2003, the
Annual Base Rent will increase by the lesser of (i) four percent (4%) of the
Annual Base Rent payable for the immediately preceding year, or (ii) two hundred
percent (200%) of the change in CPI from the immediately preceding fiscal year
(the "Base Rent Escalator"); provided the January 1, 1998 increase shall be pro
rated for the number of days in the Lease Term in 1997 divided by 365 and
multiplied by the applicable Base Rent Escalator. In addition, if the Annual
Base Rent is increased as provided in Section 4.5, then the Base Rent Escalator
shall continue to apply to each of the five (5) years following such increase,
with the increase effective on the anniversary of the increase in Base Rent as
provided in Section 4.5 in lieu of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the
Initial Term and continuing for the Initial Term and any Extended Term,
Tenant shall calculate the Gross Golf Revenue for each Fiscal Quarter (or
shorter period, if applicable) within twenty (20) days of the end of such
Fiscal Quarter (or shorter period, if applicable) and submit such calculation
in writing to Landlord by way of an Officer's Certificate. If the Gross Golf
Revenue for that Fiscal Quarter (or shorter period, if applicable) is greater
than the Gross Golf Revenue for the same Fiscal Quarter (or shorter period,
if applicable) in the Base Year (and, following the Fiscal Quarter ending
March 31, on a year-to-date basis), then Tenant shall pay to Landlord the
Percentage Rent upon submittal of the Officer's Certificate. The Percentage
Rent payable in any period in any Fiscal Year shall be adjusted to reflect
the Percentage Rent paid on a year-to-date cumulative basis for the Fiscal
Year (pro rated for any partial periods) and the limits set forth in the next
two
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sentences on a pro rated basis. The increase in Rent resulting from the
payment of Percentage Rent (together with any increase in Base Rent pursuant
to Section 4.2) payable, if any, during each of the first five (5) full
calendar years of the Initial Term shall be limited to six percent (6%) of
the Rent payable for the prior calendar year. Tenant shall receive a credit
against the payment of Percentage Rent in an amount equal to the increase in
the Base Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Golf Revenue. If the Percentage Rent for such
Fiscal Year exceeds the sum of the quarterly payments of Percentage Rent
previously paid by Tenant, Tenant shall pay such deficiency to Landlord along
with such Officer's Certificate. If the Percentage Rent for such Fiscal Year is
less than the amount of the Percentage Rent previously paid by Tenant, Landlord
shall, at Landlord's option, either (i) remit to Tenant its check in an amount
equal to such difference, or (ii) grant Tenant a credit against the payment of
Rent next coming due. Landlord shall have the right to audit all of Tenant's
business operations at the Property so as to determine the calculation of
Percentage Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs only as a result of the election
by Transferor to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, the Annual Base
Rent shall be increased, effective as of the date the additional Owner's Shares
are issued to the Transferor, to an amount equal to the Adjusted Net Operating
Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Golf Revenue.
Tenant shall retain all accounting records for each Fiscal Year conforming to
such accounting system until at least five (5) years after the expiration of
such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
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shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a similar
or dissimilar nature. Accordingly, if any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid within ten (10) days after the
date such payment is due, Tenant will pay Landlord on demand, as Additional
Charges, a late charge equal to five percent (5%) of such installment. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant and is
not a penalty. In addition, if any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid within five (5) days after the due date
with respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue Rate
on the amount of such installment, and Tenant will pay such interest to Landlord
as Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Lease, nor
prevent Landlord from exercising any other rights and remedies available to
Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a
triple net lease and Rent shall be payable to Landlord without notice or demand
and without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term. Without limiting
the foregoing, Tenant shall pay to Landlord on a monthly basis along with Base
Rent, as additional rent, an amount equal to one-twelfth (1/12) of the Capital
Replacement Reserve. Such amount shall be subject to reconciliation at the end
of each Fiscal Quarter.
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4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees that
revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES AND GRANITE SHARES. On or prior to
the Commencement Date, Tenant shall cause the Owner's Shares Pledge Agreement
and the Granite Shares Pledge Agreement to be executed for the benefit of
Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for the Property falls below the
coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Owner's Shares
Pledge Agreement, at any time following the release of any Pledged Owner's
Shares (or security deposit held by Landlord in lieu thereof), then Tenant shall
thereafter retain, and not make cash distributions (except as may be necessary
to pay any applicable taxes) to its shareholders, partners or members, as
applicable, until such time as Tenant has accumulated six (6) months of Base
Rent at the then current level. Cash distributions may be made at such time as
Tenant shall have again satisfied such coverage ratios for two (2) consecutive
Fiscal Years. Tenant shall provide Landlord with such documentation, including
Officer's Certificates and financial statements, within forty-five (45) days
after the end of each Fiscal Quarter as are necessary to establish Tenant's
compliance with the foregoing requirements.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares and the Pledged
Granite Shares shall also secure Tenant's or Tenant's Affiliates obligations
under each of the leases for the Other Leased Properties. The Pledged Granite
Shares shall not secure the obligations of Granite Golf Group, Inc. or any of
its Affiliates to Landlord under any lease or agreement except for the Granite
Shares Pledge Agreement.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal property
until payment in full of all Rent and satisfaction of all of Tenant's
obligations hereunder; provided, however, Landlord shall subordinate its lien
and security interest only to that of any third party lender or seller which
finances Tenant's personal property, the terms and conditions of such
subordination to be satisfactory to Landlord in its reasonable discretion.
Tenant shall, upon the request of Landlord, execute such financing
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statements or other documents or instruments reasonably requested by Landlord
to perfect the lien and security interests herein granted.
5.5 TERMINATION PAYMENT. On the Expiration Date (unless the
Expiration Date is December 31, 2027), Tenant shall pay to Landlord the
Termination Payment, if any, provided the maximum Termination Payment shall
equal the amounts in the Security Fund (as defined in the Owner's Shares Pledge
Agreement) then held by Landlord and shall be payable solely from the proceeds
thereof. For purposes of calculating the Termination Payment, the shares of
common stock of Golf Trust of America, Inc. shall have a value deemed to equal
the average closing share price of common stock of the Company for the five (5)
days prior to the Expiration Date.
5.6 CASH DEPOSIT. Tenant shall deposit with Landlord on the
Commencement Date the sum of Seventy-Five Thousand Dollars ($75,000) as a
security deposit (the "Cash Deposit") for the performance of Tenant's
obligations under this Lease, which Landlord shall deposit in a
federally-insured interest-bearing account. Upon written notice to Landlord,
Tenant may apply all or any part of the Cash Deposit to satisfy Tenant's
obligations under this Lease if Net Operating Income (as defined in the
Sublease) is insufficient to do so. If the Cash Deposit falls below
Seventy-Five Thousand Dollars ($75,000), Tenant shall deposit an amount with
Landlord sufficient to maintain the Cash Deposit at Seventy-Five Thousand
Dollars ($75,000) immediately after Net Operating Income (as defined in the
Sublease) becomes available to do so. So long as no Event of Default has
occurred and is continuing, on January 1, 1999, the balance of the Cash
Deposit, and any interest earned thereon, then held by Landlord shall be paid
to Tenant.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Article 14. Upon request, Tenant shall promptly furnish to Landlord copies of
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice
to Tenant of all Impositions payable by Tenant hereunder of which Landlord at
any time has actual knowledge, but Landlord's failure to give any such notice
shall in no way diminish Tenant's obligations hereunder to pay such Impositions.
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Landlord and Tenant shall, upon reasonable request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Property as may be necessary to prepare any required returns and reports.
In the event any applicable governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it must legally so file. Each
party, to the extent it possesses the same, will provide the other party, upon
reasonable request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal
period during which the Lease commences or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such commencement or termination, and Tenant's obligation to pay
its prorated share thereof shall survive such termination. If any Imposition
may, at the option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition), Tenant may
elect to pay in installments, in which event Tenant shall pay all installments
(and any accrued interest on the unpaid balance of the Imposition) that are due
during the Term hereof before any fine, penalty, premium, further interest or
cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent
to or agree in writing to (i) any special assessment or (ii) the inclusion of
any material portion of the Leased Property into a special assessment district
or other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or unless Landlord agrees to pay the
cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful
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misconduct or gross negligence of Landlord or any person whose claim arose
under Landlord, (i) Tenant, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the consent of Landlord to modify, surrender or terminate the
same, nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or set-off against the Rent by reason of, and (ii) the respective
obligations of Landlord and Tenant shall not be otherwise affected by reason
of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease
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and has found the same to be in good order and repair and satisfactory for
its purposes hereunder. Regardless, however of any inspection made by Tenant
of the Property and whether or not any patent or latent defect or condition
was revealed or discovered thereby, Tenant is leasing the Property "as is" in
its present condition. Tenant waives and releases any claim or cause of
action against Landlord with respect to the condition of the Property
including any defects or adverse conditions latent or patent, matured or
unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE
DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i)
ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY
DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi)
COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION,
(x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY,
(xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi)
COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR
LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS
SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED
BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT, AS
BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2
HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED
TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO THE
UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously operated
the Property and has knowledge of its condition which is superior to that of
Landlord, (B) fee simple title, except where the Property is held under a ground
lease, (both legal and equitable) is in Landlord and that Tenant has only the
leasehold right of possession and use of the Property as provided herein, (C) to
Tenant's knowledge the Improvements conform to all material Legal Requirements
and all material Insurance Requirements, (D) all easements necessary or
appropriate for the use or operation of the Property have been obtained, (E) all
contractors and subcontractors retained by Tenant who have performed work on or
supplied materials to the Property have been fully paid, and all
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materials to the Property have been fully paid for, (F) the Improvements
constructed by Tenant or any Affiliate of Tenant have been completed in all
material respects in a workmanlike manner of first class quality, and (G) all
equipment necessary or appropriate for the use or operation of the Property
has been installed and is presently operative in all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the property
of Landlord and (iii) that Tenant has only the right to the use of such Property
during the Term of and upon the terms and conditions of this Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired
by Landlord or Tenant, in good condition and repair, normal wear and tear
excepted. Upon the loss, destruction or obsolescence of any Tangible Personal
Property, Tenant shall replace such property with replacements of the same
type and quality as initially in place, which such property will be owned by
Tenant except to the extent acquired with funds from the Capital Replacement
Fund ("Tenant's Personal Property"). Upon the expiration or sooner
termination of this Lease, the Tenant's Personal Property shall transfer to
Landlord without requirement of any bill of sale or assignment; provided
Landlord, at its election, may require Tenant to execute such documentation
as Landlord may require to evidence such transfer. Tenant shall not remove
any Tangible Personal Property from the Property upon termination of the
Lease. If any of such Tangible Personal Property is stored away from the
Property, Tenant will provide Landlord with proper access to the storage
facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, (c) past practices of the Transferor, and (d) such other
reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
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ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, in Landlord's
absolute discretion. No use shall be made or permitted to be made of the
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property or other
improvements of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
12, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under the Property, or any adjacent property,
or incorporated in the Property or any improvements thereon except in compliance
with applicable law (including any Environmental Laws). Tenant shall not allow
the Property to be used as a landfill or a waste disposal site, or a
manufacturing, distribution or disposal facility for any Hazardous Materials.
Tenant shall neither suffer nor permit the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law. Notwithstanding the foregoing, Landlord acknowledges that a
sewer treatment plant currently exists on the Property.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
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(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of the
Property for road, highway or other public purposes; (iv) execute petitions to
have the Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants and restrictions affecting the Property; and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interest in the Property), but only upon delivery to Landlord of an Officer's
Certificate (which Officer's Certificate, if contested by Landlord, shall not be
binding on Landlord) stating that such grant, release, dedication, transfer,
petition or amendment is not detrimental to the proper conduct of the business
of Tenant on the Property and does not reduce its value or usefulness for the
Primary Intended Use. Landlord shall not grant, release, dedicate or execute
any of the foregoing items in this Section 9.4 without obtaining Tenant's
approval, which approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which signage
may include an appropriate logo selected by Landlord. In addition, it is the
intent of the parties that Tenant be a single-purpose entity with no business
operations except for those related solely to the operation of the Property for
its Primary Intended Use and other property of Landlord which may be leased to
Tenant. Tenant shall, therefore, not engage in or undertake any activities
other than those respecting the operation of the Property for its Primary
Intended Use, including leasing, managing, and operating golf courses in
accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without
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regard to any increase or decrease for inflation or deflation during the
Term) equal to at least twenty percent (20%) of the fair market value of the
Land and each of the Improvements at the Commencement Date. Tenant further
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a remaining
useful life equal to at least twenty percent (20%) of its expected useful
life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain Phase I Environmental
Assessment dated October 2, 1997 (File No. 97-2902) prepared by Environmental
Audit Incorporated, Tenant hereby represents, warrants, and covenants to
Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with all
Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to the
best knowledge of Tenant, there are no Environmental Laws requiring any material
remediation, cleanup, repairs or construction (other than normal maintenance)
with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement, and
to the best knowledge of Tenant, (a) no notices of any violation or alleged
violation of any Environmental Laws relating to the Property or its uses have
been received by either Tenant, or, to the best knowledge of Tenant, by any
prior owner, operator or occupant of the Property, and (b) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending or threatened, relating to the
ownership, use, maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with the
terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth or
described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to
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require remediation or reporting under any Environmental Law in, on or under
the Property or if Tenant, Landlord, or the Property becomes subject to any
order of any federal, state or local agency to investigate, remove,
remediate, repair, close, detoxify, decontaminate or otherwise clean up the
Property, Tenant shall, at its sole expense, but subject to the last sentence
of Section 10.7, carry out and complete any required investigation, removal,
remediation, repair, closure, detoxification, decontamination or other
cleanup of the Property. If Tenant fails to implement and diligently pursue
any such repair, closure, detoxification, decontamination or other cleanup of
the Property in a timely manner, Landlord shall have the right, but not the
obligation, to carry out such action and to recover its costs and expenses
therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any Environmental
Law, (c) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity, or (d) by reason of a breach of a representation or warranty in
Sections 10.1 through 10.5 of this Lease. Notwithstanding the foregoing or any
other provision of this Lease (including, without limitation, Section 7.2,
Section 10.9 and Article 23), Tenant shall not be liable, or otherwise be
required to indemnify Landlord or the Company or any Affiliates of the Company
for (i) any matters or events that arise after the Commencement Date
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that are not caused by any act or omission on the part of Tenant, or (ii)
any matters or events that arise after the Commencement Date that are
directly caused by a breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a result of Tenant's use, any prior use, the
elements or the age of the Property or any portion thereof) and in accordance
with any applicable Legal Requirements, and, except as otherwise provided in
Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date
(concealed or otherwise). Tenant shall operate and maintain the Property in
accordance with the operation and maintenance practices of the Property at the
Commencement Date and otherwise in a manner comparable to other comparable golf
course facilities in the vicinity of the Property. Landlord may consult with
the Advisory Association from time to time with respect to Tenant's compliance
with its maintenance and operation obligations under this Section 11.1, and
Landlord and representatives of Advisory Association
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shall have the right from time to time to enter the Property for the purpose
of inspecting the Property. If Landlord, in consultation with the Advisory
Association, determines that Tenant has failed to comply with its maintenance
and operation obligations under this Section 11.1, Landlord shall provide
written notice to Tenant setting forth a list of remedial work and/or steps
to be performed by Tenant. Tenant shall promptly and diligently perform such
remedial work and/or steps as recommended by Landlord, provided if Tenant
objects to one or more of the remedial obligations proposed by Landlord, then
the matter shall be submitted to the dispute resolution procedure set forth
in Section 12.7. Tenant will not take or omit to take any action the taking
or omission of which could reasonably be expected to impair the value or the
usefulness of the Property or any part thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Property in any way. Tenant hereby waives, to the extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and
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except for ordinary wear and tear (subject to the obligation of Tenant to
maintain the Property in good order and repair during the entire Term of the
Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
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(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Tenant for
Capital Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the
Capital Replacement Fund shall be used to purchase property to the extent that
doing so would cause Landlord to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code. Tenant shall have no rights
with respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
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(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.5
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of Percentage
Rent, Tenant shall forthwith pay to Landlord the amount of the deficiency as
finally agreed or determined, together with interest at the Overdue Rate from
the date when said payment should have been made to the date of payment thereof;
PROVIDED, HOWEVER, that as to any audit that is commenced more than twelve (12)
months after the date Gross Golf Revenue for any Fiscal Year is reported by
Tenant to Landlord in the Officer's Certificate, the deficiency, if any, with
respect to such Gross Golf Revenue shall bear interest as permitted herein only
from the date such determination of deficiency is made unless such deficiency is
the result of gross negligence or willful misconduct on the part of Tenant. If
any such audit discloses that the Gross Golf Revenue actually received by Tenant
for any Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay all
reasonable costs of such audit and examination; provided Tenant shall have the
right to submit the audit determination to arbitration in accordance with the
procedures set forth in Article 28. Landlord shall also have the right to
review and audit from time to time Tenant's business operations including all
books, records and financial statements of Tenant. Tenant shall promptly
provide to
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Landlord copies of all such books, records, financial statements or any other
documentation of Tenant's business operations reasonably requested by
Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Golf Revenue (including
membership dues, daily use fees and other sources of Gross Golf Revenue) and
other revenue for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Landlord and Tenant, together with assumptions,
in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed
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of three (3) members of the Advisory Association unaffiliated with Tenant and
two (2) members of the board of directors of the Company. Such committee
shall be responsible for resolving any such disagreement and the parties
agree that the determination of such dispute resolution committee shall be
binding on the parties. Pending the results of such resolution or the
earlier agreement of the parties, (i) if the Operating Budget has not been
agreed upon, the Property will be operated in a manner consistent with the
prior year's Operating Budget until a new Operating Budget is adopted, and
(ii) if the Capital Budget has not been agreed upon, no Capital Expenditures
shall be made unless the same are set forth in a previously approved Capital
Budget or are specifically required by Landlord or are otherwise required to
comply with Legal Requirements or Insurance Requirements. Tenant shall
operate the Property in a manner reasonably consistent with the Annual
Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property shall be kept at the Property. Such books and records
shall be available to Landlord and its representatives for examination, audit,
inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter (i) unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the amounts
set forth on the Annual Budget, together with, if appropriate, a revised Annual
Budget, which budget shall be subject to Landlord's review and approval as
provided in Section 12.7. Each quarterly report shall also forecast any
projected Percentage Rent payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year
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financial statements prepared in accordance with GAAP and audited by an
independent accounting firm approved by Landlord, in its reasonable
discretion. Notwithstanding the foregoing, Landlord shall only require
audited financial statements of Gross Golf Revenue if Tenant's financial
statements are not required to be separately stated by the Securities and
Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
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(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord, the
Company and Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment and in such case, in
the event of an adverse final determination, either (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Landlord or Tenant; or (ii) make such changes in the Improvements,
and take such other actions, as Tenant in the good faith exercise of its
judgment deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or encroachment. Tenant's
obligation under this Section 13.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and Tenant shall be entitled to a credit for any sums recovered
by Landlord under any such policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
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14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
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(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss payee,
as applicable. Losses shall be payable to Landlord and/or Tenant as provided in
this Article 15. In addition, the policies shall name as a loss payee any
Facility Mortgagee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment shall require the written consent of Landlord,
Tenant, and each Facility Mortgagee, if any. Evidence of insurance shall be
deposited with Landlord and, if requested, with any Facility Mortgagee(s). The
policies on the Property, including the Improvements, Fixtures, Tangible and
Intangible Personal Property and any Tenant Improvements, shall insure against
the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public
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liability insurance with amounts not less than five million dollars
($5,000,000) per occurrence and in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree
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that their policies will include such waiver clause or endorsement so long as
the same are obtainable without extra cost, and in the event of such an extra
charge the other party, at its election, may pay the same, but shall not be
obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written notice before the policy
or policies in question shall be altered, allowed to expire or cancelled. Each
such policy shall also provide that any loss otherwise payable thereunder shall
be payable notwithstanding (i) any act or omission of Landlord or Tenant which
might, absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by any Facility Mortgagee
pursuant to any provision of a mortgage, note, assignment or other document
evidencing or securing a loan upon the happening of an event of default therein
or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to
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carry the insurance provided for herein may be brought within the coverage of
a so-called blanket policy or policies of insurance carried and maintained by
Tenant; PROVIDED, HOWEVER, that the coverage afforded Landlord will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all other requirements of this Lease by
reason of the use of such blanket policy of insurance, and provided further
that the requirements of this Article 15 are otherwise satisfied. The amount
of this total insurance allocated to each of the Other Leased Properties,
which amount shall be not less than the amounts required pursuant to Sections
15.1 and 15.2, shall be specified either (i) in each such "blanket" or
umbrella policy or (ii) in a written statement, which Tenant shall deliver to
Landlord and Facility Mortgagee, from the insurer thereunder. A certificate
of each such "blanket" or umbrella policy shall promptly be delivered to
Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $100,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
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(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
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15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY USE.
If during the term the Property is totally or partially destroyed from a
risk covered by the insurance described in Article 15 and the Property
thereby is rendered Unsuitable For Its Primary Intended Use as reasonably
determined by Landlord, Tenant shall, at its election, either (i)
diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term, the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15, but the Real
Property is not thereby rendered Unsuitable For Its Primary Intended Use,
Tenant shall diligently restore the Property to substantially the same
condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant shall not be required to restore certain Tangible
Personal Property and/or any Tenant Improvements if failure to do so does
not adversely affect the amount of Rent payable hereunder or the Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18)
months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease
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shall remain unabated during the period required for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the then-applicable Term, then either Landlord or Tenant shall have the
right to terminate the Lease on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
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16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with no abatement of rent payable by Tenant hereunder.
In the event of any such temporary taking, the entire amount of any such Award
made for such temporary taking allocable to the Lease Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant either by paying the deficiency or
instructing Landlord by written notice to apply a portion of the Cash
Deposit to satisfy the deficiency within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under
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applicable law; PROVIDED FURTHER, HOWEVER, that the cure period shall
not extend beyond thirty (30) days as otherwise provided by this Section
17.1(b) if the facts or circumstances giving rise to the default are
creating a further harm to Landlord or the Property and Landlord makes a
good faith determination that Tenant is not undertaking remedial steps
that Landlord would cause to be taken if this Lease were then to
terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
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Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of Landlord, or an "Event of Default" under the
Owner's Shares Pledge Agreement or the Granite Shares Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's breach
of this Lease.
Notwithstanding anything to the contrary herein or in the Owner's
Shares Pledge Agreement or the Granite Shares Pledge Agreement, in the event
that an "Event of Default" exists under clause (a) above and Landlord has
fully applied the Cash Deposit to the payment of Base Rent hereunder, then,
prior to Landlord exercising any of its remedies hereunder, Landlord first
shall liquidate the security under the Granite Shares Pledge Agreement and
apply the proceeds to any indebtedness of Tenant to Landlord. In addition,
Landlord agrees that it shall liquidate the security under the Granite Shares
Pledge Agreement prior to Landlord liquidating the security under the Owner's
Shares Pledge Agreement and the security under the Owner's Shares Pledge
Agreement shall be liquidated only if the proceeds from liquidation of the
security under the Granite Shares Pledge Agreement are insufficient to
satisfy Tenant's obligations under this Lease. Prior to January 1, 1999, if
the security under the Granite Shares Pledge Agreement is liquidated,
Landlord shall pay to Tenant an amount equal to the difference between
Seventy-Five Thousand Dollars ($75,000) and the balance of the Cash Deposit
then held by Landlord. On or after January 1, 1999, if the security under
the Granite Shares Pledge Agreement is liquidated, Landlord shall pay to
Tenant an amount equal to the difference
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between Seventy-Five Thousand Dollars ($75,000) and the balance of the Cash
Deposit paid to Tenant pursuant to Section 5.6 of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
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(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
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17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use
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of the Property then being made, and for the proper erection, installation,
operation and maintenance of the Property or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all Additional Charges accruing during the
month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential
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damages, penalties, causes of action, costs and expenses (including
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Landlord, the Company or
Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect
to the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under
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this Article 22, the indemnified party shall give notice thereof to the
indemnifying party. The indemnified party may at its option demand indemnity
under this Article 22 as soon as a claim has been threatened by a third
party, regardless of whether an actual loss has been suffered, so long as the
indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise
incur, a loss as a result thereof and shall give notice of such determination
to the indemnifying party. The indemnified party shall permit the
indemnifying party, at its option and expense, to assume the defense of any
such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying
party shall fail to undertake such defense within thirty (30) days after such
notice, or within such shorter time as may be reasonable under the
circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease or
any interest therein, all or any part of the Property, whether voluntarily,
involuntarily or by operation of law. For purposes
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of this Article 23, a Change in Control of the Tenant shall constitute an
assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Except for the Sublease, Tenant shall
not, without the prior written consent of Landlord, which consent Landlord
may withhold in its sole discretion, further sublease or license portions
of the Property to third parties, including concessionaires or licensees.
Without limiting the foregoing, Tenant's proposed sublease or any of the
following transfers shall require Landlord's prior written consent, which
consent Landlord may withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs; and
(viii) sublease or license to operate any other portions (but
not the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior
to any proposed assignment or sublease, deliver to Landlord written
notice of its intent to assign or sublease, which notice shall identify
the intended assignee or sublessee by name and address, shall specify
the effective date of the intended assignment or sublease, and
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shall be accompanied by an exact copy of the proposed assignment or sublease.
Tenant shall provide Landlord with such additional information or
documents reasonably requested by Landlord with respect to the proposed
transaction and the proposed assignee or subtenant, and an opportunity
to meet and interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent payable to Landlord hereunder.
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23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
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(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive an assignment of this Lease or subletting of the Property to Landlord or
Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (b) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth equal to at least One Million Dollars ($1,000,000) or, in the
alternative, the proposed assignee shall provide a guarantor of such proposed
assignee's obligations under this Lease, which guarantor shall provide an
audited financial statement meeting the requirements of (i) above and shall
execute and deliver to Landlord a guaranty agreement in form and substance
acceptable to Landlord; and (ii) any proposed assignee shall grant to Landlord a
security interest in favor of Landlord in all furniture, fixtures, and other
personal property to be used by such proposed assignee in the Property. All
payments required of Tenant under this Lease, whether or not expressly
denominated as such in this Lease, shall constitute rent for the purposes of
Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure
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defaults and compensate Landlord for actual pecuniary loss, the word
"promptly" shall mean that cure of defaults and compensation will occur no
later than sixty (60) days following the filing of any motion or application
to assume this Lease; and (b) the obligation of the Trustee to compensate or
to provide adequate assurance that the Trustee will promptly compensate
Landlord for "actual pecuniary loss". The term "actual pecuniary loss" shall
mean, in addition to any other provisions contained herein relating to
Landlord's damages upon default, obligations of Tenant to pay money under
this Lease and all attorneys' fees and related costs of Landlord incurred in
connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings.
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would
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materially and adversely affect the financial condition and
operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee or beneficiary, affecting
any lease or the Property. In confirmation of such
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subordination, Tenant shall execute promptly any certificate that Landlord
may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party.
However, if the price at which Landlord intends to sell the Property to a third
party is less than 95% of the price set forth in the notice provided by Landlord
to Tenant, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other
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than as security for a debt, Landlord shall, upon the written assumption by
the transferee of the Property of all liabilities and obligations of the
Lease, be released from all future liabilities and obligations under this
Lease arising or accruing from and after the date of such conveyance or other
transfer as to the Property. All such future liabilities and obligations
shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Landlord and Tenant regarding the Property during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security,
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health, safety or confidentiality requirements of Tenant or any governmental
agency or insurance requirement relating to the Property, or imposed by law
or applicable regulations. Landlord shall indemnify Tenant for all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against Tenant by reason of
Landlord's inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and
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remedies shall not preclude the simultaneous or subsequent exercise by
Landlord or Tenant of any or all of such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
190 King Street
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
With a copy to: O'Melveny & Myers LLP
275 Battery Street
Suite 2500
San Francisco, California 94111-3305
Attention: Peter T. Healy, Esq.
If to Tenant: Golf Properties of the Country, L.L.C
P.O. Box 7030
Shawnee Mission, Kansas 66207
With a copy to: Shughart, Thomson & Kilroy, P.C.
Twelve Wyandotte Plaza
120 West 12th Street
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Kansas City, Missouri 64105
Attention: Daniel T. Murphy, Esq.
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
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28.19 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease, express
or implied, is intended to confer any rights or remedies under or by reason of
this Lease on any Person other than the parties to this Lease and their
respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any party
hereto or give any third Person any right of subrogation or action against any
party to this Lease.
28.20 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
28.21 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.22 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
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LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. BRADLEY BLAIR, II
------------------------
W. Bradley Blair, II
President and CEO
TENANT: Golf Properties of the Country, L.L.C.,
a Kansas limited liability company
By: /s/ Jerry D. Simmons
------------------------
Its: Manager
------------------------
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- -------------------------------------------------------------------------------
Black Bear Golf Club
Lake County
Florida
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
GRANITE SUBDIDIARY, INC.,
TENANT
DATED AS OF NOVEMBER 25, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Right of First Offer to Lease. . . . . . . . . . . . . . . . . . 14
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . . 15
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . . 16
4.5 Increase in Base Rent Following Conversion Date. . . . . . . . . 16
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Net Lease; Capital Replacement Reserve . . . . . . . . . . . . . 17
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Pledge of Owner's Shares and Granite Shares. . . . . . . . . . . 18
5.2 Obligation to Withhold Distributions . . . . . . . . . . . . . . 18
5.3 Cross-Collateral . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Landlord's Lien. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Termination Payment. . . . . . . . . . . . . . . . . . . . . . . 19
(i)
<PAGE>
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . 19
6.2 Information and Reporting. . . . . . . . . . . . . . . . . . . . 19
6.3 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Assessment Districts . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 No Termination, Abatement, Etc . . . . . . . . . . . . . . . . . 20
7.2 Condition of the Property. . . . . . . . . . . . . . . . . . . . 21
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . 22
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . . 22
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . . 24
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Landlord to Grant Easements, Etc . . . . . . . . . . . . . . . . 24
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . . 25
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . . 25
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 26
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . 27
10.9 Environmental Violations at Expiration
or Termination of Lease . . . . . . . . . . . . . . . . . . . 27
(ii)
<PAGE>
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . 28
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . . 29
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . 29
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . 30
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . 31
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . 31
12.6 Landlord's Right to Audit Calculation
of Gross Golf Revenue . . . . . . . . . . . . . . . . . . . . 32
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . 34
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . 35
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . 37
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . 37
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . 39
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . 39
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . 40
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 40
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . 41
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . . 42
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . . 42
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . . 43
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . 43
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . . 43
(iii)
<PAGE>
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . 44
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 45
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . 47
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . 48
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . 48
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . 48
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . 49
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 50
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . 51
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . 52
22.4 Survival of Indemnification Obligations;
Available Insurance Proceeds . . . . . . . . . . . . . . . . . . 52
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 52
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . 52
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . 55
(iv)
<PAGE>
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . 55
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . 55
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . 57
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . 57
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . 58
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . 59
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . 59
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . 59
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . 61
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . 61
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . 61
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 62
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . 62
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . 62
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . 62
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.10 Survival of Claims . . . . . . . . . . . . . . . . . . . . . . . 63
28.11 Invalidity of Terms or Provisions. . . . . . . . . . . . . . . . 63
28.12 Prohibition Against Usury. . . . . . . . . . . . . . . . . . . . 63
28.13 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . . 63
28.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 63
28.15 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.17 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . . . . 63
28.18 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.19 Non-Recourse as to Landlord. . . . . . . . . . . . . . . . . . . 64
28.20 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.21 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(v)
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Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Owner's Shares Pledge Agreement
Exhibit E - Granite Shares Pledge Agreement
Exhibit F - Adjustments to Gross Golf Revenue for Private Clubs
Exhibit G - Calculation of Gross Golf Revenue for the
Base Year by Quarter
(vi)
<PAGE>
Black Bear Golf Club
Lake County
Florida
LEASE
THIS LEASE (this "Lease"), dated as of November 25, 1997, is
entered into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Landlord"), and GRANITE SUBSIDIARY, INC., a Florida corporation
("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement dated as
of November 5, 1997, by and between Granite Golf Group, Inc., a Nevada
corporation ("Granite"), as buyer, and Black Bear Golf Club, Ltd., a Florida
limited partnership ("Transferor") (the "Agreement"), the right, title and
interest of Tenant thereunder being transferred to Landlord pursuant to that
certain Assignment and Assumption of Purchase and Sale Agreement dated as of
November 19, 1997 (the "Assignment Agreement"), Transferor transferred to
Landlord all of its right, title and interest in and to the Property (as
hereafter defined); and
B. Tenant, an Affiliate of Granite, desires to lease the Property
from Landlord, and Landlord desires to lease the Property to Tenant, on the
terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants
and agreements to be performed by Tenant and Landlord hereunder, and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord's rights and interest (to the extent acquired from Transferor) in
and to the following real property, improvements, personal property and
related rights (collectively the "Property"):
(a) the Land;
(b) the Improvements;
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(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of
Landlord.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be
adjusted annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required
by any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
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"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on October
1, 1996, and ending on September 30, 1997; provided, however, that the Base
Year shall refer to the Fiscal Year immediately preceding the Conversion Date
if the Base Rent is increased as provided in Section 4.5. A
quarter-by-quarter calculation of Gross Golf Revenue in the Base Year is
attached hereto as EXHIBIT G.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York,
New York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the
Capital Replacement Reserve accrued by Landlord, together with interest
thereon as provided in Section 12.4, less amounts withdrawn from the Capital
Replacement Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means, on an annual basis, the
greater of (i) an amount equal to 3% of each Fiscal Quarter's Gross Golf
Revenue, to be accrued monthly by Landlord as part of the Capital Replacement
Fund, as provided in Section 12.4 hereof, based on the Officer's Certificate,
or (ii) Forty Thousand Dollars ($40,000).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders or, partners or members
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who control Tenant as of the date hereof no longer having Control of
Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes
of Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat
of condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
the Assignment Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Granite elects
to receive additional Owner's Shares in the Partnership as a Contingent
Purchase Price for the contribution of the Property, (ii) the date on which
Granite elects in writing to waive its right to receive additional Owner's
Shares, or (iii) the date that is the one hundred fifth (105th) day following
the end of the fifth (5th) full Fiscal Year of the Initial Term.
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"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Section 1801, et seq.; the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. 99-499 and 99-563; the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act,
as amended, 42 U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 201, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and
local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means the date that is the last day of the
fortieth (40th) full Fiscal Quarter following the Commencement Date, as such
date may be extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other
security agreement securing any indebtedness or any other Landlord's
Encumbrance placed on the Property in accordance with the provisions of
Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity
and address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable
portions thereof) in any Fiscal Year from January 1 through March 31, April 1
through June 30, July 1 through September 30 and October 1 through December
31.
"FISCAL YEAR" means the twelve (12) month period from the first day
of the first Fiscal Quarter commencing after the Commencement Date to the
last day of the fourth Fiscal Quarter commencing after the Commencement Date.
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"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GRANITE SHARES" means common stock of Granite Golf Group, Inc., a
Nevada corporation, par value $0.01 per share.
"GRANITE SHARES PLEDGE AGREEMENT" means that certain pledge agreement
dated as of the date of this Lease by and between Granite and Landlord, in the
form attached hereto as Exhibit E.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT F
attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv) fees to
reserve a tee time, (v) guest fees, (vi) golf cart rentals, (vii) parking lot
fees, (viii) locker rentals, (ix) fees for golf club storage, (x) fees for the
use of swim, tennis or other facilities, (xi) charges for range balls, range
fees or other fees for golf practice facilities, (xii) fees or other charges
paid for golf or tennis lessons (except where retained by or paid to a USTA or
PGA professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with respect
to any membership application, (xv) transfer fees imposed on any member in
connection with the transfer of any membership interest, (xvi) fees or other
charges paid to Tenant by sponsors of golf
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tournaments at the Property (unless the terms under which Tenant is paid by
such sponsor do not comply with Section 23.4, in which event the gross
revenues received from such sponsor for the tournament shall be excluded from
Gross Golf Revenue and further provided that Tenant shall use commercially
reasonable efforts to structure such payment to comply with Section 23.4),
(xvii) advertising or placement fees paid by vendors in exchange for
exclusive use or name rights at the Property, and (xviii) fees received in
connection with any golf package sponsored by any hotel group, condominium
group, golf association, travel agency, tourist or travel association or
similar payments; PROVIDED, HOWEVER, that Gross Golf Revenue shall not
include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
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"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an income,
franchise, capital stock or other tax) imposed on Landlord or any other
Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other Person
other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on any
indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
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"INITIAL BASE RENT" means $500,242 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the fortieth (40th) full Fiscal Quarter following the
Commencement Date.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord
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without the consent of Tenant), at any time in force affecting the Property;
or (iii) require the cleanup or other treatment of any Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"OWNER'S SHARES PLEDGE AGREEMENT" means that certain pledge agreement
dated as of the date of this Lease, by and between Granite and Landlord, in the
form attached hereto as Exhibit D.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (33 1/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, pro rated for any partial periods.
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"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGED GRANITE SHARES" means the Granite Shares pledged pursuant to
the Granite Shares Pledge Agreement.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property.
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
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"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith, with the exception of golf carts.
"TENANT" means Granite Subsidiary, Inc., a Florida corporation, and
any successor thereto, or assignee thereof, as permitted by the terms of this
Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one-half percent (113.5%) of all rent due under this Lease for the prior Fiscal
Year and the Net Operating Income for the prior Fiscal Year, divided by ten and
five tenths percent (10.5%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for
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performing an obligation hereunder, PROVIDED THAT lack of funds shall not be
deemed a cause beyond the control of either party hereto unless such lack of
funds is caused by the failure of the other party hereto to perform any
obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on the last day of the fortieth (40th)
full Fiscal Quarter following the Commencement Date.
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3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease six (6) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-current term.
Tenant shall be entitled to exercise these options only if at the time of the
giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord, at
its election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if at
the time of the giving of such notice and at the time of the commencement of the
applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid
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monthly, on the twenty-fifth (25th) day of each month in arrears, at
Landlord's address set forth in Section 28.9 or at such other place or to
such other Person as Landlord from time to time may designate in writing.
The first monthly installment shall be prorated as to any partial month. If
any payment owing hereunder shall otherwise be due on a day that is not a
Business Day, such payment shall be due on the next succeeding Business Day.
Tenant shall receive a credit against Rent (or be paid directly, at
Landlord's option) for any operating expense credits or operating revenues
credited to Landlord pursuant to the Agreement which are applicable to any
period in the Lease Term (E.G., credit for real property taxes, membership
dues, sublease rents, etc.) and conversely Tenant shall reimburse Landlord
for any operating expenses paid for by Landlord pursuant to the Agreement
which are the responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date (the
"Adjustment Date") that is the first day of the first Fiscal Quarter commencing
after the one (1) year anniversary of the Commencement Date, and on each
Adjustment Date thereafter through and including the fourth (4th) Adjustment
Date, the Annual Base Rent will increase by the lesser of (i) three percent (3%)
of the Annual Base Rent payable for the immediately preceding year, or (ii) two
hundred percent (200%) of the change in CPI from the immediately preceding
fiscal year (the "Base Rent Escalator"); provided the January 1, 1998 increase
shall be pro rated for the number of days in the Lease Term in 1997 divided by
365 and multiplied by the applicable Base Rent Escalator. In addition, if the
Annual Base Rent is increased as provided in Section 4.5, then the Base Rent
Escalator shall continue to apply to each of the five (5) years following such
increase, with the increase effective on the anniversary of the increase in Base
Rent as provided in Section 4.5 in lieu of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the
Initial Term and continuing for the Initial Term and any Extended Term,
Tenant shall calculate the Gross Golf Revenue for each Fiscal Quarter (or
shorter period, if applicable) within twenty (20) days of the end of such
Fiscal Quarter (or shorter period, if applicable) and submit such calculation
in writing to Landlord by way of an Officer's Certificate. If the Gross Golf
Revenue for that Fiscal Quarter (or shorter period, if applicable) is greater
than the Gross Golf Revenue for the same Fiscal Quarter (or shorter period,
if applicable) in the Base Year (and, following the Fiscal Quarter ending
March 31, on a year-to-date basis), then Tenant shall pay to Landlord the
Percentage Rent upon submittal of the Officer's Certificate. The Percentage
Rent payable in any period in any Fiscal Year shall be adjusted to reflect
the Percentage Rent paid on a year-to-date cumulative basis for the Fiscal
Year (pro rated for any partial periods) and the limits set forth in the next
two
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sentences on a pro rated basis. The increase in Rent resulting from the
payment of Percentage Rent (together with any increase in Base Rent pursuant
to Section 4.2) payable, if any, during each of the first five (5) full
Fiscal Years of the Initial Term shall be limited to five percent (5%) of the
Rent payable for the prior Fiscal Year. Tenant shall receive a credit
against the payment of Percentage Rent in an amount equal to the increase in
the Base Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Golf Revenue. If the Percentage Rent for such
Fiscal Year exceeds the sum of the quarterly payments of Percentage Rent
previously paid by Tenant, Tenant shall pay such deficiency to Landlord along
with such Officer's Certificate. If the Percentage Rent for such Fiscal Year is
less than the amount of Percentage Rent previously paid by Tenant, Landlord
shall, at Landlord's option, either (i) remit to Tenant its check in an amount
equal to such difference, or (ii) grant Tenant a credit against the payment of
Rent next coming due. Landlord shall have the right to audit all of Tenant's
business operations at the Property so as to determine the calculation of
Percentage Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs only as a result of the election
by Transferor to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, the Annual Base
Rent shall be increased, effective as of the date the additional Owner's Shares
are issued to Granite, to an amount equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP approved by Landlord, which will accurately record all
Gross Golf Revenue. Tenant shall retain all accounting records for each Fiscal
Year conforming to such accounting system until at least five (5) years after
the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
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shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a similar
or dissimilar nature. Accordingly, if any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid within ten (10) days after the
date such payment is due, Tenant will pay Landlord on demand, as Additional
Charges, a late charge equal to five percent (5%) of such installment. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant and is
not a penalty. In addition, if any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid within five (5) days after the due date
with respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue Rate
on the amount of such installment, and Tenant will pay such interest to Landlord
as Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Lease, nor
prevent Landlord from exercising any other rights and remedies available to
Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a
triple net lease and Rent shall be payable to Landlord without notice or demand
and without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term. Without limiting
the foregoing, Tenant shall pay to Landlord on a monthly basis along with Base
Rent, as additional rent, an amount equal to one-twelfth (1/12) of the Capital
Replacement Reserve. Such amounts shall be subject to
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reconciliation at the end of each Fiscal Quarter and at the end of each
Fiscal Year.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees that
revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES AND GRANITE SHARES. On or prior to
the Commencement Date, Tenant shall cause the Owner's Shares Pledge Agreement
and the Granite Shares Pledge Agreement to be executed for the benefit of
Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for the Property falls below the
coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Pledge Agreement,
at any time following the release of any Pledged Owner's Shares (or security
deposit held by Landlord in lieu thereof), then Tenant shall thereafter retain,
and not make cash distributions (except as may be necessary to pay any
applicable taxes) to its shareholders, partners or members, as applicable, until
such time as Tenant has accumulated six (6) months of Base Rent at the then
current level. Cash distributions may be made at such time as Tenant shall have
again satisfied such coverage ratios for two (2) consecutive Fiscal Years.
Tenant shall provide Landlord with such documentation, including Officer's
Certificates and financial statements, within forty-five (45) days after the end
of each Fiscal Quarter as are necessary to establish Tenant's compliance with
the foregoing requirements.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares shall also
secure Tenant's or Tenant's Affiliates obligations under each of the leases for
the Other Leased Properties.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal property
until payment in full of all Rent and satisfaction of all of Tenant's
obligations hereunder; provided, however, Landlord shall subordinate its lien
and security interest only to that of any third party lender or seller which
finances Tenant's personal property, the terms and conditions of such
subordination to be satisfactory to Landlord in its reasonable discretion.
Tenant shall, upon the request of Landlord, execute such financing statements or
other documents or instruments reasonably requested
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by Landlord to perfect the lien and security interests herein granted.
5.5 TERMINATION PAYMENT. On the Expiration Date, unless each
option for an Extended Term is exercised, Tenant shall pay to Landlord the
Termination Payment, if any, provided the maximum Termination Payment shall
equal the amounts in the Security Funds (as defined in the Owner's Shares Pledge
Agreement and as defined in the Granite Shares Pledge Agreement) then held by
Landlord and shall be payable solely from the proceeds thereof. For purposes of
calculating the Termination Payment, the Owner's Shares shall have a value
deemed to equal the average closing share price of common stock of Golf Trust of
America, Inc. for the five (5) day period prior to the Expiration Date.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Article 14. Upon request, Tenant shall promptly furnish to Landlord copies of
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice
to Tenant of all Impositions payable by Tenant hereunder of which Landlord at
any time has actual knowledge, but Landlord's failure to give any such notice
shall in no way diminish Tenant's obligations hereunder to pay such Impositions.
Landlord and Tenant shall, upon reasonable request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Property as may be necessary to prepare any required returns and reports.
In the event any applicable governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it must legally so file. Each
party, to the extent it possesses the same, will provide the other party, upon
reasonable request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal
period during which the Lease commences or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such commencement or termination, and Tenant's obligation to pay
its prorated share thereof shall survive such termination. If any Imposition
may, at the option of the taxpayer, lawfully be paid
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in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Tenant may elect to pay in installments, in which event
Tenant shall pay all installments (and any accrued interest on the unpaid
balance of the Imposition) that are due during the Term hereof before any
fine, penalty, premium, further interest or cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent
to or agree in writing to (i) any special assessment or (ii) the inclusion of
any material portion of the Leased Property into a special assessment district
or other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or unless Landlord agrees to pay the
cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
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(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR
PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION,
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(x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY,
(xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi)
COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR
LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS
SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED
BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT, AS
BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2
HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED
TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO THE
UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously operated
the Property and has knowledge of its condition which is superior to that of
Landlord, (B) fee simple title, except where the Property is held under a ground
lease, (both legal and equitable) is in Landlord and that Tenant has only the
leasehold right of possession and use of the Property as provided herein, (C) to
Tenant's knowledge the Improvements conform to all material Legal Requirements
and all material Insurance Requirements, (D) all easements necessary or
appropriate for the use or operation of the Property have been obtained, (E) all
contractors and subcontractors retained by Tenant who have performed work on or
supplied materials to the Property have been fully paid, and all materials to
the Property have been fully paid for, (F) the Improvements constructed by
Tenant or any Affiliate of Tenant have been completed in all material respects
in a workmanlike manner of first class quality, and (G) all equipment necessary
or appropriate for the use or operation of the Property has been installed and
is presently operative in all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the property
of Landlord and (iii) that Tenant has only the right to the use of such Property
during the Term of and upon the terms and conditions of this Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of the
Property, whether initially included in the Lease or thereafter acquired by
Landlord or Tenant, in good condition and
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repair, normal wear and tear excepted. Upon the loss, destruction or
obsolescence of any Tangible Personal Property, Tenant shall replace such
property with replacements of the same type and quality as initially in
place, which such property will be owned by Tenant except to the extent
acquired with funds from the Capital Replacement Fund ("Tenant's Personal
Property"). Upon the expiration or sooner termination of this Lease, the
Tenant's Personal Property shall transfer to Landlord without requirement of
any bill of sale or assignment; provided Landlord, at its election, may
require Tenant to execute such documentation as Landlord may require to
evidence such transfer. Tenant shall not remove any Tangible Personal
Property from the Property upon termination of the Lease. If any of such
Tangible Personal Property is stored away from the Property, Tenant will
provide Landlord with proper access to the storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, (c) past practices of the Transferor, and (d) such other
reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, in Landlord's
absolute discretion. No use shall be made or permitted to be made of the
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property or other
improvements
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of any insurance board, association, organization or company necessary for
the maintenance of insurance, as herein provided, covering the Property and
Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
12, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under the Property, or any adjacent property,
or incorporated in the Property or any improvements thereon except in compliance
with applicable law (including any Environmental Laws). Tenant shall not allow
the Property to be used as a landfill or a waste disposal site, or a
manufacturing, distribution or disposal facility for any Hazardous Materials.
Tenant shall neither suffer nor permit the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of the
Property for road, highway or other public purposes; (iv) execute petitions to
have the Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants and restrictions affecting the Property; and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent
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of its interest in the Property), but only upon delivery to Landlord of an
Officer's Certificate (which Officer's Certificate, if contested by Landlord,
shall not be binding on Landlord) stating that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the proper
conduct of the business of Tenant on the Property and does not reduce its
value or usefulness for the Primary Intended Use. Landlord shall not grant,
release, dedicate or execute any of the foregoing items in this Section 9.4
without obtaining Tenant's approval, which approval shall not be unreasonably
withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which signage
may include an appropriate logo selected by Landlord. In addition, it is the
intent of the parties that Tenant be a single-purpose entity with no business
operations except for those related solely to the operation of the Property for
its Primary Intended Use and other property of Landlord which may be leased to
Tenant. Tenant shall, therefore, not engage in or undertake any activities
other than those respecting the operation of the Property for its Primary
Intended Use, including leasing, managing, and operating golf courses in
accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including all Extended
Terms, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain Phase I Environmental
Site Assessment dated September, 1997, prepared by The Land Planning Group,
Inc., Tenant hereby represents, warrants, and covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with all
Environmental Laws.
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10.2 REMEDIATION. Except as set forth in the Agreement, and to the
best knowledge of Tenant, there are no Environmental Laws requiring any material
remediation, cleanup, repairs or construction (other than normal maintenance)
with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement, and
to the best knowledge of Tenant, (a) no notices of any violation or alleged
violation of any Environmental Laws relating to the Property or its uses have
been received by either Tenant, or, to the best knowledge of Tenant, by any
prior owner, operator or occupant of the Property, and (b) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending or threatened, relating to the
ownership, use, maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with the
terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth or
described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Property or if Tenant, Landlord,
or the Property becomes subject to any order of any federal, state or local
agency to investigate, remove, remediate, repair, close, detoxify, decontaminate
or otherwise clean up the Property, Tenant shall, at its sole expense, but
subject to the last sentence of Section 10.7, carry out and complete any
required investigation, removal, remediation, repair, closure, detoxification,
decontamination or other cleanup of the Property. If Tenant fails to implement
and diligently pursue any such repair, closure, detoxification, decontamination
or other cleanup of the Property in a timely manner, Landlord shall have the
right, but not the obligation, to carry out such action and to recover its costs
and expenses therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
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(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any Environmental
Law, (c) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity, or (d) by reason of a breach of a representation or warranty in
Sections 10.1 through 10.5 of this Lease. Notwithstanding the foregoing or any
other provision of this Lease (including, without limitation, Section 7.2,
Section 10.9 and Article 23), Tenant shall not be liable, or otherwise be
required to indemnify Landlord or the Company or any Affiliates of the Company
for (i) any matters or events that arise after the Commencement Date that are
not caused by any act or omission on the part of Tenant, or (ii) any matters or
events that arise after the Commencement Date that are directly caused by a
breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect
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to the Property until the earlier to occur of (i) the completion of all
remedial action in accordance with applicable Environmental Laws or (ii) 12
months beyond such expiration or termination date; PROVIDED, that Tenant may,
upon any such extension of the Term, terminate the Term by paying to Landlord
such amount as is necessary in the reasonable judgment of Landlord to
complete or perform such remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a result of Tenant's use, any prior use, the
elements or the age of the Property or any portion thereof) and in accordance
with any applicable Legal Requirements, and, except as otherwise provided in
Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date
(concealed or otherwise). Tenant shall operate and maintain the Property in
accordance with the operation and maintenance practices of the Property at the
Commencement Date and otherwise in a manner comparable to other comparable golf
course facilities in the vicinity of the Property. Landlord may consult with
the Advisory Association from time to time with respect to Tenant's compliance
with its maintenance and operation obligations under this Section 11.1, and
Landlord and representatives of Advisory Association shall have the right from
time to time to enter the Property for the purpose of inspecting the Property.
If Landlord, in consultation with the Advisory Association, determines that
Tenant has failed to comply with its maintenance and operation obligations under
this Section 11.1, Landlord shall provide written notice to Tenant setting forth
a list of remedial work and/or steps to be performed by Tenant. Tenant shall
promptly and diligently perform such remedial work and/or steps as recommended
by Landlord, provided if Tenant objects to one or more of the remedial
obligations proposed by Landlord, then the matter shall be submitted to the
dispute resolution procedure set forth in Section 12.7. Tenant will not take or
omit to take any action the taking or omission of which could reasonably be
expected to impair the value or the usefulness of the Property or any part
thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect
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thereto, in connection with this Lease, or to maintain the Property in any
way. Tenant hereby waives, to the extent permitted by law, the right to make
repairs at the expense of Landlord pursuant to any law in effect at the time
of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
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(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
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Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Tenant for
Capital Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the
Capital Replacement Fund shall be used to purchase property to the extent that
doing so would cause Landlord to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code. Tenant shall have no rights
with respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
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12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of Percentage
Rent, Tenant shall forthwith pay to Landlord the amount of the deficiency as
finally agreed or determined, together with interest at the Overdue Rate from
the date when said payment should have been made to the date of payment thereof;
PROVIDED, HOWEVER, that as to any audit that is commenced more than twelve (12)
months after the date Gross Golf Revenue for any Fiscal Year is reported by
Tenant to Landlord in the Officer's Certificate, the deficiency, if any, with
respect to such Gross Golf Revenue shall bear interest as permitted herein only
from the date such determination of deficiency is made unless such deficiency is
the result of gross negligence or willful misconduct on the part of Tenant. If
any such audit discloses that the Gross Golf Revenue actually received by Tenant
for any Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay all
reasonable costs of such audit and examination; provided Tenant shall have the
right to submit the audit determination to arbitration in accordance with the
procedures set forth in Article 28. Landlord shall also have the right to
review and audit from time to time Tenant's business operations including all
books, records and financial statements of Tenant. Tenant shall promptly
provide to Landlord copies of all such books, records, financial statements or
any other documentation of Tenant's business operations reasonably requested by
Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Golf Revenue (including
membership dues, daily use fees and other sources of Gross Golf Revenue) and
other revenue for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Landlord and Tenant, together with assumptions,
in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next
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four Fiscal Years, subject to the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed of three (3)
members of the Advisory Association unaffiliated with Tenant and two (2) members
of the board of directors of the Company. Such committee shall be responsible
for resolving any such disagreement and the parties agree that the determination
of such dispute resolution committee shall be binding on the parties. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the prior year's Operating Budget until a new Operating
Budget is adopted, and (ii) if the Capital Budget has not been agreed upon, no
Capital Expenditures shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically required by Landlord or are
otherwise required to comply with Legal Requirements or Insurance Requirements.
Tenant shall operate the Property in a manner reasonably consistent with the
Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent,
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and Tenant shall retain for at least five (5) years after the expiration of
each Fiscal Year, reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage Rent. The books of
account and all other records relating to or reflecting the operation of the
Property shall be kept either at the Property or at Tenant's offices in
Scottsdale, Arizona. Such books and records shall be available to Landlord
and its representatives for examination, audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the amounts
set forth on the Annual Budget, together with, if appropriate a revised Annual
Budget, which budget shall be subject to Landlord's review and approval as
provided in Section 12.7. Each quarterly report shall also forecast any
projected Percentage Rent payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Golf Revenue if
Tenant's financial statements are not required to be separately stated by the
Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
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ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to
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contest the existence of any such encroachment, violation or impairment),
shall protect, indemnify, save harmless and defend Landlord, the Company and
Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment and in such case, in
the event of an adverse final determination, either (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the
same shall affect Landlord or Tenant; or (ii) make such changes in the
Improvements, and take such other actions, as Tenant in the good faith
exercise of its judgment deems reasonably practicable, to remove such
encroachment, and to end such violation or impairment, including, if
necessary, the alteration of any of the Improvements, and in any event take
all such actions as may be necessary in order to be able to continue the
operation of the Improvements for the Primary Intended Use substantially in
the manner and to the extent the Improvements were operated prior to the
assertion of such violation or encroachment. Tenant's obligation under this
Section 13.2 shall be in addition to and shall in no way discharge or
diminish any obligation of any insurer under any policy of title or other
insurance and Tenant shall be entitled to a credit for any sums recovered by
Landlord under any such policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
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(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents
as may reasonably be required in any such contest, and, if reasonably
requested by Tenant or if Landlord so desires, Landlord shall join as a party
therein. Tenant shall indemnify and save Landlord harmless against any
liability, cost or expense of any kind that may be imposed upon Landlord in
connection with any such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all
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property located in or on the Property, including all Tenant's Personal
Property and any Tenant Improvements, insured with the kinds and amounts of
insurance described below. This insurance shall be written by companies
authorized to do insurance business in the State, and shall otherwise meet
the requirements set forth in Section 15.5 of this Lease. The policies must
name Landlord as an additional insured or loss payee, as applicable. Losses
shall be payable to Landlord and/or Tenant as provided in this Article 15.
In addition, the policies shall name as a loss payee any Facility Mortgagee
by way of a standard form of mortgagee's loss payable endorsement. Any loss
adjustment shall require the written consent of Landlord, Tenant, and each
Facility Mortgagee, if any. Evidence of insurance shall be deposited with
Landlord and, if requested, with any Facility Mortgagee(s). The policies on
the Property, including the Improvements, Fixtures, Tangible and Intangible
Personal Property and any Tenant Improvements, shall insure against the
following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the
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approval of Landlord, in Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written
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notice before the policy or policies in question shall be altered, allowed to
expire or cancelled. Each such policy shall also provide that any loss
otherwise payable thereunder shall be payable notwithstanding (i) any act or
omission of Landlord or Tenant which might, absent such provision, result in
a forfeiture of all or a part of such insurance payment, (ii) the occupation
or use of the Property for purposes more hazardous than those permitted by
the provisions of such policy, (iii) any foreclosure or other action or
proceeding taken by any Facility Mortgagee pursuant to any provision of a
mortgage, note, assignment or other document evidencing or securing a loan
upon the happening of an event of default therein or (iv) any change in title
to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less than
the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $100,000, be paid to Landlord and held by Landlord and (ii) if less
than
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such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
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(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15 and
the Property thereby is rendered Unsuitable For Its Primary Intended Use as
reasonably determined by Landlord, Tenant shall, at its election, either
(i) diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15, but
the Real Property is not thereby rendered Unsuitable For Its Primary
Intended Use, Tenant shall diligently restore the Property to substantially
the same condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant
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shall not be required to restore certain Tangible Personal Property and/or
any Tenant Improvements if failure to do so does not adversely affect the
amount of Rent payable hereunder or the Primary Intended Use in
substantially the same manner immediately prior to such damage or
destruction. Such damage or destruction shall not terminate this Lease;
PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18) months
obtain all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need, after
diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the
Term, the Property is totally or materially destroyed from a risk not covered
by the insurance described in Article 15, whether or not such damage or
destruction renders the Property Unsuitable For Its Primary Intended Use,
Tenant shall restore the Property to substantially the same condition as
existed immediately before the damage or destruction. Tenant shall have the
right to use proceeds from the Capital Replacement Fund to perform such work,
subject to the conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all
other charges required by this Lease shall remain unabated during the period
required for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore
under any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other
provision to the contrary in this Article 15, if damage to or destruction of
the Property occurs during the last twenty-four (24) months of the Lease
Term, and if such damage or destruction cannot reasonably be expected by
Landlord to be fully repaired or restored prior to the date that is twelve
(12) months prior to the end of the then-applicable Term, then either
Landlord or Tenant shall have the right to terminate the Lease on thirty (30)
days' prior notice to the other by giving notice thereof within sixty (60)
days after the date of such damage or destruction. Upon any such
termination, Landlord shall be entitled to retain all insurance proceeds,
grossed up by Tenant to account for the deductible or any self-insured
retention. If Landlord shall give Tenant a notice under this Section 15.15
that it seeks to
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terminate this Lease at a time when Tenant has a remaining Extended Term,
then such termination notice shall be of no effect if Tenant shall exercise
its rights to extend the Term not later than the earlier of the time required
by Section 3.2 or thirty (30) days after Landlord's notice given under this
Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property
is totally and permanently taken by Condemnation, this Lease shall terminate
on the Date of Taking and Tenant shall promptly pay all outstanding rent and
other charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not
thereby rendered Unsuitable For Its Primary Intended Use, but if the Property
is thereby rendered Unsuitable For Its Primary Intended Use, this Lease shall
terminate on the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property
and this Lease remains in full force and effect pursuant to Section 16.2,
Landlord at its cost shall accomplish all necessary restoration up to but not
exceeding the amount of the Award payable to Landlord, as provided herein.
If Tenant receives an Award under Section 16.4, Tenant shall repair or
restore any Tenant Improvements up to but not exceeding the amount of the
Award payable to Tenant therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility
Mortgagee, Tenant shall be entitled to receive from the Award, if and to the
extent such Award specifically includes such items, a sum attributable to the
value, if any, of: (i) the loss of Tenant's business during the remaining
term, (ii) any Tenant Improvements and (iii) the leasehold interest of Tenant
under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month
period, which shall be a temporary taking, all the provisions of this Lease
shall remain in full force and effect with no abatement of rent payable by
Tenant hereunder. In the event of any such temporary taking, the entire
amount of any such Award made for such temporary taking allocable to the
Lease Term, whether paid by way of damages, rent or otherwise, shall be paid
to Tenant.
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ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following
events (individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property, or
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(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of Landlord, or an "Event of Default" under the
Owner's Shares Pledge Agreement or the Granite Shares Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease.
Landlord may terminate this Lease by giving Tenant not less than ten (10)
days' notice (or no notice for clauses (c), (d), (e), (f) and (g)) of such
termination and upon the
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expiration of the time fixed in such notice, the Term shall terminate and all
rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's
breach of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on
behalf of Landlord, including reasonable attorneys' fees and expenses, as a
result of any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have
occurred and be continuing, whether or not this Lease has been terminated
pursuant to Section 17.1, Tenant shall, to the extent permitted by law, if
required by Landlord to do so, immediately surrender to Landlord the Property
pursuant to the provisions of Section 17.1 and quit the same and Landlord may
enter upon and repossess the Property by reasonable force, summary
proceedings, ejectment or otherwise, and may remove Tenant and all other
Persons and any and all Tenant's Personal Property from the Property subject
to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any
such termination, repossession or reletting: (a) the termination of this
Lease pursuant to Section 17.1, (b) the repossession of the Property, (c) the
failure of Landlord, notwithstanding reasonable good faith efforts, to relet
the Property, (d) the reletting of all or any portion thereof, nor (e) the
failure of Landlord to collect or receive any rentals due upon any such
reletting. In the event of any such termination, Tenant shall forthwith pay
to Landlord all Rent due and payable with respect to the Property to, and
including, the date of such termination. Thereafter, Tenant shall forthwith
pay to Landlord, at Landlord's option, as and for liquidated and agreed
current damages for Tenant's default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such
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unpaid Rent that Tenant proves could be reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate
of the Federal Reserve Bank of San Francisco at the time of the award plus
one percent (1%) and the Percentage Rent shall be deemed to be the same as
for the then-current Fiscal Year or, if not determinable, the immediately
preceding Fiscal Year, for the remainder of the Term, or such other amount as
either party shall prove reasonably could have been earned during the
remainder of the Term or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due
until paid, and Landlord may enforce, by action or otherwise, any other term
or covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that
may be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial
proceedings to enforce the rights of Landlord hereunder, Landlord shall be
entitled, as a matter or right, to the appointment of a receiver or receivers
acceptable to Landlord of the Property and of the revenues, earnings, income,
products and profits thereof, pending such proceedings, with such powers as
the court making such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section
17.1, Tenant waives, to the extent permitted by applicable law (a) any right
of redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord
under any of the provisions of this Lease during the existence or continuance
of any Event of Default (and such payment is made to Landlord rather than
Tenant due to the
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existence of an Event of Default) shall be applied to Tenant's obligations in
the order which Landlord may determine or as may be prescribed by the laws of
the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the
Impound Charges (as hereinafter defined) as they become due. As used herein,
"Impound Charges" shall mean real estate taxes on the Property or payments in
lieu thereof and premiums on any insurance required by this Lease. Landlord
shall determine the amount of the Impound Charges and of each Impound
Payment. The Impound Payments shall be held in a separate account and shall
not be commingled with other funds of Landlord and interest thereon shall be
held for the account of Tenant. Landlord shall apply the Impound Payments to
the payment of the Impound Charges in such order or priority as Landlord
shall determine or as required by law. If at any time the Impound Payments
theretofore paid to Landlord shall be insufficient for the payment of the
Impound Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same
within the relevant time periods provided in Article 17, Landlord, after
notice to and demand upon Tenant, and without waiving or releasing any
obligation or default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Tenant. Landlord may, to the extent permitted by law, enter upon
the Property for such purpose and take all such action thereon as, in
Landlord's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Tenant. All sums so paid by Landlord and all
costs and expenses (including reasonable attorneys' fees and expenses, to the
extent permitted by law) so incurred, together with a late charge thereon at
the Overdue Rate from the date on which such sums or expenses are paid or
incurred by Landlord, shall be paid by Tenant to Landlord on demand. The
obligations of Tenant and rights of Landlord contained in this Article 18
shall survive the expiration or earlier termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property,
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whether or not compliance therewith shall require structural changes in any
of the Improvements or interfere with the use and enjoyment of the Property;
and (b) procure, maintain and comply with all licenses and other
authorizations required for any use of the Property then being made, and for
the proper erection, installation, operation and maintenance of the Property
or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof,
such possession shall be deemed to be a tenant at sufferance during which
time Tenant shall pay as rental each month, 125% of the aggregate of (i) the
aggregate Base Rent and monthly portion of the Percentage Rent payable with
respect to that month in the last Fiscal Year; (ii) all Additional Charges
accruing during the month; and (iii) all other sums, if any, payable by
Tenant pursuant to the provisions of this Lease with respect to the Property.
During such period of month-to-month tenancy, Tenant shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given
by law to month-to-month tenancies, to continue its occupancy and use of the
Property. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage
or destruction thereof by fire, flood, the elements, casualties, thefts,
riots, wars or otherwise, or in consequence of foreclosures, attachments,
levies or executions (other than by Landlord and those claiming from, through
or under Landlord) is assumed by Tenant. In the absence of gross negligence,
willful misconduct or breach of this Lease by Landlord pursuant to Section
28.2, Landlord shall in no event be answerable or accountable therefor nor
shall any of the events mentioned in this Article 21 entitle Tenant to any
abatement of Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any
such insurance, Tenant
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will protect, indemnify, save harmless and defend Landlord, the Company and
Affiliates of the Company from and against all liabilities, obligations,
claims, actual or consequential damages, penalties, causes of action, costs
and expenses (including reasonable attorneys' fees and expenses), to the
extent permitted by law, imposed upon or incurred by or asserted against
Landlord, the Company or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect
to the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall
protect, indemnify, save harmless and defend Tenant from and against all
liabilities, obligations, claims, actual or consequential damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees)
imposed upon or incurred by or asserted against Tenant as a result of
Landlord's active, gross negligence or willful misconduct.
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22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability
or claim incurred by or asserted against the indemnified party that is
subject to indemnification under this Article 22, the indemnified party shall
give notice thereof to the indemnifying party. The indemnified party may at
its option demand indemnity under this Article 22 as soon as a claim has been
threatened by a third party, regardless of whether an actual loss has been
suffered, so long as the indemnified party shall in good faith determine that
such claim is not frivolous and that the indemnified party may be liable for,
or otherwise incur, a loss as a result thereof and shall give notice of such
determination to the indemnifying party. The indemnified party shall permit
the indemnifying party, at its option and expense, to assume the defense of
any such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying
party shall fail to undertake such defense within thirty (30) days after such
notice, or within such shorter time as may be reasonable under the
circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination
of this Lease. Notwithstanding anything herein to the contrary, each party
agrees to look first to the available proceeds from any insurance it carries
in connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then
to seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without
the prior written consent of Landlord, which consent Landlord may withhold in
its sole discretion, assign, mortgage,
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pledge, hypothecate, encumber or otherwise transfer (except to an Affiliate
of Tenant or a Permitted Assignee) the Lease or any interest therein, all or
any part of the Property, whether voluntarily, involuntarily or by operation
of law. For purposes of this Article 23, a Change in Control of the Tenant
shall constitute an assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole discretion, further sublease or license portions of the Property to
third parties, including concessionaires or licensees. Without limiting
the foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs; and
(viii) sublease or license to operate any other portions (but
not the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to
any proposed assignment or sublease, deliver
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to Landlord written notice of its intent to assign or sublease, which
notice shall identify the intended assignee or sublessee by name and
address, shall specify the effective date of the intended assignment or
sublease, and shall be accompanied by an exact copy of the proposed
assignment or sublease. Tenant shall provide Landlord with such
additional information or documents reasonably requested by Landlord with
respect to the proposed transaction and the proposed assignee or
subtenant, and an opportunity to meet and interview the proposed assignee
or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way
impair the continuing primary liability of Tenant hereunder, as a principal
and not as a surety or guarantor, and no consent to any assignment or
sublease in a particular instance shall be deemed to be a waiver of the
prohibition set forth in Section 23.1. Any assignment shall be solely of
Tenant's entire interest in this Lease. Any assignment or other transfer of
all or any portion of Tenant's interest in the Lease in contravention of the
terms of this Lease shall be voidable at Landlord's option. Anything in this
Lease to the contrary notwithstanding,
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Tenant shall not sublet all or any portion of the Property or enter into any
other agreement which has the effect of reducing the Percentage Rent payable
to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as
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amended (the "Bankruptcy Code"), shall not seek or request any extension of
time to assume or reject this Lease or to perform any obligations of this
Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive and assignment of this Lease or subletting of the Property to Landlord
or Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth reasonably satisfactory to Landlord or, in the alternative, the
proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver to
Landlord a guaranty agreement in form and substance acceptable to Landlord; and
(ii) any proposed assignee shall grant to Landlord a security interest in favor
of Landlord in all furniture, fixtures, and other personal property to be used
by such proposed assignee in the Property. All payments required of Tenant
under this Lease, whether or not expressly denominated as such in this
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Lease, shall constitute rent for the purposes of Title 11 of the Bankruptcy
Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure defaults and compensate Landlord for actual
pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss." The term "actual
pecuniary loss" shall mean, in addition to any other provisions contained herein
relating to Landlord's damages upon default, obligations of Tenant to pay money
under this Lease and all attorneys' fees and related costs of Landlord incurred
in connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
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(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further
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instrument of subordination shall be required by any ground or underlying
lessor or by any mortgagee or beneficiary, affecting any lease or the
Property. In confirmation of such subordination, Tenant shall execute
promptly any certificate that Landlord may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party.
However, if the price at which Landlord intends to sell the Property to a third
party is less than 95% of the price set forth in the notice provided by Landlord
to Tenant, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
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26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future liabilities
and obligations under this Lease arising or accruing from and after the date of
such conveyance or other transfer as to the Property. All such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Landlord and Tenant regarding the Property during the arbitration.
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ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
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28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
62
<PAGE>
If to Tenant: Granite Subsidiary, Inc.
c/o Granite Golf Group, Inc.
15170 N. Hayden Road, Suite 106
Scottsdale, Arizona 85260-2512
Attention: T. Marney Edwards
With a copy to: Mr. Mark Nesvig
Fennemore Craig
3003 N. Central Avenue
Phoenix, Arizona 85012-2913
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
63
<PAGE>
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease, express
or implied, is intended to confer any rights or remedies under or by reason of
this Lease on any Person other than the parties to this Lease and their
respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any party
hereto or give any third Person any right of subrogation or action against any
party to this Lease.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
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<PAGE>
LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc.,
a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
---------------------------------
W. Bradley Blair, II
President and CEO
TENANT: GRANITE SUBSIDIARY, INC.,
a Florida corporation
By: /s/ Stan T. Richards
-----------------------------------
Its: Assistant Secretary
----------------------------------
65
<PAGE>
- -------------------------------------------------------------------------------
EAGLE WATCH GOLF CLUB
Woodstock
Cherokee County
Georgia
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
E.W.G.C., LLC
TENANT
DATED AS OF SEPTEMBER 26, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Right of First Offer to Lease. . . . . . . . . . . . . . . . . . 14
ARTICLE 4 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . . 15
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . . 16
4.5 Increase in Base Rent Following Conversion Date. . . . . . . . . 16
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Pledge of Owner's Shares . . . . . . . . . . . . . . . . . . . . 18
5.2 Obligation to Withhold Distributions . . . . . . . . . . . . . . 18
5.3 Cross-Collateral . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Landlord's Lien. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Termination Payment. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . 19
6.2 Information and Reporting. . . . . . . . . . . . . . . . . . . . 19
6.3 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Assessment Districts . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7 TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 No Termination, Abatement, Etc.. . . . . . . . . . . . . . . . . 20
7.2 Condition of the Property. . . . . . . . . . . . . . . . . . . . 21
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ARTICLE 8 OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . 22
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . . 22
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9 USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . . 24
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Landlord to Grant Easements, Etc.. . . . . . . . . . . . . . . . 24
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . . 25
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . . 25
ARTICLE 10 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . 25
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 26
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . 27
10.9 Environmental Violations at Expiration or Termination of
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11 MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . 28
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . 28
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . 29
11.5 Bunker Repairs . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12 TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . 29
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . 30
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . 31
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . 31
12.6 Landlord's Right to Audit Calculation of Gross Golf Revenue. . . 32
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13 LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . 35
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . 35
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ARTICLE 14 PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . 36
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . 37
ARTICLE 15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . 38
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . 39
15.5 Form Satisfactory, Etc.. . . . . . . . . . . . . . . . . . . . . 39
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . 40
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 41
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . 41
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . . 42
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . . 42
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . . 43
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . 43
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 16 CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . 44
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 17 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 45
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . 47
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . 48
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . 48
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . 48
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . 49
ARTICLE 19 LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 20 HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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ARTICLE 21 RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 22 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 51
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 51
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . 51
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . 52
22.4 Survival of Indemnification Obligations; Available Insurance
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 23 SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . 53
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . 53
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . 55
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . 55
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . 56
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 24 OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . 57
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . 57
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 25 LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . 58
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . 58
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . 59
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . 59
ARTICLE 26 SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . 59
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . 59
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 27 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 28 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . 61
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . 61
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . 61
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 62
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . 62
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . 62
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . 62
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.10 Survival of Claims . . . . . . . . . . . . . . . . . . . . . . . 63
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28.11 Invalidity of Terms or Provisions. . . . . . . . . . . . . . . . 63
28.12 Prohibition Against Usury. . . . . . . . . . . . . . . . . . . . 63
28.13 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . . 63
28.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 63
28.15 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.17 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . . . . 63
28.18 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.19 Non-Recourse as to Landlord. . . . . . . . . . . . . . . . . . . 64
28.20 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.21 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
EXHIBITS
- --------
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Properties
Exhibit D - Pledge Agreement
Exhibit E - Adjustments to Calculation of Gross
Golf Revenue for Private Clubs
Exhibit F - Calculation of Gross Golf Revenue for the Base Year on a Quarter by
Quarter Basis
v
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EAGLE WATCH GOLF CLUB
Woodstock
Cherokee County
Georgia
LEASE
THIS LEASE (this "Lease"), dated as of September 26, 1997, is
entered into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Landlord"), and E.W.G.C., LLC, a Georgia limited liability
company ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback Agreement
(the "Agreement") dated as of September 18, 1997 by and between Landlord and
EAGLE WATCH GOLF CLUB LIMITED PARTNERSHIP, an Illinois limited partnership
("Transferor"), Transferor transferred to Landlord all of its right, title
and interest in and to the Property (as hereafter defined); and
B. Tenant, an Affiliate of Transferor, desires to lease the
Property from Landlord, and Landlord desires to lease the Property to Tenant,
on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants
and agreements to be performed by Tenant and Landlord hereunder, and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord's rights and interest (to the extent acquired from Transferor) in
and to the following real property, improvements, personal property and
related rights (collectively the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without
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limitation, all of Landlord's right, title and interest, if any, in and to
all mineral and water rights and all easements, rights-of-way and other
appurtenances used or connected with the beneficial use or enjoyment of
the Land and the Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of
Landlord.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be
adjusted annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required
by any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
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"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on October
1, 1996, and ending on September 30, 1997; provided, however, that the Base
Year shall refer to the calendar year immediately preceding the Conversion
Date if the Base Rent is increased as provided in Section 4.5. A
quarter-by-quarter calculation of Gross Golf Revenue in the Base Year is
attached hereto as EXHIBIT F.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York,
New York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the
Capital Replacement Reserve accrued by Landlord, together with interest
thereon as provided in Section 12.4, less amounts withdrawn from the Capital
Replacement Fund as provided in Section 12.4.
"CAPITAL REPLACEMENT RESERVE" means the greater of (i) an amount
equal to 3.22% of each Fiscal Year's Gross Golf Revenue, to be accrued
quarterly by Landlord as part of the Capital Replacement Fund, as provided in
Section 12.4 hereof, based on the Officer's Certificate, or (ii) Fifty
Thousand Dollars ($50,000) per Fiscal Year.
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who
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control Tenant as of the date hereof no longer having Control of Tenant;
or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes
of Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat
of condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor
elects to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, (ii) the date
on which Transferor elects in writing to waive its right to receive
additional Owner's Shares, or (iii) April 30, 2003.
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"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2007, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from January 1 to
December 31 of each year; provided that for purposes of the Lease Term and the
Pledge Agreement, the first Fiscal Year shall be deemed to include the period
from the Commencement Date to December 31, 1997.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal
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property, including all components thereof, now or hereafter located in, on
or used in connection with and permanently affixed to or incorporated into
the Property, including all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems
and apparatus, sprinkler systems and fire and theft protection equipment, all
of which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding
all items included within the category of Tenant's Personal Property and any
Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT E
attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv) fees to
reserve a tee time, (v) guest fees, (vi) golf cart rentals, (vii) parking lot
fees, (viii) locker rentals, (ix) fees for golf club storage, (x) fees for the
use of swim, tennis or other facilities, (xi) charges for range balls, range
fees or other fees for golf practice facilities, (xii) fees or other charges
paid for golf or tennis lessons (except where retained by or paid to a USTA or
PGA professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with respect
to any membership application, (xv) transfer fees imposed on any member in
connection with the transfer of any membership interest, (xvi) fees or other
charges paid to Tenant by sponsors of golf tournaments at the Property (unless
the terms under which Tenant is paid by such sponsor do not comply with Section
23.4, in which event the gross revenues received from such sponsor for the
tournament shall be excluded from Gross Golf Revenue and further provided that
Tenant shall use commercially reasonable efforts to structure such payment to
comply with Section 23.4), (xvii) advertising or placement fees paid by vendors
in exchange for exclusive use or name rights at the Property, and (xviii) fees
received in connection with any golf package sponsored by any hotel group,
condominium group, golf association, travel agency,
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tourist or travel association or similar payments; PROVIDED, HOWEVER, that
Gross Golf Revenue shall not include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
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(c) excises;
(d) fees (including license, permit, inspection, authorization and
similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any
other Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $652,800 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2007.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
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"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property; or (iii) require the cleanup or other treatment of any
Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
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"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (33 1/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the
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Property and the proposed assignee's net worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of the
date of this Lease, by and between Transferor and Landlord, in the form attached
hereto as EXHIBIT D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A. or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property.
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic
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training equipment, office equipment or machines, antiques or other
decorations, furniture, computers or other control systems, and equipment or
machinery of every kind or nature, including all warranties and guaranties
associated therewith, with the exception of golf carts.
"TENANT" means E.W.G.C., LLC, a Georgia limited liability company, and
any successor thereto, or assignee thereof, as permitted by the terms of this
Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one half percent (113.5%) of the Rent and the Net Operating Income for the prior
Fiscal Year, divided by ten and two tenths percent (10.2%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
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2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2007.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease five (5) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-current term.
Tenant shall be entitled to exercise these options only if at the time of the
giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
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3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord, at
its election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if at
the time of the giving of such notice and at the time of the commencement of the
applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.9 or at such other place
or to such other Person as Landlord from time to time may designate in writing.
The first monthly installment shall be prorated as to any partial month. If any
payment owing hereunder shall otherwise be due on a day that is not a Business
Day, such payment shall be due on the next succeeding Business Day. No payment
in addition to the payment of Rent shall be required in order to require
Landlord to accrue the Capital Replacement Fund as provided in Section 12.4.
Tenant shall receive a credit against Rent (or be paid directly, at Landlord's
option) for any operating expense credits or operating revenues credited to
Landlord pursuant to the Agreement which are applicable to any period in the
Lease Term (E.G., credit for real property taxes, membership dues, sublease
rents, etc.) and conversely Tenant
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shall reimburse Landlord for any operating expenses paid for by Landlord
pursuant to the Agreement which are the responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1, 1999
and on each January 1 thereafter through and including January 1, 2003, the
Annual Base Rent will increase by the lesser of (i) three percent (3%) of the
Annual Base Rent payable for the immediately preceding year, or (ii) two hundred
percent (200%) of the change in CPI from the immediately preceding fiscal year
(the "Base Rent Escalator"). If Landlord provides Tenant with the Bunker Repair
Funds as provided in Section 11.5, Annual Base Rent shall increase by an amount
that is 10.5% of the Bunker Repair Funds. In addition, if the Annual Base Rent
is increased as provided in Section 4.5, then the Base Rent Escalator shall
continue to apply to each of the five (5) years following such increase, with
the increase effective on the anniversary of the increase in Base Rent as
provided in Section 4.5 in lieu of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and any Extended Term, Tenant shall
calculate the Gross Golf Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If the Gross Golf Revenue for that
Fiscal Quarter (or shorter period, if applicable) is greater than the Gross Golf
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the Fiscal Quarter ending March 31, on a year-to-date
basis), then Tenant shall pay to Landlord the Percentage Rent upon submittal of
the Officer's Certificate. The Percentage Rent payable in any period in any
Fiscal Year shall be adjusted to reflect the Percentage Rent paid on a year-to-
date cumulative basis for the Fiscal Year (pro rated for any partial periods)
and the limits set forth in the next two sentences on a pro rated basis. The
increase in Rent resulting from the payment of Percentage Rent (together with
any increase in Base Rent pursuant to Section 4.2) payable, if any, during each
of the first five (5) full calendar years of the Initial Term shall be limited
to five percent (5%) of the Rent payable for the prior calendar year. Tenant
shall receive a credit against the payment of Percentage Rent in an amount equal
to the increase in the Base Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
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comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Golf Revenue. If the Percentage Rent for such
Fiscal Year exceeds the sum of the quarterly payments of Percentage Rent
previously paid by Tenant, Tenant shall pay such deficiency to Landlord along
with such Officer's Certificate. If the Percentage Rent for such Fiscal Year is
less than the amount of Percentage Rent previously paid by Tenant, Landlord
shall, at Landlord's option, either (i) remit to Tenant its check in an amount
equal to such difference, or (ii) grant Tenant a credit against the payment of
Rent next coming due. Landlord shall have the right to audit all of Tenant's
business operations at the Property so as to determine the calculation of
Percentage Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs, the Annual Base Rent shall be
increased, effective as of the date the additional Owner's Shares are issued to
the Transferor, to an amount equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP, approved by Landlord, which will accurately record all
Gross Golf Revenue. Tenant shall retain all accounting records for each Fiscal
Year conforming to such accounting system until at least five (5) years after
the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the
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terms of any mortgage or deed of trust covering the Property and other
expenses of a similar or dissimilar nature. Accordingly, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within ten (10) Business Days after the date such payment is due, Tenant will
pay Landlord on demand, as Additional Charges, a late charge equal to five
percent (5%) of such installment. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant and is not a penalty. In addition,
if any installment of Base Rent, Percentage Rent or Additional Charges (but
only as to those Additional Charges which are payable directly to Landlord)
shall not be paid within five (5) Business Days after the due date with
respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue
Rate on the amount of such installment, and Tenant will pay such interest to
Landlord as Additional Charges. The acceptance of any late charge or
interest shall not constitute a waiver of, nor excuse or cure, any default
under this Lease, nor prevent Landlord from exercising any other rights and
remedies available to Landlord.
4.9 NET LEASE. This Lease shall be a triple net lease and Rent
shall be payable to Landlord without notice or demand and without set-off,
counterclaim, recoupment, abatement, suspension, determent, deduction or
defense, except as expressly provided herein, so that this Lease shall yield
to Landlord the full amount of the installments of Base Rent, Percentage Rent
and Additional Charges throughout the Term. Without limiting the foregoing,
Tenant shall pay to Landlord on a monthly basis along with Base Rent, as
additional rent, an amount equal to one-twelfth (1/12) of the Capital
Replacement Reserve. Such amount shall be subject to reconciliation at the
end of each Fiscal Quarter.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees
that revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES. On or prior to the Commencement
Date, Tenant shall cause the Pledge Agreement to be executed for the benefit
of Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income
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for the Property falls below the coverage ratio set forth in Section 2(a) of
EXHIBIT D-1 to the Pledge Agreement, at any time following the release of any
Pledged Owner's Shares (or security deposit held by Landlord in lieu
thereof), then Tenant shall thereafter retain, and not make cash
distributions (except as may be necessary to pay any applicable taxes) to its
shareholders, partners or members, as applicable, until such time as Tenant
has accumulated six (6) months of Base Rent at the then current level. Cash
distributions may be made at such time as Tenant shall have again satisfied
such coverage ratios for two (2) consecutive Fiscal Years. Tenant shall
provide Landlord with such documentation, including Officer's Certificates
and financial statements, within forty-five (45) days after the end of each
Fiscal Quarter as are necessary to establish Tenant's compliance with the
foregoing requirements.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares shall also
secure Tenant's or Tenant's Affiliates obligations under each of the leases
for the Other Leased Properties. Notwithstanding the foregoing, the Pledged
Owner's Shares shall not secure any obligations of O.A.G.C., LLC, a Georgia
limited liability company ("Olde Atlanta"), under that certain Lease (the
"Olde Atlanta Lease") dated as of February 11, 1997, by and between Landlord
and Olde Atlanta, nor shall any security for Olde Atlanta's performance under
the Olde Atlanta Lease secure the performance of Tenant under this Lease.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal
property until payment in full of all Rent and satisfaction of all of
Tenant's obligations hereunder; provided, however, Landlord shall subordinate
its lien and security interest only to that of any third party lender or
seller which finances Tenant's personal property, the terms and conditions of
such subordination to be satisfactory to Landlord in its reasonable
discretion. Tenant shall, upon the request of Landlord, execute such
financing statements or other documents or instruments reasonably requested
by Landlord to perfect the lien and security interests herein granted.
5.5 TERMINATION PAYMENT. On the day following the Expiration
Date (unless the Expiration Date is December 31, 2032), Tenant shall pay to
Landlord the Termination Payment, if any, provided the maximum Termination
Payment shall equal the amounts in the Security Fund (as defined in the
Pledge Agreement) then held by Landlord and shall be payable solely from the
proceeds thereof. For purposes of calculating the Termination Payment, the
shares of Common Stock of GTA shall have a value deemed to equal the closing
share price of common stock of GTA on the Expiration Date.
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ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be
made directly to the taxing authorities where feasible. All payments of
Impositions shall be subject to Tenant's right of contest pursuant to the
provisions of Section 6.3 or Article 14. Upon request, Tenant shall promptly
furnish to Landlord copies of official receipts, if available, or other
satisfactory proof evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay
such Impositions. Landlord and Tenant shall, upon reasonable request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Property as may be necessary to prepare any required
returns and reports. In the event any applicable governmental authorities
classify any property covered by this Lease as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it
must legally so file. Each party, to the extent it possesses the same, will
provide the other party, upon reasonable request, with cost and depreciation
records necessary for filing returns for any property so classified as
personal property.
6.3 PRORATIONS. Impositions imposed in respect of the
tax-fiscal period during which the Lease commences or terminates shall be
adjusted and prorated between Landlord and Tenant, whether or not such
Imposition is imposed before or after such commencement or termination, and
Tenant's obligation to pay its prorated share thereof shall survive such
termination. If any Imposition may, at the option of the taxpayer, lawfully
be paid in installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may elect to pay in installments, in
which event Tenant shall pay all installments (and any accrued interest on
the unpaid balance of the Imposition) that are due during the Term hereof
before any fine, penalty, premium, further interest or cost may be added
thereto.
6.4 REFUNDS. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article 17.
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6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the Leased Property into a special
assessment district or other taxing jurisdiction unless Tenant shall have
consented thereto, which consent shall not be unreasonably withheld or unless
Landlord agrees to pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord
or any person whose claim arose under Landlord, (i) Tenant, to the extent
permitted by law, shall remain bound by this Lease in accordance with its
terms and shall neither take any action without the consent of Landlord to
modify, surrender or terminate the same, nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent by
reason of, and (ii) the respective obligations of Landlord and Tenant shall
not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
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Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by
Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the
execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purposes hereunder. Regardless,
however of any inspection made by Tenant of the Property and whether or not
any patent or latent defect or condition was revealed or discovered thereby,
Tenant is leasing the Property "as is" in its present condition. Tenant
waives and releases any claim or cause of action against Landlord with
respect to the condition of the Property including any defects or adverse
conditions latent or patent, matured or unmatured, known or unknown by Tenant
or Landlord as of the date hereof. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER
ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL
NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING
ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT,
(iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x)
MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv)
OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi) COMPLIANCE
OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR LEGAL
REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS SELECTION AND
TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED BY TENANT AND
IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE
PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT, AS BETWEEN LANDLORD AND
TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT
THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT
LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2 HAVE BEEN NEGOTIATED
AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED TO BE A COMPLETE
EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED,
WITH RESPECT TO THE
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PROPERTY, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW
NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found
the same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously
operated the Property and has knowledge of its condition which is superior to
that of Landlord, (B) fee simple title, except where the Property is held
under a ground lease, (both legal and equitable) is in Landlord and that
Tenant has only the leasehold right of possession and use of the Property as
provided herein, (C) to Tenant's knowledge the Improvements conform to all
material Legal Requirements and all material Insurance Requirements, (D) all
easements necessary or appropriate for the use or operation of the Property
have been obtained, (E) all contractors and subcontractors retained by Tenant
who have performed work on or supplied materials to the Property have been
fully paid, and all materials to the Property have been fully paid for, (F)
the Improvements constructed by Tenant or any Affiliate of Tenant have been
completed in all material respects in a workmanlike manner of first class
quality, and (G) all equipment necessary or appropriate for the use or
operation of the Property has been installed and is presently operative in
all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of
such Property during the Term of and upon the terms and conditions of this
Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired
by Landlord or Tenant, in good condition and repair, normal wear and tear
excepted. Upon the loss, destruction or obsolescence of any Tangible Personal
Property, Tenant shall replace such property with replacements of the same
type and quality as initially in place, which such property will be owned by
Tenant except to the extent acquired with funds from the Capital Replacement
Fund ("Tenant's Personal Property"). Upon the expiration or sooner
termination of this Lease, the Tenant's Personal Property shall transfer to
Landlord without requirement of any bill of sale or assignment; provided
Landlord, at its election, may require Tenant to execute such documentation
as Landlord may require to evidence such transfer. Tenant shall not remove
any Tangible Personal Property from the Property upon termination of the
Lease. If any of such Tangible Personal Property is stored away from the
Property, Tenant will provide Landlord with proper access to the storage
facility.
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8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public,
and food and beverage, as shall be necessary in order to operate the Property
in compliance with (a) all applicable Legal Requirements, (b) customary
practices in the golf industry, (c) past practices of the Transferor, and (d)
such other reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal
Property may, upon notice to Landlord and during reasonable hours, enter the
Property and take possession of any of Tenant's Personal Property without
liability for trespass or conversion upon a default by Tenant, provided that
such lessor provide Landlord with the opportunity to cure the defaults of
Tenant on terms and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term,
Tenant shall use or cause to be used the Property and the improvements
thereon for its Primary Intended Use. Tenant shall not use the Property or
any portion thereof for any other use without the prior written consent of
Landlord, in Landlord's absolute discretion. No use shall be made or
permitted to be made of the Property, and no acts shall be done, which will
cause the cancellation of any insurance policy covering the Property or any
part thereof, nor shall Tenant sell or otherwise provide to patrons, or
permit to be kept, used or sold in or about the Property any article which
may be prohibited by law or by the standard form of fire insurance policies,
or any other insurance policies required to be carried hereunder, or fire
underwriters regulations. Tenant shall, at its sole cost, comply with all of
the requirements pertaining to the Property or other improvements of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Property and
Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be
done in or on the Property, in a manner which would (i) violate or fail to
comply with any law, rule or regulation or Legal Requirement, (ii) subject to
Article 12, cause structural injury to any of the Improvements or (iii)
constitute a public or private nuisance or waste. Tenant shall not allow any
Hazardous Material to be located in, on or under the Property, or any
adjacent property, or incorporated in the Property or any improvements
thereon except in compliance with applicable law (including any Environmental
Laws). Tenant shall not allow the Property to be used as a landfill or a
waste
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disposal site, or a manufacturing, distribution or disposal facility for any
Hazardous Materials. Tenant shall neither suffer nor permit the Property or
any portion thereof, including Tenant's Personal Property, to be used in such
a manner as (i) might reasonably tend to impair Landlord's title thereto or
to any portion thereof, or (ii) may reasonably make possible a claim or
claims of adverse usage or adverse possession by the public, as such, or of
implied dedication of the Property or any portion thereof, or (iii) is in
material violation of any applicable Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the
approval of Landlord, which approval shall not be unreasonably withheld or
delayed): (i) grant easements and other rights in the nature of easements;
(ii) release existing easements or other rights in the nature of easements
which are for the benefit of the Property; (iii) dedicate or transfer
unimproved portions of the Property for road, highway or other public
purposes; (iv) execute petitions to have the Property annexed to any
municipal corporation or utility district; (v) execute amendments to any
covenants and restrictions affecting the Property; and (vi) execute and
deliver to any person any instrument appropriate to confirm or effect such
grants, releases, dedications and transfers (to the extent of its interest in
the Property), but only upon delivery to Landlord of an Officer's Certificate
(which Officer's Certificate, if contested by Landlord, shall not be binding
on Landlord) stating that such grant, release, dedication, transfer, petition
or amendment is not detrimental to the proper conduct of the business of
Tenant on the Property and does not reduce its value or usefulness for the
Primary Intended Use. Landlord shall not grant, release, dedicate or execute
any of the foregoing items in this Section 9.4 without obtaining Tenant's
approval, which approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b)
at its election, engage in reasonable cross-marketing endeavors with the
members of the Advisory Association; and (c) at its election, provide signage
on the
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Property which references that the Property is owned by Landlord, which
signage may include an appropriate logo selected by Landlord. In addition,
it is the intent of the parties that Tenant be a single-purpose entity with
no business operations except for those related solely to the operation of
the Property for its Primary Intended Use and other property of Landlord
which may be leased to Tenant. Tenant shall, therefore, not engage in or
undertake any activities other than those respecting the operation of the
Property for its Primary Intended Use, including leasing, managing, and
operating golf courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market
value (determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement
Date. Tenant further represents that, at the end of the Term, including all
Extended Terms, it expects that the Land and each of the Improvements will
have a remaining useful life equal to at least twenty percent (20%) of its
expected useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as set forth in the environmental report dated September,
1997, prepared by Law Engineering, Tenant hereby represents, warrants, and
covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with
all Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to
the best knowledge of Tenant, there are no Environmental Laws requiring any
material remediation, cleanup, repairs or construction (other than normal
maintenance) with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement,
and to the best knowledge of Tenant, (a) no notices of any violation or
alleged violation of any Environmental Laws relating to the Property or its
uses have been received by either Tenant, or, to the best knowledge of
Tenant, by any prior owner, operator or occupant of the Property, and (b)
there are no writs, injunctions, decrees, orders or judgments outstanding, or
any actions, suits, claims, proceedings or investigations pending or
threatened, relating to the ownership, use, maintenance or operation of the
Property.
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10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with
the terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth
or described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or
reporting under any Environmental Law in, on or under the Property or if
Tenant, Landlord, or the Property becomes subject to any order of any
federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant
shall, at its sole expense, but subject to the last sentence of Section 10.7,
carry out and complete any required investigation, removal, remediation,
repair, closure, detoxification, decontamination or other cleanup of the
Property. If Tenant fails to implement and diligently pursue any such
repair, closure, detoxification, decontamination or other cleanup of the
Property in a timely manner, Landlord shall have the right, but not the
obligation, to carry out such action and to recover its costs and expenses
therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees
and expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any
Environmental Law) in respect of the Property howsoever arising, without
regard to fault on the part of Tenant, including (a) liability for response
costs and for costs of removal and remedial action incurred by the United
States Government, any state or local governmental unit to any other Person,
or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any
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Environmental Law, (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying
on of a dangerous activity, or (d) by reason of a breach of a representation
or warranty in Sections 10.1 through 10.5 of this Lease. Notwithstanding the
foregoing or any other provision of this Lease (including, without
limitation, Section 7.2, Section 10.9 and Article 23), Tenant shall not be
liable, or otherwise be required to indemnify Landlord or the Company or any
Affiliates of the Company for (i) any matters or events that arise after the
Commencement Date that are not caused by any act or omission on the part of
Tenant, or (ii) any matters or events that arise after the Commencement Date
that are directly caused by a breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise
terminate or expire, a violation of any Environmental Law has been asserted
by Landlord and has not been resolved in a manner reasonably satisfactory to
Landlord, or has been acknowledged by Tenant to exist or has been found to
exist at the Property or has been asserted by any governmental authority and
Tenant's failure to have completed all action required to correct, abate or
remediate such a violation of any Environmental Law materially impairs the
leasability of the Property upon the expiration of the Term, then, at the
option of Landlord, the Term shall be automatically extended with respect to
the Property beyond the date of termination or expiration and this Lease
shall remain in full force and effect under the same terms and conditions
beyond such date with respect to the Property until the earlier to occur of
(i) the completion of all remedial action in accordance with applicable
Environmental Laws or (ii) 12 months beyond such expiration or termination
date; PROVIDED, that Tenant may, upon any such extension of the Term,
terminate the Term by paying to Landlord such amount as is necessary in the
reasonable judgment of Landlord to complete or perform such remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or
not the need for such repairs occurs as a result of Tenant's use, any prior
use, the elements or the age of the Property or any portion thereof) and in
accordance with any applicable Legal Requirements, and, except as otherwise
provided
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in Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
Commencement Date (concealed or otherwise). Tenant shall operate and
maintain the Property in accordance with the operation and maintenance
practices of the Property at the Commencement Date and otherwise in a manner
comparable to other comparable golf course facilities in the vicinity of the
Property. Landlord may consult with the Advisory Association from time to
time with respect to Tenant's compliance with its maintenance and operation
obligations under this Section 11.1, and Landlord and representatives of
Advisory Association shall have the right from time to time to enter the
Property for the purpose of inspecting the Property. If Landlord, in
consultation with the Advisory Association, determines that Tenant has failed
to comply with its maintenance and operation obligations under this Section
11.1, Landlord shall provide written notice to Tenant setting forth a list of
remedial work and/or steps to be performed by Tenant. Tenant shall promptly
and diligently perform such remedial work and/or steps as recommended by
Landlord, provided if Tenant objects to one or more of the remedial
obligations proposed by Landlord, then the matter shall be submitted to the
dispute resolution procedure set forth in Section 12.7. Tenant will not take
or omit to take any action the taking or omission of which could reasonably
be expected to impair the value or the usefulness of the Property or any part
thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under
any circumstances be required to build or rebuild any improvements on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, in connection with this
Lease, or to maintain the Property in any way. Tenant hereby waives, to the
extent permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of
any labor or services or the furnishing of any materials or other property
for the construction, alteration, addition, repair or demolition of or to the
Property or any part thereof; or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property, in either case, in such
fashion as
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would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
11.5 BUNKER REPAIRS. During the Initial Term, Tenant shall have
the right to cause repairs to be made to bunkers on the Property (the "Bunker
Repairs"), which Bunker Repairs shall be completed to the satisfaction of
Landlord. So long as the Net Operating Income for the immediately preceding
fiscal year was equal to or greater than 113.5% of Base Rent (as increased for
the payment of the Bunker Repair Funds) and the Percentage Rent, then Landlord
shall provide Tenant with funds (the "Bunker Repair Funds") necessary to
complete the Bunker Repairs, in an amount not to exceed One Hundred Thousand
Dollars ($100,000). Payment of the Bunker Repair Funds shall be made within
thirty (30) days of Landlord's receipt and approval of paid invoices for the
same.
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
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(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
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12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Tenant for
Capital Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the
Capital Replacement Fund shall be used to purchase property to the extent that
doing so would cause Landlord to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code. Tenant shall have no rights
with respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in
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connection with such audits to examine Tenant's book and records with respect
thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of
Percentage Rent, Tenant shall forthwith pay to Landlord the amount of the
deficiency as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the
date of payment thereof; PROVIDED, HOWEVER, that as to any audit that is
commenced more than twelve (12) months after the date Gross Golf Revenue for
any Fiscal Year is reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Golf Revenue
shall bear interest as permitted herein only from the date such determination
of deficiency is made unless such deficiency is the result of gross
negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue actually received by Tenant for any
Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay
all reasonable costs of such audit and examination; provided Tenant shall
have the right to submit the audit determination to arbitration in accordance
with the procedures set forth in Article 28. Landlord shall also have the
right to review and audit from time to time Tenant's business operations
including all books, records and financial statements of Tenant. Tenant
shall promptly provide to Landlord copies of all such books, records,
financial statements or any other documentation of Tenant's business
operations reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this
Section 12.7. The Operating Budget and the Capital Budget (together, the
"Annual Budget") shall be prepared in a form approved by Landlord for use
throughout the Lease Term and show by quarter and for the year as a whole the
following:
(a) Tenant's reasonable estimate of Gross Golf Revenue (including
membership dues, daily use fees and other sources of Gross Golf Revenue) and
other revenue for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Landlord and Tenant, together with assumptions,
in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
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(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed of three (3)
members of the Advisory Association unaffiliated with Tenant and two (2) members
of the board of directors of the Company. Such committee shall be responsible
for resolving any such disagreement and the parties agree that the determination
of such dispute resolution committee shall be binding on the parties. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the prior year's Operating Budget until a new Operating
Budget is adopted, and (ii) if the Capital Budget has not been agreed upon, no
Capital Expenditures shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically required by Landlord or are
otherwise required to comply with Legal Requirements or Insurance Requirements.
Tenant shall operate the Property in a manner reasonably consistent with the
Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property
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shall be kept either at the Property or at Tenant's offices in Libertyville,
Illinois. Such books and records shall be available to Landlord and its
representatives for examination, audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter (i) unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations and a balance sheet. If Landlord requests, Tenant shall provide
reviewed financial statements for such Fiscal Quarter; provided, however, such
review (except as provided for in clause (ii)) shall be at Landlord's expense.
Each quarterly report shall also include a narrative explaining any deviation in
any major revenue or expense category or operating expenses (by category) of
more than ten percent (10%) from the amounts set forth on the Annual Budget,
together with, if appropriate a revised Annual Budget, which budget shall be
subject to Landlord's review and approval as provided in Section 12.7. Each
quarterly report shall also forecast any projected Percentage Rent payable for
the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Golf Revenue if
Tenant's financial statements are not required to be separately stated by the
Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy,
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claim or encumbrance emanating from Tenant's actions or negligence, not
including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord, the
Company and Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including
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reasonable attorneys' fees and expenses) based on or arising by reason of any
such encroachment, violation or impairment and in such case, in the event of
an adverse final determination, either (i) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each
such encroachment, violation or impairment, whether the same shall affect
Landlord or Tenant; or (ii) make such changes in the Improvements, and take
such other actions, as Tenant in the good faith exercise of its judgment
deems reasonably practicable, to remove such encroachment, and to end such
violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary
in order to be able to continue the operation of the Improvements for the
Primary Intended Use substantially in the manner and to the extent the
Improvements were operated prior to the assertion of such violation or
encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy
of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however,
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shall permit Tenant to delay compliance with any requirement of an
Environmental Law to the extent such non-compliance poses an immediate
threat of injury to any Person or to the public health or safety or of
material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord
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as an additional insured or loss payee, as applicable. Losses shall be
payable to Landlord and/or Tenant as provided in this Article 15. In
addition, the policies shall name as a loss payee any Facility Mortgagee by
way of a standard form of mortgagee's loss payable endorsement. Any loss
adjustment shall require the written consent of Landlord, Tenant, and each
Facility Mortgagee, if any. Evidence of insurance shall be deposited with
Landlord and, if requested, with any Facility Mortgagee(s). The policies on
the Property, including the Improvements, Fixtures, Tangible and Intangible
Personal Property and any Tenant Improvements, shall insure against the
following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type
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of building size and use to the Property and located in the geographic area
where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written notice before the policy
or policies in question shall be altered, allowed to expire or cancelled. Each
such policy shall also provide that any loss otherwise payable thereunder shall
be payable notwithstanding (i) any act or omission of Landlord or Tenant which
might, absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those
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permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by any Facility Mortgagee pursuant to any
provision of a mortgage, note, assignment or other document evidencing or
securing a loan upon the happening of an event of default therein or (iv) any
change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less than
the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $100,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from
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time to time for the reasonable costs of such reconstruction or repair;
PROVIDED, HOWEVER, that Landlord shall disburse proceeds subject to the
following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
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(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY USE.
If during the term the Property is totally or partially destroyed from a
risk covered by the insurance described in Article 15 and the Property
thereby is rendered Unsuitable For Its Primary Intended Use as reasonably
determined by Landlord, Tenant shall, at its election, either (i)
diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term, the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15, but the Real
Property is not thereby rendered Unsuitable For Its Primary Intended Use,
Tenant shall diligently restore the Property to substantially the same
condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant shall not be required to restore certain Tangible
Personal Property and/or any Tenant Improvements if failure to do so does
not adversely affect the amount of Rent payable hereunder or the Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen
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(18) months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the then-applicable Term, then either Landlord or Tenant shall have the
right to terminate the Lease on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
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ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with no abatement of rent payable by Tenant hereunder.
In the event of any such temporary taking, the entire amount of any such Award
made for such temporary taking allocable to the Lease Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant.
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ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property, or
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(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of Landlord, or an "Event of Default" under the
Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the
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expiration of the time fixed in such notice, the Term shall terminate and all
rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's
breach of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
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(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
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17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use
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of the Property then being made, and for the proper erection, installation,
operation and maintenance of the Property or any party thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all Additional Charges accruing during the
month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses
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(including reasonable attorneys' fees and expenses), to the extent permitted
by law, imposed upon or incurred by or asserted against Landlord, the Company
or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect
to the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof
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to the indemnifying party. The indemnified party may at its option demand
indemnity under this Article 22 as soon as a claim has been threatened by a
third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise
incur, a loss as a result thereof and shall give notice of such determination
to the indemnifying party. The indemnified party shall permit the
indemnifying party, at its option and expense, to assume the defense of any
such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying
party shall fail to undertake such defense within thirty (30) days after such
notice, or within such shorter time as may be reasonable under the
circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease or
any interest therein, all or any part of the Property, whether voluntarily,
involuntarily or by operation of law. For purposes
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of this Article 23, a Change in Control of the Tenant shall constitute an
assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole discretion, further sublease or license portions of the Property to
third parties, including concessionaires or licensees. Without limiting
the foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs; and
(viii) sublease or license to operate any other portions (but
not the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to
any proposed assignment or sublease, deliver to Landlord written notice of
its intent to assign or sublease, which notice shall identify the intended
assignee or sublessee by name and address, shall specify the effective date
of the intended assignment or sublease, and
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shall be accompanied by an exact copy of the proposed assignment or
sublease. Tenant shall provide Landlord with such additional information
or documents reasonably requested by Landlord with respect to the proposed
transaction and the proposed assignee or subtenant, and an opportunity to
meet and interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent payable to Landlord hereunder.
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23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
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(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive and assignment of this Lease or subletting of the Property to Landlord
or Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth reasonably satisfactory to Landlord or, in the alternative, the
proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver to
Landlord a guaranty agreement in form and substance acceptable to Landlord; and
(ii) any proposed assignee shall grant to Landlord a security interest in favor
of Landlord in all furniture, fixtures, and other personal property to be used
by such proposed assignee in the Property. All payments required of Tenant
under this Lease, whether or not expressly denominated as such in this Lease,
shall constitute rent for the purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to
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provide adequate assurance that the Trustee will "promptly" cure defaults and
compensate Landlord for actual pecuniary loss, the word "promptly" shall mean
that cure of defaults and compensation will occur no later than sixty (60)
days following the filing of any motion or application to assume this Lease;
and (b) the obligation of the Trustee to compensate or to provide adequate
assurance that the Trustee will promptly compensate Landlord for "actual
pecuniary loss", (the term "actual pecuniary loss" shall mean, in addition to
any other provisions contained herein relating to Landlord's damages upon
default obligations of Tenant to pay money under this Lease and all
attorneys' fees and related costs of Landlord incurred in connection with any
default of Tenant in connection with Tenant's bankruptcy proceedings).
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would
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materially and adversely affect the financial condition and operations
of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee or beneficiary, affecting
any lease or the Property. In confirmation of such
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subordination, Tenant shall execute promptly any certificate that Landlord
may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party.
However, if the price at which Landlord intends to sell the Property to a third
party is less than 95% of the price set forth in the notice provided by Landlord
to Tenant, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
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26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future liabilities
and obligations under this Lease arising or accruing from and after the date of
such conveyance or other transfer as to the Property. All such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant
except as otherwise specified above in this Section 27.2. Unless otherwise
agreed in writing by the parties or required by the arbitrator or AAA, if
applicable, arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Landlord and Tenant
regarding the Property during the arbitration.
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ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
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28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 N. Adger's Wharf
Charleston, South Carolina 29401
Attn: W. Bradley Blair, II
David J. Dick
Scott D. Peters
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If to Tenant: E.W.G.C., LLC
c/o The Crescent Company
1580 S. Milwaukee Avenue, Suite 208
Libertyville, Illinois 60048
With a copy to: David Grossberg
Sachnoff & Weaver
30 S. Wacker Drive, 28th Floor
Chicago, Illinois 60606-7484
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
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be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
64
<PAGE>
LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland
corporation, General Partner
By: /s/ W. Bradley Blair, II
--------------------------------------
W. Bradley Blair, II
Its: CEO and President
TENANT: E.W.G.C., LLC,
a Georgia limited liability company
By: Eagle Watch Golf Club Limited Partnership,
an Illinois limited partnership, its sole member
By: The Crescent Company,
its General Partner
By: /s/ E. Neal Trogdon
---------------------------------
E. Neal Trogdon
Its: President
65
<PAGE>
- --------------------------------------------------------------------------------
Wildewood Country Club
The Country Club at Woodcreek Farms
Columbia
Richland County
South Carolina
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
STONEHENGE GOLF DEVELOPMENT, LLC,
TENANT
DATED AS OF DECEMBER 19, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 2
2.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 INITIAL TERM . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 EXTENSION OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 RIGHT OF FIRST OFFER TO LEASE. . . . . . . . . . . . . . . . . . 14
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 INCREASE IN INITIAL BASE RENT. . . . . . . . . . . . . . . . . . 15
4.3 PERCENTAGE RENT. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT . . . . . . . . . . . . 16
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. . . . . . . . . 16
4.6 RECORD-KEEPING . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 ADDITIONAL CHARGES . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 LATE PAYMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . 17
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE . . . . . . . . . . . . . 17
4.10 ALLOCATION OF REVENUES . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 PLEDGE OF OWNER'S SHARES . . . . . . . . . . . . . . . . . . . . 18
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS . . . . . . . . . . . . . . 18
5.3 CROSS-COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 LANDLORD'S LIEN. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 TERMINATION PAYMENT. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 PAYMENT OF IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . 19
6.2 INFORMATION AND REPORTING. . . . . . . . . . . . . . . . . . . . 19
6.3 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 REFUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 UTILITY CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 ASSESSMENT DISTRICTS . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 NO TERMINATION, ABATEMENT, ETC . . . . . . . . . . . . . . . . . 20
7.2 CONDITION OF THE PROPERTY. . . . . . . . . . . . . . . . . . . . 21
(i)
<PAGE>
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . 23
8.1 PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 TENANT'S PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . 23
8.3 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . 23
8.4 LANDLORD'S WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 SPECIFIC PROHIBITED USES . . . . . . . . . . . . . . . . . . . . 24
9.3 MEMBERSHIP SALES . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 LANDLORD TO GRANT EASEMENTS, ETC . . . . . . . . . . . . . . . . 24
9.5 TENANT'S ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . 25
9.6 VALUATION OF REMAINDER INTEREST IN LEASE . . . . . . . . . . . . 25
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 REMEDIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 VIOLATIONS; ORDERS . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 REMEDIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . . 27
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. . . . . . . . . . . . . 27
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . 28
11.2 WAIVER OF STATUTORY OBLIGATIONS. . . . . . . . . . . . . . . . . 29
11.3 MECHANIC'S LIENS . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 SURRENDER OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . . 29
12.1 TENANT'S RIGHT TO CONSTRUCT. . . . . . . . . . . . . . . . . . . 29
12.2 SCOPE OF RIGHT . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 COOPERATION OF LANDLORD. . . . . . . . . . . . . . . . . . . . . 30
12.4 CAPITAL REPLACEMENT FUND . . . . . . . . . . . . . . . . . . . . 31
12.5 RIGHTS IN TENANT IMPROVEMENTS. . . . . . . . . . . . . . . . . . 32
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE. . . 32
12.7 ANNUAL BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.8 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . 35
13.1 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. . . . . . . . . . . . . . 35
(ii)
<PAGE>
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.1 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.2 INDEMNIFICATION OF LANDLORD. . . . . . . . . . . . . . . . . . . 38
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 GENERAL INSURANCE REQUIREMENTS . . . . . . . . . . . . . . . . . 38
15.2 OTHER INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 REPLACEMENT COST . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . . . . . . . 39
15.5 FORM SATISFACTORY, ETC . . . . . . . . . . . . . . . . . . . . . 39
15.6 CHANGE IN LIMITS . . . . . . . . . . . . . . . . . . . . . . . . 40
15.7 BLANKET POLICY . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.8 INSURANCE PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 41
15.9 DISBURSEMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . . 41
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. . . . . . . . . . . . . 42
15.11 RECONSTRUCTION COVERED BY INSURANCE. . . . . . . . . . . . . . . 42
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. . . . . . . . . . . . . 43
15.13 NO ABATEMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . 43
15.14 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.15 DAMAGE NEAR END OF TERM. . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 TOTAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 PARTIAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.3 RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.4 AWARD-DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 44
16.5 TEMPORARY TAKING . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 45
17.2 PAYMENT OF COSTS . . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 CERTAIN REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 47
17.4 DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.5 ADDITIONAL REMEDIES. . . . . . . . . . . . . . . . . . . . . . . 48
17.6 APPOINTMENT OF RECEIVER. . . . . . . . . . . . . . . . . . . . . 48
17.7 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.8 APPLICATION OF FUNDS . . . . . . . . . . . . . . . . . . . . . . 49
17.9 IMPOUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . 49
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(iii)
<PAGE>
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
22.1 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . . 51
22.2 LANDLORD'S INDEMNIFICATION OF TENANT . . . . . . . . . . . . . . 52
22.3 MECHANICS OF INDEMNIFICATION . . . . . . . . . . . . . . . . . . 52
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.1 PROHIBITION AGAINST ASSIGNMENT . . . . . . . . . . . . . . . . . 53
23.2 SUBLEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.3 TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.4 REIT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 55
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. . . . . . 55
23.6 BANKRUPTCY LIMITATIONS . . . . . . . . . . . . . . . . . . . . . 56
23.7 MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . 57
24.1 OFFICER'S CERTIFICATES . . . . . . . . . . . . . . . . . . . . . 57
24.2 ENVIRONMENTAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
25.1 LANDLORD MAY GRANT LIENS . . . . . . . . . . . . . . . . . . . . 59
25.2 TENANT'S NON-DISTURBANCE RIGHTS. . . . . . . . . . . . . . . . . 59
25.3 FACILITY MORTGAGE PROTECTION . . . . . . . . . . . . . . . . . . 59
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
26.1 RIGHT OF FIRST OFFER TO PURCHASE . . . . . . . . . . . . . . . . 59
26.2 CONVEYANCE BY LANDLORD . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.1 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.2 ARBITRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.1 LANDLORD'S RIGHT TO INSPECT. . . . . . . . . . . . . . . . . . . 61
28.2 BREACH BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . 61
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. . . . . . . . . . . . . 61
28.4 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.5 REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . . 62
28.6 ACCEPTANCE OF SURRENDER. . . . . . . . . . . . . . . . . . . . . 62
28.7 NO MERGER OF TITLE . . . . . . . . . . . . . . . . . . . . . . . 62
28.8 QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 62
28.9 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.10 SURVIVAL OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . . 63
28.11 INVALIDITY OF TERMS OR PROVISIONS. . . . . . . . . . . . . . . . 63
28.12 PROHIBITION AGAINST USURY. . . . . . . . . . . . . . . . . . . . 63
(iv)
<PAGE>
28.13 AMENDMENTS TO LEASE. . . . . . . . . . . . . . . . . . . . . . . 63
28.14 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 63
28.15 TITLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.16 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.17 MEMORANDUM OF LEASE. . . . . . . . . . . . . . . . . . . . . . . 64
28.18 ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.19 NON-RECOURSE AS TO LANDLORD. . . . . . . . . . . . . . . . . . . 64
28.20 NO RELATIONSHIP. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.21 RELETTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Exhibits
Exhibit A-1 - Legal Description (Woodcreek)
Exhibit A-2 - Legal Description (Wildewood)
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Pledge Agreement
Exhibit E - INTENTIONALLY OMITTED
Exhibit F-1 - Calculation of Gross Golf Revenue for the Base Year by
Quarter (Gross Golf Revenue less than $3 million)
Exhibit F-2 - Calculation of Gross Golf Revenue for the Base Year by
Quarter (Gross Golf Revenue greater than or equal to $3
million)
(v)
<PAGE>
Wildewood Country Club
The Country Club at Woodcreek Farms
Columbia
Richland County
South Carolina
LEASE
THIS LEASE (this "Lease"), dated as of December 19, 1997, is
entered into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Landlord"), and STONEHENGE GOLF DEVELOPMENT, LLC, a South
Carolina limited liability company (in its capacity as tenant under this
Lease, "Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback
Agreement (the "Agreement") dated as of December 18, 1997 by and between
Landlord and Stonehenge Golf Development, LLC, a South Carolina limited
liability company (in its capacity as prior owner of the Property (as
hereinafter defined), "Transferor"), Transferor transferred to Landlord all
of its right, title and interest in and to the Property; and
B. Tenant desires to lease the Property from Landlord, and Landlord
desires to lease the Property to Tenant, on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the
covenants and agreements to be performed by Tenant and Landlord hereunder,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord's rights and interest (to the extent acquired from Transferor) in and
to the following real property, improvements, personal property and related
rights (collectively the "Property"):
(a) the Land;
(b) the Improvements;
1
<PAGE>
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be
adjusted annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer
for the ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
2
<PAGE>
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on
January 1, 1997, and ending on December 31, 1997; provided, however, that the
Base Year shall refer to the Fiscal Year immediately preceding the Conversion
Date if the Base Rent is increased as provided in Section 4.5.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which national banks in the City of New
York, New York, are authorized, or obligated, by law or executive order, to
close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the
Capital Replacement Reserve accrued by Landlord, together with interest
thereon as provided in Section 12.4, less amounts withdrawn from the Capital
Replacement Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means, on an annual basis, the
greater of (i) an amount equal to 3% of each Fiscal Quarter's Gross Golf
Revenue, to be accrued monthly by Landlord as part of the Capital Replacement
Fund, as provided in Section 12.4 hereof, based on the Officer's Certificate,
or (ii) Ninety Thousand Dollars ($90,000).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or
substantially all of the assets of Tenant (whether by operation of law or
otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who control Tenant as of
the date hereof no longer having Control of Tenant; or
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(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes
of Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat
of condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor
elects to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, (ii) the date
on which Transferor elects in writing to waive its right to receive
additional Owner's Shares, or (iii) the date that is the one hundred fifth
(105th) day following the end of the fifth (5th) full Fiscal Year of the
Initial Term.
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"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Section 1801, et seq.; the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. 99-499 and 99-563; the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act,
as amended, 42 U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 201, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and
local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means the date that is the last day of the
fortieth (40th) full Fiscal Quarter following the Commencement Date, as such
date may be extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other
security agreement securing any indebtedness or any other Landlord's
Encumbrance placed on the Property in accordance with the provisions of
Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a
Facility Mortgage, if any; provided Landlord has given Tenant notice of the
identity and address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable
portions thereof) in any Fiscal Year from January 1 through March 31, April 1
through June 30, July 1 through September 30 and October 1 through December
31.
"FISCAL YEAR" means the twelve (12) month period from the first
day of the first Fiscal Quarter commencing after the Commencement Date to the
last day of the fourth Fiscal Quarter commencing after the Commencement Date.
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"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection
with and permanently affixed to or incorporated into the Property, including
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which, to the
greatest extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property and any Tenant
Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from
time to time of the improvement being insured, including the increased cost
of a construction endorsement, less exclusions provided in the fire insurance
policy.
"GAAP" means generally accepted accounting principles,
consistently applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by
Tenant or any subtenants, assignees, concessionaires or licensees) from or by
reason of the operation of the golf operations at the Property calculated in
accordance with GAAP (but excluding reasonable reserves for refunds,
allowances and bad debts applicable to such operations), including, without
limitation, (i) revenues from membership initiation fees, (ii) periodic
membership dues, (iii) greens fees, (iv) fees to reserve a tee time, (v)
guest fees, (vi) golf cart rentals, (vii) parking lot fees, (viii) locker
rentals, (ix) fees for golf club storage, (x) fees for the use of swim,
tennis or other facilities, (xi) charges for range balls, range fees or other
fees for golf practice facilities, (xii) fees or other charges paid for golf
or tennis lessons (except where retained by or paid to a USTA or PGA
professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with
respect to any membership application, (xv) transfer fees imposed on any
member in connection with the transfer of any membership interest, (xvi) fees
or other charges paid to Tenant by sponsors of golf tournaments at the
Property (unless the terms under which Tenant is paid by such sponsor do not
comply with Section 23.4, in which event the gross revenues received from
such sponsor for the tournament shall be excluded from Gross Golf Revenue and
further provided that Tenant shall use commercially reasonable efforts to
structure such payment to comply with Section 23.4), (xvii) advertising or
placement fees paid by vendors in exchange for exclusive use or name rights
at the Property, and (xviii) fees received in connection with any golf
package sponsored by any
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hotel group, condominium group, golf association, travel agency, tourist or
travel association or similar payments; PROVIDED, HOWEVER, that Gross Golf
Revenue shall not include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of
machinery, vehicles, trade fixtures or personal property owned by
Tenant used in connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or
substance which is (i) defined as a "hazardous waste", "hazardous material",
or "restricted hazardous waste" or words of similar import under any
provision of any Environmental Law; (ii) petroleum or petroleum products;
(iii) asbestos; (iv) polychlorinated biphenyl; (v) radioactive material; (vi)
radon gas; (vii) designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C.
Section 1317); (viii) defined as a "hazardous waste" pursuant to Section 1004
of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. (42 U.S.C. Section 6903); or (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C.
Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which
is then carrying the largest amount of casualty insurance carried on the
Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
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(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Property and/or
the Rent or Additional Charges (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time during or in
respect of the Term hereof may be assessed or imposed on or in respect of or
be a lien upon (i) Landlord or Landlord's interest in the Property; (ii) the
Property or any part thereof or any therefrom or any estate, right, title or
interest therein; or (iii) any operation, use or possession of, or sales from
or activity conducted on or in connection with the Property or the leasing or
use of the Property or any part thereof; PROVIDED, HOWEVER, that Impositions
shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any
other Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf courses commonly known as Wildewood
Country Club and The Country Club at Woodcreek Farms, driving ranges, putting
greens, clubhouse facilities, snack bars, restaurants, pro shops, buildings,
structures, parking lots, improvements, Fixtures and other items of real estate
located on the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $1,102,500 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the fortieth (40th) full Fiscal Quarter following the
Commencement Date.
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"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal
property owned by Landlord and used solely in connection with the ownership,
operation, leasing or maintenance of the Real Property or the Tangible
Personal Property, and any and all trademarks and copyrights, guarantees,
Authorizations, general intangibles, business records, plans and
specifications, surveys, all licenses, permits and approvals solely with
respect to the construction, ownership, operation or maintenance of the
Property.
"LAND" means the land described in EXHIBIT A-1 and EXHIBIT A-2
attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor
or assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or
refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through
and including the Expiration Date (or the termination date, if earlier
terminated pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal
and other governmental statutes, laws (including the Americans with
Disabilities Act and any Environmental Laws), rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting either the Property
or the construction, use or alteration thereof, whether now or hereafter
enacted and in force, including any which may (i) require repairs,
modifications, or alterations in or to the Property; (ii) in any way
adversely affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments,
either of record or known to Tenant (other than encumbrances created by
Landlord without the consent of Tenant), at any time in force affecting the
Property; or (iii) require the cleanup or other treatment of any Hazardous
Material.
"NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
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"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by
an officer authorized to so sign by the board of directors or by-laws, or if
Tenant is a partnership, by an officer authorized to so sign by the general
partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased
or hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an
Affiliate of Landlord, other than pursuant to this Lease, which as of the
date hereof are the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate
plus an additional five percent (5%) per annum, but in no event greater than
the maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware
limited partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease
Term, thirty-three and one-third percent (331/3%) of the positive difference,
if any, between the current year's Gross Golf Revenue and the Gross Golf
Revenue for the Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the
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proposed assignee's reputation and experience in owning, operating and
managing golf courses similar in type to the Property and the proposed
assignee's net worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships,
joint stock companies, joint ventures, associations, companies, trusts,
banks, trusts companies, land trusts, business trusts, Indian tribes or other
organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as
of the date of this Lease, by and between Transferor and Landlord, in the
form attached hereto as EXHIBIT D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged
pursuant to the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of two golf courses
and other activities incidental to the operation of two golf courses.
"PRIME RATE" means on any date, a rate equal to the annual rate
on such date announced by NationsBank, N.A., or its successor entity, to be
its prime rate or, if the prime rate is discontinued, the base rate for
90-day unsecured loans to its corporate borrowers of the highest credit
standing.
"PROPERTY" means the Real Property, the Tangible Personal
Property and the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all
easements and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used
solely in connection with the Real Property, including, but not limited to,
machinery, equipment, furniture, furnishings, movable walls or partitions,
phone systems, restaurant equipment, computers or trade fixtures, golf course
operation and maintenance equipment, including mowers, tractors,
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aerators, sprinklers, sprinkler and irrigation facilities and equipment,
valves or rotors, driving range equipment, athletic training equipment,
office equipment or machines, antiques or other decorations, furniture,
computers or other control systems, and equipment or machinery of every kind
or nature, including all warranties and guaranties associated therewith, with
the exception of golf carts.
"TENANT" means Stonehenge Golf Development, LLC, a South Carolina
limited liability company and any successor thereto, or assignee thereof, as
permitted by the terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section
8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided
in Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning
provided in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended
Terms, as the context may require, unless earlier terminated pursuant to the
provisions hereof.
"TERMINATION PAYMENT" means an amount calculated on the
Expiration Date equal to the positive difference, if any, between one hundred
thirteen and one-half percent (113.5%) of all rent due under this Lease and
the Net Operating Income for the prior Fiscal Year, divided by ten and five
tenths percent (10.5%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil
commotion, fire, unavoidable casualty or other causes beyond the control of
the party responsible for performing an obligation hereunder, PROVIDED THAT
lack of funds shall not be deemed a cause beyond the control of either party
hereto unless such lack of funds is caused by the failure of the other party
hereto to perform any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of
condition of the Property such that in the good faith judgment of Landlord,
reasonably exercised, the Property cannot be operated on a commercially
practicable basis for its Primary Intended Use.
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2.2 RULES OF CONSTRUCTION. The following rules shall apply
to the construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Lease nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on the last day of the fortieth (40th)
full Fiscal Quarter following the Commencement Date.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to
extend the Initial Term of this Lease six (6) consecutive times for a period
of five (5) years each (each such extension, an "Extended Term"). Tenant may
exercise its option for an Extended Term solely by giving written notice at
least one hundred eighty (180) days prior to the termination of the
then-current term. Tenant shall be entitled to exercise these options only
if at the time of the giving of such notice, Tenant is then the lessee of the
Property pursuant to this Lease, and at the time of the commencement of the
applicable Term or Extended Term no Event of Default shall then exist.
During the Extended Term, all of the terms and conditions of this Lease shall
continue in
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full force and effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of
the Lease Term and provided that Tenant has exercised each Extended Term and
no Event of Default then exists beyond any applicable notice and cure
period, Tenant shall have a right of first offer ("Tenant's Right of First
Offer to Lease") to lease the Property upon the same terms and conditions as
Landlord, at its election, intends to offer to lease the Property to a third
party. Tenant shall be entitled to exercise Tenant's Right of First Offer to
Lease only if at the time of the giving of such notice and at the time of the
commencement of the applicable term no Event of Default shall then exist and
only if Landlord elects to lease the Property at the expiration of the Lease
Term. Not more than nine (9) months and not less than three (3) months prior
to the expiration of the Lease Term, Landlord shall, if applicable, give
Tenant written notice of its intent to lease the Property and shall indicate
the terms and conditions upon which Landlord intends to lease the Property.
Tenant shall thereafter have a period of thirty (30) days to elect by
unequivocal written notice to Landlord to lease the Property on the same
terms and conditions as Landlord intends to offer to a third party; provided
prior to Tenant's acceptance Landlord shall retain the right to elect not to
lease the Property by giving Tenant written notice thereof. If Tenant elects
not to lease the Property, then Landlord shall be free to lease the Property
to a third party. However, if the Base Rent for such proposed lease is
reduced by five percent (5%) or more as compared to the Base Rent included in
the lease that Tenant rejected, then Landlord shall again offer Tenant the
right to acquire the Property upon the same terms and conditions, provided
that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the twenty-fifth (25th) day of
each month in arrears, at Landlord's address set forth in Section 28.9 or at
such other place or to such other Person as Landlord from time to time may
designate in writing. The first monthly installment shall be prorated as to any
partial month. If any payment owing hereunder shall otherwise be due on a day
that is not a Business Day, such payment shall be due on the next succeeding
Business Day. Tenant shall receive a credit against Rent (or be paid directly,
at Landlord's option) for any operating expense credits or operating revenues
credited to Landlord pursuant to the Agreement which are applicable to any
period in the Lease Term (E.G., credit for real property taxes, membership dues,
sublease rents, etc.) and
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conversely Tenant shall reimburse Landlord for any operating expenses paid
for by Landlord pursuant to the Agreement which are the responsibility of
Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date
(the "Adjustment Date") that is the first day of the first Fiscal Quarter
commencing after the one (1) year anniversary of the Commencement Date, and
on each Adjustment Date thereafter through and including the fourth (4th)
Adjustment Date, the Annual Base Rent will increase by the lesser of (i)
three percent (3%) of the Annual Base Rent payable for the immediately
preceding year, or (ii) two hundred percent (200%) of the change in CPI from
the immediately preceding fiscal year (the "Base Rent Escalator"); provided
the January 1, 1998 increase shall be pro rated for the number of days in the
Lease Term in 1997 divided by 365 and multiplied by the applicable Base Rent
Escalator. In addition, if the Annual Base Rent is increased as provided in
Section 4.5, then the Base Rent Escalator shall continue to apply to each of
the five (5) years following such increase, with the increase effective on
the anniversary of the increase in Base Rent as provided in Section 4.5 in
lieu of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall
pay Percentage Rent as provided herein. Beginning in the first year of the
Initial Term and continuing for the Initial Term and any Extended Term,
Tenant shall calculate the Gross Golf Revenue for each Fiscal Quarter (or
shorter period, if applicable) within twenty (20) days of the end of such
Fiscal Quarter (or shorter period, if applicable) and submit such calculation
in writing to Landlord by way of an Officer's Certificate. If the Gross Golf
Revenue for that Fiscal Quarter (or shorter period, if applicable) is greater
than the Gross Golf Revenue for the same Fiscal Quarter (or shorter period,
if applicable) in the Base Year (and, following the Fiscal Quarter ending
March 31, on a year-to-date basis), then Tenant shall pay to Landlord the
Percentage Rent upon submittal of the Officer's Certificate. The Percentage
Rent payable in any period in any Fiscal Year shall be adjusted to reflect
the Percentage Rent paid on a year-to-date cumulative basis for the Fiscal
Year (pro rated for any partial periods) and the limits set forth in the next
two sentences on a pro rated basis. The increase in Rent resulting from the
payment of Percentage Rent (together with any increase in Base Rent pursuant
to Section 4.2) payable, if any, during each of the first five (5) full
Fiscal Years of the Initial Term shall be limited to five percent (5%) of the
Rent payable for the prior Fiscal Year. Tenant shall receive a credit
against the payment of Percentage Rent in an amount equal to the increase in
the Base Rent over the Initial Base Rent. Both Landlord and Tenant
acknowledge that the amount of Gross Golf Revenue for the Base Year shall be
an estimated amount due to the fact that The Country Club at Woodcreek Farms
was not in operation for much of the Base Year. If Gross Golf Revenue for
the first Fiscal Year
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of the Initial Term is less than Three Million Dollars ($3,000,000), then for
purposes of this Lease the quarter-by-quarter calculation of Gross Golf
Revenue for the Base Year shall be deemed to be as attached hereto as EXHIBIT
F-1. If the Gross Golf Revenue for the first Fiscal Year of the Initial Term
is greater than or equal to Three Million Dollars ($3,000,000), then for
purposes of this Lease the quarter-by-quarter calculation of Gross Golf
Revenue shall be deemed to be as attached hereto as EXHIBIT F-2. For
purposes of calculating the payments of Percentage Rent due during the first
Fiscal Year of the Initial Term, the Gross Golf Revenue for the Base Year
shall be deemed to be as attached hereto as EXHIBIT F-2.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty
(60) days after the end of each Fiscal Year, or after the expiration or
termination of this Lease, Tenant shall deliver to Landlord an Officer's
Certificate setting forth (i) the Gross Golf Revenue for the Fiscal Year just
ended, and (ii) a comparison of the amount of the Percentage Rent actually
paid during such Fiscal Year versus the amount of Percentage Rent actually
owing on the basis of the annual calculation of the Gross Golf Revenue. If
the Percentage Rent for such Fiscal Year exceeds the sum of the quarterly
payments of Percentage Rent previously paid by Tenant, Tenant shall pay such
deficiency to Landlord along with such Officer's Certificate. If the
Percentage Rent for such Fiscal Year is less than the amount of Percentage
Rent previously paid by Tenant, Landlord shall, at Landlord's option, either
(i) remit to Tenant its check in an amount equal to such difference, or (ii)
grant Tenant a credit against the payment of Rent next coming due. Landlord
shall have the right to audit all of Tenant's business operations at the
Property so as to determine the calculation of Percentage Rent as provided in
Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs only as a result of the
election by Transferor to receive additional Owner's Shares in the
Partnership as a Contingent Purchase Price for the contribution of the
Property, the Annual Base Rent shall be increased, effective as of the date
the additional Owner's Shares are issued to the Transferor, to an amount
equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting
system for the Property in accordance with its usual and customary practices
and in accordance with GAAP approved by Landlord, which will accurately
record all Gross Golf Revenue. Tenant shall retain all accounting records
for each Fiscal Year conforming to such accounting system until at least five
(5) years after the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when
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due and payable all other amounts, liabilities, obligations and Impositions
which Tenant assumes or agrees to pay under this Lease, and (b) in the event
of any failure on the part of Tenant to pay any of those items referred to in
clause (a) above, Tenant shall also pay and discharge every fine, penalty,
interest and cost which may be added for non-payment or late payment of such
items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"). Except as otherwise
provided in this Lease, all Additional Charges shall become due and payable
at the earlier of (i) thirty (30) days after either Landlord or the
applicable third party delivery of an invoice to Tenant, or (ii) the date of
delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that
late payment by Tenant to Landlord of Base Rent, Percentage Rent or
Additional Charges will cause Landlord to incur costs not contemplated under
the terms of this Lease, the exact amount of which is presently anticipated
to be extremely difficult to ascertain. Such costs may include processing
and accounting charges and late charges which may be imposed on Landlord by
the terms of any mortgage or deed of trust covering the Property and other
expenses of a similar or dissimilar nature. Accordingly, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within ten (10) days after the date such payment is due, Tenant will pay
Landlord on demand, as Additional Charges, a late charge equal to five
percent (5%) of such installment. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant and is not a penalty. In addition,
if any installment of Base Rent, Percentage Rent or Additional Charges (but
only as to those Additional Charges which are payable directly to Landlord)
shall not be paid within five (5) days after the due date with respect to
Base Rent or Percentage Rent or delivery of an invoice to Tenant with respect
to the Additional Charge, the amount unpaid shall bear interest, from such
due date to the date of payment thereof, computed at the Overdue Rate on the
amount of such installment, and Tenant will pay such interest to Landlord as
Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Lease, nor
prevent Landlord from exercising any other rights and remedies available to
Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be
a triple net lease and Rent shall be payable to Landlord without notice or
demand and without set-off, counterclaim, recoupment, abatement, suspension,
determent, deduction or defense, except as expressly provided herein, so that
this Lease shall yield to Landlord the full amount of the installments of Base
Rent, Percentage Rent and Additional Charges throughout the Term. Without
limiting the foregoing, Tenant
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shall pay to Landlord on a monthly basis along with Base Rent, as additional
rent, an amount equal to one-twelfth (1/12) of the Capital Replacement
Reserve. Such amounts shall be subject to reconciliation at the end of each
Fiscal Quarter and at the end of each Fiscal Year.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees
that revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES. On or prior to the
Commencement Date, Tenant shall cause the Pledge Agreement to be executed for
the benefit of Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding
the above provisions, if the Net Operating Income for the Property falls
below the coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the
Pledge Agreement, at any time following the release of any Pledged Owner's
Shares (or security deposit held by Landlord in lieu thereof), then Tenant
shall thereafter retain, and not make cash distributions (except as may be
necessary to pay any applicable taxes) to its shareholders, partners or
members, as applicable, until such time as Tenant has accumulated six (6)
months of Base Rent at the then current level. Cash distributions may be
made at such time as Tenant shall have again satisfied such coverage ratios
for two (2) consecutive Fiscal Years. Tenant shall provide Landlord with such
documentation, including Officer's Certificates and financial statements,
within forty-five (45) days after the end of each Fiscal Quarter as are
necessary to establish Tenant's compliance with the foregoing requirements.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares shall also
secure Tenant's or Tenant's Affiliates obligations under each of the leases
for the Other Leased Properties.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal
property until payment in full of all Rent and satisfaction of all of
Tenant's obligations hereunder; provided, however, Landlord shall subordinate
its lien and security interest only to that of any third party lender or
seller which finances Tenant's personal property, the terms and conditions of
such subordination to be satisfactory to Landlord in its reasonable
discretion. Tenant
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shall, upon the request of Landlord, execute such financing statements or
other documents or instruments reasonably requested by Landlord to perfect
the lien and security interests herein granted.
5.5 TERMINATION PAYMENT. On the Expiration Date, unless each
option for an Extended Term is exercised, Tenant shall pay to Landlord the
Termination Payment, if any, provided the maximum Termination Payment shall
equal the amounts in the Security Fund (as defined in the Pledge Agreement)
then held by Landlord and shall be payable solely from the proceeds thereof.
For purposes of calculating the Termination Payment, the Owner's Shares shall
have a value deemed to equal the average closing share price of common stock
of Golf Trust of America, Inc. for the five (5) day period prior to the
Expiration Date.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and
Section 17.9, Tenant will pay, or cause to be paid, all Impositions before
any fine, penalty, interest or cost may be added for non-payment, such
payments to be made directly to the taxing authorities where feasible. All
payments of Impositions shall be subject to Tenant's right of contest
pursuant to the provisions of Article 14. Upon request, Tenant shall
promptly furnish to Landlord copies of official receipts, if available, or
other satisfactory proof evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay
such Impositions. Landlord and Tenant shall, upon reasonable request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Property as may be necessary to prepare any required
returns and reports. In the event any applicable governmental authorities
classify any property covered by this Lease as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it
must legally so file. Each party, to the extent it possesses the same, will
provide the other party, upon reasonable request, with cost and depreciation
records necessary for filing returns for any property so classified as
personal property.
6.3 PRORATIONS. Impositions imposed in respect of the
tax-fiscal period during which the Lease commences or terminates shall be
adjusted and prorated between Landlord and Tenant, whether or not such
Imposition is imposed before or after such commencement or termination, and
Tenant's obligation to pay its prorated share thereof shall survive such
termination. If any
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Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of
such Imposition), Tenant may elect to pay in installments, in which event
Tenant shall pay all installments (and any accrued interest on the unpaid
balance of the Imposition) that are due during the Term hereof before any
fine, penalty, premium, further interest or cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid
prior to delinquency charges for all utilities and services, including,
without limitation, electricity, telephone, trash disposal, gas, oil, water,
sewer, communication and all other utilities used in the Property during the
Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the Leased Property into a special
assessment district or other taxing jurisdiction unless Tenant shall have
consented thereto, which consent shall not be unreasonably withheld or unless
Landlord agrees to pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21
and except as otherwise specifically provided in this Lease, and except for
those causes resulting from the willful misconduct or gross negligence of
Landlord or any person whose claim arose under Landlord, (i) Tenant, to the
extent permitted by law, shall remain bound by this Lease in accordance with
its terms and shall neither take any action without the consent of Landlord
to modify, surrender or terminate the same, nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent by
reason of, and (ii) the respective obligations of Landlord and Tenant shall
not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Property or any
portion thereof from whatever cause or any taking of the Property or any
portion thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
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(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by
Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt
and delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the
execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purposes hereunder. Regardless,
however of any inspection made by Tenant of the Property and whether or not
any patent or latent defect or condition was revealed or discovered thereby,
Tenant is leasing the Property "as is" in its present condition. Tenant
waives and releases any claim or cause of action against Landlord with
respect to the condition of the Property including any defects or adverse
conditions latent or patent, matured or unmatured, known or unknown by Tenant
or Landlord as of the date hereof. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER
ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL
NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING
ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT,
(iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION,
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(x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY,
(xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi)
COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR
LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS
SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED
BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT, AS
BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2
HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED
TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO THE
UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title
to the Property prior to the execution and delivery of this Lease and has
found the same to be satisfactory for the purposes contemplated hereby.
Tenant acknowledges that (A) Tenant or an Affiliate of Tenant has previously
operated the Property and has knowledge of its condition which is superior to
that of Landlord, (B) fee simple title, except where the Property is held
under a ground lease, (both legal and equitable) is in Landlord and that
Tenant has only the leasehold right of possession and use of the Property as
provided herein, (C) to Tenant's knowledge the Improvements conform to all
material Legal Requirements and all material Insurance Requirements, (D) all
easements necessary or appropriate for the use or operation of the Property
have been obtained, (E) all contractors and subcontractors retained by Tenant
who have performed work on or supplied materials to the Property have been
fully paid, and all materials to the Property have been fully paid for, (F)
the Improvements constructed by Tenant or any Affiliate of Tenant have been
completed in all material respects in a workmanlike manner of first class
quality, and (G) all equipment necessary or appropriate for the use or
operation of the Property has been installed and is presently operative in
all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of
such Property during the Term of and upon the terms and conditions of this
Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired
by Landlord or Tenant, in good condition and
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repair, normal wear and tear excepted. Upon the loss, destruction or
obsolescence of any Tangible Personal Property, Tenant shall replace such
property with replacements of the same type and quality as initially in
place, which such property will be owned by Tenant except to the extent
acquired with funds from the Capital Replacement Fund ("Tenant's Personal
Property"). Upon the expiration or sooner termination of this Lease, the
Tenant's Personal Property shall transfer to Landlord without requirement of
any bill of sale or assignment; provided Landlord, at its election, may
require Tenant to execute such documentation as Landlord may require to
evidence such transfer. Tenant shall not remove any Tangible Personal
Property from the Property upon termination of the Lease. If any of such
Tangible Personal Property is stored away from the Property, Tenant will
provide Landlord with proper access to the storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain,
or cause to be provided and maintained, during the entire term of the Lease,
all Tangible Personal Property, as well as merchandise for sale to the
public, and food and beverage, as shall be necessary in order to operate the
Property in compliance with (a) all applicable Legal Requirements, (b)
customary practices in the golf industry, (c) past practices of the
Transferor, and (d) such other reasonable requirements imposed by Landlord
from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal
Property may, upon notice to Landlord and during reasonable hours, enter the
Property and take possession of any of Tenant's Personal Property without
liability for trespass or conversion upon a default by Tenant, provided that
such lessor provide Landlord with the opportunity to cure the defaults of
Tenant on terms and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term,
Tenant shall use or cause to be used the Property and the improvements
thereon for its Primary Intended Use. Tenant shall not use the Property or
any portion thereof for any other use without the prior written consent of
Landlord, in Landlord's absolute discretion. No use shall be made or
permitted to be made of the Property, and no acts shall be done, which will
cause the cancellation of any insurance policy covering the Property or any
part thereof, nor shall Tenant sell or otherwise provide to patrons, or
permit to be kept, used or sold in or about the Property any article which
may be prohibited by law or by the standard form of fire insurance policies,
or any other insurance policies required to be carried hereunder, or fire
underwriters regulations. Tenant shall, at its sole cost, comply with all of
the requirements pertaining to the Property or other improvements
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of any insurance board, association, organization or company necessary for
the maintenance of insurance, as herein provided, covering the Property and
Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy
or permit the Property to be used or occupied, nor do or permit anything to
be done in or on the Property, in a manner which would (i) violate or fail to
comply with any law, rule or regulation or Legal Requirement, (ii) subject to
Article 12, cause structural injury to any of the Improvements or (iii)
constitute a public or private nuisance or waste. Tenant shall not allow any
Hazardous Material to be located in, on or under the Property, or any
adjacent property, or incorporated in the Property or any improvements
thereon except in compliance with applicable law (including any Environmental
Laws). Tenant shall not allow the Property to be used as a landfill or a
waste disposal site, or a manufacturing, distribution or disposal facility
for any Hazardous Materials. Tenant shall neither suffer nor permit the
Property or any portion thereof, including Tenant's Personal Property, to be
used in such a manner as (i) might reasonably tend to impair Landlord's title
thereto or to any portion thereof, or (ii) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as
such, or of implied dedication of the Property or any portion thereof, or
(iii) is in material violation of any applicable Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify
or reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from
time to time so long as no Event of Default has occurred and is continuing,
at the request of Tenant and at Tenant's cost and expense (but subject to the
approval of Landlord, which approval shall not be unreasonably withheld or
delayed): (i) grant easements and other rights in the nature of easements;
(ii) release existing easements or other rights in the nature of easements
which are for the benefit of the Property; (iii) dedicate or transfer
unimproved portions of the Property for road, highway or other public
purposes; (iv) execute petitions to have the Property annexed to any
municipal corporation or utility district; (v) execute amendments to any
covenants and restrictions affecting the Property; and (vi) execute and
deliver to any person any instrument appropriate to confirm or effect such
grants, releases, dedications and transfers (to the extent
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of its interest in the Property), but only upon delivery to Landlord of an
Officer's Certificate (which Officer's Certificate, if contested by Landlord,
shall not be binding on Landlord) stating that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the proper
conduct of the business of Tenant on the Property and does not reduce its
value or usefulness for the Primary Intended Use. Landlord shall not grant,
release, dedicate or execute any of the foregoing items in this Section 9.4
without obtaining Tenant's approval, which approval shall not be unreasonably
withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b)
at its election, engage in reasonable cross-marketing endeavors with the
members of the Advisory Association; and (c) at its election, provide signage
on the Property which references that the Property is owned by Landlord,
which signage may include an appropriate logo selected by Landlord. In
addition, it is the intent of the parties that Tenant be a single-purpose
entity with no business operations except for those related solely to the
operation of the Property for its Primary Intended Use and other property of
Landlord which may be leased to Tenant. Tenant shall, therefore, not engage
in or undertake any activities other than those respecting the operation of
the Property for its Primary Intended Use, including leasing, managing, and
operating golf courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market
value (determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement
Date. Tenant further represents that, at the end of the Term, including all
Extended Terms, it expects that the Land and each of the Improvements will
have a remaining useful life equal to at least twenty percent (20%) of its
expected useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in those certain Updated Phase I
Environmental Assessments dated November 26, 1997, prepared by ARM
Environmental Services, Inc., Tenant hereby represents, warrants, and
covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with
all Environmental Laws.
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10.2 REMEDIATION. Except as set forth in the Agreement, and
to the best knowledge of Tenant, there are no Environmental Laws requiring
any material remediation, cleanup, repairs or construction (other than normal
maintenance) with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the
Agreement, and to the best knowledge of Tenant, (a) no notices of any
violation or alleged violation of any Environmental Laws relating to the
Property or its uses have been received by either Tenant, or, to the best
knowledge of Tenant, by any prior owner, operator or occupant of the
Property, and (b) there are no writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending or threatened, relating to the ownership, use,
maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all
material permits and licenses required under any Environmental Laws in
respect of the operations of the Property have been obtained or are in the
process of being obtained, and Tenant shall be in compliance, in all material
respects, with the terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth
or described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of
any Hazardous Material in a quantity sufficient to require remediation or
reporting under any Environmental Law in, on or under the Property or if
Tenant, Landlord, or the Property becomes subject to any order of any
federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant
shall, at its sole expense, but subject to the last sentence of Section 10.7,
carry out and complete any required investigation, removal, remediation,
repair, closure, detoxification, decontamination or other cleanup of the
Property. If Tenant fails to implement and diligently pursue any such
repair, closure, detoxification, decontamination or other cleanup of the
Property in a timely manner, Landlord shall have the right, but not the
obligation, to carry out such action and to recover its costs and expenses
therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
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(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees
and expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any
Environmental Law) in respect of the Property howsoever arising, without
regard to fault on the part of Tenant, including (a) liability for response
costs and for costs of removal and remedial action incurred by the United
States Government, any state or local governmental unit to any other Person,
or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory,
including damages assessed for the maintenance of a public or private
nuisance or for carrying on of a dangerous activity, or (d) by reason of a
breach of a representation or warranty in Sections 10.1 through 10.5 of this
Lease. Notwithstanding the foregoing or any other provision of this Lease
(including, without limitation, Section 7.2, Section 10.9 and Article 23),
Tenant shall not be liable, or otherwise be required to indemnify Landlord or
the Company or any Affiliates of the Company for (i) any matters or events
that arise after the Commencement Date that are not caused by any act or
omission on the part of Tenant, or (ii) any matters or events that arise
after the Commencement Date that are directly caused by a breach by Landlord
of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise
terminate or expire, a violation of any Environmental Law has been asserted
by Landlord and has not been resolved in a manner reasonably satisfactory to
Landlord, or has been acknowledged by Tenant to exist or has been found to
exist at the Property or has been asserted by any governmental authority and
Tenant's failure to have completed all action required to correct, abate or
remediate such a violation of any Environmental Law materially impairs the
leasability of the Property upon the expiration of the Term, then, at the
option of Landlord, the Term shall be automatically extended with respect
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to the Property beyond the date of termination or expiration and this Lease
shall remain in full force and effect under the same terms and conditions
beyond such date with respect to the Property until the earlier to occur of
(i) the completion of all remedial action in accordance with applicable
Environmental Laws or (ii) 12 months beyond such expiration or termination
date; PROVIDED, that Tenant may, upon any such extension of the Term,
terminate the Term by paying to Landlord such amount as is necessary in the
reasonable judgment of Landlord to complete or perform such remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will
operate and maintain the Property in good order, repair and appearance
(whether or not the need for such repairs occurs as a result of Tenant's use,
any prior use, the elements or the age of the Property or any portion
thereof) and in accordance with any applicable Legal Requirements, and,
except as otherwise provided in Article 15, with reasonable promptness, make
all necessary and appropriate repairs thereto of every kind and nature,
whether interior or exterior, structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the Commencement Date (concealed or otherwise). Tenant
shall operate and maintain the Property in accordance with the operation and
maintenance practices of the Property at the Commencement Date and otherwise
in a manner comparable to other comparable golf course facilities in the
vicinity of the Property. Landlord may consult with the Advisory Association
from time to time with respect to Tenant's compliance with its maintenance
and operation obligations under this Section 11.1, and Landlord and
representatives of Advisory Association shall have the right from time to
time to enter the Property for the purpose of inspecting the Property. If
Landlord, in consultation with the Advisory Association, determines that
Tenant has failed to comply with its maintenance and operation obligations
under this Section 11.1, Landlord shall provide written notice to Tenant
setting forth a list of remedial work and/or steps to be performed by Tenant.
Tenant shall promptly and diligently perform such remedial work and/or steps
as recommended by Landlord, provided if Tenant objects to one or more of the
remedial obligations proposed by Landlord, then the matter shall be submitted
to the dispute resolution procedure set forth in Section 12.7. Tenant will
not take or omit to take any action the taking or omission of which could
reasonably be expected to impair the value or the usefulness of the Property
or any part thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not
under any circumstances be required to build or rebuild any improvements on
the Property, or to make any repairs, replacements, alterations, restorations
or renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect
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thereto, in connection with this Lease, or to maintain the Property in any
way. Tenant hereby waives, to the extent permitted by law, the right to make
repairs at the expense of Landlord pursuant to any law in effect at the time
of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of
any labor or services or the furnishing of any materials or other property
for the construction, alteration, addition, repair or demolition of or to the
Property or any part thereof; or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property, in either case, in such
fashion as would permit the making of any claim against Landlord in respect
thereof or to make any agreement that may create, or in any way be the basis
for, any right, title, interest, lien, claim or other encumbrance upon the
estate of Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the
Property to Landlord in the condition in which the Property was originally
received from Landlord, except as repaired, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Lease and except
for ordinary wear and tear (subject to the obligation of Tenant to maintain
the Property in good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior
written approval of Landlord in its reasonable discretion, during the Lease
Term Tenant may make alterations, additions, changes and/or improvements to
the Property (individually, a "Tenant Improvement," and collectively, "Tenant
Improvements"). Any such Tenant Improvement shall be made at Tenant's sole
expense and shall become the property of Landlord upon termination of this
Lease. Unless made on an emergency basis to prevent injury to Person or
property, Tenant will submit plans and specifications for any Tenant
Improvements, in the form necessary for any required building permits, to
Landlord for Landlord's prior written approval, such approval not to be
unreasonably withheld or delayed.
Upon approval by Landlord:
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(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant
Improvement, Tenant shall diligently prosecute any such Tenant Improvement
to completion in accordance with applicable insurance requirements and the
laws, rules and regulations of all governmental bodies or agencies having
jurisdiction over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or
any other claims or demands arising from the work of construction of any
Tenant Improvement to be enforced against the Property or any part thereof,
and Tenant agrees to hold Landlord and the Property free and harmless from
all liability from any such liens, claims or demands, together with all
costs and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike
manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost
and expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with
Tenant and take such actions, including the execution and delivery to Tenant
of any applications or other documents, reasonably requested by Tenant in
order to obtain any governmental approvals sought by Tenant to construct any
Tenant Improvement approved by Landlord in accordance with Section 12.1 of
this Lease within ten (10) Business Days following the later of (a) the date
Landlord receives Tenant's request, or (b) the date of delivery of any such
application or document to Landlord, so long as the taking of such action,
including the execution of said applications or documents, shall be without
cost to Landlord (or if there is a cost to Landlord, such cost shall be
reimbursed by Tenant), and will not cause Landlord to be in violation of any
law, ordinance or regulation.
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Landlord shall have the right at any time and from time to time
to post and maintain upon the Property such notices as may be necessary to
protect Landlord's interest from mechanics' liens, materialmen's liens or
liens of a similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord
shall be obligated to accrue the Capital Replacement Reserve. The Capital
Replacement Reserve shall accrue quarterly based on the Officer's Certificate
and shall be placed in the Capital Replacement Fund. Amounts in the Capital
Replacement Fund from time to time shall be deemed to accrue interest at a
money market rate as reasonably determined by Landlord and such interest
shall be credited to the Capital Replacement Fund. Upon the written request
by Tenant to Landlord stating the specific use to be made and subject to the
reasonable approval of Landlord, the Capital Replacement Fund shall be made
available to Tenant for Capital Expenditures; PROVIDED, HOWEVER, no portion
of amounts credited to the Capital Replacement Fund shall be used to purchase
property to the extent that doing so would cause Landlord to recognize income
other than "rents from real property" as defined in Section 856(d) of the
Code. Tenant shall have no rights with respect to any amounts in the Capital
Replacement Fund except as provided herein. Subject to Landlord's approval
of the Capital Expenditures, Landlord shall make available to Tenant amounts
from the Capital Replacement Fund under the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement,
or qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget
submitted to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements
shall be the property of Landlord. However, Tenant shall be entitled to all
federal and state income tax benefits associated with any Tenant Improvement
during the Lease Term exclusive of any Capital Expenditures paid for from
amounts credited to the Capital Replacement Fund, as to which Landlord shall be
entitled all income tax benefits.
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12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF
REVENUE. Landlord, at its own expense except as provided hereinbelow, shall
have the right from time to time directly or though its accountants to audit
the information set forth in the Officer's Certificate referred to in Section
4.4 and in connection with such audits to examine Tenant's book and records
with respect thereto (including supporting data, sales tax returns and
Tenant's work papers). If any such audit discloses a deficiency in the
payment of Percentage Rent, Tenant shall forthwith pay to Landlord the amount
of the deficiency as finally agreed or determined, together with interest at
the Overdue Rate from the date when said payment should have been made to the
date of payment thereof; PROVIDED, HOWEVER, that as to any audit that is
commenced more than twelve (12) months after the date Gross Golf Revenue for
any Fiscal Year is reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Golf Revenue
shall bear interest as permitted herein only from the date such determination
of deficiency is made unless such deficiency is the result of gross
negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue actually received by Tenant for any
Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay
all reasonable costs of such audit and examination; provided Tenant shall
have the right to submit the audit determination to arbitration in accordance
with the procedures set forth in Article 28. Landlord shall also have the
right to review and audit from time to time Tenant's business operations
including all books, records and financial statements of Tenant. Tenant
shall promptly provide to Landlord copies of all such books, records,
financial statements or any other documentation of Tenant's business
operations reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior
to the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget
(the "Capital Budget") prepared in accordance with the requirements of this
Section 12.7. The Operating Budget and the Capital Budget (together, the
"Annual Budget") shall be prepared in a form approved by Landlord for use
throughout the Lease Term and show by quarter and for the year as a whole the
following:
(a) Tenant's reasonable estimate of Gross Golf Revenue
(including membership dues, daily use fees and other sources of Gross Golf
Revenue) and other revenue for the forthcoming Fiscal Year itemized on
schedules on a quarterly basis as approved by Landlord and Tenant, together
with assumptions, in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next
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four Fiscal Years, subject to the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant
events, including, if requested by Landlord, a narrative description of any
category of operating expenses that decrease or increase by five percent (5%)
or more from the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of
the Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual
Budget. If the parties are not able to reach agreement on the Annual Budget
for any Fiscal Year during Landlord's thirty (30) day review period, the
parties shall attempt in good faith during the subsequent thirty (30) day
period to resolve any disputes, which attempts shall include, if requested by
either party, at least one (1) meeting of executive-level officers of
Landlord and Tenant and one (1) meeting with the directors of the Advisory
Association. In the event the parties are still not able to reach agreement
on the Annual Budget for any particular Fiscal Year after complying with the
foregoing requirements of this Section 12.7, the parties shall adopt such
portions of the Operating Budget and the Capital Budget as they may have
agreed upon, and any matters not agreed upon shall be referred to a dispute
resolution committee composed of three (3) members of the Advisory
Association unaffiliated with Tenant and two (2) members of the board of
directors of the Company. Such committee shall be responsible for resolving
any such disagreement and the parties agree that the determination of such
dispute resolution committee shall be binding on the parties. Pending the
results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated
in a manner consistent with the prior year's Operating Budget until a new
Operating Budget is adopted, and (ii) if the Capital Budget has not been
agreed upon, no Capital Expenditures shall be made unless the same are set
forth in a previously approved Capital Budget or are specifically required by
Landlord or are otherwise required to comply with Legal Requirements or
Insurance Requirements. Tenant shall operate the Property in a manner
reasonably consistent with the Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an
accounting system for the Property in accordance with its usual and customary
practice, and in accordance with GAAP, that will accurately record all data
necessary to compute Percentage Rent,
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and Tenant shall retain for at least five (5) years after the expiration of
each Fiscal Year, reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage Rent. The books of
account and all other records relating to or reflecting the operation of the
Property shall be kept either at the Property or at Tenant's offices in
Columbia, South Carolina. Such books and records shall be available to
Landlord and its representatives for examination, audit, inspection and
transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days
of the end of each Fiscal Quarter unaudited financial statements for the
Fiscal Quarter and year to date, together with the same information for the
comparable prior Fiscal Quarter and year to date, including the following:
results of operations, a balance sheet, statements of cash flows and
statement of changes in owner's equity. If Landlord requests, Tenant shall
provide reviewed financial statements for such Fiscal Quarter; provided,
however, such review shall be at Landlord's expense. Each quarterly report
shall also include a narrative explaining any deviation in any major revenue
or expense category or operating expenses (by category) of more than ten
percent (10%) from the amounts set forth on the Annual Budget, together with,
if appropriate a revised Annual Budget, which budget shall be subject to
Landlord's review and approval as provided in Section 12.7. Each quarterly
report shall also forecast any projected Percentage Rent payable for the
following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord
within sixty (60) days of the end of such Fiscal Year financial statements
prepared in accordance with GAAP and audited by an independent accounting
firm approved by Landlord, in its reasonable discretion. Notwithstanding the
foregoing, Landlord shall only require audited financial statements of Gross
Golf Revenue if Tenant's financial statements are not required to be
separately stated by the Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably
cooperate with Landlord and the Company in effecting public or private debt
or equity financings by the Landlord or the Company, without any additional
cost to Tenant, modifications to this Lease or the requirement of additional
collateral from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
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13.1 LIENS. Subject to the provisions of Article 14 relating
to permitted contests, Tenant will not directly or indirectly create or allow
to remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement
Date, as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, or any easements granted pursuant to
the provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not
required to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (1) the same are not yet
payable or are payable without the addition of any fine or penalty or (2)
such liens are in the process of being contested as permitted by Article
14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant
to the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article
21 and excepting any matters granted or created by Landlord after the
Commencement Date, if any of the Improvements shall, at any time, encroach upon
any property, street or right-of-way adjacent to the Property, or shall violate
the agreements or conditions contained in any lawful restrictive covenant or
other agreement affecting the Property, or any part thereof, or shall impair the
rights of others under any easement or right-of-way to which the Property is
subject, or the use of the Property is impaired, limited or interfered with by
reason of the exercise of the right of surface entry or any other rights under a
lease or reservation of any oil, gas, water or other minerals, then promptly
upon request of Landlord or at the behest of any person affected by any such
encroachment, violation or impairment, Tenant, at its sole cost and expense
(subject to its right to
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contest the existence of any such encroachment, violation or impairment),
shall protect, indemnify, save harmless and defend Landlord, the Company and
Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment and in such case, in
the event of an adverse final determination, either (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the
same shall affect Landlord or Tenant; or (ii) make such changes in the
Improvements, and take such other actions, as Tenant in the good faith
exercise of its judgment deems reasonably practicable, to remove such
encroachment, and to end such violation or impairment, including, if
necessary, the alteration of any of the Improvements, and in any event take
all such actions as may be necessary in order to be able to continue the
operation of the Improvements for the Primary Intended Use substantially in
the manner and to the extent the Improvements were operated prior to the
assertion of such violation or encroachment. Tenant's obligation under this
Section 13.2 shall be in addition to and shall in no way discharge or
diminish any obligation of any insurer under any policy of title or other
insurance and Tenant shall be entitled to a credit for any sums recovered by
Landlord under any such policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's
behalf (or in Landlord's name) but at Tenant's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any Imposition
or any Legal Requirement or Insurance Requirement, or any lien, attachment,
levy, encumbrance, charge or claim not otherwise permitted by Section 13.1;
provided, however, that nothing in this Section 14.1 shall limit the right of
Landlord to contest the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, Insurance Requirement, or any lien,
attachment, levy, encumbrance, charge or claim with respect to the Property
(and Tenant shall reasonably cooperate with Landlord with respect to such
contest), and, FURTHER PROVIDED THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
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(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition,
lien, encumbrance or charge, Tenant shall give such reasonable security, if
any, as may be demanded by Landlord to insure ultimate payment of the same
and to prevent any sale or forfeiture of the affected Property or the Rent
by reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage
required by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term,
Tenant shall at all times keep the Property, and all
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property located in or on the Property, including all Tenant's Personal
Property and any Tenant Improvements, insured with the kinds and amounts of
insurance described below. This insurance shall be written by companies
authorized to do insurance business in the State, and shall otherwise meet
the requirements set forth in Section 15.5 of this Lease. The policies must
name Landlord as an additional insured or loss payee, as applicable. Losses
shall be payable to Landlord and/or Tenant as provided in this Article 15.
In addition, the policies shall name as a loss payee any Facility Mortgagee
by way of a standard form of mortgagee's loss payable endorsement. Any loss
adjustment shall require the written consent of Landlord, Tenant, and each
Facility Mortgagee, if any. Evidence of insurance shall be deposited with
Landlord and, if requested, with any Facility Mortgagee(s). The policies on
the Property, including the Improvements, Fixtures, Tangible and Intangible
Personal Property and any Tenant Improvements, shall insure against the
following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in
whole or in material part a designated flood plain area) in an amount
similar to the amount insured by comparable golf course properties in the
area. Notwithstanding the foregoing, Tenant shall not be required to
participate in the National Flood Insurance Program or otherwise obtain
flood insurance to the extent not available at commercially reasonable
rates; provided Tenant shall give Landlord written notice thereof prior to
cancelling or not obtaining any flood insurance. Tenant may opt to insure
the structures only, and not the Land, subject to the approval of Landlord,
in Landlord's reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the
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approval of Landlord, in Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in
connection with any of the Property as Landlord or any Facility Mortgagee may
reasonably require, which at the time is usual and commonly obtained in
connection with properties similar in type of building size and use to the
Property and located in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes
that the Full Replacement Cost of the insured property has increased or
decreased at any time during the Lease Term, it shall have the right to have
such Full Replacement Cost redetermined by the Impartial Appraiser. The
party desiring to have the Full Replacement Cost so redetermined shall
forthwith, on receipt of such determination by such Impartial Appraiser, give
written notice thereof to the other party hereto. The determination of such
Impartial Appraiser shall be final and binding on the parties hereto, and
Tenant shall forthwith increase, or may decrease, the amount of the insurance
carried pursuant to this Section 15.3, as the case may be, to the amount so
determined by the Impartial Appraiser. Each party shall pay one-half of the
fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The
parties hereto agree that their policies will include such waiver clause or
endorsement so long as the same are obtainable without extra cost, and in the
event of such an extra charge the other party, at its election, may pay the
same, but shall not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies
of insurance referred to in Sections 15.1 and 15.2 and shall deliver
certificates thereof to Landlord prior to their effective date (and with
respect to any renewal policy, at least ten (10) days prior to the expiration
of the existing policy). In the event Tenant fails to satisfy its
obligations under this Article 15, Landlord shall be entitled, but shall have
no obligation, to effect such insurance and pay the premiums therefore, which
premiums shall be repayable to Landlord upon written demand as Additional
Charges. Each insurer issuing policies pursuant to this Article 15 shall
agree, by endorsement on the policy or policies issued by it, or by
independent instrument furnished to Landlord, that it will give to Landlord
thirty (30) days' written
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notice before the policy or policies in question shall be altered, allowed to
expire or cancelled. Each such policy shall also provide that any loss
otherwise payable thereunder shall be payable notwithstanding (i) any act or
omission of Landlord or Tenant which might, absent such provision, result in
a forfeiture of all or a part of such insurance payment, (ii) the occupation
or use of the Property for purposes more hazardous than those permitted by
the provisions of such policy, (iii) any foreclosure or other action or
proceeding taken by any Facility Mortgagee pursuant to any provision of a
mortgage, note, assignment or other document evidencing or securing a loan
upon the happening of an event of default therein or (iv) any change in title
to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at
any time reasonably determine on the basis of prudent industry practice that
the liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2
is either excessive or insufficient, the parties shall endeavor to agree on
the proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such
insurance which is self-retained by Tenant shall be as reasonably determined
by Tenant so long as Tenant can reasonably demonstrate its ability to satisfy
such deductible or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided further that the
requirements of this Article 15 are otherwise satisfied. The amount of this
total insurance allocated to each of the Leased Properties, which amount
shall be not less than the amounts required pursuant to Sections 15.1 and
15.2, shall be specified either (i) in each such "blanket" or umbrella policy
or (ii) in a written statement, which Tenant shall deliver to Landlord and
Facility Mortgagee, from the insurer thereunder. A certificate of each such
"blanket" or umbrella policy shall promptly be delivered to Landlord and
Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i)
if greater than $100,000, be paid to Landlord and held by Landlord and (ii)
if less than
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such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any
portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord
or Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies
of all necessary governmental and private approvals necessary to complete
the reconstruction or repair, including building permits, licenses,
conditional use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last disbursement,
upon receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
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(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction of the Property (or in the event neither Landlord nor Tenant
is required to or elects to repair and restore) shall be paid to Landlord and
deposited in the Capital Replacement Fund except for any portion specifically
applicable to Tenant's merchandise and inventory. All salvage resulting from
any risk covered by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount
of proceeds received by Landlord or Tenant from insurance, Tenant shall pay
for such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover
some or all of such excess, subject to the approval of Landlord in Landlord's
sole and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15 and the
Property thereby is rendered Unsuitable For Its Primary Intended Use as
reasonably determined by Landlord, Tenant shall, at its election, either
(i) diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15, but
the Real Property is not thereby rendered Unsuitable For Its Primary
Intended Use, Tenant shall diligently restore the Property to substantially
the same condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant
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shall not be required to restore certain Tangible Personal Property
and/or any Tenant Improvements if failure to do so does not adversely
affect the amount of Rent payable hereunder or the Primary Intended Use
in substantially the same manner immediately prior to such damage or
destruction. Such damage or destruction shall not terminate this Lease;
PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18) months
obtain all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need, after
diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the
Term, the Property is totally or materially destroyed from a risk not covered
by the insurance described in Article 15, whether or not such damage or
destruction renders the Property Unsuitable For Its Primary Intended Use,
Tenant shall restore the Property to substantially the same condition as
existed immediately before the damage or destruction. Tenant shall have the
right to use proceeds from the Capital Replacement Fund to perform such work,
subject to the conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full
force and effect and Tenant's obligation to make rental payments and to pay
all other charges required by this Lease shall remain unabated during the
period required for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore
under any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other
provision to the contrary in this Article 15, if damage to or destruction of
the Property occurs during the last twenty-four (24) months of the Lease
Term, and if such damage or destruction cannot reasonably be expected by
Landlord to be fully repaired or restored prior to the date that is twelve
(12) months prior to the end of the then-applicable Term, then either
Landlord or Tenant shall have the right to terminate the Lease on thirty (30)
days' prior notice to the other by giving notice thereof within sixty (60)
days after the date of such damage or destruction. Upon any such
termination, Landlord shall be entitled to retain all insurance proceeds,
grossed up by Tenant to account for the deductible or any self-insured
retention. If Landlord shall give Tenant a notice under this Section 15.15
that it seeks to
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terminate this Lease at a time when Tenant has a remaining Extended Term,
then such termination notice shall be of no effect if Tenant shall exercise
its rights to extend the Term not later than the earlier of the time required
by Section 3.2 or thirty (30) days after Landlord's notice given under this
Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the
Property is totally and permanently taken by Condemnation, this Lease shall
terminate on the Date of Taking and Tenant shall promptly pay all outstanding
rent and other charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not
thereby rendered Unsuitable For Its Primary Intended Use, but if the Property
is thereby rendered Unsuitable For Its Primary Intended Use, this Lease shall
terminate on the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the
Property and this Lease remains in full force and effect pursuant to Section
16.2, Landlord at its cost shall accomplish all necessary restoration up to
but not exceeding the amount of the Award payable to Landlord, as provided
herein. If Tenant receives an Award under Section 16.4, Tenant shall repair
or restore any Tenant Improvements up to but not exceeding the amount of the
Award payable to Tenant therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and
be paid to Landlord, except that, subject to the rights of the Facility
Mortgagee, Tenant shall be entitled to receive from the Award, if and to the
extent such Award specifically includes such items, a sum attributable to the
value, if any, of: (i) the loss of Tenant's business during the remaining
term, (ii) any Tenant Improvements and (iii) the leasehold interest of Tenant
under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any
part thereof, by military or other public authority shall constitute a taking
by Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month
period, which shall be a temporary taking, all the provisions of this Lease
shall remain in full force and effect with no abatement of rent payable by
Tenant hereunder. In the event of any such temporary taking, the entire
amount of any such Award made for such temporary taking allocable to the
Lease Term, whether paid by way of damages, rent or otherwise, shall be paid
to Tenant.
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ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following
events (individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material
term, covenant or condition of this Lease and such failure is not cured by
Tenant within a period of thirty (30) days after receipt by Tenant of
notice thereof from Landlord, unless such failure cannot with due diligence
be cured within a period of thirty (30) days, in which case such failure
shall not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as
they become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself
or of the whole or any substantial part of its property, or
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(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against
it, be adjudicated as bankrupt or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of Tenant, a
receiver of Tenant or of the whole or substantially all of its property, or
approving a petition filed against it seeking reorganization or arrangement
of Tenant under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, and such
judgment, order or decree shall not be vacated or set aside or stayed
within sixty (60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in
any certificate, demand or request made pursuant hereto proves to be
incorrect, now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant
or any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of Landlord, or an "Event of Default" under the
Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease.
Landlord may terminate this Lease by giving Tenant not less than ten (10) days'
notice (or no notice for clauses (c), (d), (e), (f) and (g)) of such termination
and upon the
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expiration of the time fixed in such notice, the Term shall terminate and all
rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's
breach of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted
by law, pay as Additional Charges all costs and expenses incurred by or on
behalf of Landlord, including reasonable attorneys' fees and expenses, as a
result of any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have
occurred and be continuing, whether or not this Lease has been terminated
pursuant to Section 17.1, Tenant shall, to the extent permitted by law, if
required by Landlord to do so, immediately surrender to Landlord the Property
pursuant to the provisions of Section 17.1 and quit the same and Landlord may
enter upon and repossess the Property by reasonable force, summary
proceedings, ejectment or otherwise, and may remove Tenant and all other
Persons and any and all Tenant's Personal Property from the Property subject
to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve
Tenant of its liability and obligations hereunder, all of which shall survive
any such termination, repossession or reletting: (a) the termination of this
Lease pursuant to Section 17.1, (b) the repossession of the Property, (c) the
failure of Landlord, notwithstanding reasonable good faith efforts, to relet
the Property, (d) the reletting of all or any portion thereof, nor (e) the
failure of Landlord to collect or receive any rentals due upon any such
reletting. In the event of any such termination, Tenant shall forthwith pay
to Landlord all Rent due and payable with respect to the Property to, and
including, the date of such termination. Thereafter, Tenant shall forthwith
pay to Landlord, at Landlord's option, as and for liquidated and agreed
current damages for Tenant's default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent
which had been earned at the time of termination,
(ii) the worth at the time of award of the amount by
which the unpaid Rent which would have been earned after
termination until the time of award exceeds the amount of such
unpaid Rent that Tenant proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of such unpaid Rent that Tenant proves
could be reasonably avoided, and
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(iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate
of the Federal Reserve Bank of San Francisco at the time of the award plus
one percent (1%) and the Percentage Rent shall be deemed to be the same as
for the then-current Fiscal Year or, if not determinable, the immediately
preceding Fiscal Year, for the remainder of the Term, or such other amount as
either party shall prove reasonably could have been earned during the
remainder of the Term or any portion thereof; or
(b) without termination of Tenant's right to possession of
the Property, each installment of said Rent and other sums payable by Tenant
to Landlord under the Lease as the same becomes due and payable, which Rent
and other sums shall bear interest at the Overdue Rate from the date when due
until paid, and Landlord may enforce, by action or otherwise, any other term
or covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies
that may be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event
of Default, and upon filing of a suit or other commencement of judicial
proceedings to enforce the rights of Landlord hereunder, Landlord shall be
entitled, as a matter or right, to the appointment of a receiver or receivers
acceptable to Landlord of the Property and of the revenues, earnings, income,
products and profits thereof, pending such proceedings, with such powers as
the court making such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section
17.1, Tenant waives, to the extent permitted by applicable law (a) any right
of redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord
under any of the provisions of this Lease during the existence or continuance
of any Event of Default (and such payment is made to Landlord rather than
Tenant due to the existence of an Event of Default) shall be applied to
Tenant's obligations in the order which Landlord may determine or as may be
prescribed by the laws of the State.
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17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same
within the relevant time periods provided in Article 17, Landlord, after
notice to and demand upon Tenant, and without waiving or releasing any
obligation or default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Tenant. Landlord may, to the extent permitted by law, enter upon
the Property for such purpose and take all such action thereon as, in
Landlord's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Tenant. All sums so paid by Landlord and all
costs and expenses (including reasonable attorneys' fees and expenses, to the
extent permitted by law) so incurred, together with a late charge thereon at
the Overdue Rate from the date on which such sums or expenses are paid or
incurred by Landlord, shall be paid by Tenant to Landlord on demand. The
obligations of Tenant and rights of Landlord contained in this Article 18
shall survive the expiration or earlier termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at
its expense, shall promptly (a) comply with all Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair
and restoration of the Property, whether or not compliance therewith shall
require structural changes in any of the Improvements or interfere with the
use and enjoyment of the Property; and (b) procure, maintain and comply with
all licenses and other authorizations required for any use
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of the Property then being made, and for the proper erection, installation,
operation and maintenance of the Property or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the
Property after the expiration of the Term or earlier termination of the Term
hereof, such possession shall be deemed to be a tenant at sufferance during
which time Tenant shall pay as rental each month, 125% of the aggregate of
(i) the aggregate Base Rent and monthly portion of the Percentage Rent
payable with respect to that month in the last Fiscal Year; (ii) all
Additional Charges accruing during the month; and (iii) all other sums, if
any, payable by Tenant pursuant to the provisions of this Lease with respect
to the Property. During such period of month-to-month tenancy, Tenant shall
be obligated to perform and observe all of the terms, covenants and
conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent given by law to month-to-month tenancies, to continue
its occupancy and use of the Property. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over
of Tenant after the expiration or earlier termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage
or destruction thereof by fire, flood, the elements, casualties, thefts,
riots, wars or otherwise, or in consequence of foreclosures, attachments,
levies or executions (other than by Landlord and those claiming from, through
or under Landlord) is assumed by Tenant. In the absence of gross negligence,
willful misconduct or breach of this Lease by Landlord pursuant to Section
28.2, Landlord shall in no event be answerable or accountable therefor nor
shall any of the events mentioned in this Article 21 entitle Tenant to any
abatement of Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as
otherwise provided in Section 10.7 and notwithstanding the existence of any
insurance provided for in Article 15, and without regard to the policy limits
of any such insurance, Tenant will protect, indemnify, save harmless and
defend Landlord, the Company and Affiliates of the Company from and against
all liabilities, obligations, claims, actual or consequential damages,
penalties, causes of action, costs and expenses
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(including reasonable attorneys' fees and expenses), to the extent permitted
by law, imposed upon or incurred by or asserted against Landlord, the Company
or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair
of the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of
any and all existing and future subleases of the Property to be performed
by the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with
respect to the Property; or
(h) any liability Landlord may incur or suffer as a result of
any permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall
protect, indemnify, save harmless and defend Tenant from and against all
liabilities, obligations, claims, actual or consequential damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees)
imposed upon or incurred by or asserted against Tenant as a result of Landlord's
active, gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof
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to the indemnifying party. The indemnified party may at its option demand
indemnity under this Article 22 as soon as a claim has been threatened by a
third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise
incur, a loss as a result thereof and shall give notice of such determination
to the indemnifying party. The indemnified party shall permit the
indemnifying party, at its option and expense, to assume the defense of any
such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying
party shall fail to undertake such defense within thirty (30) days after such
notice, or within such shorter time as may be reasonable under the
circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE
INSURANCE PROCEEDS. Tenant's or Landlord's liability for a breach of the
provisions of this Article 22 arising during the term hereof shall survive
any termination of this Lease. Notwithstanding anything herein to the
contrary, each party agrees to look first to the available proceeds from any
insurance it carries in connection with the Property prior to seeking
indemnification or otherwise seeking to recover any amounts to compensate a
party for its damages and then to seek indemnification only to the extent of
any loss not covered by their available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not,
without the prior written consent of Landlord, which consent Landlord may
withhold in its sole discretion, assign, mortgage, pledge, hypothecate,
encumber or otherwise transfer (except to an Affiliate of Tenant or a
Permitted Assignee) the Lease or any interest therein, all or any part of the
Property, whether voluntarily, involuntarily or by operation of law. For
purposes
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of this Article 23, a Change in Control of the Tenant shall constitute an
assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole discretion, further sublease or license portions of the Property to
third parties, including concessionaires or licensees. Without limiting
the foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs;
and
(viii) sublease or license to operate any other portions
(but not the entirety) of the Property customarily associated with
or incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the
Property shall be subject and subordinate to the provisions of this Lease.
No sublease made as permitted by this Section 23.2 shall affect or reduce
any of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior
to any proposed assignment or sublease, deliver to Landlord written notice
of its intent to assign or sublease, which notice shall identify the
intended assignee or sublessee by name and address, shall specify the
effective date of the intended assignment or sublease, and
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shall be accompanied by an exact copy of the proposed assignment or
sublease. Tenant shall provide Landlord with such additional information
or documents reasonably requested by Landlord with respect to the proposed
transaction and the proposed assignee or subtenant, and an opportunity to
meet and interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way
impair the continuing primary liability of Tenant hereunder, as a principal and
not as a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent payable to Landlord hereunder.
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23.4 REIT LIMITATIONS. Anything contained in this Lease to
the contrary notwithstanding, Tenant shall not (i) sublet or assign or enter
into other arrangements such that the amounts to be paid by the sublessee or
assignee thereunder would be based, in whole or in part, on the income or
profits derived by the business activities of the sublessee or assignee; (ii)
sublet or assign the Property or this Lease to any person that Landlord owns,
directly or indirectly (by applying constructive ownership rules set forth in
Section 856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or
assign the Property or this Lease in any other manner or otherwise derive any
income which could cause any portion of the amounts received by Landlord
pursuant to this Lease or any sublease to fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or which could
cause any other income received by Landlord to fail to qualify as income
described in Section 856(c)(2) of the Code. The requirements of this Section
23.4 shall likewise apply to any further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD.
In addition to Landlord's rights in Section 23.1, Landlord or its designee
shall have, for a period of sixty (60) days following receipt of the written
notice of Tenant's intent to assign its interest in the Lease to a third
party unaffiliated with Tenant (and in which management of the Tenant shall
have no continuing management or ownership interest), the right to elect to
purchase the leasehold interest on the terms and conditions at which Tenant
proposes to sell or assign its interest. If Landlord or its designee elects
not to purchase such interest of Tenant, then Tenant shall be free to sell
its interest to a third party, subject to Landlord's prior written consent as
provided in Section 23.1. However, if (i) the price at which Tenant intends
to sell its interest is reduced by five percent (5%) or more, or (ii) the
assignment to the third party is not completed within one hundred eighty
(180) days of Landlord's receipt of written notice of Tenant's intention to
assign its interest in the Lease, then Tenant shall again offer Landlord the
right to acquire its interest; provided, however, that in the case of a
change in price, Landlord shall have only fifteen (15) days to accept such
revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor
in possession, or the trustee for Tenant (collectively, the "Trustee") in
any proceeding under Title 11 of the United States Bankruptcy Code relating
to Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request
any extension of time to assume or reject this Lease or to perform any
obligations of this Lease which arise from or after the order of relief.
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(b) If the Trustee proposes to assume or to assign this Lease
or sublet the Property (or any portion thereof) to any Person which shall
have made a bona fide offer to accept an assignment of this Lease or a
subletting on terms acceptable to the Trustee, the Trustee shall give
Landlord, and lessors and mortgagees of Landlord of which Tenant has notice,
written notice setting forth the name and address of such person and the
terms and conditions of such offer, no later than twenty (20) days after
receipt of such offer, but in any event no later than ten (10) days prior to
the date on which the Trustee makes application to the bankruptcy court for
authority and approval to enter into such assumption and assignment or
subletting. Landlord shall have the prior right and option, to be exercised
by written notice to the Trustee given at any time prior to the effective
date of such proposed assignment or subletting, to receive and assignment of
this Lease or subletting of the Property to Landlord or Landlord's designee
upon the same terms and conditions and for the same consideration, if any, as
the bona fide offer made by such person, less any brokerage commissions which
may be payable out of the consideration to be paid by such person for the
assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's
rights and obligations under this Lease only if the Trustee: (a) promptly
cures any Event of Default then existing or provides adequate assurance that
the Trustee will promptly compensate Landlord for any actual pecuniary loss
incurred by Landlord as a result of Tenant's default under this Lease; and
(c) provides adequate assurance of future performance under this Lease.
Adequate assurance of future performance by the proposed assignee shall
include, as a minimum, that: (i) any proposed assignee of this Lease shall
provide to Landlord an audited financial statement, dated no later than six
(6) months prior to the effective date of such proposed assignment or
sublease, with no material change therein as of the effective date, which
financial statement shall show the proposed assignee to have a net worth
reasonably satisfactory to Landlord or, in the alternative, the proposed
assignee shall provide a guarantor of such proposed assignee's obligations
under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver
to Landlord a guaranty agreement in form and substance acceptable to
Landlord; and (ii) any proposed assignee shall grant to Landlord a security
interest in favor of Landlord in all furniture, fixtures, and other personal
property to be used by such proposed assignee in the Property. All payments
required of Tenant under this Lease, whether or not expressly denominated as
such in this Lease, shall constitute rent for the purposes of Title 11 of the
Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy
code relating to (a) the obligation of the Trustee to
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provide adequate assurance that the Trustee will "promptly" cure defaults and
compensate Landlord for actual pecuniary loss, the word "promptly" shall mean
that cure of defaults and compensation will occur no later than sixty (60)
days following the filing of any motion or application to assume this Lease;
and (b) the obligation of the Trustee to compensate or to provide adequate
assurance that the Trustee will promptly compensate Landlord for "actual
pecuniary loss." The term "actual pecuniary loss" shall mean, in addition to
any other provisions contained herein relating to Landlord's damages upon
default, obligations of Tenant to pay money under this Lease and all
attorneys' fees and related costs of Landlord incurred in connection with any
default of Tenant in connection with Tenant's bankruptcy proceedings).
(e) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed, without
further act or deed, to have assumed all of the obligations arising under
this Lease and each of the conditions and provisions hereof on and after the
date of such assignment. Any such assignee shall, upon the request of
Landlord, forthwith execute and deliver to Landlord an instrument, in form
and substance acceptable to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written
consent of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or
that this Lease is in full force and effect as modified and setting forth
the modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is
in default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no
proceedings pending or, to the knowledge of the signatory, threatened,
against Tenant before or by any court or administrative agency which, if
adversely decided, would
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materially and adversely affect the financial condition and operations
of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within
such time shall constitute an acknowledgement by Tenant that this Lease is
unmodified and in full force and effect except as may be represented to the
contrary by Landlord, Landlord is not in default in the performance of any
covenant, agreement or condition contained in this Lease and the other
matters set forth in such request, if any, are true and correct. Any such
Officer's Certificate furnished pursuant to this Section 24.1 may be relied
upon by Landlord and any prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's
learning, or having reasonable cause to believe, that any Hazardous Material
in a quantity sufficient to require remediation or reporting under applicable
law is located in, on or under the Property or any adjacent property, Tenant
shall notify Landlord in writing of (a) the existence of any such Hazardous
Material; (b) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened; (c) any claim made or
threatened by any Person against Tenant or the Property relating to damage,
contribution, cost recovery, compensation, loss, or injury resulting from or
claimed to result from any Hazardous Material; and (d) any reports made to
any federal, state or local environmental agency arising out of or in
connection with any Hazardous Material in or removed from the Property,
including any complaints, notices, warnings or asserted violations in
connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2,
without the consent of Tenant, Landlord may, from time to time, directly or
indirectly, create or otherwise cause to exist any Landlord's Encumbrance
upon the Property, or any portion thereof or interest therein, whether to
secure any borrowing or other means of financing or refinancing. This Lease
is and at all times shall be subject and subordinate to any ground or
underlying leases, mortgages, trust deeds or like encumbrances, which may now
or hereafter affect the Property and to all renewals, modifications,
consolidations, replacements and extensions of any such lease, mortgage,
trust deed or like encumbrance. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee or beneficiary, affecting any lease or
the Property. In confirmation of such
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subordination, Tenant shall execute promptly any certificate that Landlord
may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall
pay all Rent as the same becomes due and shall fully comply with all of the
terms of this Lease and fully perform its obligations hereunder, none of
Tenant's rights under this Lease shall be disturbed by the holder of any
Landlord's Encumbrance which is created or otherwise comes into existence
after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the
holder of any Landlord Encumbrance shall have no duty, liability or
obligation to perform any of the obligations of Landlord under this Lease,
but that in the event of Landlord's default with respect to any such
obligation, Tenant will give any such holder whose name and address have been
furnished Tenant in writing for such purpose notice of Landlord's default and
allow such holder thirty (30) days following receipt of such notice for the
cure of said default before invoking any remedies Tenant may have by reason
thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to
sell the Property during the Lease Term, and provided no Event of Default
then exists, Tenant shall have a right of first offer to purchase the
Property ("Tenant's Right of First Offer to Purchase") on the terms and
conditions at which Landlord proposes to sell the Property to a third party.
Landlord shall give Tenant written notice of its intent to sell and shall
indicate the terms and conditions (including the sale price) upon which
Landlord intends to sell the Property to a third party. Tenant shall
thereafter have sixty (60) days to elect in writing to purchase the Property
and execute a Purchase and Sale Agreement with respect thereto and shall have
an additional fifty (50) days to close on the acquisition of the Property on
the terms and conditions set forth in the notice provided by Landlord to
Tenant; provided that prior to the execution of a binding purchase and sale
agreement, Landlord shall retain the right to elect not to sell the Property.
If Tenant does not elect to purchase the Property, then Landlord shall be
free to sell the Property to a third party. However, if the price at which
Landlord intends to sell the Property to a third party is less than 95% of
the price set forth in the notice provided by Landlord to Tenant, then
Landlord shall again offer Tenant the right to acquire the Property upon the
same terms and conditions, provided that Tenant shall have only thirty (30)
days thereafter to complete the acquisition at such price, terms and
conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the
Property in accordance with the terms hereof other
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than as security for a debt, Landlord shall, upon the written assumption by
the transferee of the Property of all liabilities and obligations of the
Lease be released from all future liabilities and obligations under this
Lease arising or accruing from and after the date of such conveyance or other
transfer as to the Property. All such future liabilities and obligations
shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in
which it shall become necessary to resort to arbitration, such arbitration
shall be determined as provided in this Section 27.1. The party desiring
such arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by
the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced
pursuant to Section 27.1 a single arbitrator shall be designated and shall
resolve the dispute. The arbitrator's decision shall be binding on all
parties and shall not be subject to further review or appeal except as
otherwise allowed by applicable law. Upon the failure of either party (the
"non-complying party") to comply with his decision, the arbitrator shall be
empowered, at the request of the other party, to order such compliance by the
non-complying party and to supervise or arrange for the supervision of the
non-complying party. To the maximum extent practicable, the arbitrator and
the parties, and the AAA if applicable, shall take any action necessary to
insure that the arbitration shall be concluded within ninety (90) days of the
filing of such dispute. The fees and expenses of the arbitrator shall be
shared equally by Landlord and Tenant. Unless otherwise agreed in writing by
the parties or required by the arbitrator or AAA, if applicable, arbitration
proceedings hereunder shall be conducted in the State. Notwithstanding
formal rules of evidence, each party may submit such evidence as each party
deems appropriate to support its position and the arbitrator shall have
access to and right to examine all books and records of Landlord and Tenant
regarding the Property during the arbitration.
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ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit
Landlord and its authorized representatives to inspect the Property during
usual business hours subject to any security, health, safety or
confidentiality requirements of Tenant or any governmental agency or
insurance requirement relating to the Property, or imposed by law or
applicable regulations. Landlord shall indemnify Tenant for all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Tenant by reason of Landlord's
inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease
if Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of
thirty (30) days, in which case such failure shall not be deemed to continue
if Landlord, within said thirty (30)-day period, proceeds promptly and with
due diligence to cure the failure and diligently completes the curing
thereof. The time within which Landlord shall be obligated to cure any such
failure shall also be subject to extension of time due to the occurrence of
any Unavoidable Delay. In no event shall any breach by Landlord permit
Tenant to terminate this Lease or permit Tenant to offset any Rent due and
owing hereunder or otherwise excuse Tenant from any of its obligations
hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and
Tenant agree that neither party shall be restricted as to other relationships
and competition. Affiliates of Tenant shall be allowed to own, lease and/or
manage other golf courses that are not affiliated with Landlord, provided
that such other ownership, leasing or management arrangements are disclosed
to Landlord in writing. Landlord may acquire or own golf courses that may be
geographically proximate to one or more golf courses that Tenant or
Affiliates of Tenant may own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist
upon the strict performance of any term hereof or to exercise any right,
power or remedy consequent upon a breach thereof, and no acceptance of full
or partial payment of Rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of any such term. To the extent
permitted by law, no waiver of any breach shall affect or alter this Lease,
which shall continue in full force and effect with respect to any other then
existing or subsequent breach.
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28.5 REMEDIES CUMULATIVE. To the extent permitted by law,
each legal, equitable or contractual rights, power and remedy of Landlord or
Tenant now or hereafter provided either in this Lease or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power and remedy. The exercise or beginning of the
exercise by Landlord or Tenant of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by
Landlord or Tenant of any or all of such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of
this Lease or of the Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing
by Landlord and no act by Landlord or any representative or agent of
Landlord, other than such a written acceptance by Landlord, shall constitute
an acceptance of any such surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this
Lease or of the leasehold estate created hereby by reason of the fact that
the same Person may acquire, own or hold, directly or indirectly, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as
the same becomes due and shall fully comply with all of the terms of this
Lease and fully perform its obligations hereunder, Tenant shall peaceably and
quietly have, hold and enjoy the Property for the Term hereof, free of any
claim or other action by Landlord or anyone claiming by, through or under
Landlord, but subject to all liens and encumbrances of record as of the date
hereof or any Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and
delivered or mailed (by registered or certified mail, return receipt
requested and postage prepaid), addressed to the respective parties, as set
forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
If to Tenant: Stonehenge Golf Development, LLC
90 Mallet Hill Road
Columbia, South Carolina 29223
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28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to
the contrary notwithstanding, all claims against, and liabilities of, Tenant
or Landlord arising prior to any date of termination of this Lease shall
survive such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or
provision of this Lease or any application thereof shall be invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided
for in any provision of this Lease are based upon a rate in excess of the
maximum rate permitted by applicable law, the parties agree that such charges
shall be fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any
provision hereof may be changed, waived, discharged or terminated except by
an instrument in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties
hereto. All permitted assignees or sublessees shall be subject to the terms
and provisions of this Lease.
28.15 TITLES. The headings in this Lease are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and
construed in accordance with the laws of the State (but not including its
conflict of laws rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly
upon the request of either, enter into a short form memorandum of this Lease,
in form and substance satisfactory to Landlord and suitable for recording
under the State, in which reference to this Lease, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording
such Memorandum of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease
or arising out of the subject matter of this Lease, the prevailing party
shall be entitled to recover against the other party reasonable attorneys'
fees and court costs.
28.19 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease,
express or implied, is intended to confer any rights or
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remedies under or by reason of this Lease on any Person other than the
parties to this Lease and their respective permitted successors and assigns,
nor is anything in this Lease intended to relieve or discharge any obligation
of any third Person to any party hereto or give any third Person any right of
subrogation or action against any party to this Lease.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein
to the contrary notwithstanding, any claim based on or in respect of any
liability of Landlord under this Lease shall be enforced only against the
Property and not against any other assets, properties or funds of (a)
Landlord, (b) any director, officer, general partner, limited partner,
employee or agent of Landlord, or any general partner of Landlord, any of
their respective general partners or stockholders (or any legal
representative, heir, estate, successor or assign of any thereof), (c) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of their respective general partners, either directly or
through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer,
employee or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed
for any purpose to be a partner, joint venturer or associate of Tenant or of
any subtenant, operator, concessionaire or licensee of Tenant with respect to
the Property or any of the Other Leased Properties or otherwise in the
conduct of their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to
extend or further extend the Term under Section 3.2 or if an Event of Default
occurs, then Landlord shall have the right during the remainder of the Term
then in effect to advertise the availability of the Property for sale or
reletting and to show the Property to prospective purchasers or tenants or
their agents at such reasonable times as Landlord may elect.
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LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
---------------------------------
W. Bradley Blair, II
President and CEO
TENANT: STONEHENGE GOLF DEVELOPMENT, LLC,
a South Carolina limited liability company
By: /s/ Lyndell L. Young
---------------------------------
Its: President
--------------------------------
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Bonaventure Golf Courses
Weston
Broward County
Florida
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
EMERALD DUNES - BONAVENTURE, INC.
TENANT
DATED AS OF JANUARY 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 2
2.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 INITIAL TERM . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 EXTENSION OPTIONS. . . . . . . . . . . . . . . . . . . . . . . 14
3.3 RIGHT OF FIRST OFFER TO LEASE. . . . . . . . . . . . . . . . . 14
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 INCREASE IN INITIAL BASE RENT. . . . . . . . . . . . . . . . . 16
4.3 PERCENTAGE RENT. . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT . . . . . . . . . . . 16
4.5 INCREASE IN BASE RENT FOR CAPITAL IMPROVEMENTS . . . . . . . . 16
4.6 RECORD-KEEPING . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 ADDITIONAL CHARGES . . . . . . . . . . . . . . . . . . . . . . 17
4.8 LATE PAYMENT OF RENT . . . . . . . . . . . . . . . . . . . . . 17
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE . . . . . . . . . . . . 18
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 PLEDGE OF OWNER'S SHARES . . . . . . . . . . . . . . . . . . . 18
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS . . . . . . . . . . . . . 18
5.3 LANDLORD'S LIEN. . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 TERMINATION PAYMENT. . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 PAYMENT OF IMPOSITIONS . . . . . . . . . . . . . . . . . . . . 19
6.2 INFORMATION AND REPORTING. . . . . . . . . . . . . . . . . . . 19
6.3 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 REFUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 UTILITY CHARGES. . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 ASSESSMENT DISTRICTS . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 NO TERMINATION, ABATEMENT, ETC . . . . . . . . . . . . . . . . 20
7.2 CONDITION OF THE PROPERTY. . . . . . . . . . . . . . . . . . . 21
(i)
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ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . 22
8.1 PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 TENANT'S PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . 22
8.3 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 23
8.4 PURCHASE OF INVENTORY. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 SPECIFIC PROHIBITED USES . . . . . . . . . . . . . . . . . . . 24
9.3 MEMBERSHIP SALES . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 LANDLORD TO GRANT EASEMENTS, ETC . . . . . . . . . . . . . . . 24
9.5 TENANT'S ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . 25
9.6 VALUATION OF REMAINDER INTEREST IN LEASE . . . . . . . . . . . 25
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 REMEDIATION. . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . 26
10.3 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. . . . . . . . . . . . 27
10.4 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 28
11.2 WAIVER OF STATUTORY OBLIGATIONS. . . . . . . . . . . . . . . . 28
11.3 MECHANIC'S LIENS . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 SURRENDER OF PROPERTY. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . 29
12.1 TENANT'S RIGHT TO CONSTRUCT. . . . . . . . . . . . . . . . . . 29
12.2 SCOPE OF RIGHT . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 COOPERATION OF LANDLORD. . . . . . . . . . . . . . . . . . . . 30
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.4 CAPITAL REPLACEMENT FUND . . . . . . . . . . . . . . . . . . . 31
12.5 RIGHTS IN TENANT IMPROVEMENTS. . . . . . . . . . . . . . . . . 32
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS REVENUE . . . . 32
12.7 ANNUAL BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . 33
12.8 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . 35
13.1 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. . . . . . . . . . . . . 36
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.1 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 37
14.2 INDEMNIFICATION OF LANDLORD. . . . . . . . . . . . . . . . . . 38
(ii)
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ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 GENERAL INSURANCE REQUIREMENTS . . . . . . . . . . . . . . . . 38
15.2 OTHER INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 REPLACEMENT COST . . . . . . . . . . . . . . . . . . . . . . . 40
15.4 WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . . . . . . 40
15.5 FORM SATISFACTORY, ETC . . . . . . . . . . . . . . . . . . . . 40
15.6 CHANGE IN LIMITS . . . . . . . . . . . . . . . . . . . . . . . 41
15.7 BLANKET POLICY . . . . . . . . . . . . . . . . . . . . . . . . 41
15.8 INSURANCE PROCEEDS . . . . . . . . . . . . . . . . . . . . . . 41
15.9 DISBURSEMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . 41
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. . . . . . . . . . . . 43
15.11 RECONSTRUCTION COVERED BY INSURANCE. . . . . . . . . . . . . . 43
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. . . . . . . . . . . . 44
15.13 NO ABATEMENT OF RENT . . . . . . . . . . . . . . . . . . . . . 44
15.14 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.15 DAMAGE NEAR END OF TERM. . . . . . . . . . . . . . . . . . . . 44
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.1 TOTAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.2 PARTIAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . 45
16.3 RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.4 AWARD-DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 45
16.5 TEMPORARY TAKING . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 45
17.2 PAYMENT OF COSTS . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 CERTAIN REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 48
17.4 DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.5 ADDITIONAL REMEDIES. . . . . . . . . . . . . . . . . . . . . . 49
17.6 APPOINTMENT OF RECEIVER. . . . . . . . . . . . . . . . . . . . 49
17.7 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.8 APPLICATION OF FUNDS . . . . . . . . . . . . . . . . . . . . . 49
17.9 IMPOUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . 50
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
22.1 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . 51
22.2 LANDLORD'S INDEMNIFICATION OF TENANT . . . . . . . . . . . . . 52
(iii)
<PAGE>
22.3 MECHANICS OF INDEMNIFICATION . . . . . . . . . . . . . . . . . 52
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 53
23.1 PROHIBITION AGAINST ASSIGNMENT . . . . . . . . . . . . . . . . 53
23.2 SUBLEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
23.3 TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.4 REIT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . 55
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. . . . . 56
23.6 BANKRUPTCY LIMITATIONS . . . . . . . . . . . . . . . . . . . . 56
23.7 MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . 58
24.1 OFFICER'S CERTIFICATES . . . . . . . . . . . . . . . . . . . . 58
24.2 ENVIRONMENTAL STATEMENTS . . . . . . . . . . . . . . . . . . . 59
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
25.1 LANDLORD MAY GRANT LIENS . . . . . . . . . . . . . . . . . . . 59
25.2 TENANT'S NON-DISTURBANCE RIGHTS. . . . . . . . . . . . . . . . 60
25.3 FACILITY MORTGAGE PROTECTION . . . . . . . . . . . . . . . . . 60
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
26.1 RIGHT OF FIRST OFFER TO PURCHASE . . . . . . . . . . . . . . . 60
26.2 CONVEYANCE BY LANDLORD . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
27.1 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . 61
27.2 ARBITRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.1 TRANSFER OF INVENTORY. . . . . . . . . . . . . . . . . . . . . 62
28.2 LANDLORD'S RIGHT TO INSPECT. . . . . . . . . . . . . . . . . . 62
28.3 BREACH BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . 62
28.4 COMPETITION BETWEEN LANDLORD AND TENANT. . . . . . . . . . . . 62
28.5 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.6 REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . 63
28.7 ACCEPTANCE OF SURRENDER. . . . . . . . . . . . . . . . . . . . 63
28.8 NO MERGER OF TITLE . . . . . . . . . . . . . . . . . . . . . . 63
28.9 QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . 63
28.10 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.11 SURVIVAL OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . 64
28.12 INVALIDITY OF TERMS OR PROVISIONS. . . . . . . . . . . . . . . 64
28.13 PROHIBITION AGAINST USURY. . . . . . . . . . . . . . . . . . . 64
28.14 AMENDMENTS TO LEASE. . . . . . . . . . . . . . . . . . . . . . 64
28.15 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 64
28.16 TITLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.17 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . 64
(iv)
<PAGE>
28.18 MEMORANDUM OF LEASE. . . . . . . . . . . . . . . . . . . . . . 64
28.19 ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . 64
28.20 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . 65
28.21 NON-RECOURSE AS TO LANDLORD. . . . . . . . . . . . . . . . . . 65
28.22 NO RELATIONSHIP. . . . . . . . . . . . . . . . . . . . . . . . 65
28.23 RELETTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Pledge Agreement
Exhibit E - Adjustments to Gross Golf Revenue and Gross Profit
Exhibit F - Schedule of Capital Improvements
(v)
<PAGE>
Bonaventure Golf Courses
Weston
Broward County
Florida
LEASE
THIS LEASE (this "Lease"), dated as of January 1, 1998, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and EMERALD DUNES-BONAVENTURE, INC., a Florida corporation
("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement (the
"Agreement") dated as of November 26, 1997 by and between Landlord and
Bonaventure Country Club Associates, a Florida general partnership
("Transferor"), Transferor transferred to Landlord all of its right, title and
interest in and to the Property (as hereafter defined); and
B. Tenant, desires to lease the Property from Landlord, and Landlord
desires to lease the Property to Tenant, on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
rights and interest (to the extent acquired from Transferor) in and to the
following real property, improvements, personal property and related rights
(collectively the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if
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any, in and to all mineral and water rights and all easements, rights-of-
way and other appurtenances used or connected with the beneficial use or
enjoyment of the Land and the Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in
Section 4.7.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
2
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"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL IMPROVEMENTS" has the meaning provided in Section 12.3.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the Capital
Replacement Reserve accrued by Landlord, together with interest thereon as
provided in Section 12.4, less amounts withdrawn from the Capital Replacement
Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means, beginning at the commencement of
the fourth (4th) Fiscal Year, on an annual basis, the greater of (i) an amount
equal to 3% of each Fiscal Quarter's Gross Golf Revenue, to be accrued monthly
by Landlord as part of the Capital Replacement Fund, as provided in Section 12.4
hereof, based on the Officer's Certificate, or (ii) One Hundred Fifty Thousand
Dollars ($150,000).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof,
exclusive of transfers to spouse and lineal descendants of any stockholder
of Tenant as well as any trust created for estate planning purposes where
such stockholder and/or spouses and lineal descendants are beneficiaries;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who control Tenant as of
the date hereof no longer having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an
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entity owned and Controlled by an Affiliate of Tenant as of the date
hereof), and Tenant is not the surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes of
Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as
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<PAGE>
amended, 42 U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 201, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and
local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means the date that is the last day of the fortieth
(40th) full Fiscal Quarter following the Commencement Date, as such date may be
extended by the Extended Term.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from the first day of
the first Fiscal Quarter commencing after the Commencement Date to the last day
of the fourth Fiscal Quarter commencing after the Commencement Date.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
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"FOOD AND BEVERAGE REVENUE" means all revenue received (whether by
Tenant or any subtenants, assignees, concessionaires or licensees) from or by
reason of the Property relating to (i) the operation of snack bars, restaurants,
bars, catering functions, and banquet operations (except to the extent of any
hotel referral or commission fees payable to any hotel or other third party
unrelated to Tenant or any affiliate of Tenant pursuant to any written
agreements or other arrangements in place prior to the Effective Date with
respect to such revenue); PROVIDED, HOWEVER, that Food and Beverage Revenue
shall not include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Food and Beverage
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT E
attached hereto), (ii) periodic membership dues, (iii) greens fees (except to
the extent of any hotel referral or commission fees payable to any hotel or
other third party unrelated to Tenant or any affiliate of Tenant pursuant to any
written agreements or other arrangements in place prior to the Effective Date
with respect to such green fees), (iv) fees to reserve a tee time, (v) guest
fees, (vi) golf cart rentals, (vii) parking lot fees, (viii) locker rentals,
(ix) fees for golf club storage, (x) fees for the use of swim, tennis or other
facilities, (xi) charges for range balls, range fees or other fees for golf
practice facilities, (xii) fees or other charges paid for golf or tennis lessons
(except where retained by or paid to a USTA or PGA professional in accordance
with historical practice at the Property), (xiii) fees or other charges for
fitness centers, (xiv) forfeited deposits with
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respect to any membership application, (xv) transfer fees imposed on any
member in connection with the transfer of any membership interest, (xvi) fees
or other charges paid to Tenant by sponsors of golf tournaments at the
Property (unless the terms under which Tenant is paid by such sponsor do not
comply with Section 23.4, in which event the gross revenues received from such
sponsor for the tournament shall be excluded from Gross Golf Revenue and
further provided that Tenant shall use commercially reasonable efforts to
structure such payment to comply with Section 23.4), (xvii) advertising or
placement fees paid by vendors in exchange for exclusive use or name rights at
the Property, (xviii) revenues from photography services, and (xix) fees
received in connection with any golf package sponsored by any hotel group,
condominium group, golf association, travel agency, tourist or travel
association or similar payments; PROVIDED, HOWEVER, that Gross Golf Revenue
shall not include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GROSS OPERATING EXPENSES" means the gross operating expenses of
the Property, for the then-current Fiscal Year, calculated in accordance with
GAAP.
"GROSS REVENUE" means the sum of Gross Golf Revenue, Food and Beverage
Revenue and Merchandise Revenue for the applicable period.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901,
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et seq. (42 U.S.C. Section 6903); or (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C.
Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization and
similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an income,
franchise, capital stock or other tax) imposed on Landlord or any other
Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other Person
other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on any
indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
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"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $2,332,250 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the fortieth (40th) full Fiscal Quarter following the
Commencement Date.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Transferor's
business.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
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"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property; or (iii) require the cleanup or other treatment of any
Hazardous Material.
"MERCHANDISE REVENUE" means all revenue received (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the Property relating to the sale of merchandise and inventory on the Property
(except to the extent of any hotel referral or commission fees payable to any
hotel or other third party unrelated to Tenant or any affiliate of Tenant
pursuant to any written agreements or other arrangements in place prior to the
Effective Date with respect to such revenue); PROVIDED, HOWEVER, that
Merchandise Revenue shall not include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Merchandise
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"NET OPERATING INCOME" for purposes of Coverage Ratio shall be defined
on EXHIBIT E.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
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"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership with a value of Five Hundred Thousand Dollars ($500,000 which may
include up to Two Hundred Fifty Thousand Dollars ($250,000) newly created Class
B Limited Partnership Units) or, at Tenant's election, cash or other securities
with a value of not less than Five Hundred Thousand Dollars ($500,000).
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, (i) for any Fiscal Year during the Initial
Term, the positive difference, if any, between (x) the sum of forty-seven and
five tenths percent (47.5%) of Gross Golf Revenue, twelve and five tenths
percent (12.5%) of Merchandise Revenue and fifteen percent (15%) of Food and
Beverage Revenue for such Fiscal Year and (y) the Annual Base Rent for such
Fiscal Year, pro rated for any partial periods, and (ii) for any Fiscal Year
during the Extended Term, the positive difference, if any, between (x) fifty
percent (50%) of the Gross Golf Revenue, twelve and five tenths percent (12.5%)
of Merchandise Revenue and fifteen percent (15%) of Food and Beverage Revenue
for such Fiscal Year and (y) the Annual Base Rent for such Fiscal Year, prorated
for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
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(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of
the date of this Lease, by and between Transferor and Landlord, in the form
attached hereto as Exhibit D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant
to the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all
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warranties and guaranties associated therewith, with the exception of golf
carts.
"TENANT" means Emerald Dunes-Bonaventure, Inc., a Florida corporation
and any successor thereto, or assignee thereof, as permitted by the terms of
this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and the Extended Term, as
the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means the amount in the Security Fund (as
defined in the Pledge Agreement) held by Landlord on the Expiration Date.
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
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(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on the last day of the fortieth (40th)
full Fiscal Quarter following the Commencement Date.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease two (2) consecutive times for a period of five
(5) years each (such extension, an "Extended Term").
Tenant may exercise its option for an Extended Term solely by giving
written notice at least one hundred eighty (180) days prior to the termination
of the then-current term. Tenant shall be entitled to exercise these options
only if at the time of the giving of such notice, Tenant is then the lessee of
the Property pursuant to this Lease, and at the time of the commencement of the
applicable Extended Term no Event of Default shall then exist. During each
Extended Term, all of the terms and conditions of this Lease shall continue in
full force and effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Initial Term and provided that Tenant has exercised the Extended Term and no
Event of Default then exists
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beyond any applicable notice and cure period, Tenant shall have a right of
first offer ("Tenant's Right of First Offer to Lease") to lease the Property
upon the same terms and conditions as Landlord, at its election, intends to
offer to lease the Property to a third party. Tenant shall be entitled to
exercise Tenant's Right of First Offer to Lease only if at the time of the
giving of such notice and at the time of the commencement of the applicable
term no Event of Default shall then exist and only if Landlord elects to lease
the Property at the expiration of the Lease Term. Not more than nine (9)
months and not less than three (3) months prior to the expiration of the Lease
Term, Landlord shall, if applicable, give Tenant written notice of its intent
to lease the Property and shall indicate the terms and conditions upon which
Landlord intends to lease the Property. Tenant shall thereafter have a period
of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to
offer to a third party; provided prior to Tenant's acceptance Landlord shall
retain the right to elect not to lease the Property by giving Tenant written
notice thereof. If Tenant elects not to lease the Property, then Landlord
shall be free to lease the Property to a third party. However, if the Base
Rent for such proposed lease is reduced by five percent (5%) or more as
compared to the Base Rent included in the lease that Tenant rejected, then
Landlord shall again offer Tenant the right to acquire the Property upon the
same terms and conditions, provided that Tenant shall have only fifteen (15)
days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the twenty-fifth (25th) day of
each month in arrears, at Landlord's address set forth in Section 27.9 or at
such other place or to such other Person as Landlord from time to time may
designate in writing. The first monthly installment shall be prorated as to any
partial month. If any payment owing hereunder shall otherwise be due on a day
that is not a Business Day, such payment shall be due on the next succeeding
Business Day. Tenant shall receive a credit against Rent (or be paid directly,
at Landlord's option) for any operating expense credits or operating revenues
credited to Landlord pursuant to the Agreement which are applicable to any
period in the Lease Term (E.G., credit for real property taxes, membership dues,
sublease rents, etc.) and conversely Tenant shall reimburse Landlord for any
operating expenses paid for by Landlord pursuant to the Agreement which are the
responsibility of Tenant hereunder.
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4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date (the
"Adjustment Date") that is the first day of the first Fiscal Quarter commencing
after the one (1) year anniversary of the Commencement Date, and on each
Adjustment Date thereafter during the Term, including the Extended Term, Annual
Base Rent will increase by the lesser of (i) two percent (2%) of the Annual Base
Rent payable for the immediately preceding year, or (ii) two hundred percent
(200%) of the change in CPI from the immediately preceding fiscal year (the
"Base Rent Escalator").
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and the Extended Term, Tenant shall
calculate the Gross Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If there is Percentage Rent for
that Fiscal Quarter (or shorter period, if applicable), then Tenant shall pay to
Landlord the Percentage Rent, upon submittal of the Officer's Certificate. The
Percentage Rent payable in any period in any Fiscal Year shall be adjusted to
reflect the Percentage Rent paid on a year-to-date cumulative basis for the
Fiscal Year (pro rated for any partial periods).
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Revenue. If the Percentage Rent for such Fiscal
Year exceeds the sum of the quarterly payments of Percentage Rent previously
paid by Tenant, Tenant shall pay such deficiency to Landlord along with such
Officer's Certificate. If the Percentage Rent for such Fiscal Year is less than
the amount of Percentage Rent previously paid by Tenant, Landlord shall, at
Landlord's option, either (i) remit to Tenant its check in an amount equal to
such difference, or (ii) grant Tenant a credit against the payment of Rent next
coming due. Landlord shall have the right to audit all of Tenant's business
operations at the Property so as to determine the calculation of Percentage Rent
as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOR CAPITAL IMPROVEMENTS. At the end of
each Fiscal Quarter, Landlord shall calculate the amount (the "Quarterly Capital
Expenditure"), if any, funded to Tenant for construction of Capital Improvements
pursuant to Section 12.3, and provide notice to Tenant of the Quarterly Capital
Expenditure. Effective as of the due date of the next monthly installment of
Annual Base Rent, Annual Base Rent shall
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increase by an amount equal to nine and five-tenths percent (9.5%) of the
Quarterly Capital Expenditure.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP approved by Landlord, which will accurately record all
Gross Revenue. Tenant shall retain all accounting records for each Fiscal Year
conforming to such accounting system until at least five (5) years after the
expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a similar
or dissimilar nature. Accordingly, if any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid within ten (10) days after the
date such payment is due, Tenant will pay Landlord on demand, as Additional
Charges, a late charge equal to five percent (5%) of such installment. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant and is
not a penalty. In addition, if any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid within five (5) days after the due date
with respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue Rate
on the amount of such installment, and Tenant will pay such interest to Landlord
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as Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Lease, nor
prevent Landlord from exercising any other rights and remedies available to
Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a
triple net lease and Rent shall be payable to Landlord without notice or demand
and without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term. Without limiting
the foregoing, beginning at the commencement of the fourth (4th) Fiscal Year of
the Initial Term, Tenant shall pay to Landlord on a monthly basis along with
Base Rent, as additional rent, an amount equal to one-twelfth (1/12) of the
Capital Replacement Reserve. Such amounts shall be subject to reconciliation at
the end of each Fiscal Quarter and at the end of each Fiscal Year.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES. Within sixty (60) days after the
Commencement Date, Tenant shall cause the Pledge Agreement to be executed for
the benefit of Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for Coverage Ratio purposes for
the Property falls below the coverage ratio set forth in Section 2(a) of EXHIBIT
D-1 to the Pledge Agreement, at any time following the release of any Pledged
Owner's Shares (or security deposit held by Landlord in lieu thereof), then
Tenant shall thereafter retain, and not make cash distributions (except as may
be necessary to pay any applicable taxes and customarily paid reasonable
compensation) to its shareholders, partners or members, as applicable, until
such time as Tenant has accumulated six (6) months of Base Rent at the then
current level. Cash distributions may be made at such time as Tenant shall have
again satisfied such coverage ratios for two (2) consecutive Fiscal Years.
Tenant shall provide Landlord with such documentation, including Officer's
Certificates and financial statements, within forty-five (45) days after the end
of each Fiscal Quarter as are necessary to establish Tenant's compliance with
the foregoing requirements.
5.3 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal property
until payment in full of all Rent and satisfaction of all of Tenant's
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obligations hereunder; provided, however, Landlord shall subordinate its lien
and security interest only to that of any third party lender or seller which
finances Tenant's personal property or any lessor that leases personal property
to Tenant, the terms and conditions of such subordination to be satisfactory to
Landlord in its reasonable discretion. Tenant shall, upon the request of
Landlord, execute such financing statements or other documents or instruments
reasonably requested by Landlord to perfect the lien and security interests
herein granted.
5.4 TERMINATION PAYMENT. On the Expiration Date, unless each
option for an Extended Term is exercised, Tenant shall pay to Landlord the
Termination Payment, if any, which shall be payable solely from the proceeds of
the Security Fund. For purposes of calculating the Termination Payment, the
Owner's Shares shall have a value deemed to equal the average closing share
price of common stock of Golf Trust of America, Inc. for the five (5) day period
prior to the Expiration Date.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Article 14. Upon request, Tenant shall promptly furnish to Landlord copies of
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay
such Impositions. Landlord and Tenant shall, upon reasonable request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Property as may be necessary to prepare any required
returns and reports. In the event any applicable governmental authorities
classify any property covered by this Lease as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it
must legally so file. Each party, to the extent it possesses the same, will
provide the other party, upon reasonable request, with cost and depreciation
records necessary for filing returns for any property so classified as
personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal
period during which the Lease commences or terminates shall be adjusted and
prorated between Landlord and Tenant,
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whether or not such Imposition is imposed before or after such commencement or
termination, and Tenant's obligation to pay its prorated share thereof shall
survive such termination. If any Imposition may, at the option of the
taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Tenant may elect to pay in
installments, in which event Tenant shall pay all installments (and any
accrued interest on the unpaid balance of the Imposition) that are due during
the Term hereof before any fine, penalty, premium, further interest or cost
may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent
to or agree in writing to (i) any special assessment or (ii) the inclusion of
any material portion of the Leased Property into a special assessment district
or other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or unless Landlord agrees to pay the
cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
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(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.
7.2 CONDITION OF THE PROPERTY. Subject to Section 12.3 hereof,
Tenant acknowledges receipt and delivery of possession of the Property and that
Tenant has examined and otherwise has knowledge of the condition of the Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder.
Regardless, however of any inspection made by Tenant of the Property and whether
or not any patent or latent defect or condition was revealed or discovered
thereby, subject to Section 12.3 hereof, Tenant is leasing the Property "as is"
in its present condition, subject to the obligation of the Transferor to
complete certain environmental remediation work pursuant to an agreement
previously provided to Tenant. Subject to Section 12.3 hereof, Tenant waives
and releases any claim or cause of action against Landlord with respect to the
condition of the Property including any defects or adverse conditions latent or
patent, matured or unmatured, known or unknown by Tenant or Landlord as of the
date hereof. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER
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ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL
NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING
ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S
TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION,
(viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii)
DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE EXISTENCE OF ANY
HAZARDOUS MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING
ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE
PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY
HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY
DEFECT OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT,
AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2 HAVE
BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED TO BE
A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING
OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that fee simple title, except where the Property is held under a
ground lease, (both legal and equitable) is in Landlord and that Tenant has only
the leasehold right of possession and use of the Property as provided herein.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of
such Property during the Term of and upon the terms and conditions of this
Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired
by Landlord or Tenant, in good condition and repair, normal wear and tear
excepted. Upon the loss, destruction or obsolescence of any Tangible Personal
Property, Tenant shall replace such property with replacements of the same
type and quality as initially in place, which such property will be owned by
Tenant except to the extent acquired with funds from
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the Capital Replacement Fund ("Tenant's Personal Property"). Upon the
expiration or sooner termination of this Lease, the Tenant's Personal Property
shall transfer to Landlord without requirement of any bill of sale or
assignment; provided Landlord, at its election, may require Tenant to execute
such documentation as Landlord may require to evidence such transfer. Tenant
shall not remove any Tangible Personal Property from the Property upon
termination of the Lease. If any of such Tangible Personal Property is stored
away from the Property, Tenant will provide Landlord with proper access to the
storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, and (c) such other reasonable requirements imposed by
Landlord from time to time.
8.4 PURCHASE OF INVENTORY. Transferor will transfer to Tenant
Fifty Thousand Dollars ($50,000) worth of Inventory, as reasonably determined by
Landlord and Transferor based on Landlord's cost and the wholesale replacement
cost thereof. Tenant shall purchase the remainder of the Inventory (the
"Remaining Inventory") for one-half (1/2) of the price which Tenant could have
purchased the Remaining Inventory had Tenant purchased the Remaining Inventory
directly from its suppliers.
8.5 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, in Landlord's
absolute discretion. No use shall be made or permitted to be made of the
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance
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policies required to be carried hereunder, or fire underwriters regulations.
Tenant shall, at its sole cost, comply with all of the requirements pertaining
to the Property or other improvements of any insurance board, association,
organization or company necessary for the maintenance of insurance, as herein
provided, covering the Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
11, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under the Property, or any adjacent property,
or incorporated in the Property or any improvements thereon except in compliance
with applicable law (including any Environmental Laws). Tenant shall not allow
the Property to be used as a landfill or a waste disposal site, or a
manufacturing, distribution or disposal facility for any Hazardous Materials.
Tenant shall neither suffer nor permit the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as approved by Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of the
Property for road, highway or other public purposes; (iv) execute petitions to
have the Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants and restrictions affecting the Property; and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interest in the Property), but only upon delivery to Landlord of an Officer's
Certificate (which Officer's
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Certificate, if contested by Landlord, shall not be binding on Landlord)
stating that such grant, release, dedication, transfer, petition or amendment
is not detrimental to the proper conduct of the business of Tenant on the
Property and does not reduce its value or usefulness for the Primary Intended
Use. Landlord shall not grant, release, dedicate or execute any of the
foregoing items in this Section 8.4 without obtaining Tenant's approval, which
approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which signage
may include an appropriate logo selected by Landlord. In addition, it is the
intent of the parties that Tenant be a single-purpose entity with no business
operations except for those related solely to the operation of the Property for
its Primary Intended Use and other property of Landlord which may be leased to
Tenant. Tenant shall, therefore, not engage in or undertake any activities
other than those respecting the operation of the Property for its Primary
Intended Use, including leasing, managing, and operating golf courses in
accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including the Extended Term, it expects
that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including the Extended
Term, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
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ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in the Phase I Environmental Site
Assessment dated February 27, 1997, prepared by SECOR International Incorporated
("SECOR"), Phase II Environmental Site Assessment dated April 10, 1997, prepared
by SECOR, Phase III Environmental Site Assessment dated May 8, 1997, prepared by
SECOR, the Limited Asbestos Survey Report, dated February 21, 1997, prepared by
SECOR, and the letter from Mr. Douglas M. Hasley, P.A., dated April 28, 1997
regarding petroleum contamination cleanup (collectively, the "Environmental
Reports"), Tenant hereby covenants to Landlord as follows:
10.1 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Property or if Tenant, Landlord,
or the Property becomes subject to any order of any federal, state or local
agency to investigate, remove, remediate, repair, close, detoxify, decontaminate
or otherwise clean up the Property, Tenant shall, at its sole expense, but
subject to the last sentence of Section 10.2, carry out and complete any
required investigation, removal, remediation, repair, closure, detoxification,
decontamination or other cleanup of the Property. If Tenant fails to implement
and diligently pursue any such repair, closure, detoxification, decontamination
or other cleanup of the Property in a timely manner, Landlord shall have the
right, but not the obligation, to carry out such action and to recover its costs
and expenses therefor from Tenant as Additional Charges.
10.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for
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costs and expenses of abatement, investigation, removal, remediation,
correction or clean-up, fines, damages, response costs or penalties which
arise from the provisions of any Environmental Law, or (c) liability for
personal injury or property damage arising under any statutory or common-law
tort theory, including damages assessed for the maintenance of a public or
private nuisance or for carrying on of a dangerous activity. Notwithstanding
the foregoing or any other provision of this Lease (including, without
limitation, Section 7.2, Section 10.4 and Article 23), Tenant shall not be
liable, or otherwise be required to indemnify Landlord or the Company or any
Affiliates of the Company, or incur any costs in connection with, (i) any
environmental conditions that are disclosed in the Environmental Reports, (ii)
any matters or events that arise after the Commencement Date that are not
caused by any act or omission on the part of Tenant, or (iii) any matters or
events that arise after the Commencement Date that are directly caused by a
breach by Landlord of the terms of this Lease. In the event Tenant and
Landlord disagree whether an environmental condition was caused by an act or
omission on the part of the Tenant, the matter shall be submitted to
arbitration as provided in Section 27.1.
10.3 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.4 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.2), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
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ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a result of Tenant's use, any prior use, the
elements or the age of the Property or any portion thereof) and in accordance
with any applicable Legal Requirements, and, except as otherwise provided in
Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date
(concealed or otherwise), except that Tenant shall have no obligation to make
any capital improvements in connection with environmental conditions disclosed
in the Environmental Reports (except to the extent such conditions are
exacerbated by Tenant). Tenant shall operate and maintain the Property in
accordance with the operation and maintenance practices of the Property at the
Commencement Date and otherwise in a manner comparable to other comparable golf
course facilities in the vicinity of the Property. Landlord may consult with
the Advisory Association from time to time with respect to Tenant's compliance
with its maintenance and operation obligations under this Section 11.1, and
Landlord and representatives of Advisory Association shall have the right from
time to time to enter the Property for the purpose of inspecting the Property.
If Landlord, in consultation with the Advisory Association, determines that
Tenant has failed to comply with its maintenance and operation obligations under
this Section 10.1, Landlord shall provide written notice to Tenant setting forth
a list of remedial work and/or steps to be performed by Tenant. Tenant shall
promptly and diligently perform such remedial work and/or steps as recommended
by Landlord, provided if Tenant objects to one or more of the remedial
obligations proposed by Landlord, then the matter shall be submitted to the
dispute resolution procedure set forth in Section 12.7. Tenant will not take or
omit to take any action the taking or omission of which could reasonably be
expected to impair the value or the usefulness of the Property or any part
thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Property in any way. Tenant hereby waives, to the extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
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11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its sole discretion, during the Lease Term Tenant may
make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant
Improvements"). Any such Tenant Improvement shall be made at Tenant's sole
expense, except for the Capital Improvements, and shall become the property
of Landlord upon termination of this Lease. Unless made on an emergency
basis to prevent injury to Person or property, Tenant will submit plans and
specifications for any Tenant Improvements, in the form necessary for any
required building permits, to Landlord for Landlord's prior written approval,
which approval shall be at Landlord's sole discretion.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
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(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 11.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. On the Commencement Date Landlord
shall make available to Tenant the sum of Three Million Nine Hundred Thousand
Dollars ($3,900,000) consisting of Three Million One Hundred and Fifty Thousand
Dollars ($3,150,000) for capital improvements and certain other expense
described in this Section 12.3 ("Capital Improvements") and Seven Hundred and
Fifty Thousand Dollars ($750,000) (the "Capital Reserve") during the first three
(3) Fiscal Years of the Initial Term. Upon written notice to Landlord which
details the use to which such funds shall be applied and the unavailability of
operating cash flow sufficient to make such payments, and subject to Landlord's
approval, which shall not be unreasonably withheld, Tenant may apply all or any
part of the Capital Reserve to satisfy Tenant's obligations under this Lease.
The Capital Reserve will be applied in the following priority: (i) first, to
fund any portion of the Annual Base Rent or Percentage Rent; (ii) second, to
fund any shortfall in the Capital Replacement Reserve; and (iii) third, to fund
operating expenses for the Property (including, without limitation, payroll
expenses). No more than Two Hundred Thousand Dollars ($200,000) of the Capital
Reserve
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may be allocated to distributions, management fees or payroll expenses for any
direct or indirect owner of the Lessee. At any time, Landlord, in its sole
discretion and after consultation with Tenant, may apply the Capital Reserve
(or any portion thereof) to the Capital Improvements or to any future capital
improvement program at the Property.
Tenant shall be responsible for securing bids and estimates for the
work and for supervising such work and shall endeavor to ensure that the work
is done in a timely manner and in a good and workman-like fashion. Tenant
shall not be entitled to any construction management or other fee in
connection with the completion of the Capital Improvements nor shall Tenant be
required to make any payments to any third parties in connection therewith
(whether for permits or other expenses). An estimated schedule of the
construction of the Capital Improvements is more particularly described in
Exhibit F attached hereto. Prior to the disbursement of any funds for Capital
Improvements, Tenant shall submit to Landlord for approval (i) plans and
specifications for such Capital Improvements; (ii) a detailed budget for such
Capital Improvements including the cost of permits and related items; and
(iii) a construction schedule for such Capital Improvements. Landlord's
approval of such items shall be at its sole discretion, provided Landlord
shall consult with Tenant in good faith prior to making any determination
respecting the Capital Improvements.
Landlord shall also cooperate with Tenant and take such actions,
including the execution and delivery to Tenant of any applications or other
documents, reasonably requested by Tenant in order to obtain any governmental
approvals sought by Tenant to construct any Tenant Improvement approved by
Landlord in accordance with Section 12.1 of this Lease within ten (10) Business
Days following the later of (a) the date Landlord receives Tenant's request, or
(b) the date of delivery of any such application or document to Landlord, so
long as the taking of such action, including the execution of said applications
or documents, shall be without cost to Landlord (or if there is a cost to
Landlord, such cost shall be reimbursed by Tenant or payable out of the Capital
Replacement Fund), and will not cause Landlord to be in violation of any law,
ordinance or regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
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placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the approval of Landlord, the
Capital Replacement Fund shall be made available to Tenant for Capital
Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the Capital
Replacement Fund shall be used to purchase property to the extent that doing so
would cause Landlord to recognize income other than "rents from real property"
as defined in Section 856(d) of the Code. Tenant shall have no rights with
respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of Percentage
Rent, Tenant shall forthwith pay to Landlord the amount of the deficiency as
finally
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agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof;
PROVIDED, HOWEVER, that as to any audit that is commenced more than twelve
(12) months after the date Gross Revenue for any Fiscal Year is reported by
Tenant to Landlord in the Officer's Certificate, the deficiency, if any, with
respect to such Gross Revenue shall bear interest as permitted herein only
from the date such determination of deficiency is made unless such deficiency
is the result of gross negligence or willful misconduct on the part of Tenant.
If any such audit discloses that the Gross Revenue actually received by
Tenant for any Fiscal Year exceeds the Gross Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay all
reasonable costs of such audit and examination; provided Tenant shall have the
right to submit the audit determination to arbitration in accordance with the
procedures set forth in Article 27. Landlord shall also have the right to
review and audit from time to time Tenant's business operations including all
books, records and financial statements of Tenant. Tenant shall promptly
provide to Landlord copies of all such books, records, financial statements or
any other documentation of Tenant's business operations reasonably requested
by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Revenue (including
membership dues, daily use fees and other sources of Gross Revenue) and other
revenue for the forthcoming Fiscal Year itemized on schedules on a quarterly
basis as approved by Landlord and Tenant, together with assumptions, in
narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject
to the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category
of operating expenses that decrease or increase by five percent (5%) or more
from the prior year's expenses.
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(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed of three (3)
members of the Advisory Association unaffiliated with Tenant and two (2) members
of the board of directors of the Company. Such committee shall be responsible
for resolving any such disagreement and the parties agree that the determination
of such dispute resolution committee shall be binding on the parties. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the prior year's Operating Budget until a new Operating
Budget is adopted, and (ii) if the Capital Budget has not been agreed upon, no
Capital Expenditures shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically required by Landlord or are
otherwise required to comply with Legal Requirements or Insurance Requirements.
Tenant shall operate the Property in a manner reasonably consistent with the
Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice,
and in accordance with GAAP, that will accurately record all data necessary
to compute Percentage Rent, and Tenant shall retain for at least five (5)
years after the expiration of each Fiscal Year, reasonably adequate records
conforming to such accounting system showing all data necessary to compute
Percentage Rent. The books of account and all other records relating to or
reflecting the operation of the Property shall be kept either at the Property
or at Tenant's offices in West Palm Beach, Florida. Such books and records
shall be available to Landlord and its representatives for examination,
audit, inspection and transcription.
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(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the
comparable prior Fiscal Quarter and year to date, including the following:
results of operations, a balance sheet, statements of cash flows and
statement of changes in owner's equity. If Landlord requests, Tenant shall
provide reviewed financial statements for such Fiscal Quarter; provided,
however, such review shall be at Landlord's expense. Each quarterly report
shall also include a narrative explaining any deviation in any major revenue
or expense category or operating expenses (by category) of more than ten
percent (10%) from the amounts set forth on the Annual Budget, together with,
if appropriate a revised Annual Budget, which budget shall be subject to
Landlord's review and approval as provided in Section 12.7. Each quarterly
report shall also forecast any projected Percentage Rent payable for the
following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Revenue if Tenant's
financial statements are not required to be separately stated by the Securities
and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
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(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date or matters existing as of the Effective Date, if any of the Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Property, or shall violate the agreements or conditions contained in any
lawful restrictive covenant or other agreement affecting the Property, or any
part thereof, or shall impair the rights of others under any easement or right-
of-way to which the Property is subject, or the use of the Property is impaired,
limited or interfered with by reason of the exercise of the right of surface
entry or any other rights under a lease or reservation of any oil, gas, water or
other minerals, then promptly upon request of Landlord or at the behest of any
person affected by any such encroachment, violation or impairment, Tenant, at
its sole cost and expense (subject to its right to contest the existence of any
such encroachment, violation or impairment), shall protect, indemnify, save
harmless and defend Landlord, the Company and Affiliates of the Company from and
against all losses, liabilities, obligations, claims, damages, penalties, causes
of action, costs and expenses (including reasonable attorneys' fees and
expenses) based on or arising by reason of any such encroachment, violation or
impairment and in such case, in the event of an adverse final determination,
either (i) obtain valid and effective waivers or settlements of all claims,
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liabilities and damages resulting from each such encroachment, violation or
impairment, whether the same shall affect Landlord or Tenant; or (ii) make such
changes in the Improvements, and take such other actions, as Tenant in the good
faith exercise of its judgment deems reasonably practicable, to remove such
encroachment, and to end such violation or impairment, including, if necessary,
the alteration of any of the Improvements, and in any event take all such
actions as may be necessary in order to be able to continue the operation of the
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Improvements were operated prior to the assertion of such violation
or encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy of
title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the
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public health or safety or of material damage to any real or personal
property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 13 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 14 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss payee,
as applicable. Losses shall be payable to Landlord and/or Tenant as provided in
this Article 15. In addition, the policies shall name as a loss payee
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any Facility Mortgagee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment shall require the written consent of Landlord,
Tenant, and each Facility Mortgagee, if any. Evidence of insurance shall be
deposited with Landlord and, if requested, with any Facility Mortgagee(s). The
policies on the Property, including the Improvements, Fixtures, Tangible and
Intangible Personal Property and any Tenant Improvements, shall insure against
the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
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15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written notice before the policy
or policies in question shall be altered, allowed to expire or cancelled. Each
such policy shall also provide that any loss otherwise payable thereunder shall
be payable notwithstanding (i) any act or omission of Landlord or Tenant which
might, absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by any Facility Mortgagee
pursuant to any provision of a mortgage, note, assignment or
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other document evidencing or securing a loan upon the happening of an event of
default therein or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less than
the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $100,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
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(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of
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administration imposed by or on behalf of Facility Mortgagee should the
proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY USE.
If during the term the Property is totally or partially destroyed from a
risk covered by the insurance described in Article 15 and the Property
thereby is rendered Unsuitable For Its Primary Intended Use as reasonably
determined by Landlord, Tenant shall, at its election, either (i)
diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 20.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article
15, but the Real Property is not thereby rendered Unsuitable For Its
Primary Intended Use, Tenant shall diligently restore the Property to
substantially the same condition as existed immediately before the
damage or destruction; PROVIDED, HOWEVER, Tenant shall not be required
to restore certain Tangible Personal Property and/or any Tenant
Improvements if failure to do so does not adversely affect the amount
of Rent payable hereunder or the Primary Intended Use in substantially
the same manner immediately prior to such damage or destruction. Such
damage or destruction shall not terminate this Lease; PROVIDED
FURTHER, HOWEVER, if Tenant cannot within eighteen (18) months obtain
all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need, after
diligent efforts
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to do so in order to be able to perform all required repair and restoration
work and to operate the Property for its Primary Intended Use in
substantially the same manner immediately prior to such damage or
destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the then-applicable Term, then either Landlord or Tenant shall have the
right to terminate the Lease on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
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ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with no abatement of rent payable by Tenant hereunder.
In the event of any such temporary taking, the entire amount of any such Award
made for such temporary taking allocable to the Lease Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
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(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or
of the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree
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appointing, without the consent of Tenant, a receiver of Tenant or of the
whole or substantially all of its property, or approving a petition filed
against it seeking reorganization or arrangement of Tenant under the
federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state thereof, and such judgment, order or
decree shall not be vacated or set aside or stayed within sixty (60) days
from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property for a period in excess of ten (10) days;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto is proven to be
incorrect, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease (except the lease for Emerald
Dunes) by and between such party and Landlord or any Affiliate of Landlord,
or an "Event of Default" under the Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's breach
of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including
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reasonable attorneys' fees and expenses, as a result of any Event of Default
hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
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In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth
at the time of the award" in subsection (iii) shall be determined by the
court having jurisdiction thereof using a discount rate equal to the
discount rate of the Federal Reserve Bank of San Francisco at the time of
the award plus one percent (1%) and the Percentage Rent shall be deemed to
be the same as for the then-current Fiscal Year or, if not determinable,
the immediately preceding Fiscal Year, for the remainder of the Term, or
such other amount as either party shall prove reasonably could have been
earned during the remainder of the Term or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent
and other sums shall bear interest at the Overdue Rate from the date when
due until paid, and Landlord may enforce, by action or otherwise, any other
term or covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean
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real estate taxes on the Property or payments in lieu thereof and premiums on
any insurance required by this Lease. Landlord shall determine the amount of
the Impound Charges and of each Impound Payment. The Impound Payments shall
be held in a separate account and shall not be commingled with other funds of
Landlord and interest thereon shall be held for the account of Tenant.
Landlord shall apply the Impound Payments to the payment of the Impound
Charges in such order or priority as Landlord shall determine or as required
by law. If at any time the Impound Payments theretofore paid to Landlord
shall be insufficient for the payment of the Impound Charges, Tenant, within
ten (10) days after Landlord's demand therefor, shall pay the amount of the
deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any part thereof.
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ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all Additional Charges accruing during the
month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Notwithstanding the
existence of any insurance provided for in Article 15, but exclusive of any
conditions existing on the Property prior to the Effective Date and not caused
by Tenant (I.E., title problems, encroachments, environmental matters, etc.) and
without regard to the policy limits of any such insurance, Tenant will protect,
indemnify, save harmless and defend Landlord, the Company and Affiliates of the
Company from and against all liabilities, obligations, claims, actual or
consequential damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses), to the extent permitted by
law, imposed upon or incurred by or
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asserted against Landlord, the Company or Affiliates of the Company by reason
of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder; or
(g) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous
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and that the indemnified party may be liable for, or otherwise incur, a loss
as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying
party, at its option and expense, to assume the defense of any such claim by
counsel selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the indemnified party may at all times participate in such
defense at its expense, and PROVIDED FURTHER, HOWEVER, that the indemnifying
party shall not, in defense of any such claim, except with the prior written
consent of the indemnified party, consent to the entry of any judgment or to
enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff in question to the indemnified
party and its affiliates a release of all liabilities in respect of such
claims, or that does not result only in the payment of money damages by the
indemnifying party. If the indemnifying party shall fail to undertake such
defense within thirty (30) days after such notice, or within such shorter time
as may be reasonable under the circumstances, then the indemnified party shall
have the right to undertake the defense, compromise or settlement of such
liability or claim on behalf of and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease or
any interest therein, all or any part of the Property, whether voluntarily,
involuntarily or by operation of law. For purposes of this Article 23, a Change
in Control of the Tenant shall constitute an assignment of this Lease.
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23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior written
consent of Landlord, which consent Landlord may withhold in its sole
discretion, further sublease or license portions of the Property to third
parties, including concessionaires or licensees. Without limiting the
foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals' shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other than
a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs; and
(viii) sublease or license to operate any other portions (but not
the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to any
proposed assignment or sublease, deliver to Landlord written notice of its
intent to assign or sublease, which notice shall identify the intended
assignee or sublessee by name and address, shall specify the effective date
of the intended assignment or sublease, and shall be accompanied by an
exact copy of the proposed assignment or sublease. Tenant shall provide
Landlord with such additional information or documents reasonably
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requested by Landlord with respect to the proposed transaction and the
proposed assignee or subtenant, and an opportunity to meet and interview
the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for performance
of its obligations under this Lease, Tenant hereby grants, conveys and
assigns to Landlord all right, title and interest of Tenant in and to all
subleases now in existence or hereinafter entered into for any or all of
the Property, and all extensions, modifications and renewals thereof and
all rents, issues and profits therefrom. Landlord hereby grants to Tenant
a license to collect and enjoy all rents and other sums of money payable
under any sublease of any of the Property; provided, however, that Landlord
shall have the absolute right at any time after the occurrence and
continuance of an Event of Default upon notice to Tenant and any subtenants
to revoke said license and to collect such rents and sums of money and to
retain the same. Tenant shall not (i) consent to, cause or allow any
material modification or alteration of any of the terms, conditions or
covenants of any of the subleases or the termination thereof, without the
prior written approval of Landlord nor (ii) accept any rents (other than
customary security deposits) more than ninety (90) days in advance of the
accrual thereof nor permit anything to be done, the doing of which, nor
omit or refrain from doing anything, the omission of which, will or could
be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent payable to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
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by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of nonresidential
real property and therefore agrees that Tenant, as the debtor in possession, or
the trustee for Tenant (collectively, the "Trustee") in any proceeding under
Title 11 of the United States Bankruptcy Code relating to Bankruptcy, as
amended (the "Bankruptcy Code"), shall not seek or request any extension of
time to assume or reject this Lease or to perform any obligations of this
Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to
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the Trustee, the Trustee shall give Landlord, and lessors and mortgagees of
Landlord of which Tenant has notice, written notice setting forth the name and
address of such person and the terms and conditions of such offer, no later
than twenty (20) days after receipt of such offer, but in any event no later
than ten (10) days prior to the date on which the Trustee makes application to
the bankruptcy court for authority and approval to enter into such assumption
and assignment or subletting. Landlord shall have the prior right and option,
to be exercised by written notice to the Trustee given at any time prior to
the effective date of such proposed assignment or subletting, to receive and
assignment of this Lease or subletting of the Property to Landlord or
Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth reasonably satisfactory to Landlord or, in the alternative, the
proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver to
Landlord a guaranty agreement in form and substance acceptable to Landlord; and
(ii) any proposed assignee shall grant to Landlord a security interest in favor
of Landlord in all furniture, fixtures, and other personal property to be used
by such proposed assignee in the Property. All payments required of Tenant
under this Lease, whether or not expressly denominated as such in this Lease,
shall constitute rent for the purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure defaults and compensate Landlord for actual
pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
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any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss." The term "actual
pecuniary loss" shall mean, in addition to any other provisions contained herein
relating to Landlord's damages upon default, obligations of Tenant to pay money
under this Lease and all attorneys' fees and related costs of Landlord incurred
in connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Tenant; and
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(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, and except as set forth in the
Environmental Reports, that any Hazardous Material in a quantity sufficient to
require remediation or reporting under applicable law is located in, on or under
the Property or any adjacent property, Tenant shall notify Landlord in writing
of (a) the existence of any such Hazardous Material; (b) any enforcement,
cleanup, removal, or other governmental or regulatory action instituted,
completed or threatened; (c) any claim made or threatened by any Person against
Tenant or the Property relating to damage, contribution, cost recovery,
compensation, loss, or injury resulting from or claimed to result from any
Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee or beneficiary, affecting
any lease or the Property. In confirmation of such subordination, Tenant shall
execute promptly any certificate that Landlord may request for such purposes.
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25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to
sell the Property during the Lease Term, and provided no Event of Default
then exists, Tenant shall have a right of first offer to purchase the
Property ("Tenant's Right of First Offer to Purchase") on the terms and
conditions at which Landlord proposes to sell the Property to a third party.
Landlord shall give Tenant written notice of its intent to sell and shall
indicate the terms and conditions (including the sale price) upon which
Landlord intends to sell the Property to a third party. Tenant shall
thereafter have sixty (60) days to elect in writing to purchase the Property
and execute a Purchase and Sale Agreement with respect thereto and shall have
an additional fifty (50) days to close on the acquisition of the Property on
the terms and conditions set forth in the notice provided by Landlord to
Tenant; provided that prior to the execution of a binding purchase and sale
agreement, Landlord shall retain the right to elect not to sell the Property.
If Tenant does not elect to purchase the Property, then Landlord shall be
free to sell the Property to a third party. However, if the price at which
Landlord intends to sell the Property to a third party is less than 95% of
the price set forth in the notice provided by Landlord to Tenant, then
Landlord shall again offer Tenant the right to acquire the Property upon the
same terms and conditions, provided that Tenant shall have only thirty (30)
days thereafter to complete the acquisition at such price, terms and
conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future
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liabilities and obligations under this Lease arising or accruing from and
after the date of such conveyance or other transfer as to the Property. All
such future liabilities and obligations shall thereupon be binding upon the
new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Landlord and Tenant regarding the Property during the arbitration.
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ARTICLE 28
MISCELLANEOUS
28.1 TRANSFER OF INVENTORY. On the Commencement Date, Landlord
shall transfer to Tenant all Inventory (as defined in the Agreement) acquired by
Landlord pursuant to the Agreement and any income received by Landlord pursuant
to Section 6.6 of the Agreement.
28.2 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.3 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.4 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.5 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent
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during the continuance of any such breach, shall constitute a waiver of any such
breach or of any such term. To the extent permitted by law, no waiver of any
breach shall affect or alter this Lease, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.
28.6 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.7 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.8 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.9 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.10 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
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If to Tenant: Emerald Dunes-Bonaventure, Inc.
2100 Emerald Dunes Drive
West Palm Beach, Florida 33411
Attn: Raymond R. Finch, Jr.
28.11 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.12 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.13 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.14 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.15 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.16 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.17 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.18 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.19 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions
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contained in this Lease or arising out of the subject matter of this Lease,
the prevailing party shall be entitled to recover against the other party
reasonable attorneys' fees and court costs.
28.20 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease, express
or implied, is intended to confer any rights or remedies under or by reason of
this Lease on any Person other than the parties to this Lease and their
respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any party
hereto or give any third Person any right of subrogation or action against any
party to this Lease.
28.21 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
28.22 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.23 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
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LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
---------------------------------------
W. Bradley Blair, II
President and CEO
TENANT: EMERALD DUNES-BONAVENTURE, INC.,
a Florida corporation
By: /s/ Raymon R. Finch, Jr.
---------------------------------------
Its: Chairman
--------------------------------------
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MYSTIC CREEK GOLF CLUB
CITY OF MILFORD
COUNTY OF OAKLAND
MICHIGAN
L E A S E
GOLF TRUST OF AMERICA, L.P.,
A DELAWARE LIMITED PARTNERSHIP
LANDLORD
AND
MYSTIC CREEK GOLF CLUB, LIMITED PARTNERSHIP,
A MICHIGAN LIMITED PARTNERSHIP,
TENANT
DATED AS OF JANUARY 16, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Right of First Offer to Lease. . . . . . . . . . . . . . . . . 14
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . 15
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . 16
4.5 Increase in Base Rent Following Conversion Date. . . . . . . . 17
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . 17
4.9 Net Lease; Capital Replacement Reserve . . . . . . . . . . . . 18
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Pledge of Owner's Shares . . . . . . . . . . . . . . . . . . . 19
5.2 Obligation to Withhold Distributions . . . . . . . . . . . . . 19
5.3 Cross-Collateral . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Landlord's Lien. . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Termination Payment. . . . . . . . . . . . . . . . . . . . . . 19
5.6 Use of Second Cash Withhold Amount . . . . . . . . . . . . . . 20
(i)
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ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . 20
6.2 Information and Reporting. . . . . . . . . . . . . . . . . . . 21
6.3 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Assessment Districts . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 No Termination, Abatement, Etc . . . . . . . . . . . . . . . . 22
7.2 Condition of the Property. . . . . . . . . . . . . . . . . . . 23
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . 24
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . 24
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . 25
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . 25
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . 26
9.4 Landlord to Grant Easements, Etc . . . . . . . . . . . . . . . 26
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . 26
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . 26
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . 28
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . 29
10.9 Environmental Violations at Expiration
or Termination of Lease . . . . . . . . . . . . . . . . . . 29
(ii)
<PAGE>
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . 29
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . 30
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . 30
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . 31
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . 31
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . 32
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . 32
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . 32
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . 33
12.6 Landlord's Right to Audit Calculation
of Gross Golf Revenue . . . . . . . . . . . . . . . . . . . 33
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . 34
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . 36
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . 37
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 38
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . 39
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . 39
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . 41
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . 41
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . 41
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . 41
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . 42
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . 42
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . 42
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . 43
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . 44
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . 44
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . 45
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . 45
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . 45
(iii)
<PAGE>
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . 46
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . 47
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . 47
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . 49
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . 49
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . 51
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . 51
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . 51
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . 52
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . 53
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . 54
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . 54
22.4 Survival of Indemnification Obligations; Available Insurance
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(iv)
<PAGE>
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 55
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . 55
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . 58
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . 58
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . 59
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . 60
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . 60
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . 61
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . 61
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . 62
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . 62
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . 62
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . 63
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . 64
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . 64
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . 64
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 65
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . 65
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . 65
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . 65
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.10 Survival of Claims . . . . . . . . . . . . . . . . . . . . . . 66
28.11 Invalidity of Terms or Provisions. . . . . . . . . . . . . . . 66
28.12 Prohibition Against Usury. . . . . . . . . . . . . . . . . . . 66
28.13 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . 66
28.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 66
28.15 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(v)
<PAGE>
28.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 67
28.17 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . . . 67
28.18 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 67
28.19 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . 67
28.20 Non-Recourse as to Landlord. . . . . . . . . . . . . . . . . . 67
28.21 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . 68
28.22 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 29
GROUND LEASE; SIDE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 68
29.1 Compliance with Ground Lease . . . . . . . . . . . . . . . . . 68
29.2 Side Agreement with City of Dearborn . . . . . . . . . . . . . 68
Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Pledge Agreement
Exhibit E - Intentionally Omitted
Exhibit F - Calculation of Gross Golf Revenue for the Base Year by Quarter
(vi)
<PAGE>
Mystic Creek Golf Club
City of Milford
Oakland County
Michigan
LEASE
THIS LEASE (this "Lease"), dated as of January __, 1998, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and MYSTIC CREEK GOLF CLUB, LIMITED PARTNERSHIP, a Michigan
limited partnership ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback
Agreement (the "Agreement"), dated as of December 5, 1997, as amended by
amendment of even date herewith, by and between Landlord and Mystic Creek Golf
Club, a Michigan limited partnership ("Transferor"), Transferor agreed to
transfer to Landlord all of its right, title and interest in and to the Property
(as hereafter defined); and
B. Pursuant to that certain Assignment of Lease, of even date
herewith, Transferor has assigned to Landlord all of its right, title and
interest in and to the Property (as hereafter defined);
C. Tenant, the Transferor under the Agreement and the Assignor
under the Assignment of Lease, desires to lease the Property from Landlord, and
Landlord desires to lease the Property to Tenant, on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants
and agreements to be performed by Tenant and Landlord hereunder, and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord's rights and interest (to the extent acquired from Transferor) in and
to the following real property, improvements, personal property and related
rights (collectively the "Property"):
1
<PAGE>
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in
Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be
adjusted annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required
by any governmental or quasi-governmental
2
<PAGE>
agency, body or officer for the ownership, operation and use of the Property
or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on January
1, 1997, and ending on December 31, 1997; provided, however, that the Base Year
shall refer to the Fiscal Year immediately preceding the Conversion Date if the
Base Rent is increased as provided in Section 4.5. A quarter-by-quarter
calculation of Gross Golf Revenue in the Base Year is attached hereto as EXHIBIT
F.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the
Capital Replacement Reserve accrued by Landlord, together with interest thereon
as provided in Section 12.4, less amounts withdrawn from the Capital Replacement
Fund as provided in Section 12.4
"CASH WITHHOLD AMOUNTS" means the First Cash Withhold Amount and
the Second Cash Withhold Amount.
"CAPITAL REPLACEMENT RESERVE" means, on an annual basis, the
greater of (i) an amount equal to 3% of each Fiscal Quarter's Gross Golf
Revenue, to be accrued quarterly by Landlord as part of the Capital Replacement
Fund, as provided in Section 12.4 hereof, based on the Officer's Certificate, or
(ii) Fifty Four Thousand Dollars ($54,000).
"CHANGE OF CONTROL" means:
3
<PAGE>
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or
substantially all of the assets of Tenant (whether by operation of law or
otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders or, partners or members who control Tenant as
of the date hereof no longer having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date on which Landlord acquires the
leasehold title to the Property.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes of
Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
4
<PAGE>
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor
elects to receive either cash or additional Owner's Shares in the Partnership as
a Contingent Purchase Price for the contribution of the Property subject, in
either case, to the same fifteen percent (15%) collateral security requirements,
(ii) the date on which Transferor elects in writing to waive its right to
receive additional Owner's Shares, or (iii) the date that is the one hundred
fifth (105th) day following the end of the fifth (5th) full Fiscal Year of the
Initial Term.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. 99-499 and 99-563; the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42
U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C.
Section 201, et seq.; the Federal Water Pollution Control Act, as amended,
33 U.S.C. Section 1251, et seq.; and all federal, state and local environmental
health and safety statutes, ordinance, codes, rules, regulations, orders and
decrees regulating, relating to or imposing liability or standards concerning
or in connection with Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means the date that is the last day of the
fortieth (40th) full Fiscal Quarter following the Commencement Date, as such
date may be extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other
security agreement securing any indebtedness or any other
5
<PAGE>
Landlord's Encumbrance placed on the Property in accordance with the
provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FIRST CASH WITHHOLD AMOUNT" has the meaning provided in the
Agreement.
"FISCAL QUARTER" means the three-month periods (or applicable
portions thereof) in any Fiscal Year from January 1 through March 31, April 1
through June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from January 1,
1997 to December 31, 1997.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time
to time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant
or any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT E
attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv) fees to
reserve a tee
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time, (v) guest fees, (vi) golf cart rentals, (vii) parking lot fees, (viii)
locker rentals, (ix) fees for golf club storage, (x) fees for the use of
swim, tennis or other facilities, (xi) charges for range balls, range fees or
other fees for golf practice facilities, (xii) fees or other charges paid for
golf or tennis lessons (except where retained by or paid to a USTA or PGA
professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with
respect to any membership application, (xv) transfer fees imposed on any
member in connection with the transfer of any membership interest, (xvi) fees
or other charges paid to Tenant by sponsors of golf tournaments at the
Property (unless the terms under which Tenant is paid by such sponsor do not
comply with Section 23.4, in which event the gross revenues received from
such sponsor for the tournament shall be excluded from Gross Golf Revenue and
further provided that Tenant shall use commercially reasonable efforts to
structure such payment to comply with Section 23.4), (xvii) advertising or
placement fees paid by vendors in exchange for exclusive use or name rights
at the Property, and (xviii) fees received in connection with any golf
package sponsored by any hotel group, condominium group, golf association,
travel agency, tourist or travel association or similar payments; PROVIDED,
HOWEVER, that Gross Golf Revenue shall not include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant;
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property;
(d) Revenue from the Adventure Golf Facility (as hereinafter
defined); and
(e) Revenue from gate fees.
"GROUND LEASE" means that certain Golf Course Concession and Lease
Agreement dated July 1, 1994, between the City of Dearborn, a Michigan Municipal
Corporation and Tenant.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local,
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state or federal governmental authority, including but not limited to any
material or substance which is (i) defined as a "hazardous waste", "hazardous
material", or "restricted hazardous waste" or words of similar import under
any provision of any Environmental Law; (ii) petroleum or petroleum products;
(iii) asbestos; (iv) polychlorinated biphenyl; (v) radioactive material; (vi)
radon gas; (vii) designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C.
Section 1317); (viii) defined as a "hazardous waste" pursuant to Section 1004
of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. (42 U.S.C. Section 6903); or (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C.
Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
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(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any
other Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, Fixtures and other items of real estate
located on the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $1,000,000 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the fortieth (40th) full Fiscal Quarter following the
Commencement Date.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal
property owned by Landlord and used solely in connection with the ownership,
operation, leasing or maintenance of the Real Property or the Tangible Personal
Property, and any and all trademarks and copyrights, guarantees, Authorizations,
general intangibles, business records, plans and specifications, surveys, all
licenses, permits and approvals solely with respect to the construction,
ownership, operation or maintenance of the Property.
"LAND" means the leasehold interest under the Ground Lease relating
to the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion
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thereof or interest therein, whether to secure borrowing or other means of
financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through
and including the Expiration Date (or the termination date, if earlier
terminated pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal
and other governmental statutes, laws (including the Americans with Disabilities
Act and any Environmental Laws), rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting either the Property or the
construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any which may (i) require repairs, modifications, or
alterations in or to the Property; (ii) in any way adversely affect the use and
enjoyment thereof, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Tenant (other than
encumbrances created by Landlord without the consent of Tenant), at any time in
force affecting the Property; or (iii) require the cleanup or other treatment of
any Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT
K of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased
or hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an
Affiliate of Landlord, other than pursuant to this Lease, which as of the date
hereof are the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions,
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and banquet operations, (ii) sale of merchandise and inventory on the
Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate
plus an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (331/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of
the date of this Lease, by and between Transferor and Landlord, in the form
attached hereto as EXHIBIT D.
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"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant
to the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and
other activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property
and the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all
easements and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"SECOND CASH WITHHOLD AMOUNT" means $500,000.00 plus the absolute
value of the difference between the Net Operating Income for 1997 and
$1,000,000.00.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith, with the exception of golf carts.
"TENANT" means Mystic Creek Golf Club, a Michigan limited
partnership and any successor thereto, or assignee thereof, as permitted by the
terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
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"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section
8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided
in Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning
provided in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended
Terms, as the context may require, unless earlier terminated pursuant to the
provisions hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one-half percent (113.5%) of the Rent and the Net Operating Income for the prior
Fiscal Year, divided by ten and five tenths percent (10.5%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of
condition of the Property such that in the good faith judgment of Landlord,
reasonably exercised, the Property cannot be operated on a commercially
practicable basis for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to
the construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not
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constitute a part of this Lease nor shall they affect its meaning,
construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on the last day of the fortieth (40th)
full Fiscal Quarter following the Commencement Date.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to
extend the Initial Term of this Lease four (4) consecutive times for a period of
five (5) years each (each such extension, an "Extended Term"). Tenant may
exercise its option for an Extended Term solely by giving written notice at
least one hundred eighty (180) days prior to the termination of the then-current
term. Tenant shall be entitled to exercise these options only if at the time of
the giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord, at
its election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if at
the time of the giving of such notice and at the time of the commencement of the
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applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.9 or at such other place
or to such other Person as Landlord from time to time may designate in writing.
The first monthly installment shall be prorated as to any partial month. If any
payment owing hereunder shall otherwise be due on a day that is not a Business
Day, such payment shall be due on the next succeeding Business Day. Tenant
shall receive a credit against Rent (or be paid directly, at Landlord's option)
for any operating expense credits or operating revenues credited to Landlord
pursuant to the Agreement which are applicable to any period in the Lease Term
(E.G., credit for real property taxes, membership dues, sublease rents, etc.)
and conversely Tenant shall reimburse Landlord for any operating expenses paid
for by Landlord pursuant to the Agreement which are the responsibility of Tenant
hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date (the
"Adjustment Date") that is the first day of the first Fiscal Quarter commencing
after the one (1) year anniversary of the Commencement Date, and on each
Adjustment Date thereafter through and including the fourth (4th) Adjustment
Date, the Annual Base Rent will increase by the lesser of (i) four percent (4%)
of the Annual Base Rent payable for the immediately preceding year, or (ii) two
hundred percent (200%) of the change in CPI from the immediately preceding
fiscal year (the "Base Rent
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Escalator"); provided that an additional amount shall be added to the first
such increase (on April 1, 1999) to take into account that portion of the
Lease Term existing from the Commencement Date until April 1, 1998, which
additional amount shall be equal to: the product generated by multiplying the
applicable Base Rent Escalator for 1999 (determined on April 1, 1999) by the
number of days in the Lease Term from the Commencement Date until April 1,
1998, divided by 365. In addition, if the Annual Base Rent is increased as
provided in Section 4.5, then, for each of the five (5) years following such
increase, the Annual Base Rent will be further increased by the lesser of (i)
three percent (3%) of the Annual Base Rent payable for the immediately
preceding year, or (ii) two hundred percent (200%) of the change in CPI from
the immediately preceding fiscal year, with the increase effective on the
anniversary of the increase in Base Rent as provided in Section 4.5 in lieu
of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and any Extended Term, Tenant shall
calculate the Gross Golf Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If the Gross Golf Revenue for that
Fiscal Quarter (or shorter period, if applicable) is greater than the Gross Golf
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the Fiscal Quarter ending March 31, on a year-to-date
basis), then Tenant shall pay to Landlord the Percentage Rent upon submittal of
the Officer's Certificate. The Percentage Rent payable in any period in any
Fiscal Year shall be adjusted to reflect the Percentage Rent paid on a
year-to-date cumulative basis for the Fiscal Year (pro rated for any partial
periods) and the limits set forth in the next two sentences on a pro rated
basis. The increase in Rent resulting from the payment of Percentage Rent
(together with any increase in Base Rent pursuant to Section 4.2) payable, if
any, during each of the first five (5) full calendar years of the Initial Term
shall be limited to Six percent (6%) of the Rent payable for the prior calendar
year. Tenant shall receive a credit against the payment of Percentage Rent in
an amount equal to the increase in the Base Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent
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actually owing on the basis of the annual calculation of the Gross Golf
Revenue. If the Percentage Rent for such Fiscal Year exceeds the sum of the
quarterly payments of Percentage Rent previously paid by Tenant, Tenant shall
pay such deficiency to Landlord along with such Officer's Certificate. If
the Percentage Rent for such Fiscal Year is less than the amount of
Percentage Rent previously paid by Tenant, Landlord shall, at Tenant's
option, either (i) remit to Tenant its check in an amount equal to such
difference, or (ii) grant Tenant a credit against the payment of Rent next
coming due. Landlord shall have the right to audit all of Tenant's business
operations at the Property so as to determine the calculation of Percentage
Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs only as a result of the election
by Transferor to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, the Annual Base
Rent shall be increased, effective as of the date the additional Owner's Shares
are issued to the Transferor, to an amount equal to the Adjusted Net Operating
Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system
for the Property in accordance with its usual and customary practices and in
accordance with GAAP approved by Landlord, which will accurately record all
Gross Golf Revenue. Tenant shall retain all accounting records for each Fiscal
Year conforming to such accounting system until at least five (5) years after
the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
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charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a similar
or dissimilar nature. Accordingly, if any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid within ten (10) days after the
date such payment is due, Tenant will pay Landlord on demand, as Additional
Charges, a late charge equal to five percent (5%) of such installment. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant and is
not a penalty. In addition, if any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid within five (5) days after the due date
with respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue Rate
on the amount of such installment, and Tenant will pay such interest to Landlord
as Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Lease, nor
prevent Landlord from exercising any other rights and remedies available to
Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be
a triple net lease and Rent shall be payable to Landlord without notice or
demand and without set-off, counterclaim, recoupment, abatement, suspension,
determent, deduction or defense, except as expressly provided herein, so that
this Lease shall yield to Landlord the full amount of the installments of Base
Rent, Percentage Rent and Additional Charges throughout the Term. Without
limiting the foregoing, Tenant shall pay to Landlord on a monthly basis along
with Base Rent, as additional rent, an amount equal to one-twelfth (1/12) of the
Capital Replacement Reserve. Such amount shall be subject to reconciliation at
the end of each Fiscal Quarter.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees that
revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
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ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES AND CASH WITHHOLD AMOUNTS. On or
prior to the Commencement Date, Tenant shall cause the Pledge Agreement to be
executed for the benefit of Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for the Property falls below the
coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Pledge Agreement,
at any time following the release of any Pledged Owner's Shares (or security
deposit held by Landlord in lieu thereof), then Tenant shall thereafter retain,
and not make cash distributions (except as may be necessary to pay any
applicable taxes) to its shareholders, partners or members, as applicable, until
such time as Tenant has accumulated six (6) months of Base Rent at the then
current level. Cash distributions may be made at such time as Tenant shall have
again satisfied such coverage ratios for two (2) consecutive Fiscal Years.
Tenant shall provide Landlord with such documentation, including Officer's
Certificates and financial statements, within forty-five (45) days after the end
of each Fiscal Quarter as are necessary to establish Tenant's compliance with
the foregoing requirements.
5.3 RESERVED.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal property
until payment in full of all Rent and satisfaction of all of Tenant's
obligations hereunder; provided, however, Landlord shall subordinate its lien
and security interest only to that of any third party lender or seller which
finances Tenant's personal property, the terms and conditions of such
subordination to be satisfactory to Landlord in its reasonable discretion.
Tenant shall, upon the request of Landlord, execute such financing statements or
other documents or instruments reasonably requested by Landlord to perfect the
lien and security interests herein granted. Without limitation of the
foregoing, Tenant hereby grants Landlord a security interest in and to that
certain State of Michigan, Liquor Control Commission Liquor License, No. SDM
13591-97, or any extensions, renewals, or replacements thereof, owned by Tenant
and used in connection with the operation of the Property. The parties are
concurrently herewith executing additional documentation creating and perfecting
such security interest.
5.5 TERMINATION PAYMENT. On the Expiration Date, unless each
option for an Extended Term is exercised, Tenant
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shall pay to Landlord the Termination Payment, if any, provided the maximum
Termination Payment shall equal the amounts in the Security Fund (as defined
in the Pledge Agreement) then held by Landlord and shall be payable solely
from the proceeds thereof. For purposes of calculating the Termination
Payment, the shares of common stock of Golf Trust of America, Inc. shall have
a value deemed to equal the average closing share price of common stock of
Golf Trust of America, Inc. for the five (5) days prior to the Expiration
Date.
5.6 USE OF SECOND CASH WITHHOLD AMOUNT. In the event the Net
Operating Income with respect to the Property is not sufficient to cover Rent
and operating expenses as they become due and payable hereunder, Tenant shall
have the right, for the months of January through May of any Lease year and
subject to the Landlord's review and approval on a monthly basis of operating
statements of Tenant respecting its operations and payment of Rent and
operating expenses for the previous month, to direct Landlord to apply, from
the Second Cash Withhold Amount, to the operating expenses and/or Rent due
for such month (but excluding from such operating expenses any management
fees which shall not be paid out of the Second Cash Withhold Amount), in the
amount of such deficiency, up to $115,000.00 per month for the five (5)
months from January through May. Tenant agrees that at such time as the Net
Operating Income with respect to the Property exceeds the operating expenses
or Rent then due and payable, Tenant shall immediately deposit such excess
amount with the Landlord until the Second Cash Withhold Amount is maintained
at the sum required under this Lease and the Agreement. Tenant further agrees
that, should Tenant lose its real property tax litigation against the
Township of Milford before the Michigan Tax Tribunal (MTT Docket#0244466) and
be required to pay real property taxes with respect to the Property, then,
upon the earlier of (i) the entering of a final, unappealable adverse
judgment against Tenant with respect thereto or (ii) the resumption of
Tenant's obligation to immediately pay such real property taxes, the total
amount of the Second Cash Withhold Amount that Tenant may apply to operating
expenses and/or Rent under the terms of this paragraph shall be reduced from
$575,000.00 to $460,000.00 (such that, at a maximum, Tenant would be able to
apply up to $115,000 per month for only four (4) months.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
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shall be subject to Tenant's right of contest pursuant to the provisions of
Article 14. Upon request, Tenant shall promptly furnish to Landlord copies of
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay such
Impositions. Landlord and Tenant shall, upon reasonable request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Property as may be necessary to prepare any required returns and
reports. In the event any applicable governmental authorities classify any
property covered by this Lease as personal property, Tenant shall file all
personal property tax returns in such jurisdictions where it must legally so
file. Each party, to the extent it possesses the same, will provide the other
party, upon reasonable request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the
tax-fiscal period during which the Lease commences or terminates shall be
adjusted and prorated between Landlord and Tenant, whether or not such
Imposition is imposed before or after such commencement or termination, and
Tenant's obligation to pay its prorated share thereof shall survive such
termination. If any Imposition may, at the option of the taxpayer, lawfully
be paid in installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may elect to pay in installments, in which
event Tenant shall pay all installments (and any accrued interest on the unpaid
balance of the Imposition) that are due during the Term hereof before any fine,
penalty, premium, further interest or cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the
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Leased Property into a special assessment district or other taxing
jurisdiction unless Tenant shall have consented thereto, which consent shall
not be unreasonably withheld or unless Landlord agrees to pay the cost
thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any
portion thereof from whatever cause or any taking of the Property or any
portion thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by
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Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR
PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE
EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY
LAW (INCLUDING ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES
THAT THE PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT
OF ANY DEFECT OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR
PATENT, AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF
THIS SECTION 7.2 HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL,
AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY
LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO
THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the
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purposes contemplated hereby. Tenant acknowledges that (A) Tenant or an
Affiliate of Tenant has previously operated the Property and has knowledge of
its condition which is superior to that of Landlord, (B) fee simple title,
except where the Property is held under a ground lease, (both legal and
equitable) is in Landlord and that Tenant has only the leasehold right of
possession and use of the Property as provided herein, (C) to Tenant's
knowledge the Improvements conform to all material Legal Requirements and all
material Insurance Requirements, (D) all easements necessary or appropriate
for the use or operation of the Property have been obtained, (E) all
contractors and subcontractors retained by Tenant who have performed work on
or supplied materials to the Property have been fully paid or any and all
such claims for work performed have been waived by such persons pursuant to
valid, binding and enforceable lien waivers, and all materials to the
Property have been fully paid for, (or, if not, Tenant agrees to forever
indemnify and hold harmless Landlord from any and all damages and
liabilities, of whatever extent or nature, arising out of the nonpayment of
any and all such claims) (F) the Improvements constructed by Tenant or any
Affiliate of Tenant have been completed in all material respects in a
workmanlike manner of first class quality, and (G) all equipment necessary or
appropriate for the use or operation of the Property has been installed and
is presently operative in all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
leasehold property of Landlord subject to the terms of the Ground Lease and
(iii) that Tenant has only the right to the use of such Property during the Term
of and upon the terms and conditions of this Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired by
Landlord or Tenant, in good condition and repair, normal wear and tear excepted.
Upon the loss, destruction or obsolescence of any Tangible Personal Property,
Tenant shall replace such property with replacements of the same type and
quality as initially in place, which such property will be owned by Tenant
except to the extent acquired with funds from the Capital Replacement Fund
("Tenant's Personal Property"). Upon the expiration or sooner termination of
this Lease, the Tenant's Personal Property shall transfer to Landlord without
requirement of any bill of sale or assignment; provided Landlord, at its
election, may require Tenant to execute such documentation as Landlord may
require to evidence such transfer. Tenant shall not remove any Tangible
Personal Property from the Property upon
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termination of the Lease. If any of such Tangible Personal Property is
stored away from the Property, Tenant will provide Landlord with proper
access to the storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, (c) past practices of the Transferor, and (d) such other
reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal
Property may, upon notice to Landlord and during reasonable hours, enter the
Property and take possession of any of Tenant's Personal Property without
liability for trespass or conversion upon a default by Tenant, provided that
such lessor provide Landlord with the opportunity to cure the defaults of Tenant
on terms and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term,
Tenant shall use or cause to be used the Property and the improvements thereon
for its Primary Intended Use. Tenant shall not use the Property or any portion
thereof for any other use without the prior written consent of Landlord, in
Landlord's absolute discretion. No use shall be made or permitted to be made of
the Property, and no acts shall be done, which will cause the cancellation of
any insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property or other
improvements of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
12, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under
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the Property, or any adjacent property, or incorporated in the Property or
any improvements thereon except in compliance with applicable law (including
any Environmental Laws). Tenant shall not allow the Property to be used as a
landfill or a waste disposal site, or a manufacturing, distribution or
disposal facility for any Hazardous Materials. Tenant shall neither suffer
nor permit the Property or any portion thereof, including Tenant's Personal
Property, to be used in such a manner as (i) might reasonably tend to impair
Landlord's title thereto or to any portion thereof, or (ii) may reasonably
make possible a claim or claims of adverse usage or adverse possession by the
public, as such, or of implied dedication of the Property or any portion
thereof, or (iii) is in material violation of any applicable Environmental
Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, which consent shall not be unreasonably withheld or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 RESERVED.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which signage
may include an appropriate logo selected by Landlord. In addition, it is the
intent of the parties that Tenant be a single-purpose entity with no business
operations except for those related solely to the operation of the Property for
its Primary Intended Use and other property of Landlord which may be leased to
Tenant. Tenant (but excluding Affiliates of Tenant) shall, therefore, not
engage in or undertake any activities other than those respecting the operation
of the Property for its Primary Intended Use, including leasing, managing, and
operating golf courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without
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regard to any increase or decrease for inflation or deflation during the
Term) equal to at least twenty percent (20%) of the fair market value of the
Land and each of the Improvements at the Commencement Date. Tenant further
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a remaining
useful life equal to at least twenty percent (20%) of its expected useful
life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain Phase I
Environmental Site Assessment dated December 3, 1997, and that certain Phase II
Environmental Site Assessment dated December 26, 1997, each prepared by ATC
Associates, Inc., Tenant hereby represents, warrants, and covenants to Landlord
as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with all
Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to
the best knowledge of Tenant, without inquiry, except for such inquiry as has
actually been undertaken or for such inquiry as would be deemed reasonable for
the normal operation of such property there are no Environmental Laws requiring
any material remediation, cleanup, repairs or construction (other than normal
maintenance) with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement,
and to the best knowledge of Tenant, (a) no notices of any violation or alleged
violation of any Environmental Laws relating to the Property or its uses have
been received by either Tenant, or, to the best knowledge of Tenant, without
inquiry, except for such inquiry as has actually been undertaken or for such
inquiry as would be deemed reasonable for the normal operation of such property
by any prior owner, operator or occupant of the Property, and (b) there are no
writs, injunctions, decrees, orders or judgments outstanding, or any actions,
suits, claims, proceedings or investigations pending or threatened, relating to
the ownership, use, maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with the
terms and conditions of such permits and licenses.
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10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth or
described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Property or if Tenant, Landlord,
or the Property becomes subject to any order of any federal, state or local
agency to investigate, remove, remediate, repair, close, detoxify, decontaminate
or otherwise clean up the Property, Tenant shall, at its sole expense, but
subject to the last sentence of Section 10.7, carry out and complete any
required investigation, removal, remediation, repair, closure, detoxification,
decontamination or other cleanup of the Property. If Tenant fails to implement
and diligently pursue any such repair, closure, detoxification, decontamination
or other cleanup of the Property in a timely manner, Landlord shall have the
right, but not the obligation, to carry out such action and to recover its costs
and expenses therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any Environmental
Law, (c) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity, or (d) by reason of a breach of a representation or warranty in
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Sections 10.1 through 10.5 of this Lease. Notwithstanding the foregoing or any
other provision of this Lease (including, without limitation, Section 7.2,
Section 10.9 and Article 23), Tenant shall not be liable, or otherwise be
required to indemnify Landlord or the Company or any Affiliates of the Company
for (i) any matters or events that arise after the Commencement Date that are
not caused by any act or omission on the part of Tenant, or (ii) any matters or
events that arise after the Commencement Date that are directly caused by a
breach by Landlord of the terms of this Lease. Notwithstanding any foregoing
waivers by Tenant in favor of Landlord, none of the provisions of this Lease
(including, without limitation, Section 10.6 or Section 10.7) shall be construed
as constituting or deemed to constitute a waiver by Tenant of any rights of
contribution or indemnification that it may have against third parties
(excluding Affiliates of Landlord), including, but not limited to, rights of
contribution or indemnification against such third parties arising in connection
with Hazardous Materials or Environmental Laws.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a
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result of Tenant's use, any prior use, the elements or the age of the
Property or any portion thereof) and in accordance with any applicable Legal
Requirements, and, except as otherwise provided in Article 15, with
reasonable promptness, make all necessary and appropriate repairs thereto of
every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising
by reason of a condition existing prior to the Commencement Date (concealed
or otherwise). Tenant shall operate and maintain the Property in accordance
with the operation and maintenance practices of the Property at the
Commencement Date and otherwise in a manner comparable to other comparable
golf course facilities in the vicinity of the Property. Landlord may consult
with the Advisory Association from time to time with respect to Tenant's
compliance with its maintenance and operation obligations under this Section
11.1, and Landlord and representatives of Advisory Association shall have the
right from time to time to enter the Property for the purpose of inspecting
the Property. If Landlord, in consultation with the Advisory Association,
determines that Tenant has failed to comply with its maintenance and
operation obligations under this Section 11.1, Landlord shall provide written
notice to Tenant setting forth a list of remedial work and/or steps to be
performed by Tenant. Tenant shall promptly and diligently perform such
remedial work and/or steps as recommended by Landlord, provided if Tenant
objects to one or more of the remedial obligations proposed by Landlord, then
the matter shall be submitted to the dispute resolution procedure set forth
in Section 12.7. Tenant will not take or omit to take any action the taking
or omission of which could reasonably be expected to impair the value or the
usefulness of the Property or any part thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under
any circumstances be required to build or rebuild any improvements on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto, in connection with this Lease,
or to maintain the Property in any way. Tenant hereby waives, to the extent
permitted by law, the right to make repairs at the expense of Landlord pursuant
to any law in effect at the time of the execution of this Lease or hereafter
enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
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construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of this Lease, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant
Improvement, Tenant shall diligently prosecute any such Tenant Improvement
to completion in accordance with applicable insurance requirements and the
laws, rules and regulations of all governmental bodies or agencies having
jurisdiction over the Property; and
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(c) Tenant shall not suffer or permit any mechanics' liens or
any other claims or demands arising from the work of construction of any
Tenant Improvement to be enforced against the Property or any part thereof,
and Tenant agrees to hold Landlord and the Property free and harmless from
all liability from any such liens, claims or demands, together with all
costs and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike
manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost
and expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with
Tenant and take such actions, including the execution and delivery to Tenant of
any applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
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placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Tenant for
Capital Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the
Capital Replacement Fund shall be used to purchase property to the extent that
doing so would cause Landlord to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code. Tenant shall have no rights
with respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement,
or qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget
submitted to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements
shall be the property of Landlord. However, Tenant shall be entitled to all
federal and state income tax benefits associated with any Tenant Improvement
during the Lease Term exclusive of any Capital Expenditures paid for from
amounts credited to the Capital Replacement Fund, as to which Landlord shall be
entitled all income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or through its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of Percentage
Rent, Tenant shall forthwith pay to Landlord the amount of the deficiency as
finally
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agreed or determined, together with interest at the Overdue Rate from
the date when said payment should have been made to the date of payment thereof;
PROVIDED, HOWEVER, that as to any audit that is commenced more than twelve (12)
months after the date Gross Golf Revenue for any Fiscal Year is reported by
Tenant to Landlord in the Officer's Certificate, the deficiency, if any, with
respect to such Gross Golf Revenue shall bear interest as permitted herein only
from the date such determination of deficiency is made unless such deficiency is
the result of gross negligence or willful misconduct on the part of Tenant. If
any such audit discloses that the Gross Golf Revenue actually received by Tenant
for any Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay all
reasonable costs of such audit and examination; provided Tenant shall have the
right to submit the audit determination to arbitration in accordance with the
procedures set forth in Article 28. Landlord shall also have the right to
review and audit from time to time Tenant's business operations including all
books, records and financial statements of Tenant. Tenant shall promptly
provide to Landlord copies of all such books, records, financial statements or
any other documentation of Tenant's business operations reasonably requested by
Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Golf Revenue
(including membership dues, daily use fees and other sources of Gross Golf
Revenue) and other revenue for the forthcoming Fiscal Year itemized on schedules
on a quarterly basis as approved by Landlord and Tenant, together with
assumptions, in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant
events, including, if requested by Landlord, a narrative description of any
category of operating expenses that
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decrease or increase by five percent (5%) or more from the prior year's
expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed of three (3)
members of the Advisory Association unaffiliated with Tenant and two (2) members
of the board of directors of the Company. Such committee shall be responsible
for resolving any such disagreement and the parties agree that the determination
of such dispute resolution committee shall be binding on the parties. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the prior year's Operating Budget until a new Operating
Budget is adopted, and (ii) if the Capital Budget has not been agreed upon, no
Capital Expenditures shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically required by Landlord or are
otherwise required to comply with Legal Requirements or Insurance Requirements.
Tenant shall operate the Property in a manner reasonably consistent with the
Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property shall be kept either at the Property or at Tenant's
offices in __________________, ____________. Such books and records shall
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be available to Landlord and its representatives for examination,
audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the amounts
set forth on the Annual Budget, together with, if appropriate a revised Annual
Budget, which budget shall be subject to Landlord's review and approval as
provided in Section 12.7. Each quarterly report shall also forecast any
projected Percentage Rent payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord
within sixty (60) days of the end of such Fiscal Year financial statements
prepared in accordance with GAAP and audited by an independent accounting firm
approved by Landlord, in its reasonable discretion. Notwithstanding the
foregoing, Landlord shall only require audited financial statements of Gross
Golf Revenue if Tenant's financial statements are not required to be separately
stated by the Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy,
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claim or encumbrance emanating from Tenant's actions or negligence, not
including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement
Date, as set forth on the title policy received by Landlord including but
not limited to the Ground Lease;
(c) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, or any easements granted pursuant to
the provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not
required to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (1) the same are not yet
payable or are payable without the addition of any fine or penalty or (2)
such liens are in the process of being contested as permitted by Article
14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant
to the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article
21 and excepting any matters granted or created by Landlord after the
Commencement Date, if any of the Improvements shall, at any time, encroach upon
any property, street or right-of-way adjacent to the Property, or shall violate
the agreements or conditions contained in any lawful restrictive covenant or
other agreement affecting the Property, or any part thereof, or shall impair the
rights of others under any easement or right-of-way to which the Property is
subject, or the use of the Property is impaired, limited or interfered with by
reason of the exercise of the right of surface entry or any other rights under a
lease or reservation of any oil, gas, water or other minerals, then promptly
upon request of Landlord or at the behest of any person affected by any such
encroachment, violation or impairment, Tenant, at its sole cost and expense
(subject to its right to contest the existence of any such encroachment,
violation or impairment), shall protect, indemnify, save harmless and defend
Landlord, the Company and Affiliates of the Company from and against all losses,
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including
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reasonable attorneys' fees and expenses) based on or arising by reason of any
such encroachment, violation or impairment and in such case, in the event of
an adverse final determination, either (i) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each
such encroachment, violation or impairment, whether the same shall affect
Landlord or Tenant; or (ii) make such changes in the Improvements, and take
such other actions, as Tenant in the good faith exercise of its judgment
deems reasonably practicable, to remove such encroachment, and to end such
violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary
in order to be able to continue the operation of the Improvements for the
Primary Intended Use substantially in the manner and to the extent the
Improvements were operated prior to the assertion of such violation or
encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy
of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf
(or in Landlord's name) but at Tenant's expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or Insurance Requirement, or any lien, attachment, levy,
encumbrance, charge or claim not otherwise permitted by Section 13.1; provided,
however, that nothing in this Section 14.1 shall limit the right of Landlord to
contest the amount, validity or application, in whole or in part, of any
Imposition, Legal Requirement, Insurance Requirement, or any lien, attachment,
levy, encumbrance, charge or claim with respect to the Property (and Tenant
shall reasonably cooperate with Landlord with respect to such contest), and,
FURTHER PROVIDED THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for
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failure to comply therewith pending the outcome of such proceedings.
Nothing in this Section 14.1(b), however, shall permit Tenant to delay
compliance with any requirement of an Environmental Law to the extent such
non-compliance poses an immediate threat of injury to any Person or to the
public health or safety or of material damage to any real or personal
property;
(c) in the case of a Legal Requirement and/or an Imposition,
lien, encumbrance or charge, Tenant shall give such reasonable security, if
any, as may be demanded by Landlord to insure ultimate payment of the same
and to prevent any sale or forfeiture of the affected Property or the Rent
by reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage
required by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term,
Tenant shall at all times keep the Property, and all property located in or on
the Property, including all Tenant's Personal Property and any Tenant
Improvements, insured with the
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kinds and amounts of insurance described below. This insurance shall be
written by companies authorized to do insurance business in the State, and
shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss
payee, as applicable. Losses shall be payable to Landlord and/or Tenant as
provided in this Article 15. In addition, the policies shall name as a loss
payee any Facility Mortgagee by way of a standard form of mortgagee's loss
payable endorsement. Any loss adjustment shall require the written consent
of Landlord, Tenant, and each Facility Mortgagee, if any. Evidence of
insurance shall be deposited with Landlord and, if requested, with any
Facility Mortgagee(s). The policies on the Property, including the
Improvements, Fixtures, Tangible and Intangible Personal Property and any
Tenant Improvements, shall insure against the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages (and including, but only to the extent applicable and available,
sprinkler leakage), in an amount not less than 100% of the then Full
Replacement Cost thereof covering all structures built on the Property and
all Tangible Personal Property; and further provided the Tangible Personal
Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in
whole or in material part a designated flood plain area) in an amount
similar to the amount insured by comparable golf course properties in the
area. Notwithstanding the foregoing, Tenant shall not be required to
participate in the National Flood Insurance Program or otherwise obtain
flood insurance to the extent not available at commercially reasonable
rates; provided Tenant shall give Landlord written notice thereof prior to
cancelling or not obtaining any flood insurance. Tenant may opt to insure
the structures only, and not the Land, subject to the approval of Landlord,
in Landlord's reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the
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approval of Landlord, in Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that
the Full Replacement Cost of the insured property has increased or decreased at
any time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than "A" by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written
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notice before the policy or policies in question shall be altered, allowed to
expire or cancelled. Each such policy shall also provide that any loss
otherwise payable thereunder shall be payable notwithstanding (i) any act or
omission of Landlord or Tenant which might, absent such provision, result in
a forfeiture of all or a part of such insurance payment, (ii) the occupation
or use of the Property for purposes more hazardous than those permitted by
the provisions of such policy, (iii) any foreclosure or other action or
proceeding taken by any Facility Mortgagee pursuant to any provision of a
mortgage, note, assignment or other document evidencing or securing a loan
upon the happening of an event of default therein or (iv) any change in title
to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less than
the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance
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required by this Article 15 shall (i) if greater than $100,000, be paid to
Landlord and held by Landlord and (ii) if less than such amount, be paid to
Tenant and held by Tenant. All such proceeds shall be held in trust and
shall be made available for reconstruction or repair, as the case may be, of
any damage to or destruction of the Property, or any portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies
of all necessary governmental and private approvals necessary to complete
the reconstruction or repair, including building permits, licenses,
conditional use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last disbursement,
upon receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
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stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction of the Property (or in the event neither Landlord nor Tenant is
required to or elects to repair and restore) shall be paid to Landlord and
deposited in the Capital Replacement Fund except for any portion specifically
applicable to Tenant's merchandise and inventory. All salvage resulting from
any risk covered by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15 and the
Property thereby is rendered Unsuitable For Its Primary Intended Use as
reasonably determined by Landlord, Tenant shall, at its election, either
(i) diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in this Lease and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the
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insurance described in Article 15, but the Real Property is not
thereby rendered Unsuitable For Its Primary Intended Use, Tenant shall
diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant shall not be required to restore certain Tangible
Personal Property and/or any Tenant Improvements if failure to do so does
not adversely affect the amount of Rent payable hereunder or the Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18)
months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the
Term, the Property is totally or materially destroyed from a risk not covered by
the insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other
provision to the contrary in this Article 15, if damage to or destruction of the
Property occurs during the last twenty-four (24) months of the Lease Term, and
if such damage or destruction cannot reasonably be expected by Landlord to be
fully repaired or restored prior to the date that is twelve (12) months prior to
the end of the then-applicable Term, then either Landlord or Tenant shall have
the right to terminate the Lease on thirty (30) days' prior notice to the other
by giving notice thereof within
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sixty (60) days after the date of such damage or destruction. Upon any such
termination, Landlord shall be entitled to retain all insurance proceeds,
grossed up by Tenant to account for the deductible or any self-insured
retention. If Landlord shall give Tenant a notice under this Section 15.15
that it seeks to terminate this Lease at a time when Tenant has a remaining
Extended Term, then such termination notice shall be of no effect if Tenant
shall exercise its rights to extend the Term not later than the earlier of
the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
15.16 INSURANCE REQUIRED UNDER GROUND LEASE. Landlord and Tenant
acknowledge that the Ground Lease contains certain insurance requirements.
Tenant agrees to observe all the terms and conditions of the Ground Lease,
including the insurance provisions thereof. To the extent to which the
insurance provisions of the Ground Lease and of this Lease conflict, the terms
and provisions of the Ground Lease shall control, provided, however, that to the
extent to which the insurance requirements under this Lease impose greater
duties and requirements upon Tenant than are imposed upon the Lessee under the
Ground Lease, Tenant agrees to be bound by such higher standards, and to observe
the terms and conditions of this Article 15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property
is totally and permanently taken by Condemnation, this Lease shall terminate on
the Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property
and this Lease remains in full force and effect pursuant to Section 16.2,
Landlord at its cost shall accomplish all necessary restoration up to but not
exceeding the amount of the Award payable to Landlord, as provided herein. If
Tenant receives an Award under Section 16.4, Tenant shall repair or restore any
Tenant Improvements up to but not exceeding the amount of the Award payable to
Tenant therefor.
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16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect. In the event of any such temporary taking, the entire
amount of any such Award made for such temporary taking allocable to the Lease
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant. Tenant agrees that, to the extent to which unpaid rent accrues during
any period of temporary taking, such rent shall be paid from the proceeds of any
condemnation award, if any, payable to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following
events (individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material
term, covenant or condition of this Lease and such failure is not cured by
Tenant within a period of thirty (30) days after receipt by Tenant of
notice thereof from Landlord, unless such failure cannot with due diligence
be cured within a period of thirty (30) days, in which case such failure
shall not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure
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period shall not extend beyond thirty (30) days as otherwise provided by
this Section 17.1(b) if the facts or circumstances giving rise to the
default are creating a further harm to Landlord or the Property and
Landlord makes a good faith determination that Tenant is not undertaking
remedial steps that Landlord would cause to be taken if this Lease were
then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as
they become due,
(ii) make an assignment for the benefit of its creditors,
(iii) be unable to pay its debts as they mature,
(iv) consent to the appointment of a receiver of itself
or of the whole or any substantial part of its
property, or
(v) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any
other applicable law or statute of the United States
of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against
it, be adjudicated as bankrupt or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of Tenant, a
receiver of Tenant or of the whole or substantially all of its property, or
approving a petition filed against it seeking reorganization or arrangement
of Tenant under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, and such
judgment, order or decree shall not be vacated or set aside or stayed
within ninety (90) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with
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Article 14); PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law;
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in
any certificate, demand or request made pursuant hereto proves to be
incorrect, now or hereafter, in any material respect; or
(i) an "Event of Default" under the Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease.
Landlord may terminate this Lease by giving Tenant not less than ten (10) days'
notice (or no notice for clauses (c), (d), (e), (f) and (g)) of such termination
and upon the expiration of the time fixed in such notice, the Term shall
terminate and all rights of Tenant under this Lease shall cease. Landlord shall
have all rights at law and in equity available to Landlord as a result of
Tenant's breach of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have
occurred and be continuing, whether or not this Lease has been terminated
pursuant to Section 17.1, Tenant shall, to the fullest extent permitted by law,
if required by Landlord to do so, immediately surrender to Landlord the Property
pursuant to the provisions of Section 17.1 and quit the same and Landlord may,
to the fullest extent permitted by law, enter upon and repossess the Property by
reasonable force, summary proceedings, ejectment or otherwise, and may remove
Tenant and all other Persons and any and all Tenant's Personal Property from the
Property subject to any requirement of law. In connection with and in
furtherance of the foregoing provisions of this Section 17.3, Tenant waives, to
the fullest extent permitted, any and all rights which may be waived by Tenant
pursuant to applicable law.
17.4 DAMAGES. None of the following events shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof,
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nor (e) the failure of Landlord to collect or receive any rentals due upon
any such reletting. In the event of any such termination, Tenant shall
forthwith pay to Landlord all Rent due and payable with respect to the
Property to, and including, the date of such termination. Thereafter, Tenant
shall forthwith pay to Landlord, at Landlord's option, as and for liquidated
and agreed current damages for Tenant's default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent
which had been earned at the time of termination,
(ii) the worth at the time of award of the amount by
which the unpaid Rent which would have been earned
after termination until the time of award exceeds
the amount of such unpaid Rent that Tenant proves
could have been reasonably avoided,
(iii) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term
after the time of award exceeds the amount of such
unpaid Rent that Tenant proves could be reasonably
avoided, and
(iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease
or which in the ordinary course of things would be
likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
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paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that
may be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section
17.1, Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord
under any of the provisions of this Lease during the existence or continuance of
any Event of Default (and such payment is made to Landlord rather than Tenant
due to the existence of an Event of Default) shall be applied to Tenant's
obligations in the order which Landlord may determine or as may be prescribed by
the laws of the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
reasonably determine the amount of the Impound Charges and of each Impound
Payment. Landlord's reasonable determination shall be based upon previous tax
and insurance bills. The Impound Payments shall be held in a separate account
and shall not be commingled with other funds of Landlord and interest thereon
shall be held for the account of Tenant. Landlord shall apply the Impound
Payments to the payment of the Impound Charges in such order or priority as
Landlord shall determine or as required by law. If at any time the Impound
Payments theretofore paid to Landlord shall be insufficient for the payment of
the Impound Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
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ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the previous Fiscal Year; (ii) all Additional Charges accruing during
the month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of
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this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses),
to the extent permitted by law, imposed upon or incurred by or asserted against
Landlord, the Company or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
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(b) any use, misuse, non-use, condition, maintenance or repair
of the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of
any and all existing and future subleases of the Property to be performed
by the landlord (Tenant) thereunder;
(g) Reserved
(h) any liability Landlord may incur or suffer as a result of
any permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall
protect, indemnify, save harmless and defend Tenant from and against all
liabilities, obligations, claims, actual or consequential damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees)
imposed upon or incurred by or asserted against Tenant as a result of Landlord's
active, gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the indemnified party may at all times participate in such defense
at its expense, and PROVIDED
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FURTHER, HOWEVER, that the indemnifying party shall not, in defense of any
such claim, except with the prior written consent of the indemnified party,
consent to the entry of any judgment or to enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant
or plaintiff in question to the indemnified party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages by the indemnifying party. If the
indemnifying party shall fail to undertake such defense within thirty (30)
days after such notice, or within such shorter time as may be reasonable
under the circumstances, then the indemnified party shall have the right to
undertake the defense, compromise or settlement of such liability or claim on
behalf of and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without
the prior written consent of Landlord, which consent Landlord may withhold in
its sole discretion, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer (except to an Affiliate of Tenant or a Permitted Assignee)
the Lease or any interest therein, all or any part of the Property, whether
voluntarily, involuntarily or by operation of law. For purposes of this Article
23, a Change in Control of the Tenant shall constitute an assignment of this
Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole and absolute discretion, further sublease, assign, or license portions
of the Property to third parties, including concessionaires or licensees.
Without limiting the foregoing, all of the following transfers shall
require Landlord's prior written consent, which consent Landlord may
withhold in its sole and absolute discretion:
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(i) a sublease or license to operate golf courses;
(ii) a sublease or license to operate golf professionals'
shops;
(iii) a sublease or license to operate golf driving
ranges;
(iv) a sublease or license to provide golf lessons by
other than a resident professional provided, however, that Landlord
acknowledges and consents to Jim Dewling as a resident
professional;
(v) a sublease or license to operate restaurants;
(vi) a sublease or license to operate bars;
(vii) a sublease or license to operate spa or health
clubs; and
(viii) a sublease or license to operate any other portions
(but not the entirety) of the Property customarily associated with
or incidental to the operation of the golf course.
Notwithstanding the foregoing, Landlord acknowledges and consents
to the existence of the sublease to Total Golf, Inc., existing as of the date of
this Lease. (Landlord's acknowledgment and consent to such sublease shall not
be deemed a consent to any further assignment or sublease). Landlord further
agrees that Landlord shall not unreasonably withhold or delay its consent to a
sublease by Tenant with respect the Adventure Golf Facility (as hereinafter
defined). The "Adventure Golf Facility" shall mean that certain eighteen (18)
hole miniature golf facility located upon the Real Property (excluding any and
all portions of the twenty-seven (27) hole main golf course, with respect to
which Landlord may withhold its consent to any sublease or assignment in its
sole and absolute discretion), as shown on that certain survey to be delivered
to Landlord pursuant to Section 2.1(c) of the Agreement.
(b) TERMS OF SUBLEASE. Each sublease with respect to the
Property shall be subject and subordinate to the provisions of this Lease.
No sublease made as permitted by this Section 23.2 shall affect or reduce
any of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
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(c) COPIES. Tenant shall, not less than sixty (60) days prior
to any proposed assignment or sublease, deliver to Landlord written notice
of its intent to assign or sublease, which notice shall identify the
intended assignee or sublessee by name and address, shall specify the
effective date of the intended assignment or sublease, and shall be
accompanied by an exact copy of the proposed assignment or sublease.
Tenant shall provide Landlord with such additional information or documents
reasonably requested by Landlord with respect to the proposed transaction
and the proposed assignee or subtenant, and an opportunity to meet and
interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way
impair the continuing primary liability of Tenant hereunder, as a principal and
not as a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention
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of the terms of this Lease shall be voidable at Landlord's option. Anything
in this Lease to the contrary notwithstanding, Tenant shall not sublet all or
any portion of the Property or enter into any other agreement which has the
effect of reducing the Percentage Rent payable to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
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23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive an assignment of this Lease or subletting of the Property to Landlord or
Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights
and obligations under this Lease only if the Trustee: (a) promptly cures any
Event of Default then existing or provides adequate assurance that the Trustee
will promptly compensate Landlord for any actual pecuniary loss incurred by
Landlord as a result of Tenant's default under this Lease; and (b) provides
adequate assurance of future performance under this Lease. Adequate assurance
of future performance by the proposed assignee shall include, as a minimum,
that: (i) any proposed assignee of this Lease shall provide to Landlord an
audited financial statement, dated no later than six (6) months prior to the
effective date of such proposed assignment or sublease, with no material change
therein as of the effective date, which financial statement shall show the
proposed assignee to have a net worth reasonably satisfactory to Landlord or, in
the alternative, the proposed assignee shall provide a guarantor of such
proposed assignee's obligations under this Lease, which guarantor shall provide
an audited financial statement meeting the requirements of (i) above and shall
execute and deliver to
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Landlord a guaranty agreement in form and substance acceptable to Landlord;
and (ii) any proposed assignee shall grant to Landlord a security interest in
favor of Landlord in all furniture, fixtures, and other personal property to
be used by such proposed assignee in the Property. All payments required of
Tenant under this Lease, whether or not expressly denominated as such in this
Lease, shall constitute rent for the purposes of Title 11 of the Bankruptcy
Code.
(d) The parties agree that for the purposes of the Bankruptcy
code relating to (a) the obligation of the Trustee to provide adequate assurance
that the Trustee will "promptly" cure defaults and compensate Landlord for
actual pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss." The term "actual
pecuniary loss" shall mean, in addition to any other provisions contained herein
relating to Landlord's damages upon default, obligations of Tenant to pay money
under this Lease and all attorneys' fees and related costs of Landlord incurred
in connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed, without
further act or deed, to have assumed all of the obligations arising under this
Lease and each of the conditions and provisions hereof on and after the date of
such assignment. Any such assignee shall, upon the request of Landlord,
forthwith execute and deliver to Landlord an instrument, in form and substance
acceptable to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than thirty (30) days' prior written request
by Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or
that this Lease is in full force and effect as modified and setting forth
the modifications);
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(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is
in default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no
proceedings pending or, to the knowledge of the signatory, threatened,
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's
learning, or having reasonable cause to believe, that any Hazardous Material in
a quantity sufficient to require remediation or reporting under applicable law
is located in, on or under the Property or any adjacent property, Tenant shall
notify Landlord in writing of (a) the existence of any such Hazardous Material;
(b) any enforcement, cleanup, removal, or other governmental or regulatory
action instituted, completed or threatened; (c) any claim made or threatened by
any Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion
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thereof or interest therein, whether to secure any borrowing or other means
of financing or refinancing. This Lease is and at all times shall be subject
and subordinate to any ground or underlying leases, mortgages, trust deeds or
like encumbrances, which may now or hereafter affect the Property and to all
renewals, modifications, consolidations, replacements and extensions of any
such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required
by any ground or underlying lessor or by any mortgagee or beneficiary,
affecting any lease or the Property. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Landlord may request for
such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall
pay all Rent as the same becomes due and shall fully comply with all of the
terms of this Lease and fully perform its obligations hereunder, none of
Tenant's rights under this Lease shall be disturbed by the holder of any
Landlord's Encumbrance which is created or otherwise comes into existence after
the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to
sell the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding
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purchase and sale agreement, Landlord shall retain the right to elect not to
sell the Property. If Tenant does not elect to purchase the Property, then
Landlord shall be free to sell the Property to a third party. However, if the
price at which Landlord intends to sell the Property to a third party is less
than 95% of the price set forth in the notice provided by Landlord to Tenant,
then Landlord shall again offer Tenant the right to acquire the Property upon
the same terms and conditions, provided that Tenant shall have only thirty
(30) days thereafter to complete the acquisition at such price, terms and
conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the
Property in accordance with the terms hereof other than as security for a debt,
Landlord shall, upon the written assumption by the transferee of the Property of
all liabilities and obligations of the Lease be released from all future
liabilities and obligations under this Lease arising or accruing from and after
the date of such conveyance or other transfer as to the Property. All such
future liabilities and obligations shall thereupon be binding upon the new
owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which
it shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced
pursuant to Section 27.1 a single arbitrator shall be designated and shall
resolve the dispute. The arbitrator's decision shall be binding on all parties
and shall not be subject to further review or appeal except as otherwise allowed
by applicable law. Upon the failure of either party (the "non-complying party")
to comply with his decision, the arbitrator shall be empowered, at the request
of the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant.
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Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Landlord and Tenant regarding the Property during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord
and its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and
Tenant agree that neither party shall be restricted as to other relationships
and competition. Affiliates of Tenant shall be allowed to own, lease and/or
manage other golf courses that are not affiliated with Landlord, provided that
such other ownership, leasing or management arrangements are disclosed to
Landlord in writing. Landlord may acquire or own golf courses
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that may be geographically proximate to one or more golf courses that Tenant
or Affiliates of Tenant may own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as
the same becomes due and shall fully comply with all of the terms of this Lease
and fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and delivered
or mailed (by registered or certified mail, return receipt requested and postage
prepaid), addressed to the respective parties, as set forth below:
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If to Landlord: Golf Trust of America, L.P.
190 King Street
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
With a copy to: O'Melveny & Myers, LLP
275 Battery Street, Suite 2600
San Francisco, CA 94111
Attention: David G. Estes
Richard J. Rabbitt
If to Tenant: Mystic Golf Club, Limited Partnership
32605 West 12 Mile Road
Suite 350
Farmington Hills, Michigan 48334
With a copy to: James R. Dewling
1303 West Commerce Road
Milford, Michigan 48380
With a copy to: Steven B. Haffner & Associates, P.C.
30300 Northwestern Highway, #310
Farmington Hills, Michigan 48334
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties hereto.
All permitted assignees or
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sublessees shall be subject to the terms and provisions of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and
construed in accordance with the laws of the State (but not including its
conflict of laws rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly
upon the request of either, enter into a short form memorandum of this Lease, in
form and substance satisfactory to Landlord and suitable for recording under the
laws of the State, in which reference to this Lease, and all options contained
herein, shall be made. The requesting party shall pay all costs and expenses of
recording such Memorandum of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease,
express or implied, is intended to confer any rights or remedies under or by
reason of this Lease on any Person other than the parties to this Lease and
their respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any party
hereto or give any third Person any right of subrogation or action against any
party to this Lease.
28.20 NON-RECOURSE AS TO LANDLORD. Anything contained herein to
the contrary notwithstanding, any claim based on or in respect of any liability
of Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
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28.21 NO RELATIONSHIP. Landlord shall in no event be construed
for any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.22 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
ARTICLE 29
GROUND LEASE; SIDE AGREEMENT
29.1 GROUND LEASE. Landlord and Tenant acknowledge that the
leasehold interest of Landlord in and to the Property was created by and is
subject to that certain Ground Lease, dated July 1, 1994, by and between the
City of Dearborn and Mystic Creek Golf Club, Limited Partnership, as assigned by
Mystic Creek Golf Club, Limited Partnership, to Landlord by that certain
Assignment of Lease of even date herewith. Tenant agrees to observe and to be
bound by all the terms and conditions of such Ground Lease and to perform and
comply with all the duties and obligations of lessee thereunder, so as not to
cause a default thereunder, as if it were the lessee thereunder, except to the
extent to which this Lease specifically and expressly imposes such duty or
obligation on Landlord and not Tenant.
29.2 SIDE AGREEMENT WITH CITY OF DEARBORN. The parties hereto
have entered into an agreement with the City of Dearborn ("Side Agreement"), of
even date herewith, pursuant to which Tenant has confirmed to the City of
Dearborn (i) its agreement and obligation to comply with the terms of the Ground
Lease, consistent with the terms and provisions of Section 29.1 hereinabove, and
(ii) its obligation to provide certain notices and information to the City of
Dearborn. In connection with such agreement, Tenant hereby covenants with
Landlord that (i) Tenant shall comply with all the terms and conditions set
forth in such Side Agreement as if such terms and conditions were incorporated
into this Lease; (ii) Tenant shall provide Landlord with copies of any notices
from the City of Dearborn alleging noncompliance with such Side Agreement; and
(iii) Tenant shall indemnify and hold harmless Landlord from and against any and
all damages and liabilities that Landlord may incur, including any diminution of
its leasehold interest, due to such Side Agreement or Tenant's
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default thereunder. Nothing in this Section 29.2 shall be deemed to limit
any of Tenant's obligations set forth elsewhere in this Lease and, without
limitation of the foregoing, shall not limit any other provisions respecting
Tenant defaults and/or indemnities.
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IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease as of the
year and date written above.
LANDLORD: GOLF TRUST OF AMERICA, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
-----------------------------
W. Bradley Blair, II
President and CEO
TENANT: MYSTIC CREEK GOLF CLUB, LIMITED PARTNERSHIP,
A MICHIGAN LIMITED PARTNERSHIP
By: Foremost Golf Ventures Limited Liability Company,
a Michigan limited liability company
Its: General Partner
By: Total Golf, Inc., a Michigan corporation
Its: Member
By: /s/ James R. Dewling
-----------------------------
James R. Dewling
Its President
By: The Slavik Co., a Michigan corporation
Its: Member
By: /s/ Erik A. Gold
--------------------------
Erik A. Gold
Its Vice-President
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- --------------------------------------------------------------------------------
Emerald Dunes Golf Course
West Palm Beach
Palm Beach County
Florida
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
EMERALD DUNES - WEST PALM BEACH, INC.
TENANT
DATED AS OF FEBRUARY 1, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
<S> <C>
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Right of First Offer to Lease. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . . . . . 14
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . . . . . 15
4.5 Increase in Base Rent Following Conversion Date. . . . . . . . . . . . 16
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.9 Net Lease; Capital Replacement Reserve . . . . . . . . . . . . . . . . 17
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Pledge of Owner's Shares . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Obligation to Withhold Distributions . . . . . . . . . . . . . . . . . 17
5.3 Landlord's Lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Termination Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<PAGE>
ARTICLE 6
<TABLE>
<CAPTION>
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<S> <C>
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Information and Reporting. . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Assessment Districts . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 No Termination, Abatement, Etc . . . . . . . . . . . . . . . . . . . . 19
7.2 Condition of the Property. . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . 21
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . . . . . 23
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Landlord to Grant Easements, Etc . . . . . . . . . . . . . . . . . . . 23
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . . . . . 24
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . . . . . 24
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . . . 25
10.8 Survival of Indemnification Obligations . . . . . . . . . . . . . . . 26
10.9 Environmental Violations at Expiration
or Termination of Lease. . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . . . . 27
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS;
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . . . . 28
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . . . . 29
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . . . . 29
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . . . . 30
12.6 Landlord's Right to Audit Calculation of Gross Golf Revenue. . . . . . 30
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . . . . 33
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . . . . 34
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . 36
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . . . . 38
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 39
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . . . . . 40
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . . . . . 40
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . . . . . 41
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . 41
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . . . . 46
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
(iv)
<PAGE>
ARTICLE 21
<TABLE>
<CAPTION>
<S> <C>
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . . . 48
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . . . . 49
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . . . . 49
22.4 Survival of Indemnification Obligations;
Available Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . . . . 50
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . . . . 52
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . . . . 53
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . . . . 54
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . 54
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . 55
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . . . . 56
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . . . . 56
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
(v)
<PAGE>
ARTICLE 27
<TABLE>
<CAPTION>
<S> <C>
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . . . . 57
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . 58
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . . . . 58
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . 58
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . . . . 58
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . 58
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
28.10 Survival of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 59
28.11 Invalidity of Terms or Provisions. . . . . . . . . . . . . . . . . . . 59
28.12 Prohibition Against Usury. . . . . . . . . . . . . . . . . . . . . . . 59
28.13 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . . . . . 59
28.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 60
28.15 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
28.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
28.17 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . . . . . . . 60
28.18 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
28.19 No Third Party Beneficiaries.. . . . . . . . . . . . . . . . . . . . . 60
28.21 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
28.22 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Intentionally Omitted
Exhibit D - Pledge Agreement (including EXHIBIT K-1)
Exhibit E - Adjustments to Gross Golf Revenue for Private Clubs
Exhibit F - Calculation of Gross Golf Revenue for the
Base Year by Quarter
(vi)
<PAGE>
Emerald Dunes Golf Course
West Palm Beach
Palm Beach County
Florida
LEASE
THIS LEASE (this "Lease"), dated as of February 1, 1998, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and EMERALD DUNES - WEST PALM BEACH, INC., a Florida corporation
("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback Agreement
(the "Agreement") dated as of January 23, 1998 by and between Landlord and
Okeechobee Championship Golf, Inc., a Florida corporation ("Transferor"),
Transferor transferred to Landlord all of its right, title and interest in and
to the Property (as hereafter defined); and
B. Tenant, an Affiliate of Transferor, desires to lease the Property
from Landlord, and Landlord desires to lease the Property to Tenant, on the
terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
rights and interest (to the extent acquired from Transferor) in and to the
following real property, improvements, personal property and related rights
(collectively the "Property"):
(a) the Land;
(b) the Improvements;
<PAGE>
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in
Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
2
<PAGE>
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means calendar year 1997; provided, however, that the Base
Year shall refer to the Fiscal Year immediately preceding the Conversion Date if
the Base Rent is increased as provided in Section 4.5. A quarter-by-quarter
calculation of Gross Golf Revenue in the Base Year is attached hereto as
EXHIBIT F.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" shall mean items which are properly capitalized
in accordance with GAAP.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the Capital
Replacement Reserve accrued by Landlord, together with interest thereon as
provided in Section 12.4, less amounts withdrawn from the Capital Replacement
Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means (A) for 1998, One Hundred Twenty
Thousand Dollars ($120,000), on a pro rata basis, and (B) thereafter, on an
annual basis, the greater of (i) an amount equal to 3% of each Fiscal Quarter's
Gross Golf Revenue, to be accrued monthly by Landlord as part of the Capital
Replacement Fund, as provided in Section 12.4 hereof, based on the Officer's
Certificate, or (ii) One Hundred Twenty Thousand Dollars ($120,000).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof,
exclusive of transfers to spouse and lineal descendants of any stockholder
of Tenant as well as any trust created for estate planning purposes where
such stockholder and/or spouses and lineal descendants are beneficiaries;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
3
<PAGE>
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who control Tenant as of
the date hereof no longer having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes of
Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor elects
to receive additional Owner's Shares in the Partnership as a Contingent Purchase
Price for the contribution of the Property, (ii) the date on which Transferor
elects in writing to waive its right to receive additional Owner's Shares, or
(iii) the date that is the one
4
<PAGE>
hundred fifth (105th) day following the end of the fifth (5th) full Fiscal Year
of the Initial Term.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means the date that is the last day of the fortieth
(40th) full Fiscal Quarter following the Commencement Date, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from the first day of
the first Fiscal Quarter commencing after the Commencement Date to the last day
of the fourth Fiscal Quarter commencing after the Commencement Date.
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"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT E
attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv) fees to
reserve a tee time, (v) guest fees, (vi) golf cart rentals, (vii) parking lot
fees, (viii) locker rentals, (ix) fees for golf club storage, (x) fees for the
use of swim, tennis or other facilities, (xi) charges for range balls, range
fees or other fees for golf practice facilities, (xii) fees or other charges
paid for golf or tennis lessons (except where retained by or paid to a USTA or
PGA professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with respect
to any membership application, (xv) transfer fees imposed on any member in
connection with the transfer of any membership interest, (xvi) fees or other
charges paid to Tenant by sponsors of golf tournaments at the Property (unless
the terms under which Tenant is paid by such sponsor do not comply with Section
23.4, in which event the gross revenues received from such sponsor for the
tournament shall be excluded from Gross Golf Revenue and further provided that
Tenant shall use commercially reasonable efforts to structure such payment to
comply with Section 23.4), (xvii) advertising or placement fees paid by vendors
in exchange for exclusive use or name rights at the Property, and (xviii) fees
received in connection with any golf package sponsored by any hotel group,
condominium group, golf association, travel agency, tourist or travel
association or similar payments; PROVIDED, HOWEVER, that Gross Golf Revenue
shall not include:
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(a) The ProLink commissions received or payments to ProLink for
the usage of the ProLink systems which are collected from golfers and remitted
to ProLink and which would otherwise be included in Gross Golf Revenue.
(b) Hotel referral fees or commission fees payable to any hotel or
other third party unrelated to Tenant or any Affiliate of Tenant with respect to
the generation of Gross Golf Revenue;
(c) Other Revenue, including revenue from sales of food and
merchandise;
(d) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(e) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
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(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an income,
franchise, capital stock or other tax) imposed on Landlord or any other
Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other Person
other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on any
indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $2,240,000 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the fortieth (40th) full Fiscal Quarter following the
Commencement Date.
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"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property; or (iii) require the cleanup or other treatment of any
Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement. For purposes of calculating operating expenses, Tenant may
allocate expenses between the Property and any other property owned by Landlord
and leased by an Affiliate of Tenant, provided such allocation shall be subject
to the approval of Landlord, which approval shall not be unreasonably withheld.
For purposes of Section 5.2, the release provisions of Section 2 of EXHIBIT D-1,
and the definition of Termination Payment, the references to "Net Operating
Income" shall refer to the subtotal (NOI) for
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Coverage Ratio Purposes as shown on EXHIBITS D-2 and K-1 (I.E., the Net
Operating Income without reference to a 113.5% coverage ratio). For purposes of
calculating the release provisions of Section 3 to EXHIBIT D-1, "Net Operating
Income" shall refer to the subtotal (NOI) for REIT purposes as shown on EXHIBITS
D-2 and K-1 (I.E., Net Operating Income for coverage Ratio Purposes, as shown on
EXHIBITS D-1 and K-1, divided by a 113.5% coverage ratio.)
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (331/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience
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in owning, operating and managing golf courses similar in type to the
Property and the proposed assignee's net worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of the
date of this Lease, by and between Transferor and Landlord, in the form attached
hereto as EXHIBIT D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
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and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith.
"TENANT" means Emerald Dunes - West Palm Beach, Inc. and any successor
thereto, or assignee thereof, as permitted by the terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one-half percent (113.5%) of all Rent due under this Lease for the prior Fiscal
Year and the Net Operating Income for the prior Fiscal Year, divided by ten and
five tenths percent (10.5%). An example of the Termination Payment is set forth
in EXHIBIT D-2 attached hereto.
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
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(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on the last day of the fortieth (40th)
full Fiscal Quarter following the Commencement Date.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease five (5) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-current term.
Tenant shall be entitled to exercise these options only if at the time of the
giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of
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Default then exists beyond any applicable notice and cure period, Tenant shall
have a right of first offer ("Tenant's Right of First Offer to Lease") to lease
the Property upon the same terms and conditions as Landlord, at its election,
intends to offer to lease the Property to a third party. Tenant shall be
entitled to exercise Tenant's Right of First Offer to Lease only if at the time
of the giving of such notice and at the time of the commencement of the
applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the twenty-fifth (25th) day of
each month in arrears, at Landlord's address set forth in Section 28.9 or at
such other place or to such other Person as Landlord from time to time may
designate in writing. The first monthly installment shall be prorated as to any
partial month. If any payment owing hereunder shall otherwise be due on a day
that is not a Business Day, such payment shall be due on the next succeeding
Business Day. Tenant shall receive a credit against Rent (or be paid directly,
at Landlord's option) for any operating expense credits or operating revenues
credited to Landlord pursuant to the Agreement which are applicable to any
period in the Lease Term (E.G., credit for real property taxes, membership dues,
sublease rents, etc.) and conversely Tenant shall reimburse Landlord for any
operating expenses paid for by Landlord pursuant to the Agreement which are the
responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date (the
"Adjustment Date") that is the first day of the first Fiscal Quarter commencing
after the one (1) year anniversary of the Commencement Date, and on each
Adjustment Date thereafter through and including the fourth (4th) Adjustment
Date, the Annual Base Rent will increase by the lesser of (i) three and
five-tenths percent (3.5%) of the Annual Base Rent payable for the immediately
preceding year, or (ii) two hundred fifty percent
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(250%) of the change in CPI from the immediately preceding fiscal year. In
addition, if the Annual Base Rent is increased as provided in Section 4.5, then,
in lieu of the rent escalation provided for in the prior sentence, beginning on
the date (the "Second Adjustment Date") that is the first day of the first
Fiscal Quarter commencing after the one (1) year anniversary of the Conversion
Date, and on each Second Adjustment Date thereafter through and including the
fourth (4th) Second Adjustment Date, the Annual Base Rent will increase by the
lesser of (i) three percent (3.0%) of the Annual Base Rent payable for the
immediately preceding year, or (ii) two hundred percent (200%) of the change in
CPI from the immediately preceding Fiscal Year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and any Extended Term, Tenant shall
calculate the Gross Golf Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If the Gross Golf Revenue for that
Fiscal Quarter (or shorter period, if applicable) is greater than the Gross Golf
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the first Fiscal Quarter, on a year-to-date basis),
then Tenant shall pay to Landlord the Percentage Rent upon submittal of the
Officer's Certificate. The Percentage Rent payable in any period in any Fiscal
Year shall be adjusted to reflect the Percentage Rent paid on a year-to-date
cumulative basis for the Fiscal Year (pro rated for any partial periods) and the
limits set forth in the next two sentences on a pro rated basis. The increase
in Rent resulting from the payment of Percentage Rent (together with any
increase in Base Rent pursuant to Section 4.2) payable, if any, during each of
the first five (5) full Fiscal Years of the Initial Term shall be limited to
five percent (5%) of the Rent payable for the prior Fiscal Year. Tenant shall
receive a credit against the payment of Percentage Rent in an amount equal to
the increase in the Base Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Golf Revenue. If the Percentage Rent for such
Fiscal Year exceeds the sum of the quarterly payments of Percentage Rent
previously paid by Tenant, Tenant shall pay such deficiency to Landlord along
with such Officer's Certificate. If the Percentage Rent for such Fiscal Year is
less than the amount of Percentage Rent previously paid by Tenant, Landlord
shall, at Landlord's option, either (i) remit to Tenant its check in an amount
equal to such difference, or (ii) grant Tenant a credit against the payment of
Rent next coming due. Landlord shall have the right to audit all of Tenant's
business operations at the Property so as to determine the calculation of
Percentage Rent as provided in Section 12.6.
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4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs only as a result of the election
by Transferor to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, the Annual Base
Rent shall be increased, effective as of the date the additional Owner's Shares
are issued to the Transferor, to an amount equal to the Adjusted Net Operating
Income (as defined in EXHIBIT K to the Agreement).
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP approved by Landlord, which will accurately record all
Gross Golf Revenue. Tenant shall retain all accounting records for each Fiscal
Year conforming to such accounting system until at least five (5) years after
the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a similar
or dissimilar nature. Accordingly, if any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid within ten (10) days after the
date such payment is due, Tenant will pay Landlord on demand, as Additional
Charges, a late charge equal to five percent (5%) of such installment. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant and is
not a penalty. In addition, if any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid within five (5) days after the due date
with respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue Rate
on the amount of such installment, and Tenant will pay
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such interest to Landlord as Additional Charges. The acceptance of any late
charge or interest shall not constitute a waiver of, nor excuse or cure, any
default under this Lease, nor prevent Landlord from exercising any other rights
and remedies available to Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a
triple net lease and Rent shall be payable to Landlord without notice or demand
and without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term. Without limiting
the foregoing, Tenant shall pay to Landlord on a monthly basis along with Base
Rent, as additional rent, an amount equal to one-twelfth (1/12) of the Capital
Replacement Reserve. Such amounts shall be subject to reconciliation at the end
of each Fiscal Quarter and at the end of each Fiscal Year.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees that
revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES. On or prior to the Commencement
Date, Tenant shall cause the Pledge Agreement to be executed for the benefit of
Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for the Property falls below the
coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Pledge Agreement,
at any time following the release of any Pledged Owner's Shares (or security
deposit held by Landlord in lieu thereof), then Tenant shall thereafter retain,
and not make cash distributions (except as may be necessary to pay any
applicable taxes and customarily paid, reasonable compensation) to its
shareholders, partners or members, as applicable, until such time as Tenant has
accumulated six (6) months of Base Rent at the then current level. Cash
distributions may be made at such time as Tenant shall have again satisfied such
coverage ratios for two (2) consecutive Fiscal Years. Tenant shall provide
Landlord with such documentation, including Officer's Certificates and financial
statements, within forty-five (45) days after the end of each Fiscal Quarter as
are necessary to establish Tenant's compliance with the foregoing requirements.
5.3 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now
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or hereafter located on the Property, and such lien and security interest shall
remain attached to Tenant's personal property until payment in full of all Rent
and satisfaction of all of Tenant's obligations hereunder; provided, however,
Landlord shall subordinate its lien and security interest only to that of any
third party lender or seller which finances Tenant's personal property or any
lessor that leases personal property to Tenant, the terms and conditions of such
subordination to be satisfactory to Landlord in its reasonable discretion.
Tenant shall, upon the request of Landlord, execute such financing statements or
other documents or instruments reasonably requested by Landlord to perfect the
lien and security interests herein granted.
5.4 TERMINATION PAYMENT. On the Expiration Date, unless each
option for an Extended Term is exercised, Tenant shall pay to Landlord the
Termination Payment, if any, provided the maximum Termination Payment shall
equal the amounts in the Security Fund (as defined in the Pledge Agreement) then
held by Landlord and shall be payable solely from the proceeds thereof. For
purposes of calculating the Termination Payment, the Owner's Shares shall have a
value deemed to equal the average closing share price of common stock of Golf
Trust of America, Inc. for the five (5) day period prior to the Expiration Date.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Article 14. Upon request, Tenant shall promptly furnish to Landlord copies of
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice
to Tenant of all Impositions payable by Tenant hereunder of which Landlord at
any time has actual knowledge, but Landlord's failure to give any such notice
shall in no way diminish Tenant's obligations hereunder to pay such Impositions.
Landlord and Tenant shall, upon reasonable request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Property as may be necessary to prepare any required returns and reports.
In the event any applicable governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it must legally so file. Each
party, to the extent it possesses the same, will provide the other party, upon
reasonable request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal
period during which the Lease commences or terminates shall be adjusted and
prorated
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between Landlord and Tenant, whether or not such Imposition is imposed before or
after such commencement or termination, and Tenant's obligation to pay its
prorated share thereof shall survive such termination. If any Imposition may,
at the option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Tenant may
elect to pay in installments, in which event Tenant shall pay all installments
(and any accrued interest on the unpaid balance of the Imposition) that are due
during the Term hereof before any fine, penalty, premium, further interest or
cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent
to or agree in writing to (i) any special assessment or (ii) the inclusion of
any material portion of the Leased Property into a special assessment district
or other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or unless Landlord agrees to pay the
cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
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(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR
PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii)
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DURABILITY, (xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR
(xvi) COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR
LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS SELECTION
AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED BY TENANT AND
IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE PROPERTY
OF ANY NATURE, WHETHER LATENT OR PATENT, AS BETWEEN LANDLORD AND TENANT,
LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR
FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN
TORT). THE PROVISIONS OF THIS SECTION 7.2 HAVE BEEN NEGOTIATED AND REVIEWED BY
TENANT'S LEGAL COUNSEL, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION
OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY,
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously operated
the Property and has knowledge of its condition which is superior to that of
Landlord, (B) fee simple title, except where the Property is held under a ground
lease, (both legal and equitable) is in Landlord and that Tenant has only the
leasehold right of possession and use of the Property as provided herein, (C) to
Tenant's knowledge the Improvements conform to all material Legal Requirements
and all material Insurance Requirements, (D) except as specifically disclosed
in the Agreement, all easements necessary or appropriate for the use or
operation of the Property have been obtained, (E) all contractors and
subcontractors retained by Tenant who have performed work on or supplied
materials to the Property have been fully paid, and all materials to the
Property have been fully paid for, (F) the Improvements constructed by Tenant or
any Affiliate of Tenant have been completed in all material respects in a
workmanlike manner of first class quality, and (G) all equipment necessary or
appropriate for the use or operation of the Property has been installed and is
presently operative in all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the property
of Landlord and (iii) that Tenant has only the right to the use of such Property
during the Term of and upon the terms and conditions of this Lease.
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8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of the
Property, whether initially included in the Lease or thereafter acquired by
Landlord or Tenant, in good condition and repair, normal wear and tear excepted.
Upon the loss, destruction or obsolescence of any Tangible Personal Property,
Tenant shall replace such property with replacements of the same type and
quality as initially in place, which such property will be owned by Tenant
except to the extent acquired with funds from the Capital Replacement Fund
("Tenant's Personal Property"). Upon the expiration or sooner termination of
this Lease, the Tenant's Personal Property shall transfer to Landlord without
requirement of any bill of sale or assignment; provided Landlord, at its
election, may require Tenant to execute such documentation as Landlord may
require to evidence such transfer. Tenant shall not remove any Tangible
Personal Property from the Property upon termination of the Lease. If any of
such Tangible Personal Property is stored away from the Property, Tenant will
provide Landlord with proper access to the storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, (c) past practices of the Transferor, and (d) such other
reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, in Landlord's
absolute discretion. No use shall be made or permitted to be made of the
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property or other
improvements of
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any insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Property and Tenant's
Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
12, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under the Property, or any adjacent property,
or incorporated in the Property or any improvements thereon except in compliance
with applicable law (including any Environmental Laws). Tenant shall not allow
the Property to be used as a landfill or a waste disposal site, or a
manufacturing, distribution or disposal facility for any Hazardous Materials.
Tenant shall neither suffer nor permit the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of the
Property for road, highway or other public purposes; (iv) execute petitions to
have the Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants and restrictions affecting the Property; and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interest in the Property), but only upon delivery to Landlord of an Officer's
Certificate (which Officer's Certificate, if contested by Landlord, shall not be
binding on Landlord) stating that such grant, release, dedication, transfer,
petition or amendment is not detrimental to the proper conduct of the business
of Tenant on the Property and does not reduce its value
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or usefulness for the Primary Intended Use. Landlord shall not grant, release,
dedicate or execute any of the foregoing items in this Section 9.4 without
obtaining Tenant's approval, which approval shall not be unreasonably withheld
or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall comply will all
on-site operational requirements contained in the Mortgage and Security
Agreement by and between Okeechobee Championship Golf, Inc., a Florida
corporation and Pacific Mutual Life Insurance Company (predecessor in interest
to Pacific Life Insurance Company, the "Lender"), dated September 30, 1996, and
recorded October 2, 1996 in Official Records Book 9467, page 464 (the
"Mortgage"). Tenant shall also (a) join the Advisory Association and cooperate
in the activities of such association; (b) at its election, engage in reasonable
cross-marketing endeavors with the members of the Advisory Association; and (c)
at its election, provide signage on the Property which references that the
Property is owned by Landlord, which signage may include an appropriate logo
selected by Landlord. In addition, it is the intent of the parties that Tenant
be a single-purpose entity with no business operations except for those related
solely to the operation of the Property for its Primary Intended Use and other
property of Landlord which may be leased to Tenant. Tenant shall, therefore,
not engage in or undertake any activities other than those respecting the
operation of the Property for its Primary Intended Use, including leasing,
managing, and operating golf courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including all Extended
Terms, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain updated Phase I
Environmental Site Assessment dated December 23, 1997, prepared by Nutting
Environmental Of Florida, Inc. ("Nutting") and that certain Phase I
Environmental Site Assessment dated June 15, 1995, prepared by Nutting, Tenant
hereby represents, warrants, and covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with all
Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to the
best knowledge of Tenant, there are no Environmental Laws requiring any material
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remediation, cleanup, repairs or construction (other than normal maintenance)
with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement, and
to the best knowledge of Tenant, (a) no notices of any violation or alleged
violation of any Environmental Laws relating to the Property or its uses have
been received by either Tenant, or, to the best knowledge of Tenant, by any
prior owner, operator or occupant of the Property, and (b) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending or threatened, relating to the
ownership, use, maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with the
terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth or
described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Property or if Tenant, Landlord,
or the Property becomes subject to any order of any federal, state or local
agency to investigate, remove, remediate, repair, close, detoxify, decontaminate
or otherwise clean up the Property, Tenant shall, at its sole expense, but
subject to the last sentence of Section 10.7, carry out and complete any
required investigation, removal, remediation, repair, closure, detoxification,
decontamination or other cleanup of the Property. If Tenant fails to implement
and diligently pursue any such repair, closure, detoxification, decontamination
or other cleanup of the Property in a timely manner, Landlord shall have the
right, but not the obligation, to carry out such action and to recover its costs
and expenses therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action
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incurred by the United States Government, any state or local governmental unit
to any other Person, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory, including
damages assessed for the maintenance of a public or private nuisance or for
carrying on of a dangerous activity, or (d) by reason of a breach of a
representation or warranty in Sections 10.1 through 10.5 of this Lease.
Notwithstanding the foregoing or any other provision of this Lease (including,
without limitation, Section 7.2, Section 10.9 and Article 23), Tenant shall not
be liable, or otherwise be required to indemnify Landlord or the Company or any
Affiliates of the Company for (i) any matters or events that arise after the
Commencement Date that are not caused by any act or omission on the part of
Tenant, or (ii) any matters or events that arise after the Commencement Date
that are directly caused by a breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for
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such repairs occurs as a result of Tenant's use, any prior use, the elements or
the age of the Property or any portion thereof) and in accordance with any
applicable Legal Requirements, and, except as otherwise provided in Article 15,
with reasonable promptness, make all necessary and appropriate repairs thereto
of every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the Commencement Date (concealed or
otherwise). Tenant shall operate and maintain the Property in accordance with
the operation and maintenance practices of the Property at the Commencement Date
and otherwise in a manner comparable to other comparable golf course facilities
in the vicinity of the Property. Landlord may consult with the Advisory
Association from time to time with respect to Tenant's compliance with its
maintenance and operation obligations under this Section 11.1, and Landlord and
representatives of Advisory Association shall have the right from time to time
to enter the Property for the purpose of inspecting the Property. If Landlord,
in consultation with the Advisory Association, determines that Tenant has failed
to comply with its maintenance and operation obligations under this Section
11.1, Landlord shall provide written notice to Tenant setting forth a list of
remedial work and/or steps to be performed by Tenant. Tenant shall promptly and
diligently perform such remedial work and/or steps as recommended by Landlord,
provided if Tenant objects to one or more of the remedial obligations proposed
by Landlord, then the matter shall be submitted to the dispute resolution
procedure set forth in Section 12.7. Tenant will not take or omit to take any
action the taking or omission of which could reasonably be expected to impair
the value or the usefulness of the Property or any part thereof for its Primary
Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Property in any way. Tenant hereby waives, to the extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien,
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claim or other encumbrance upon the estate of Landlord in the Property, or any
portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
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(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Tenant for
Capital Expenditures.
Notwithstanding the foregoing, during the term of the Capital
Expenditure and Reserve Account and Security Agreement, dated February 1, 1998,
by and between Landlord and Lender (the "Capital Expenditure Account Agreement")
and pursuant to
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the terms of the Capital Expenditure Account Agreement, the Capital Replacement
Reserve must be maintained in an account with NationsBank, N.A. (the "Capital
Replacement Fund Account"). The Capital Replacement Reserve shall be deposited
quarterly based on the Officer's Certificate and shall be placed in the Capital
Replacement Fund Account. Amounts in the Capital Replacement Fund Account from
time to time shall accrue interest at a rate equal to the interest paid by
NationsBank, N.A. on the Capital Replacement Fund Account and in accordance with
the Capital Expenditure Account Agreement, such interest shall be deposited into
the Capital Replacement Fund Account. Upon the written request by Tenant to
Landlord stating the specific use to be made, subject to the reasonable approval
of Landlord and subject to Lender's approval and other applicable provisions of
the Capital Expenditure Account Agreement, the Capital Replacement Fund shall be
made available to Tenant for Capital Expenditures.
PROVIDED, HOWEVER, no portion of amounts credited to the Capital
Replacement Fund shall be used to purchase property to the extent that doing so
would cause Landlord to recognize income other than "rents from real property"
as defined in Section 856(d) of the Code. Tenant shall have no rights with
respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the
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Officer's Certificate referred to in Section 4.4 and in connection with such
audits to examine Tenant's book and records with respect thereto (including
supporting data, sales tax returns and Tenant's work papers). If any such audit
discloses a deficiency in the payment of Percentage Rent, Tenant shall forthwith
pay to Landlord the amount of the deficiency as finally agreed or determined,
together with interest at the Overdue Rate from the date when said payment
should have been made to the date of payment thereof; PROVIDED, HOWEVER, that as
to any audit that is commenced more than twelve (12) months after the date Gross
Golf Revenue for any Fiscal Year is reported by Tenant to Landlord in the
Officer's Certificate, the deficiency, if any, with respect to such Gross Golf
Revenue shall bear interest as permitted herein only from the date such
determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue actually received by Tenant for any Fiscal
Year exceeds the Gross Golf Revenue reported by Tenant in the Officer's
Certificate by more than two percent (2%), then Tenant shall pay all reasonable
costs of such audit and examination; provided Tenant shall have the right to
submit the audit determination to arbitration in accordance with the procedures
set forth in Article 28. Landlord shall also have the right to review and audit
from time to time Tenant's business operations including all books, records and
financial statements of Tenant. Tenant shall promptly provide to Landlord
copies of all such books, records, financial statements or any other
documentation of Tenant's business operations reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Golf Revenue (including
membership dues, daily use fees and other sources of Gross Golf Revenue) and
other revenue for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Landlord and Tenant, together with assumptions,
in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating
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expenses that decrease or increase by five percent (5%) or more from the prior
year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed of three (3)
members of the Advisory Association unaffiliated with Tenant and two (2) members
of the board of directors of the Company. Such committee shall be responsible
for resolving any such disagreement and the parties agree that the determination
of such dispute resolution committee shall be binding on the parties. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the prior year's Operating Budget until a new Operating
Budget is adopted, and (ii) if the Capital Budget has not been agreed upon, no
Capital Expenditures shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically required by Landlord or are
otherwise required to comply with Legal Requirements or Insurance Requirements.
Tenant shall operate the Property in a manner reasonably consistent with the
Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property shall be kept either at the Property or at Tenant's
offices in West Palm Beach, Florida. Such books and records shall be available
to Landlord and its representatives for examination, audit, inspection and
transcription.
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(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the amounts
set forth on the Annual Budget, together with, if appropriate a revised Annual
Budget, which budget shall be subject to Landlord's review and approval as
provided in Section 12.7. Each quarterly report shall also forecast any
projected Percentage Rent payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Golf Revenue if
Tenant's financial statements are not required to be separately stated by the
Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
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(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord, the
Company and Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment and in such case, in
the event of an adverse final determination, either (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Landlord or Tenant; or (ii) make such changes in the Improvements,
and take such other actions, as Tenant in the good faith exercise of its
judgment deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the
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Improvements for the Primary Intended Use substantially in the manner and to the
extent the Improvements were operated prior to the assertion of such violation
or encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy of
title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any
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Imposition or the basis for the assertion of any other claim) or any other
sums payable by Tenant to Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss payee,
as applicable. Losses shall be payable to Landlord and/or Tenant as provided in
this Article 15. In addition, the policies shall name as a loss payee any
Facility Mortgagee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment shall require the written consent of Landlord,
Tenant, and each Facility Mortgagee, if any. Evidence of insurance shall be
deposited with Landlord and, if requested, with any Facility Mortgagee(s). The
policies on the Property, including the Improvements, Fixtures, Tangible and
Intangible Personal Property and any Tenant Improvements, shall insure against
the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement
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Cost thereof covering all structures built on the Property and all Tangible
Personal Property; and further provided the Tangible Personal Property may
be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located. Notwithstanding anything
to the contrary in Section 15.1, Landlord acknowledges the insurance coverage
set forth in Section 1.02(a) and 1.02(b) of the Mortgage is satisfactory for
purposes of Section 15.1 of this Lease.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
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15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written notice before the policy
or policies in question shall be altered, allowed to expire or cancelled. Each
such policy shall also provide that any loss otherwise payable thereunder shall
be payable notwithstanding (i) any act or omission of Landlord or Tenant which
might, absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by any Facility Mortgagee
pursuant to any provision of a mortgage, note, assignment or other document
evidencing or securing a loan upon the happening of an event of default therein
or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried
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and maintained by Tenant; PROVIDED, HOWEVER, that the coverage afforded Landlord
will not be reduced or diminished or otherwise be different from that which
would exist under a separate policy meeting all other requirements of this Lease
by reason of the use of such blanket policy of insurance, and provided further
that the requirements of this Article 15 are otherwise satisfied. The amount of
this total insurance allocated to each of the Leased Properties, which amount
shall be not less than the amounts required pursuant to Sections 15.1 and 15.2,
shall be specified either (i) in each such "blanket" or umbrella policy or
(ii) in a written statement, which Tenant shall deliver to Landlord and Facility
Mortgagee, from the insurer thereunder. A certificate of each such "blanket" or
umbrella policy shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. Subject to the rights of the Lender under
the Mortgage, all proceeds of insurance payable by reason of any loss or damage
to the Property, or any portion thereof, and insured under any policy of
insurance required by this Article 15 shall (i) if greater than $100,000, be
paid to Landlord and held by Landlord and (ii) if less than such amount, be paid
to Tenant and held by Tenant. All such proceeds shall be held in trust and
shall be made available for reconstruction or repair, as the case may be, of any
damage to or destruction of the Property, or any portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Subject to the rights of the Lender
under the Mortgage, any proceeds held by Landlord or Tenant shall be paid out by
Landlord or Tenant from time to time for the reasonable costs of such
reconstruction or repair; PROVIDED, HOWEVER, that Landlord shall disburse
proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
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receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15
and the Property thereby is rendered
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Unsuitable For Its Primary Intended Use as reasonably determined by
Landlord, Tenant shall, at its election, either (i) diligently restore
the Property to substantially the same condition as existed
immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article
15, but the Real Property is not thereby rendered Unsuitable For Its
Primary Intended Use, Tenant shall diligently restore the Property to
substantially the same condition as existed immediately before the
damage or destruction; PROVIDED, HOWEVER, Tenant shall not be required
to restore certain Tangible Personal Property and/or any Tenant
Improvements if failure to do so does not adversely affect the amount
of Rent payable hereunder or the Primary Intended Use in substantially
the same manner immediately prior to such damage or destruction. Such
damage or destruction shall not terminate this Lease; PROVIDED
FURTHER, HOWEVER, if Tenant cannot within eighteen (18) months obtain
all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need, after
diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its
Primary Intended Use in substantially the same manner immediately
prior to such damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction
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cannot reasonably be expected by Landlord to be fully repaired or restored prior
to the date that is twelve (12) months prior to the end of the then-applicable
Term, then either Landlord or Tenant shall have the right to terminate the Lease
on thirty (30) days' prior notice to the other by giving notice thereof within
sixty (60) days after the date of such damage or destruction. Upon any such
termination, Landlord shall be entitled to retain all insurance proceeds,
grossed up by Tenant to account for the deductible or any self-insured
retention. If Landlord shall give Tenant a notice under this Section 15.15 that
it seeks to terminate this Lease at a time when Tenant has a remaining Extended
Term, then such termination notice shall be of no effect if Tenant shall
exercise its rights to extend the Term not later than the earlier of the time
required by Section 3.2 or thirty (30) days after Landlord's notice given under
this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the
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provisions of this Lease shall remain in full force and effect with no abatement
of rent payable by Tenant hereunder. In the event of any such temporary taking,
the entire amount of any such Award made for such temporary taking allocable to
the Lease Term, whether paid by way of damages, rent or otherwise, shall be paid
to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
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(v) consent to the appointment of a receiver of itself or
of the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property for a period in excess of ten (10) days;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto is proven to be
incorrect, in any material respect; or
(i) an "Event of Default" under the Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's breach
of this Lease.
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17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
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In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon
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shall be held for the account of Tenant. Landlord shall apply the Impound
Payments to the payment of the Impound Charges in such order or priority as
Landlord shall determine or as required by law. If at any time the Impound
Payments theretofore paid to Landlord shall be insufficient for the payment of
the Impound Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all
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Additional Charges accruing during the month; and (iii) all other sums, if any,
payable by Tenant pursuant to the provisions of this Lease with respect to the
Property. During such period of month-to-month tenancy, Tenant shall be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to month-to-month tenancies, to continue its occupancy and
use of the Property. Nothing contained herein shall constitute the consent,
express or implied, of Landlord to the holding over of Tenant after the
expiration or earlier termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses),
to the extent permitted by law, imposed upon or incurred by or asserted against
Landlord, the Company or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
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(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder; or
(g) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the indemnified party may at all times participate in such defense
at its expense, and PROVIDED FURTHER, HOWEVER, that the indemnifying party shall
not, in defense of any such claim, except with the prior written consent of the
indemnified party, consent to the entry of any judgment or to enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff in question to the indemnified party and its
affiliates a release of all liabilities in respect of such claims, or that does
not result only in the payment of money damages by the indemnifying party. If
the indemnifying party shall fail to undertake such defense within thirty (30)
days after such notice, or within such shorter time as may be reasonable under
the circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
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22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease or
any interest therein, all or any part of the Property, whether voluntarily,
involuntarily or by operation of law. For purposes of this Article 23, a Change
in Control of the Tenant shall constitute an assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole discretion, further sublease or license portions of the Property to
third parties, including concessionaires or licensees. Without limiting
the foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs; and
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(viii) sublease or license to operate any other portions (but
not the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the
Property shall be subject and subordinate to the provisions of this Lease.
No sublease made as permitted by this Section 23.2 shall affect or reduce
any of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days
prior to any proposed assignment or sublease, deliver to Landlord written
notice of its intent to assign or sublease, which notice shall identify the
intended assignee or sublessee by name and address, shall specify the
effective date of the intended assignment or sublease, and shall be
accompanied by an exact copy of the proposed assignment or sublease.
Tenant shall provide Landlord with such additional information or documents
reasonably requested by Landlord with respect to the proposed transaction
and the proposed assignee or subtenant, and an opportunity to meet and
interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2,
subleases shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
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23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent payable to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
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23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive and assignment of this Lease or subletting of the Property to Landlord
or Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth reasonably satisfactory to Landlord or, in the alternative, the
proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver to
Landlord a guaranty agreement in form and substance acceptable to Landlord; and
(ii) any proposed assignee shall grant to Landlord a security interest in favor
of Landlord in all furniture, fixtures, and other personal property to be used
by such proposed assignee in the Property. All payments required of Tenant
under this Lease, whether or not expressly denominated as
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such in this Lease, shall constitute rent for the purposes of Title 11 of the
Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure defaults and compensate Landlord for actual
pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss." The term "actual
pecuniary loss" shall mean, in addition to any other provisions contained herein
relating to Landlord's damages upon default, obligations of Tenant to pay money
under this Lease and all attorneys' fees and related costs of Landlord incurred
in connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
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(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee or beneficiary, affecting
any lease or the Property. In confirmation of such
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subordination, Tenant shall execute promptly any certificate that Landlord may
request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party.
However, if the price at which Landlord intends to sell the Property to a third
party is less than 95% of the price set forth in the notice provided by Landlord
to Tenant, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future liabilities
and obligations under this Lease arising or accruing from and after the date of
such conveyance or other transfer as
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to the Property. All such future liabilities and obligations shall thereupon be
binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Landlord and Tenant regarding the Property during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
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28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may
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acquire, own or hold, directly or indirectly, (a) this Lease or the leasehold
estate created hereby or any interest in this Lease or such leasehold estate and
(b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
If to Tenant: Emerald Dunes - West Palm Beach, Inc.
2100 Emerald Dunes Drive
West Palm Beach, Florida 33411
Attention: President
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
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28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease, express
or implied, is intended to confer any rights or remedies under or by reason of
this Lease on any Person other than the parties to this Lease and their
respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any party
hereto or give any third Person any right of subrogation or action against any
party to this Lease.
28.20 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
28.21 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant,
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operator, concessionaire or licensee of Tenant with respect to the Property or
otherwise in the conduct of their respective businesses.
28.22 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
LANDLORD
GOLF TRUST OF AMERICA, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: GTA GP, Inc.,
a Maryland corporation
Its: General Partner
By: /s/ W. Bradly Blair, II
-------------------------
Its: President and CEO
TENANT
EMERALD DUNES - WEST PALM BEACH, INC.
A FLORIDA CORPORATION
By: /s/ Raymon R. Finch, III
-------------------------
Its: President
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- --------------------------------------------------------------------------------
Sandpiper Golf Course
Goleta, California
L E A S E
SANDPIPER-GOLF TRUST, LLC
LANDLORD
AND
SANDPIPER AT SBCR, LLC
TENANT
DATED AS OF MARCH 6, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
<S> <C>
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Initial Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Extension Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Right to Extend Resulting From Environmental
Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Right to Extend for an Additional Twenty (20) Years . . . . . . . . . . 17
3.5 Right of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Increase in Initial Base Rent . . . . . . . . . . . . . . . . . . . . . 20
4.3 Increase in Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Percentage Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Annual Reconciliation of Percentage Rent. . . . . . . . . . . . . . . . 21
4.6 Record-keeping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Additional Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 Late Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 Net Lease; Capital Replacement Reserve. . . . . . . . . . . . . . . . . 22
4.10 Adjustment in Annual Base Rent for Sale of Adjacent
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5
ADDITIONAL SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Security Deposit. Intentionally Omitted. . . . . . . . . . . . . . . . 23
5.2 Additional Security . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Landlord's Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Payment of Impositions. . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Information and Reporting . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.6 Assessment Districts. . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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ARTICLE 7
<TABLE>
<S> <C>
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 No Termination, Abatement, Etc. . . . . . . . . . . . . . . . . . . . . 25
7.2 Condition of the Property . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . 27
8.1 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Tenant's Personal Property. . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Tenant's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Landlord's Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Specific Prohibited Uses. . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Membership Sales; Preferred Tee Times . . . . . . . . . . . . . . . . . 29
9.4 Landlord to Grant Easements, Etc. . . . . . . . . . . . . . . . . . . . 29
9.5 Tenant's Additional Covenants . . . . . . . . . . . . . . . . . . . . . 30
9.6 Valuation of Remainder Interest in Lease. . . . . . . . . . . . . . . . 30
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Tenant's Indemnification of Landlord. . . . . . . . . . . . . . . . . . 31
10.3 Landlord's Indemnification of Tenant. . . . . . . . . . . . . . . . . . 32
10.4 Survival of Indemnification Obligations . . . . . . . . . . . . . . . . 32
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.1 Tenant's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.2 Waiver of Statutory Obligations . . . . . . . . . . . . . . . . . . . . 33
11.3 Mechanic's Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Surrender of Property . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . . . . . 34
12.1 Tenant's Right to Construct . . . . . . . . . . . . . . . . . . . . . . 34
12.2 Scope of Right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.3 Cooperation of Landlord . . . . . . . . . . . . . . . . . . . . . . . . 35
12.4 Capital Replacement Fund. . . . . . . . . . . . . . . . . . . . . . . . 36
12.5 Rights in Tenant Improvements . . . . . . . . . . . . . . . . . . . . . 38
12.6 Landlord's Right to Audit Calculation of Gross Revenue. . . . . . . . . 38
12.7 Annual Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.8 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . . . . 41
13.1 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.2 Encroachments and Other Title Matters . . . . . . . . . . . . . . . . . 42
</TABLE>
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ARTICLE 14
<TABLE>
<S> <C>
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.2 Indemnification of Landlord . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.1 General Insurance Requirements. . . . . . . . . . . . . . . . . . . . . 44
15.2 Other Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.3 Replacement Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.4 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.5 Form Satisfactory, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 46
15.6 Change in Limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.7 Blanket Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.8 Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.9 Disbursement of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 47
15.10 Excess Proceeds, Deficiency of Proceeds . . . . . . . . . . . . . . . . 48
15.11 Reconstruction Covered by Insurance . . . . . . . . . . . . . . . . . . 48
15.12 Reconstruction Not Covered by Insurance . . . . . . . . . . . . . . . . 49
15.13 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.14 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.15 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.1 Total Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.2 Partial Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.3 Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.4 Award-Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.5 Temporary Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
17.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
17.2 Payment of Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.3 Certain Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.4 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.5 Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.6 Appointment of Receiver . . . . . . . . . . . . . . . . . . . . . . . . 54
17.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
17.8 Application of Funds. . . . . . . . . . . . . . . . . . . . . . . . . . 54
17.9 Impounds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
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ARTICLE 21
<TABLE>
<S> <C>
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
21.2 Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
22.1 Tenant's Indemnification of Landlord. . . . . . . . . . . . . . . . . . 57
22.2 Landlord's Indemnification of Tenant. . . . . . . . . . . . . . . . . . 58
22.3 Mechanics of Indemnification. . . . . . . . . . . . . . . . . . . . . . 58
22.4 Survival of Indemnification Obligations; Available Insurance
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
23.1 Prohibition Against Assignment. . . . . . . . . . . . . . . . . . . . . 59
23.2 Subleases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
23.3 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.4 REIT Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.5 Leasehold Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
23.6 Bankruptcy Limitations. . . . . . . . . . . . . . . . . . . . . . . . . 63
23.7 Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . . . . 66
24.1 Officer's Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 66
24.2 Environmental Statements. . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
25.1 Landlord May Grant Liens. . . . . . . . . . . . . . . . . . . . . . . . 67
25.2 Tenant's Non-Disturbance Rights . . . . . . . . . . . . . . . . . . . . 68
25.3 Facility Mortgage Protection. . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 27
DISPUTE RESOLUTION
27.1 Dispute Resolution Procedure. . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.1 Landlord's Right to Inspect . . . . . . . . . . . . . . . . . . . . . . 75
28.2 Landlord's Golfing Privileges . . . . . . . . . . . . . . . . . . . . . 75
28.3 Breach by Landlord. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.4 Competition Between Landlord and Tenant . . . . . . . . . . . . . . . . 76
28.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.7 Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . . 76
28.8 No Merger of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.9 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
28.11 Survival of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
28.12 Invalidity of Terms or Provisions . . . . . . . . . . . . . . . . . . . 77
28.13 Prohibition Against Usury . . . . . . . . . . . . . . . . . . . . . . . 77
28.14 Amendments to Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 78
28.15 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . 78
28.16 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
28.17 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
28.18 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 78
28.19 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
28.19 Non-Recourse as to Landlord . . . . . . . . . . . . . . . . . . . . . . 78
28.21 No Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
28.22 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
28.23 Consent/Duty to Act Reasonably. . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Pro Forma Operating Expenses
Exhibit D - Additional Security
Exhibit E - Calculation of Gross Revenue on a Quarter-by-Quarter Basis
Exhibit F - Golf Utilization Agreement
Exhibit G - Schedule of Capital Improvement Schedule
(v)
<PAGE>
SANDPIPER GOLF COURSE
GOLETA, CALIFORNIA
LEASE
THIS LEASE (this "Lease"), dated as of March 6, 1998, is entered into
by and between SANDPIPER-GOLF TRUST, LLC, a Delaware limited liability company
("Landlord"), and SANDPIPER AT SBCR, LLC, a Delaware limited liability company
("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement (the
"Agreement") dated as of January 9, 1998 Landlord acquired the Property (as
hereafter defined) from Aradon Corporation ("Transferor"); and
B. Tenant, desires to lease the Property from Landlord, and Landlord
desires to lease the Property to Tenant, on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
rights and interest (to the extent acquired from Transferor) in and to the
following real property, improvements, personal property and related rights
(collectively the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all
Authorizations (including all liquor licenses) (and Landlord agrees to take
all reasonable actions and execute such documents as are
1
<PAGE>
reasonably necessary or appropriate to transfer such rights, including any
liquor licenses, to Tenant), all of Landlord's right, title and interest,
if any, in and to all mineral and water rights and all easements,
rights-of-way and other appurtenances used or connected with the beneficial
use or enjoyment of the Land and the Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
The Property shall not include any oil, gas or mineral rights upon and
under the Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in
Section 4.7.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
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<PAGE>
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the Capital
Replacement Reserve accrued by Landlord, together with interest thereon as
provided in Section 12.4, less amounts withdrawn from the Capital Replacement
Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means, on an annual basis, commencing on
January 1, 2001, equal to Two Hundred Thousand Dollars ($200,000), increased
each Fiscal Year by three percent (3%) of the Capital Replacement Reserve
payable in the prior Fiscal Year. Notwithstanding the foregoing, in the event
the Property undergoes a significant redesign and renovation as contemplated by
Section 12.3, the Capital Replacement Reserve shall not commence until the first
day following four (4) Fiscal Quarters after the Property is reopened for
business. In no event shall the amount in the Capital Replacement Reserve
exceed Two Million Dollars ($2,000,000), which amount shall be increased every
ten (10) years by the change in the CPI for such period.
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who
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<PAGE>
control Tenant as of the date hereof no longer having Control of
Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred for purposes of this Lease (i) if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest; (ii) in the event of any transfers by
inter vivos gift or by testamentary transfer to any spouse, parent, sibling,
in-law, child or grandchild or any holder of a direct or indirect interest in
Tenant, to a trust for the benefit of any holder of a direct or indirect
interest in Tenant or such spouse, parent, sibling, in-law, child or grandchild
of a holder of a direct or indirect interest in Tenant; or (iii) in the event of
any transfer any person or entity that is a constituent member, partner or
shareholder of Tenant or of any entity that has a direct or indirect interest in
Tenant.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes of
Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
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<PAGE>
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means the date that is the last day of the fortieth
(40th) full Fiscal Quarter following the Commencement Date, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"F&B PERCENTAGE RENT" means, for any Fiscal Year during the Lease
Term, ten percent (10%) of the positive difference, if any, between Food and
Beverage Revenue for such Fiscal Year and Three Hundred Seventy-Five Thousand
Dollars ($375,000).
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
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"FISCAL YEAR" means the twelve (12) month period from the first day of
the first Fiscal Quarter commencing after the Commencement Date to the last day
of the fourth Fiscal Quarter commencing after the Commencement Date.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FOOD AND BEVERAGE REVENUE" means all revenue received (whether by
Tenant or any subtenants, assignees, concessionaires or licensees) from or by
reason of the Property relating to (i) the operation of snack bars, restaurants,
bars, catering functions, and banquet operations provided, however, that Food
and Beverage Revenue shall not include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, excise tax or other tax, assessment or charge on
the item included in Food and Beverage Revenue, which is both added to
or incorporated in the selling price and payable to the taxing,
assessing or charging authority by Tenant;
(b) Revenues or proceeds from sales or trade-ins of
machinery, vehicles, trade fixtures or personal property owned by
Tenant used in connection with Tenant's operation of the Property;
(c) Sales receipts from any vending machine or other coin
or token operated device, such as public telephones, stamp machines,
mechanical entertainment machines; soft drink and candy dispensers;
and other receipts and deposits which Tenant and its subtenants are
not entitled to receive, but are collected and payable to an
independent third party;
(d) Cash refunded or credit allowed on merchandise returned
by customers;
(e) Cash or credit allowances given to customers in good
faith;
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(f) Cash register "over rings";
(g) Sales canceled to the extent the purchase price is not
retained by Tenant;
(h) Merchandise returned to suppliers or transferred to
another store or warehouse of Tenant or any Affiliate of Tenant;
(i) Cash and credits received by Tenant in settlement of
claims for loss or damage of merchandise;
(j) Sales in bulk of all or substantially all of the
merchandise in connection with a sale of all or part of Tenant's
business;
(k) Advertising rebates, discounts, and allowances, and
other rebates, credits, and dividends received from suppliers;
(l) Interest, service, and carrying charges paid by
customers for extension of credit on sales;
(m) Service charges on credit cards, and credit accounts;
(n) Bad checks and uncollectible credit card accounts
(unless the same results from Tenant's failure to engage in prudent
business regarding the extension of credit or the acceptance of
checks);
(o) The net amount of any discount allowed to Tenant's
employees when sales are made to such employees at prices below the
retail selling prices then in effect in Tenant's store on the
Property, and the net amount of any discounts allowed to any
charitable institution or organization;
(p) Amounts paid to merchandise vendors, entertainers and
professionals who are not employees of Tenant; and
(q) Money-off coupons and vendor coupons.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
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"GROSS GOLF PERCENTAGE RENT" means the following percentages:
(a) $5,000,000 - $6,000,000 - 5%,
(b) $6,000,001 - $7,000,000 - 20%
(c) $7,000,001 - $8,000,000 - 40%
(d) in excess of $8,000,001 - 50%
For example, if the Gross Golf Revenue for any Fiscal Year was
Eight Million Five Hundred Thousand Dollars ($8,500,000), then the Gross Golf
Percentage Rent would be $900,000.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees, (ii) periodic membership dues, (iii)
greens fees, (iv) fees to reserve a tee time, (v) guest fees, (vi) golf cart
rentals, (vii) parking lot fees, (viii) locker rentals, (ix) fees for golf club
storage, (x) charges for range balls, range fees or other fees for golf practice
facilities, (xi) fees or other charges paid for golf lessons (except where
retained by or paid to a professional not an employee of Tenant), (xii)
forfeited deposits with respect to any membership application, (xiii) transfer
fees imposed on any member in connection with the transfer of any membership
interest, (xiv) fees or other charges paid to Tenant by sponsors of golf
tournaments at the Property (unless the terms under which Tenant is paid by such
sponsor do not comply with Section 23.4, in which event the gross revenues
received from such sponsor for the tournament shall be excluded from Gross
Revenue and further provided that Tenant shall use commercially reasonable
efforts to structure such payment to comply with Section 23.4), (xv) advertising
or placement fees paid by vendors in exchange for exclusive use or name rights
at the Property, and (xvi) revenues from photography services, and (xvii) fees
received in connection with any golf package sponsored by any hotel group,
condominium group, golf association, travel agency, tourist or travel
association or similar payments; PROVIDED, HOWEVER, that Gross Revenue shall not
include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Revenue,
which is both added to or incorporated in the selling price and paid to the
taxing authority by Tenant;
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property;
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(c) Any of the items set forth in subsections (c) to (q) as
exceptions and exclusions from Food and Beverage Revenue; and
(d) Any revenue collected by any hotel from its customers in
connection with the golf course but which are not paid to Tenant,
including, without limitation, membership fees, dues, club programs, spa
facilities, recreation facilities.
"GROSS REVENUE" means the sum of the Gross Golf Revenue, Food and
Beverage Revenue and Merchandise Revenue for the applicable period.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for
public improvements or benefits, whether or not commenced or completed
prior to the date hereof and whether or not to be completed within the
Term);
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(c) excises;
(d) fees (including license, permit, inspection,
authorization and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any
other Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant;
(cc) any initial valuation of the golf course for ad valorem tax
purposes in excess of Thirty-Three Million Dollars ($33,000,000) (excepting
any valuation based on the length of the leasehold which is deemed a
"change in ownership") or any other tax imposed on the Property based
solely upon the actions of Landlord;
(dd) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means Two Million Nine Hundred Seventy Thousand
Dollars ($2,970,000) per year.
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"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the fortieth (40th) full Fiscal Quarter following the
Commencement Date.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property. (Tenant acknowledges that Landlord is
not assigning any representations or warranties received by Landlord in
connection with its acquisition of the Property, but Landlord agrees to enforce
such representations and warranties in a commercially reasonable manner for the
benefit of Landlord and Tenant).
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Sandpiper-Golf Trust, LLC and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEASEHOLD" means all of Tenant's right, title and interest in and to
the Property pursuant to the terms of this Lease, and all Tenant's rights under
this Lease.
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"LEASEHOLD FINANCING" means any financing provided by a Leasehold
Mortgagee secured by a Leasehold Mortgage provided the proceeds of such
Leasehold Financing are used solely for the purpose of funding capital
improvements to the Property or to pay for operating expenses (not to include
Tenant's fees paid for course management) related to the operations at the
Property. Landlord shall be given prior written notice of any proposed
Leasehold Financing.
"LEASEHOLD MORTGAGE" means the Mortgage encumbering the entire
Leasehold and securing Leasehold Financing.
"LEASEHOLD MORTGAGEE" means the lender which holds the beneficial
interest under the Leasehold Mortgage.
"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force.
"MERCHANDISE PERCENTAGE RENT" means, for any Fiscal Year during the
Lease Term, ten percent (10%) of the positive difference, if any, between
Merchandise Revenue for such Fiscal Year and Four Hundred Seventy-Five Thousand
Dollars ($475,000).
"MERCHANDISE REVENUE" means all revenue received (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the Property relating to the sale of merchandise and inventory on the Property;
provided, however, that Merchandise Revenue shall not include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Merchandise
Revenue, which is both added to or incorporated in the selling price
and paid to the taxing authority by Tenant;
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property; and
(c) Any of the items set forth in subsections (c) to (q) as
exceptions and exclusions from Food and Beverage Revenue.
"NET OPERATING INCOME" means net operating income for the Tenant
calculated in accordance with GAAP, including applicable reserves.
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"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional three percent (3%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
the sum of F&B Percentage Rent, Merchandise Percentage Rent and Gross Golf
Percentage Rent, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord
from time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PRIMARY INTENDED USE" means the operation of an 18-hole golf course
and other activities incidental to the operation of a golf course.
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"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith. Tenant understands and acknowledges that
Landlord is purchasing the liquor license on the Property and shall convey the
same to Tenant for Tenant's use during the term of Lease: provided Tenant shall
be responsible for payment to Transferor of $2,500 per month until the
conveyance is complete (or Tenant elects not to proceed with the transfer of
such liquor license, in which case Tenant shall be obligated to purchase a
liquor license at its sole cost and expense). In addition, Tenant understands
and acknowledges that Transferor has retained a residual right in the golf carts
at the property and will be entitled and receive any residual value allocated to
such golf carts at trade-in.
"TENANT" means Sandpiper at SBCR, LLC, a Delaware limited liability
company, and any successor thereto, or assignee thereof, as permitted by the
terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
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"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that the Property cannot be operated on a commercially
practicable basis for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore
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any usual rules of construction requiring that ambiguities are to be
resolved against a particular party shall not be applicable in the
construction and interpretation of this Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on the last day of the fortieth (40th)
full Fiscal Quarter following the Commencement Date.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease two (2) consecutive times for a period of five
(5) years each (each such extension, together with any extension pursuant to
Section 3.4, an "Extended Term"). Tenant shall be deemed to have elected to
extend the Lease for each Extended Term unless Tenant has given Landlord written
notice at least one hundred eighty (180) days prior to the termination of the
then-current term (the "Exercise Date") that Tenant is not exercising such
option. Tenant shall be entitled to exercise these options only if at the time
of the Exercise Date Tenant is then the lessee of the Property pursuant to this
Lease, and at the time of the commencement of the applicable Term or Extended
Term no Event of Default shall then exist. During each Extended Term, all of
the terms and conditions of this Lease shall continue in full force and effect,
as the same may be amended, supplemented or modified.
3.3 RIGHT TO EXTEND RESULTING FROM ENVIRONMENTAL REMEDIATION.
Tenant acknowledges that Landlord has notified Tenant that the Property has
certain environmental contamination resulting from the operation of a petroleum
extraction facility on the Property. As a result of such contamination and
pursuant to that certain Third Amendment to Purchase and Sale Agreement (the
"Third Amendment") by and among Atlantic Richfield Company ("ARCO"), Transferor
and Landlord (a copy of which has been provided to Tenant), ARCO has certain
rights to come onto the Property and remediate all or a portion of such
environmental contamination. If the environmental remediation contemplated by
the Third Amendment is commenced prior to January 1, 2006 and as a result the
golf course operations on the Property are closed for a period of in excess of
thirty (30) days, then (a) Tenant shall be granted one additional extension
option on the same terms and conditions as set forth above, and (b) all rent
shall abate from the date Tenant is required to vacate the Property or a
material portion thereof as provided herein. In the event of such rent
abatement, Tenant shall be obligated to pay to Landlord the abated rent from any
Net Operating Income of Tenant from the Property, calculated in accordance with
GAAP (without deduction for any debt service of Tenant payable to any third
party under any Leasehold Financing). In addition, if the environmental
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remediation contemplated by the Third Amendment is commenced after December 31,
2005 and as a result the golf course operations on the Property are closed for a
period of in excess of thirty (30) days, then Tenant shall have the right to
terminate this Lease on thirty (30) days written notice by giving written notice
to Landlord before the remediation work is completed. If Tenant does not so
terminate this Lease, then rent shall not abate and the current term of the
Lease shall be extended for a period equal to two (2) days for each day that the
golf course operations on the Property are closed, up to a maximum extension of
five (5) years.
3.4 RIGHT TO EXTEND FOR AN ADDITIONAL TWENTY (20) YEARS. Upon the
expiration of the Term, as extended by each of the Extended Terms, and provided
Tenant has given Landlord notice of its intent to exercise such right not less
than two hundred seventy days (270) days prior to the scheduled expiration of
the Term, Tenant shall have the right to extend this Lease for an additional
forty (40) Full Fiscal Quarters plus two (2) five (5) year extension options
("Tenant's Twenty (20) Year Extension Right") at ninety-five percent (95%) of
the then market-rate base rent and percentage rent. In the event Tenant elects
to extend the Lease, and if the parties are unable to agree upon a rental rate,
then Landlord shall obtain from a bona fide third party capable of performing
the obligations of Tenant hereunder a written term sheet executed by such third
party (which may be in the form of a customary non-binding letter of intent)
(the "Bona Fide Offer"). Tenant shall be entitled to exercise Tenant's Twenty
(20) Year Extension Right only if at the time of the giving of such notice and
at the time of the commencement of the applicable term no Event of Default shall
then exist. Not more than nine (9) months and not less than three (3) months
prior to the expiration of the Lease Term ("Landlord's Procuring Period"),
Landlord shall, if applicable, give Tenant the Bona Fide Offer. Tenant shall
thereafter have a period of thirty (30) days to elect by unequivocal written
notice to Landlord to lease the Property on the same terms and conditions as
Landlord intends to offer to a third party, provided the Base Rent and
Percentage Rent shall be set at ninety-five percent (95%) of such proposed
offer. If Tenant elects not to lease the Property, then Landlord shall be free
to lease the Property to a third party on substantially the same terms and
conditions as set forth in the Bona Fide Offer; provided if such lease is not
consummated within one hundred eighty (180) days from the expiration of the term
of this Lease, then Tenant shall again have the right to extend the Term of the
Lease as provided in this Section 3.4. If Tenant elects to extend the Lease as
provided in this Section 3.4 and Landlord does not provide to Tenant a Bona Fide
Offer within Landlord's Procuring Period, then the Base Rent and Percentage Rent
shall be set at ninety-five percent (95%) of the Fair Market Rental Rate at set
forth below.
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(a) Not later than fifteen (15) days from and after the
expiration of Landlord's Procuring Period, Landlord and Tenant shall each
appoint one arbitrator who shall by profession be a real estate appraiser, which
appointee shall have been active over the five (5) year period ending on the
date of such appointment in the appraisal of golf courses in the Southern
California area.
(i) The two arbitrators so appointed shall within
fifteen (15) days of the date of the appointment of the last appointed
arbitrator agree upon and appoint a third arbitrator who shall be qualified
under the same criteria set forth hereinabove for qualification of the initial
two arbitrators. Upon appointment of the third arbitrator, Landlord and Tenant
shall each submit to the other and to the third arbitrator sealed envelopes
containing their respective determinations of the Fair Market Rental Rate. If
Landlord's and Tenant's determination are within five percent (5%) of each
other, the third arbitrator shall average the determination. If such
determinations are not within five percent (5%) of each other, the third
arbitrator shall choose the determination closer to his or her own
determination. The determination of the third arbitrator described below shall
be limited solely to the issue of whether Landlord's or Tenant's submitted fair
market rent for the Property is the closest to the actual Fair Market Rental
Rate determined by the arbitrator, based upon what a willing, comparable tenant
would pay and a willing, comparable landlord would accept at arm's length, for
leasing of the Property under the terms of this Lease and all other then
existing factors ("Fair Market Rental Rate").
(ii) The third arbitrator shall within thirty (30)
days of his or her appointment reach a decision as to whether the parties shall
use Landlord's or Tenant's submitted Fair Market Rental Rate, or, if Landlord's
and Tenant's determination are within five percent (5%) of each other, the
average of the two, and shall notify Landlord and Tenant thereof.
(iii) The decision of the third arbitrator shall be
binding upon Landlord and Tenant.
(iv) If either Landlord or Tenant fails to appoint
an arbitrator within fifteen (15) days after the expiration of Landlord's
Procuring Period, the arbitrator timely appointed by one of them shall reach a
decision, notify Landlord and Tenant thereof, and such arbitrator's decision
shall be binding upon Landlord and Tenant.
(v) If the two arbitrators fail to agree upon and
appoint a third arbitrator, both arbitrators shall be dismissed and the matter
to be decided shall be forthwith submitted to arbitration under the provisions
of the American
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Arbitration Association, but subject to the instructions set forth herein.
(vi) The cost of arbitration shall be paid by
Landlord and Tenant equally.
(vii) If the Fair Market Rental Rate has not been
determined by the commencement of such additional Term, then until the time the
Fair Market Rental Rate is determined, Tenant shall continue making payment
under the terms of this Lease by an amount equal to one hundred percent (100%)
of the sum of Landlord's and Tenant's determination of the Fair Market Rental
Rate for the applicable Option Term divided by two (2). If the arbitration
procedure results in a higher Base Rent and Percentage Rent than that paid by
Tenant prior to date of the arbitrators' determination, Tenant shall make up the
difference and pay such amount to Landlord along with the next installment of
Base Rent due. If the arbitration procedure results in a lower Base Rent than
that paid by Tenant prior to the date of the arbitrators' determination, Tenant
shall receive a credit against any next succeeding installment(s) of Base Rent
to the extent of such overpayment.
3.5 RIGHT OF TERMINATION. Landlord and Tenant are entering into
this Lease with the expectation that the golf course on the Property will
undergo a significant redesign and renovation. In the event either Landlord or
Tenant determines, in good faith and in its reasonable discretion, that
acceptable permits to undertake such approvals have not been obtained by January
1, 2006, then for a period of ninety (90) days thereafter either party shall
have the right to terminate this Lease upon delivery of ninety (90) days prior
written notice to the other. Landlord and Tenant shall use commercially
reasonable efforts to obtain such permits on a prompt basis.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term,
subject to the provisions of Section 12.3. Payments of Base Rent shall be paid
monthly, on the twenty-fifth (25th) day of each month in arrears, at Landlord's
address set forth in Section 28.10 or at such other place or to such other
Person as Landlord from time to time may designate in writing. The first
monthly installment shall be prorated as to any partial month. If any payment
owing hereunder shall otherwise be due on a day that is not a Business Day, such
payment shall be due on the next succeeding Business Day. Tenant shall receive
a credit against Rent (or be paid directly, at Landlord's option) for any
operating expense credits or operating revenues credited to Landlord pursuant to
the Agreement which are applicable to any period in the Lease Term (E.G., credit
for real
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property taxes, membership dues, sublease rents, etc.) and conversely Tenant
shall reimburse Landlord for any operating expenses paid for by Landlord
pursuant to the Agreement which are the responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date (the
"Adjustment Date") that is the first day of the first Fiscal Quarter commencing
after the one (1) year anniversary of the Commencement Date, and on each
Adjustment Date thereafter during the Term until Gross Golf Revenue for the
prior Fiscal Year equals or exceeds Five Million Dollars ($5,000,000), Annual
Base Rent will increase by the lesser of (i) three percent (3%) of the Annual
Base Rent payable for the immediately preceding year, or (ii) two hundred fifty
percent (250%) of the change in CPI from the immediately preceding fiscal year
(the "Base Escalator"). Tenant shall be permitted to defer payment of the Base
Escalator until such time as Gross Golf Revenue for any Fiscal Year equals or
exceeds Five Million Dollars ($5,000,000), but only if and to the extent that
Net Operating Income of the Property (exclusive of Tenant's debt service to any
third party under any Leasehold Financing, if any), calculated in accordance
with GAAP, is negative. Any amounts so deferred shall be payable from net
operating income in subsequent years, and no positive distributions shall be
made to any of the members or affiliates of Tenant so long as any deferred
amounts are outstanding. For purposes of the calculation of net operating
income pursuant to this Section 4.2, the operating expenses shall not exceed the
pro forma amounts set forth in EXHIBIT C without the approval of Landlord, which
approval shall not be unreasonably withheld or delayed.
4.3 INCREASE IN BASE RENT FOR CAPITAL IMPROVEMENTS. At the end of
each Fiscal Quarter, Landlord shall calculate the amount (the "Quarterly Capital
Expenditure"), if any, funded to Tenant pursuant to Section 12.3(a), and provide
notice to Tenant of the Quarterly Capital Expenditure. Effective as of the due
date of the next monthly installment of Annual Base Rent, Annual Base Rent shall
be increased by an amount equal to nine percent (9%) of the Quarterly Capital
Expenditure.
4.4 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and any Extended Term, Tenant shall
calculate the Gross Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If there is Percentage Rent for
that Fiscal Quarter (or shorter period, if applicable), then Tenant shall pay to
Landlord the Percentage Rent, upon submittal of the Officer's Certificate. The
Percentage Rent payable in any period in any Fiscal Year shall be adjusted to
reflect the Percentage Rent paid
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on a year-to-date cumulative basis for the Fiscal Year (pro rated for any
partial periods). Percentage Rent shall be payable by annualizing the quarterly
Gross Golf Revenue, Food and Beverage Revenue and Merchandise Revenue as more
particularly set forth on EXHIBIT E attached hereto.
4.5 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Revenue. If the Percentage Rent for such Fiscal
Year exceeds the sum of the quarterly payments of Percentage Rent previously
paid by Tenant, Tenant shall pay such deficiency to Landlord along with such
Officer's Certificate. If the Percentage Rent for such Fiscal Year is less than
the amount of Percentage Rent previously paid by Tenant, Landlord shall, at
Landlord's option, either (i) remit to Tenant its check in an amount equal to
such difference, or (ii) grant Tenant a credit against the payment of Rent next
coming due. Landlord shall have the right to audit all of Tenant's business
operations at the Property so as to determine the calculation of Percentage Rent
as provided in Section 12.6. Landlord shall not audit Tenant's business
operations more than once in any calendar year.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP approved by Landlord, which will accurately record all
Gross Revenue. Tenant shall retain all accounting records for each Fiscal Year
conforming to such accounting system until at least five (5) years after the
expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
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4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a similar
or dissimilar nature. Accordingly, if any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid within ten (10) days after the
date such payment is due following written notice thereof from Landlord to
Tenant, Tenant will pay Landlord on demand, as Additional Charges, a late charge
equal to three percent (3%) of such installment. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of late payment by Tenant and is not a penalty. In
addition, if any installment of Base Rent, Percentage Rent or Additional Charges
(but only as to those Additional Charges which are payable directly to Landlord)
shall not be paid within five (5) days after the due date with respect to Base
Rent or Percentage Rent or delivery of an invoice to Tenant with respect to the
Additional Charge, the amount unpaid shall bear interest, from such due date to
the date of payment thereof, computed at the Overdue Rate on the amount of such
installment, and Tenant will pay such interest to Landlord as Additional
Charges. The acceptance of any late charge or interest shall not constitute a
waiver of, nor excuse or cure, any default under this Lease, nor prevent
Landlord from exercising any other rights and remedies available to Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a
triple net lease and Rent shall be payable to Landlord without notice or demand
and without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term. Without limiting
the foregoing, Tenant shall pay to Landlord on a monthly basis along with Base
Rent, as additional rent, an amount equal to one-twelfth (1/12) of the Capital
Replacement Reserve. Such amounts shall be subject to reconciliation at the end
of each Fiscal Quarter and at the end of each Fiscal Year.
4.10 ADJUSTMENT IN ANNUAL BASE RENT FOR SALE OF ADJACENT PROPERTY.
Approximately fourteen (14) acres of land adjacent to the Property (the
"Adjacent Property") is owned by an affiliate of Landlord (the "Affiliate
Owner"). Landlord and Tenant desire to have the Affiliate Owner sell the
Adjacent Property as soon as reasonably possible, at the maximum price possible.
Affiliate Owner will not sell the Adjacent Property
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for a period of ninety (90) days from the Commencement Date without the Tenant's
approval, which approval the Tenant may withhold in its sole discretion for the
first eighteen (18) months of the Lease and in its reasonable discretion
thereafter. The determination of whether Tenant is being reasonable shall be
determined by mediation and arbitration as provided in Section 27.1. If after
such ninety (90) day period the Affiliate Owner wishes to accept an offer to
sell the Adjacent Property, then Landlord shall give written notice to Tenant
for Tenant's approval of the terms and conditions of such sale for Tenant's
approval as provided above. If the Affiliate Owner elects to sell such
property, then the Annual Base Rent shall be adjusted downward by the positive
difference (and upward by the negative difference), if any, between the
aggregate net sales proceeds of such property less (A) Three Million Six Hundred
Thousand Dollars ($3,600,000) increased from the Commencement Date by ten
percent (10%) per annum compounded (pro rated for partial periods), and (B) and
any real property taxes and income taxes and other operating costs incurred by
the Affiliate Owner in owning and selling such property, MULTIPLIED BY nine
percent (9%) (twelve percent (12%) if Landlord requests Tenant's approval for a
sale of the Adjacent Property for an amount which would not result in an
increase in the Annual Base Rent and Tenant withholds its approval for such
transaction). For example, if the Adjacent Property is sold for Five Million
Dollars ($5,000,000) on the first anniversary of the Commencement Date, and the
taxes and operating expenses are Two Hundred Thousand Dollars, then the Annual
Base Rent would be reduced by Seventy-Five Thousand Six Hundred Dollars
($75,600).
ARTICLE 5
ADDITIONAL SECURITY
5.1 SECURITY DEPOSIT. Intentionally Omitted.
5.2 ADDITIONAL SECURITY. In connection with, and as a condition
to the effectiveness of, this Lease, Tenant shall cause to be delivered to
Landlord a limited lease guaranty and a letter of credit agreement
(collectively, the "Additional Security") in the form attached hereto as EXHIBIT
D, executed by Great Universal Capital Associates, L.P. and EGSB, LLC, a
Delaware limited liability company, respectively.
5.3 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property (exclusive
of any artwork or telecommunication or computer system paid for by Tenant and
not advanced by or on behalf of Landlord pursuant to Section 12.3 or otherwise),
and such lien and security interest shall remain attached to Tenant's personal
property until payment in full of all Rent and satisfaction of all of Tenant's
obligations hereunder; provided, however, Landlord shall subordinate its lien
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and security interest only to that of any third party lender or seller which
finances Tenant's personal property, the terms and conditions of such
subordination to be satisfactory to Landlord in its reasonable discretion.
Tenant shall, upon the request of Landlord, execute such financing statements or
other documents or instruments reasonably requested by Landlord to perfect the
lien and security interests herein granted.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Article 14. Upon request, Tenant shall promptly furnish to Landlord copies of
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice
to Tenant of all Impositions payable by Tenant hereunder of which Landlord at
any time has actual knowledge, but Landlord's failure to give any such notice
shall in no way diminish Tenant's obligations hereunder to pay such Impositions.
Landlord and Tenant shall, upon reasonable request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Property as may be necessary to prepare any required returns and reports.
In the event any applicable governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it must legally so file. Each
party, to the extent it possesses the same, will provide the other party, upon
reasonable request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal
period during which the Lease commences or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such commencement or termination, and Tenant's obligation to pay
its prorated share thereof shall survive such termination. If any Imposition
may, at the option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition), Tenant may
elect to pay in installments, in which event Tenant shall pay all installments
(and any accrued interest on the unpaid balance of the Imposition) that are due
during the Term hereof before any fine, penalty, premium, further interest or
cost may be added thereto.
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6.4 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent
to or agree in writing to (i) any special assessment or (ii) the inclusion of
any material portion of the Leased Property into a special assessment district
or other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or unless Landlord agrees to pay the
cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord or as a result of Landlord's failure
to fund any amounts payable to Tenant in accordance with the terms of the Lease,
(i) Tenant, to the extent permitted by law, shall remain bound by this Lease in
accordance with its terms and shall neither take any action without the consent
of Landlord to modify, surrender or terminate the same, nor be entitled to any
abatement, deduction, deferment or reduction of Rent, or set-off against the
Rent by reason of, and (ii) the respective obligations of Landlord and Tenant
shall not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof except as otherwise expressly provided;
(b) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(c) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding
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up or other proceedings affecting Landlord or any assignee or transferee of
Landlord; or
(d) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. Except for
Landlord's obligation to make payments to Tenant, the obligations of Landlord
and Tenant hereunder shall be separate and independent covenants and agreements
and the Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof,
including, without limitation, claims resulting from the existence of Hazardous
Materials on the Property. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS
LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR
SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING ANY WARRANTY OR
REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE
OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE
EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v)
VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix)
CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii)
DURABILITY, (xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR
(xvi) COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR
LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS SELECTION
AND TO ITS
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SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED BY TENANT AND IS
SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE PROPERTY OF
ANY NATURE, WHETHER LATENT OR PATENT, AS BETWEEN LANDLORD AND TENANT, LANDLORD
SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE
PROVISIONS OF THIS SECTION 7.2 HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S
LEGAL COUNSEL, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY,
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that fee simple title (both legal and equitable) is in Landlord and
that Tenant has only the leasehold right of possession and use of the Property
as provided herein.
Notwithstanding anything to the contrary in this Lease, nothing in
this Section 7.2 is intended to waive, modify or limit in any respect any of
Tenant's rights set forth in this Lease including, without limitation, such
rights as are set forth under Section 3.3, Article 15, Article 16 and Article
21.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the property
of Landlord and (iii) that Tenant has only the right to the use of such Property
during the Term of and upon the terms and conditions of this Lease.
8.2 TENANT'S PERSONAL PROPERTY. Subject to the provisions of
Articles 15 and 16, Tenant shall maintain all of the Property, whether initially
included in the Lease or thereafter acquired by Landlord or Tenant, in good
condition and repair, normal wear and tear excepted. Upon the loss, destruction
or obsolescence of any Tangible Personal Property, Tenant shall replace such
property with replacements of the same type and quality as initially in place,
which such property will be owned by Tenant except to the extent acquired with
funds from the Capital Replacement Fund ("Tenant's Personal Property").
Tenant's Personal Property shall not include its artwork or telecommunication or
computer systems (except to the extent paid for by Landlord pursuant to Section
12.3 or otherwise) or any of its trade secrets. Upon the expiration or sooner
termination of this Lease, the Tenant's Personal Property shall transfer to
Landlord without requirement of any bill of sale or assignment;
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provided Landlord, at its election, may require Tenant to execute such
documentation as Landlord may require to evidence such transfer. Tenant shall
not remove any Tangible Personal Property from the Property upon termination of
the Lease. If any of such Tangible Personal Property is stored away from the
Property, Tenant will provide Landlord with proper access to the storage
facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry for a first-class golf course, and (c) such other
reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, which consent
Landlord may withhold in its sole discretion. No use shall be made or permitted
to be made of the Property, and no acts shall be done, which will cause the
cancellation of any insurance policy covering the Property or any part thereof,
nor shall Tenant sell or otherwise provide to patrons, or permit to be kept,
used or sold in or about the Property any article which is prohibited by law or
by the standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriters regulations. Tenant
shall, at its sole cost, comply with all of the requirements pertaining to the
Property or other improvements of any insurance board, association, organization
or company necessary for the maintenance of insurance, as herein provided,
covering the Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner
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which would (i) violate any law, rule or regulation or Legal Requirement, (ii)
subject to Article 12, cause structural injury to any of the Improvements or
(iii) constitute a public or private nuisance or waste. Tenant shall not cause
any Hazardous Material to be located in, on or under the Property, or any
adjacent property, or incorporated in the Property or any improvements thereon
except in compliance with applicable law (including any Environmental Laws).
Tenant shall not cause the Property to be used as a landfill or a waste disposal
site, or a manufacturing, distribution or disposal facility for any Hazardous
Materials. Tenant shall not cause the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) to materially violate any applicable Environmental
Law.
9.3 MEMBERSHIP SALES; PREFERRED TEE TIMES. Tenant shall not sell
and/or classify or reclassify memberships, or set initiation fees, dues and
other charges or materially increase or decrease the number of memberships
available at the Property, except as approved by Landlord, in Landlord's
reasonable discretion. In addition, Tenant shall not enter into preferred tee
time arrangements or any exclusive arrangements with any hotel operators or
other lodging operators without the prior approval of Landlord, which approval
Landlord may withhold in its reasonable discretion. Landlord has approved the
Golf Utilization Agreement attached hereto as EXHIBIT F. Landlord acknowledges
that such restriction shall not limit the right of any hotel owned by any
affiliate of Lessee from membership or club interests in such hotel which
include rights to play golf in accordance with the provisions of the Golf
Utilization Agreement.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of the
Property for road, highway or other public purposes; (iv) execute petitions to
have the Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants and restrictions affecting the Property; and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interest in the Property), but only upon delivery to Landlord of an Officer's
Certificate (which Officer's Certificate, if contested by Landlord, shall not be
binding on
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Landlord) stating that such grant, release, dedication, transfer, petition or
amendment is not detrimental to the proper conduct of the business of Tenant on
the Property and does not reduce its value or usefulness for the Primary
Intended Use. Landlord shall not grant, release, dedicate or execute any of the
foregoing items in this Section 9.4 without obtaining Tenant's approval, which
approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage (at the cost
of Landlord) on the Property which references that the Property is owned by
Landlord, which signage may include an appropriate logo selected by Landlord.
In addition, it is the intent of the parties that Tenant be a single-purpose
entity with no business operations except for those related solely to the
operation of the Property for its Primary Intended Use and other property of
Landlord which may be leased to Tenant. Tenant shall, therefore, not engage in
or undertake any activities other than those respecting the operation of the
Property for its Primary Intended Use, including leasing, managing, and
operating golf courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant expects (but
does not guarantee) that the Land and each of the Improvements will have a fair
market value (determined without regard to any increase or decrease for
inflation or deflation during the Term) equal to at least twenty percent (20%)
of the fair market value of the Land and each of the Improvements at the
Commencement Date. Tenant expects (but does not guarantee) that the Land and
each of the Improvements will have a remaining useful life equal to at least
twenty percent (20%) of its expected useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
10.1 REMEDIATION. Subject to the limitations and exclusions
contained in the last sentence of Section 10.2, if Tenant becomes aware of the
presence of any Hazardous Material in a quantity sufficient to require
remediation or reporting under any Environmental Law in, on or under the
Property or if Tenant, Landlord, or the Property becomes subject to any order of
any federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant shall,
at its sole expense, carry out and complete any required investigation, removal,
remediation, repair, closure, detoxification, decontamination
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or other cleanup of the Property. If Tenant fails to implement and diligently
pursue any such repair, closure, detoxification, decontamination or other
cleanup of the Property in a timely manner, Landlord shall have the right, but
not the obligation, to carry out such action and to recover its costs and
expenses therefor from Tenant as Additional Charges.
10.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any Environmental
Law, (c) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity. Notwithstanding the foregoing or any other provision of this Lease
(including, without limitation, Section 7.2, Section 10.4 and Article 23),
Tenant shall not be liable, or otherwise be required to indemnify Landlord or
the Company or any Affiliates of the Company, or incur any costs in connection
with, (i) any environmental conditions that are existing on the Property on the
Commencement Date and the conditions are not exacerbated as a result of the
willful misconduct or gross negligence of Tenant (ii) any matters or events that
arise after the Commencement Date that are not caused by Tenant, or (iii) any
matters or events that arise after the Commencement Date that are directly
caused by a breach by Landlord of the terms of this Lease.
10.3 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall pay,
protect, indemnify, save, hold harmless and defend Tenant, Affiliates of the
Tenant (including, without limitation, their respective officers, directors and
controlling persons), from and against all liabilities, obligations, claims,
damages (including punitive or consequential damages), penalties, causes of
action, demands, judgments, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted
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by law, imposed upon or incurred by or asserted against Tenant or the Property
by reason of any Environmental Law (irrespective of whether there has occurred
any violation of any Environmental Law) in respect of the Property howsoever
arising, without regard to fault on the part of Landlord, including (a)
liability for response costs and for costs of removal and remedial action
incurred by the United States Government, any state or local governmental unit
to any other Person, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory, including
damages assessed for the maintenance of a public or private nuisance or for
carrying on of a dangerous activity. Notwithstanding the foregoing or any other
provision of this Lease, Landlord shall not be liable, or otherwise be required
to indemnify Tenant or any Affiliates of the Tenant or incur any costs to the
extent that Landlord is not indemnified by Arco for such liability pursuant to
the Third Amendment.
10.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Each party's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Except as otherwise expressly provided
in this Lease, Tenant, at its expense, will operate and maintain the Property in
good order, repair and appearance (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
the Property or any portion thereof) and in accordance with any applicable Legal
Requirements, and, except as otherwise provided in this Lease, with reasonable
promptness, make all necessary and appropriate repairs thereto of every kind and
nature, whether interior or exterior, structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the Commencement Date (concealed or otherwise). Tenant shall
operate and maintain the Property in accordance with the operation and
maintenance practices of the Property at the Commencement Date and otherwise in
a manner comparable to other comparable golf course facilities in the vicinity
of the Property. Landlord may consult with the Advisory Association from time
to time with respect to Tenant's compliance with its maintenance and operation
obligations under this Section 11.1, and Landlord and representatives of
Advisory Association shall have the right from time to time to enter the
Property for
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the purpose of inspecting the Property. If Landlord, in consultation with the
Advisory Association, determines that Tenant has failed to comply with its
maintenance and operation obligations under this Section 11.1, Landlord shall
provide written notice to Tenant setting forth a list of remedial work and/or
steps to be performed by Tenant. Tenant shall promptly and diligently perform
such remedial work and/or steps as recommended by Landlord, provided if Tenant
objects to one or more of the remedial obligations proposed by Landlord, then
the matter shall be submitted to the dispute resolution procedure set forth in
Section 27.1.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Property in any way. Tenant hereby waives, to the extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
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ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Notwithstanding the foregoing, if Tenant proposes to make any Tenant
Improvements that would create an additional source of revenue at the Property
(i.e., tennis courts, swim facility, etc.) that is not currently included in the
calculation of Gross Golf Revenue, Landlord shall not be obligated to consent to
such improvement unless the Percentage Rent is adjusted hereunder in a manner
satisfactory to Landlord. Any such Tenant Improvement shall be made at Tenant's
sole expense and shall become the property of Landlord upon termination of this
Lease. Unless made on an emergency basis to prevent injury to Person or
property, Tenant will submit plans and specifications for any Tenant
Improvements, in the form necessary for any required building permits, to
Landlord for Landlord's prior written approval, which approval shall be at
Landlord's reasonable discretion.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Subject to Landlord's obligation to make funds available to
Tenant as provided in Section 12.3 and Section 12.4, Tenant shall not
suffer or permit any mechanics' liens or any other claims or demands
arising from the work of construction of any Tenant Improvement to be
enforced against the Property or any part thereof, and Tenant agrees to
hold Landlord and the Property free and harmless from all liability from
any such liens, claims or demands, together with all costs and expenses in
connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
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(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD.
(a) On the Commencement Date Landlord shall make available to Tenant
up to Six Million Dollars ($6,000,000) for capital improvements and certain
other expenses described in this Section 12.3 ("Capital Improvements") for
purposes of redesigning and renovating the existing facilities on the Property.
Tenant shall be responsible for securing bids and estimates for the work and for
supervising such work and shall endeavor to ensure that the work is done in a
timely manner and in a good and workman-like fashion. Neither Tenant nor any
Affiliate of Tenant or any owner or member of Tenant shall receive any
construction management or other fee in connection with the completion of the
Capital Improvements, provided Environmental Golf or any Affiliate thereof shall
be entitled to reimbursement in connection with the Capital Improvements in an
amount equal to ten percent (10%) of the total direct cost of the Capital
Improvements, including an allocation for equipment (or twenty percent (20%)
without any allocation for equipment) as more particularly set forth on EXHIBIT
G attached hereto. An estimated schedule and description of the Capital
Improvements is more particularly described in EXHIBIT G attached hereto. Prior
to the disbursement of any funds for Capital Improvements, Tenant shall submit
to Landlord for its approval (i) plans and specifications for such Capital
Improvements; (ii) a detailed budget for such Capital Improvements including the
cost of permits and related items; (iii) a construction schedule for such
Capital Improvements; and (iv) a cost plus with a guaranteed maximum price
construction contract executed by Environmental Golf in a form and substance
satisfactory to Landlord and with a payment and completion bond from a surety
acceptable to Landlord. Landlord's approval of such items shall be in its
reasonable discretion.
Landlord shall also cooperate with Tenant and take such actions,
including the execution and delivery to Tenant of any applications or other
documents, reasonably requested by Tenant in order to obtain any governmental
approvals sought by Tenant to construct any Tenant Improvement approved by
Landlord in accordance with Section 12.1 of this Lease within ten (10) Business
Days following the later of (a) the date Landlord
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receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant or
payable out of the Capital Replacement Fund), and will not cause Landlord to be
in violation of any law, ordinance or regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
(b) In addition Landlord shall also make available to Tenant a loan,
on a non-recourse basis, to be evidenced by a promissory note, up to an
additional Five Million Dollars ($5,000,000) (the "Loan Amount") during the
first four (4) Fiscal Years of the Initial Term. Upon written notice to
Landlord which details the use to which such funds shall be applied and the
unavailability of operating cash flow sufficient to make such payments, and
subject to Landlord's approval, which shall not be unreasonably withheld, Tenant
may apply all or any part of the Loan Amount to satisfy Tenant's obligations
under this Lease. Landlord's failure to make all or any portion of the Loan
Amount available to Tenant shall during any period in which there is not
sufficient operating cash flow shall permit Tenant to abate Rent to the amount
of the requested draw and such abatement shall be deemed an advance of the Loan
Amount. No more than One Million Dollars ($1,000,000) shall be drawn down
during the period prior to the redesign and renovation of the golf course on the
Property. The Loan Amount will be applied in the following priority: (i) first,
to fund any portion of the Annual Base Rent or Percentage Rent; and (ii) second,
to fund operating expenses for the Property (including, without limitation,
payroll expenses). No more than Two Hundred Thousand Dollars ($200,000) per year
of the Loan Amount may be allocated to distributions or management fees to
Tenant or any Affiliate of Tenant. Such management fee or amount, pro rated for
partial years, shall only be payable during the period prior to the redesign and
renovation of the golf course on the Property. Interest on the Loan Amount
shall accrue at nine percent (9%) per annum, shall be payable monthly in arrears
from the date of disbursement and all principal shall be due and payable at the
expiration of the Lease. Interest on the Loan Amount shall be increased
annually by the Base Escalator if and to the same extent that Base Rent is
subject to increase by the Base Escalator.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve beginning with the
calendar year 2001 or in the event the Property undergoes a significant redesign
and
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renovation as contemplated by Section 12.3, the Capital Replacement Reserve
shall not commence until the first day following four (4) Fiscal Quarters after
the Property is reopened for business. The Capital Replacement Reserve shall
accrue quarterly based on the Officer's Certificate and shall be placed in the
Capital Replacement Fund. Amounts in the Capital Replacement Fund shall be
deemed to accrue interest at a money market rate as reasonably determined by
Landlord and such interest shall be credited to the Capital Replacement Fund.
Upon the written request by Tenant to Landlord stating the specific use to be
made and subject to the approval of Landlord, the Capital Replacement Fund shall
be made available to Tenant for Capital Expenditures; PROVIDED, HOWEVER, no
portion of amounts credited to the Capital Replacement Fund shall be used to
purchase property to the extent that doing so would cause Landlord to recognize
income other than "rents from real property" as defined in Section 856(d) of the
Code. Tenant shall have no rights with respect to any amounts in the Capital
Replacement Fund except as provided herein. Subject to Landlord's approval of
the Capital Expenditures, Landlord shall make available to Tenant amounts from
the Capital Replacement Fund under the following conditions (with payment being
made to Tenant within ten (10) days from Tenant's request):
(a) No Event of Default exists and is continuing;
(b) Tenant presents invoices for payment or paid qualifying
receipts for reimbursement;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
Upon the expiration of the Lease, any balance in the Capital Replacement Fund
shall be applied as follows:
(i) first, to pay for any improvements, repairs or capital
improvements necessary to ensure that the golf course on the Property on such
date is in first-class condition and repair;
(ii) to any accruals, sinking funds or the like set forth in
the Capital Budget for repairs, improvements or replacements for items such as
roofs, sprinkler systems and other similar items which will need to be replaced
in the future; and
(iii) the balance to Tenant.
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12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord, except to the extent necessary for Tenant to have
title in order for Tenant to be entitled to federal and state income tax
benefits associated with Tenant Improvements as hereinafter stated. However,
Tenant shall be entitled to all federal and state income tax benefits associated
with any Tenant Improvement during the Lease Term exclusive of any Capital
Expenditures paid for from amounts credited to the Capital Replacement Fund, as
to which Landlord shall be entitled all income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time, but not more often than once per year, directly or
though its accountants to audit the information set forth in the Officer's
Certificate referred to in Section 4.4 and in connection with such audits to
examine Tenant's book and records with respect thereto (including supporting
data, sales tax returns and Tenant's work papers). If any such audit discloses
a deficiency in the payment of Percentage Rent, Tenant shall forthwith pay to
Landlord the amount of the deficiency as finally agreed or determined, together
with interest at the Overdue Rate from the date when said payment should have
been made to the date of payment thereof; PROVIDED, HOWEVER, that as to any
audit that is commenced more than twelve (12) months after the date Gross
Revenue for any Fiscal Year is reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Revenue shall
bear interest as permitted herein only from the date such determination of
deficiency is made unless such deficiency is the result of gross negligence or
willful misconduct on the part of Tenant. If any such audit discloses that the
Gross Revenue actually received by Tenant for any Fiscal Year exceeds the Gross
Revenue reported by Tenant in the Officer's Certificate by more than three
percent (3%), then Tenant shall pay all reasonable costs of such audit and
examination; provided Tenant shall have the right to submit the audit
determination to arbitration in accordance with the procedures set forth in
Article 27. Landlord shall also have the right to review and audit from time to
time, but not more often than once per year, Tenant's business operations
including all books, records and financial statements of Tenant. Tenant shall
promptly provide to Landlord copies of all such books, records, financial
statements or any other documentation of Tenant's business operations reasonably
requested by Landlord. Landlord shall not use any auditor in connection with
audits permitted under this Lease whose fee is dependent, in whole or in part,
on the result achieved by such audit.
12.7 ANNUAL BUDGET. Not later than ninety (90) days prior to the
commencement of each Fiscal Year, Tenant shall prepare and submit to Landlord an
operating budget (the
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"Operating Budget") and a capital budget (the "Capital Budget") prepared in
accordance with the requirements of this Section 12.7. The Operating Budget and
the Capital Budget (together, the "Annual Budget") shall be prepared in a form
approved by Landlord for use throughout the Lease Term and show by quarter and
for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Revenue (including
membership dues, daily use fees and other sources of Gross Revenue) and other
revenue for the forthcoming Fiscal Year itemized on schedules on a quarterly
basis as approved by Landlord and Tenant, together with assumptions, in
narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to the dispute resolution process set forth in this Lease for
resolving disputes between Landlord and Tenant. Pending the results of such
resolution or the earlier agreement of the parties, (i) if the Operating Budget
has not been agreed upon, the Property will be operated in a manner consistent
with the prior year's Operating Budget until a new Operating Budget is adopted,
and (ii) if the Capital Budget has not been agreed upon, no Capital Expenditures
shall be made
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unless the same are set forth in a previously approved Capital Budget or are
specifically agreed to by Landlord and Tenant or are otherwise required to
comply with Legal Requirements or Insurance Requirements. Tenant shall use its
good faith and reasonable efforts to operate the Property in a manner reasonably
consistent with the Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property shall be kept either at the Property or at Tenant's
offices in Calabassas, California. Such books and records shall be available to
Landlord and its representatives for examination, audit, inspection and
transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the amounts
set forth on the Annual Budget, together with, if appropriate a revised Annual
Budget, which budget shall be subject to Landlord's review and approval as
provided in Section 12.7. Each quarterly report shall also forecast any
projected Percentage Rent payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Revenue if Tenant's
financial statements are not required to be separately stated by the Securities
and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such
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additional information and financial statements with respect to Tenant and the
Property as Landlord may reasonably request without any additional cost to
Tenant, and Tenant agrees to reasonably cooperate with Landlord and the Company
in effecting public or private debt or equity financings by the Landlord or the
Company, without any additional cost to Tenant, modifications to this Lease or
the requirement of additional collateral from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Property or any attachment, levy, claim or
encumbrance emanating from Tenant's actions or negligence, not including,
however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are created by or through Landlord or the
responsibility of Landlord pursuant to the provisions of Article 25.
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13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord or matters existing as
of the Commencement Date (which matters shall be the responsibility of Landlord
unless set forth in the survey of the Property previously delivered to Tenant
and then only to the extent that no material expenditure shall be required by
Tenant), if any of the Improvements shall, at any time, encroach upon any
property, street or right-of-way adjacent to the Property, or shall violate the
agreements or conditions contained in any lawful restrictive covenant or other
agreement affecting the Property, or any part thereof, or shall impair the
rights of others under any easement or right-of-way to which the Property is
subject, or the use of the Property is impaired, limited or interfered with by
reason of the exercise of the right of surface entry or any other rights under a
lease or reservation of any oil, gas, water or other minerals, then promptly
upon request of Landlord or at the behest of any person affected by any such
encroachment, violation or impairment, Tenant, at its sole cost and expense
(subject to its right to contest the existence of any such encroachment,
violation or impairment), shall protect, indemnify, save harmless and defend
Landlord, the Company and Affiliates of the Company from and against all losses,
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including reasonable attorneys' fees and expenses) based on or
arising by reason of any such encroachment, violation or impairment and in such
case, in the event of an adverse final determination, either (i) obtain valid
and effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Landlord or Tenant; or (ii) make such changes in the Improvements,
and take such other actions, as Tenant in the good faith exercise of its
judgment deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or encroachment. Tenant's
obligation under this Section 13.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and Tenant shall be entitled to a credit for any sums recovered
by Landlord under any such policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or
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application, in whole or in part, of any Imposition or any Legal Requirement or
Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or
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comply with the applicable Legal Requirement or Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss payee,
as applicable. Losses shall be payable to Landlord and/or Tenant as provided in
this Article 15. In addition, the policies shall name as a loss payee any
Facility Mortgagee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment shall require the written consent of Landlord
provided Landlord by written notice to Tenant has elected to participate in such
loss adjustment, Tenant, and each Facility Mortgagee, if any. Evidence of
insurance shall be deposited with Landlord and, if requested, with any Facility
Mortgagee(s). The policies on the Property, including the Improvements,
Fixtures, Tangible and Intangible Personal Property and any Tenant Improvements,
shall insure against the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general liability insurance with amounts
not less than five million dollars ($5,000,000) per occurrence and in the
aggregate.
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(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws, which may include provisions for self-insurance if permitted by
applicable law.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
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15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than B+, XII
by A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies
of insurance referred to in Sections 15.1 and 15.2 and shall deliver
certificates thereof to Landlord prior to their effective date (and with respect
to any renewal policy, at least ten (10) days prior to the expiration of the
existing policy). In the event Tenant fails to satisfy its obligations under
this Article 15, Landlord shall be entitled, but shall have no obligation, to
effect such insurance and pay the premiums therefore, which premiums shall be
repayable to Landlord upon written demand as Additional Charges. Each insurer
issuing policies pursuant to this Article 15 shall agree, by endorsement on the
policy or policies issued by it, or by independent instrument furnished to
Landlord, that it will give to Landlord thirty (30) days' written notice before
the policy or policies in question shall be altered, allowed to expire or
cancelled. Each such policy shall also provide that any loss otherwise payable
thereunder shall be payable notwithstanding (i) any act or omission of Landlord
or Tenant which might, absent such provision, result in a forfeiture of all or a
part of such insurance payment, (ii) the occupation or use of the Property for
purposes more hazardous than those permitted by the provisions of such policy,
(iii) any foreclosure or other action or proceeding taken by any Facility
Mortgagee pursuant to any provision of a mortgage, note, assignment or other
document evidencing or securing a loan upon the happening of an event of default
therein or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by
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reason of the use of such blanket policy of insurance, and provided further that
the requirements of this Article 15 are otherwise satisfied. The amount of this
total insurance allocated to each of the Leased Properties, which amount shall
be not less than the amounts required pursuant to Sections 15.1 and 15.2, shall
be specified either (i) in each such "blanket" or umbrella policy or (ii) in a
written statement, which Tenant shall deliver to Landlord and Facility
Mortgagee, from the insurer thereunder. A certificate of each such "blanket" or
umbrella policy shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $200,000, be held in an escrow with disbursements approved in
writing by Landlord and (ii) if less than such amount, be paid to Tenant and
held by Tenant. All such proceeds shall be held in trust and shall be made
available for reconstruction or repair, as the case may be, of any damage to or
destruction of the Property, or any portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Except for payments as are customary to be made prior thereto,
Tenant shall have obtained and delivered to Landlord copies of all
necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total
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cost of completion and performance of the work to date in a good and
workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
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15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15 and
the Property thereby is rendered Unsuitable For Its Primary Intended Use,
Tenant shall, at its election, either (i) diligently restore the Property
to substantially the same condition as existed immediately before the
damage or destruction, or (ii) terminate the Lease by delivery of written
notice received by Landlord within thirty (30) days of the date of the
damage or destruction and assign all of its rights to any insurance
proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15, but
the Real Property is not thereby rendered Unsuitable For Its Primary
Intended Use, Tenant shall diligently restore the Property to substantially
the same condition as existed immediately before the damage or destruction,
subject to Legal Requirements; PROVIDED, HOWEVER, Tenant shall not be
required to restore certain Tangible Personal Property and/or any Tenant
Improvements if failure to do so does not adversely affect the amount of
Rent payable hereunder or the Primary Intended Use in substantially the
same manner immediately prior to such damage or destruction. Such damage
or destruction shall not terminate this Lease; PROVIDED FURTHER, HOWEVER,
if Tenant cannot within eighteen (18) months obtain all necessary
governmental approvals, including building permits, licenses, conditional
use permits and any certificates of need, after diligent efforts to do so
in order to be able to perform all required repair and restoration work and
to operate the Property for its Primary Intended Use in substantially the
same manner immediately prior to such damage or destruction, Tenant may
terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is damaged from a risk not covered by the insurance described in
Article 15, and such damage or destruction does not render the Property
Unsuitable For Its Primary Intended Use, Tenant shall restore the Property to
substantially the same condition as existed immediately before the damage or
destruction and Tenant may use proceeds from the Capital Replacement Fund to
perform such work, subject to the conditions set forth in Section 12.4 hereof.
If during the Term, the Property is materially damaged or destroyed by a risk
not covered by the insurance described in Article 15 and the Property is
rendered Unsuitable For Its Primary Intended Use, Tenant shall have the right to
terminate this Lease upon by delivery of
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written notice received by Landlord within thirty (30) days of the date of the
damage or destruction.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the then-applicable Term, then either Landlord or Tenant shall have the
right to terminate the Lease on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant
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to Section 16.2, Landlord at its cost shall accomplish all necessary restoration
up to but not exceeding the amount of the Award payable to Landlord, as provided
herein. If Tenant receives an Award under Section 16.4, Tenant shall repair or
restore any Tenant Improvements up to but not exceeding the amount of the Award
payable to Tenant therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that Tenant shall be entitled to receive from the
Award, if and to the extent such Award specifically includes such items, a sum
attributable to the value, if any, of: (i) the loss of Tenant's business during
the remaining term, (ii) any Tenant Improvements and (iii) the leasehold
interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with an abatement of rent during the period Tenant is
deprived of the material benefits of the Property. In the event of any such
temporary taking, the entire amount of any such Award made for such temporary
taking allocable to the Lease Term, whether paid by way of damages, rent or
otherwise, shall be paid to Tenant; provided, however, that Landlord shall be
reimbursed for all rent abated under this Section 16.5.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
PROVIDED,
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HOWEVER, that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(c) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily ceases
operations on the Property;
(d) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(e) a monetary event of default under the Guaranty (including any
failure to increase the letter of credit as provided therein or violation
of the debt limitations therein) shall exist and such default shall not
have been cured within ten (10) days of Tenant's receipt of written notice
thereof;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice of
such termination and upon the expiration of the time fixed in such notice, the
Term shall terminate and all rights of Tenant under this Lease shall cease.
Landlord shall have all rights at law and in equity available to Landlord as a
result of Tenant's breach of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such
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termination, Tenant shall forthwith pay to Landlord all Rent due and payable
with respect to the Property to, and including, the date of such termination.
Thereafter, Tenant shall forthwith pay to Landlord, at Landlord's option, as and
for liquidated and agreed current damages for Tenant's default, and not as a
penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
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17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but
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shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Tenant. Landlord may, to
the extent permitted by law, enter upon the Property for such purpose and take
all such action thereon as, in Landlord's opinion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of Tenant. All
sums so paid by Landlord and all costs and expenses (including reasonable
attorneys' fees and expenses, to the extent permitted by law) so incurred,
together with a late charge thereon at the Overdue Rate from the date on which
such sums or expenses are paid or incurred by Landlord, shall be paid by Tenant
to Landlord on demand. The obligations of Tenant and rights of Landlord
contained in this Article 18 shall survive the expiration or earlier termination
of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all Additional Charges accruing during the
month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
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ARTICLE 21
RISK OF LOSS
21.1 GENERALLY. Except as otherwise provided herein, during the
Lease Term, the risk of loss or of decrease in the enjoyment and beneficial use
of the Property as a consequence of the damage or destruction thereof by fire,
flood, the elements, casualties, thefts, riots, wars or otherwise, or in
consequence of foreclosures, attachments, levies or executions (other than by
Landlord and those claiming from, through or under Landlord) is assumed by
Tenant. In the absence of gross negligence, willful misconduct or breach of
this Lease by Landlord pursuant to Section 28.2, except as otherwise provided
below, Landlord shall in no event be answerable or accountable therefor nor
shall any of the events mentioned in this Article 21 entitle Tenant to any
abatement of Rent.
21.2 ABATEMENT OF RENT. In the event Tenant is prevented from
using, and does not use, the Property or any portion thereof, for thirty
consecutive (30) days ("Eligibility Period") as a result of (a) through no fault
of Tenant, any damage or destruction (b) through no fault of Tenant, the
enactment or enforcement of any Legal Requirement that effectively prohibits the
use the Property for the Primary Intended Use, or (b) because of the presence of
Hazardous Substances in, on or around the Property not caused by Tenant which
could pose a health risk to users of the Property, then Tenant's Rent shall be
abated or reduced, as the case may be, as of the commencement of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Property or a portion thereof, in the proportion that the area
of the portion of the Property that Tenant is prevented from using, and does not
use, impacts the operation of Tenant's business on the Property. However, in
the event that Tenant is prevented from conducting, and does not conduct, its
business in any portion of the Property for a period of time in excess of the
Eligibility Period, and the remaining portion of the Property is not sufficient
to allow Tenant to conduct in a reasonable manner its business therein, and if
Tenant does not conduct its business from such remaining portion, then for such
time after expiration of the Eligibility Period during which Tenant is so
prevented from conducting in a reasonable manner its business therein, the Rent
for the entire Property shall be abated; provided, however, if Tenant reoccupies
and conducts its business from any portion of the Property during such period,
the Rent equitably allocable to such reoccupied portion shall be payable by
Tenant from the date such business operations commence. If Tenant's right to
abatement occurs because of an eminent domain or taking Tenant's abatement
period shall continue until Tenant has been given sufficient time as reasonably
determined by Tenant's contractor and sufficient access to the Property to
rebuild such portion it is required to rebuild (including the Tenant
Improvements) to the extent the same shall have been removed as a result of such
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damage or destruction. To the extent Tenant is entitled to abatement without
regard to the Eligibility Period, because of an event covered by this Lease,
then the Eligibility Period shall not be applicable.
In the event Tenant is prevented from using, and does not use, the
Property or any portion thereof, for a period of 180 consecutive days as a
result of (a) through no fault of Tenant, the enactment or enforcement of any
Legal Requirement that effectively prohibits the use the Property for the
Primary Intended Use, or (b) because of the presence of Hazardous Substances in,
on or around the Property not caused by Tenant which could pose a health risk to
users of the Property, then Tenant shall have the right to terminate this Lease
by giving written notice to Landlord.
In the event of any abatement of rent described in Section 21.2(a)
(damage or destruction), then Landlord, at Landlord's option, shall have the
right to make a loan to Tenant to permit Tenant to pay the Rent hereunder.
The terms of such loan shall be the same as for the Loan Amount described in
Section 12.3(b), except (i) there shall be no increase in the interest rate
as a result of the Base Escalator, and (ii) principal shall be payable from
any Net Operating Income prior to any distributions of Net Operating Income
to any partners or members of Tenant or Affiliates thereof. Furthermore, if
at the time of the damage or destruction giving rise to the rent abatement
described in Section 21.2(a) the Net Operating Income for the Property
(exclusive of Tenant debt service under the Loan Amount, if any, or any
Leasehold Financing, if any prior to payment of Rent hereunder) does not
equal or exceed 110% of the Rent, then (A) the Rent shall not abate, and (B)
Landlord shall not make any loan to Tenant.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.2 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses),
to the extent permitted by law, imposed upon or incurred by or asserted against
Landlord, the Company or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited
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to, any accident, injury to or death of Person or loss of or damage to
property resulting from golf balls, golf clubs, golf shoes, lawn mowers or
other equipment, pesticides, fertilizers or other substances, golf carts,
tractors or other motorized vehicles present on or adjacent to the
Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder; or
(g) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct or as a result of Landlord's
non-performance of its obligations under the Lease.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by
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the indemnifying party and reasonably satisfactory to the indemnified party, and
to settle or otherwise dispose of the same; PROVIDED, HOWEVER, that the
indemnified party may at all times participate in such defense at its expense,
and PROVIDED FURTHER, HOWEVER, that the indemnifying party shall not, in defense
of any such claim, except with the prior written consent of the indemnified
party, consent to the entry of any judgment or to enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff in question to the indemnified party and its affiliates a release of
all liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying party
shall fail to undertake such defense within thirty (30) days after such notice,
or within such shorter time as may be reasonable under the circumstances, then
the indemnified party shall have the right to undertake the defense, compromise
or settlement of such liability or claim on behalf of and for the account of the
indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Except as otherwise permitted
hereunder, Tenant shall not, without the prior written consent of Landlord,
which consent Landlord may not unreasonably withhold or delay, assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer (except to an Affiliate of
Tenant) the Lease or any interest therein, all or any part of the Property,
whether voluntarily, involuntarily or by operation of law. For purposes of this
Article 23, a Change in Control of the Tenant shall constitute an assignment of
this Lease. Notwithstanding anything to the contrary in this Lease, Tenant
shall have the right to assign, sublease or otherwise transfer all or any
portion of the Property subject to this Lease or this Lease to any Permitted
Assignee without the consent of Landlord, provided Landlord shall be given prior
written notice of such transfer. In no event shall Tenant be permitted to
transfer this Lease to any publicly-traded Real Estate Investment Trust or any
affiliate thereof or to American Golf Corporation.
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23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in
its reasonable discretion, further sublease or license portions of the
Property to third parties, including concessionaires or licensees. Without
limiting the foregoing, Tenant's proposed sublease or any of the following
transfers shall require Landlord's prior written consent, which consent
Landlord may withhold in its reasonable discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf
professionals' shops;
(iii) sublease or license to operate golf driving
ranges;
(iv) sublease or license to provide golf lessons
by other than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health
clubs; and
(viii) sublease or license to operate any other
portions (but not the entirety) of the Property customarily associated
with or incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the
Property shall be subject and subordinate to the provisions of this Lease.
No sublease made as permitted by this Section 23.2 shall affect or reduce
any of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days
prior to any proposed assignment or sublease, deliver to Landlord written
notice of its intent to assign or sublease, which notice shall identify the
intended assignee or sublessee by name and address, shall specify the
effective date of the intended assignment or sublease, and shall be
accompanied by an exact copy of the proposed assignment or sublease.
Tenant shall provide Landlord with such additional information or documents
reasonably
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requested by Landlord with respect to the proposed transaction and the
proposed assignee or subtenant, and an opportunity to meet and interview
the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2,
subleases shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Landlord shall have no obligation to consent to any proposed
sublet if Landord reasonably determines that such sublet would reduce the
Percentage Rent payable to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the
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amounts to be paid by the sublessee or assignee thereunder would be based, in
whole or in part, on the income or profits derived by the business activities of
the sublessee or assignee; (ii) sublet or assign the Property or this Lease to
any person that Landlord owns, directly or indirectly (by applying constructive
ownership rules set forth in Section 856(d)(5) of the Code), a 10% or greater
interest; or (iii) sublet or assign the Property or this Lease in any other
manner or otherwise derive any income which could cause any portion of the
amounts received by Landlord pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or which could cause any other income received by Landlord to fail to
qualify as income described in Section 856(c)(2) of the Code. The requirements
of this Section 23.4 shall likewise apply to any further subleasing by any
subtenant.
23.5 LEASEHOLD MORTGAGE. Tenant shall have the right to mortgage
the Leasehold under a Leasehold Mortgage and to assign the entire Leasehold as
collateral security for such Leasehold Mortgage. The parties hereby acknowledge
and agree that Landlord's right, title and interest in and to the Property are
and at all times shall be superior to any Leasehold Mortgage. In addition,
Landlord shall have no obligation to guarantee any of Tenant's indebtedness or
other obligations secured by any Leasehold Mortgage.
If Tenant shall mortgage the Leasehold, in accordance with Section
23.5, Landlord agrees that so long as such Leasehold Mortgage shall remain
unsatisfied of record or until written notice of satisfaction is given by the
holders of any such Leasehold Mortgage to Landlord, the following provisions
shall apply:
(a) Landlord agrees that if the Leasehold Mortgagee acquires title to
the Leasehold by reason of any event of default by Tenant, if requested by and
at the cost of such Leasehold Mortgagee within thirty (30) days of the Leasehold
Mortgagee acquiring title, Landlord will, upon the Leasehold Mortgagee curing
all past monetary defaults of Tenant, enter into a new lease of the Property
with the Leasehold Mortgagee for the remainder of the Term, effective as of the
date of such termination, at the Rent and upon the terms, provisions, covenants
and agreements as herein contained and subject to the rights, if any, of any
parties then in possession of any part of the Property;
(b) Nothing herein contained shall require the Leasehold Mortgagee
to enter into a new lease;
(c) Foreclosure of the Leasehold Mortgage, or any sale or
conveyance of the Leasehold from Tenant to the Leasehold Mortgagee in lieu
thereof, shall not require the
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consent of Landlord or constitute a breach of any provision of or a default
under this Lease, provided the Leasehold Mortgagee satisfies the following
conditions upon such foreclosure, sale or conveyance Landlord shall recognize
the purchaser or other transferee in connection therewith as Tenant hereunder:
(x) such Leasehold Mortgagee, in good faith, has promptly notified Landlord of
its intent to cure any default of Tenant, and thereafter, (i) in the event of a
default which can be cured by the payment of money, has cured such default
within thirty (30) days after notice thereof has been given to such Leasehold
Mortgagee, or (y) in the event of any other default, has promptly commenced to
cure such default and is prosecuting the same to completion with reasonable
diligence, subject to force majeure; or (ii) if possession of the Property is
required in order to cure such default, or if such default is not susceptible of
being cured by such Mortgagee, as long as such Mortgagee, in good faith, shall
have notified Landlord and Tenant that such Mortgagee intends to institute
proceedings under its Mortgage and, thereafter, as long as such proceedings
shall have been promptly instituted and shall be prosecuted with reasonable
diligence and, after having obtained possession, such Mortgagee prosecutes the
cure to completion with reasonable diligence.
(d) In the event the Leasehold Mortgagee becomes Tenant under this
Lease or under any new lease, the Leasehold Mortgagee shall be personally liable
for the obligations of Tenant under this Lease or a new lease for the period of
time that the Leasehold Mortgagee remains Tenant hereunder. The Leasehold
Mortgagee's right thereafter to assign this Lease or the new lease shall be
subject to the terms and conditions of this Lease.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of nonresidential
real property and therefore agrees that Tenant, as the debtor in possession, or
the trustee for Tenant (collectively, the "Trustee") in any proceeding under
Title 11 of the United States Bankruptcy Code relating to Bankruptcy, as amended
(the "Bankruptcy Code"), shall not seek or request any extension of time to
assume or reject this Lease or to perform any obligations of this Lease which
arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days
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after receipt of such offer, but in any event no later than ten (10) days prior
to the date on which the Trustee makes application to the bankruptcy court for
authority and approval to enter into such assumption and assignment or
subletting. Landlord shall have the prior right and option, to be exercised by
written notice to the Trustee given at any time prior to the effective date of
such proposed assignment or subletting, to receive and assignment of this Lease
or subletting of the Property to Landlord or Landlord's designee upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions which may be payable
out of the consideration to be paid by such person for the assignment or
subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth reasonably satisfactory to Landlord or, in the alternative, the
proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver to
Landlord a guaranty agreement in form and substance acceptable to Landlord; and
(ii) any proposed assignee shall grant to Landlord a security interest in favor
of Landlord in all furniture, fixtures, and other personal property to be used
by such proposed assignee in the Property. All payments required of Tenant
under this Lease, whether or not expressly denominated as such in this Lease,
shall constitute rent for the purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy Code
relating to (a) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure defaults and compensate Landlord for actual
pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss." The term "actual
pecuniary loss" shall
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mean, in addition to any other provisions contained herein relating to
Landlord's damages upon default, obligations of Tenant to pay money under this
Lease and all attorneys' fees and related costs of Landlord incurred in
connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord and any such agreement shall be deemed to be an assignment for
purposes of this Lease. The golf course at the Property will always be managed
by a golf course operator experienced in the operations of first-class golf
courses.
23.8 RIGHT OF FIRST OFFER.
(a) Subject in all events to the restrictions contained herein on
assignments or other transfers, in the event either party desires to assign,
sell, convey or otherwise transfer (in any case, "Transfer") all or any portion
of its interest in the Property, or should either party receive an offer for the
same which such party intends to accept (in either case, the "Selling Party"),
the Selling Party shall give prompt notice in writing to the other party hereto
("Buying Party") setting forth the interests or rights (the "Conveyed Rights")
which will be the subject of the Transfer, the price and other terms (the "Terms
of Sale") of the Transfer of the Conveyed Rights.
(b) The giving of such notice by the Selling Party to the Buying
Party shall constitute an offer by Selling Party to Transfer the Conveyed Rights
to the Buying Party upon the same terms and conditions as contained in the Terms
of Sale. Within ten (10) days after receipt of such notice, the Buying Party
shall request any and all further information covering such offer as the Selling
Party may reasonably require in order to evaluate fully such offer.
(c) Within thirty (30) days after the Selling Party has supplied
(to the extent available or reasonably obtainable) all requested information to
the Buying Party (the "Election Period"), the Buying Party may elect (by sending
notice to the Selling Party) to purchase or acquire the Conveyed Rights upon
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the same terms and conditions as contained in the Terms of Sale. If the Buying
Party elects to purchase, then on the closing date (which date shall be the date
set forth in the Buying Party's notice of election to the Selling Party but
shall not be sooner than 15 days nor later than 120 days after the date of the
giving of such notice of election), the Selling Party shall convey, transfer and
assign to the Buying Party (or to its nominee or designee) all of the Conveyed
Rights upon the same terms and conditions as contained in the Terms of Sale.
(d) If the Buying Party does not exercise its right to purchase
within the Election Period, the Selling Party may Transfer the Conveyed Rights
to any third party; provided, however, such Transfer is made on terms and
conditions no more favorable to such third party than those set forth in the
Terms of Sale and such Transfer is consummated within 120 days after the
expiration of the Election Period. In the event that such Transfer to a third
party is not consummated within such 120 days, the provisions of this Section
23.8 shall be applicable to any subsequent proposed Transfer by the Selling
Party as if the previous Terms of Sale had never been submitted.
(e) No such sale shall relieve the Selling Party from any of its
obligations under this Lease accruing prior to such sale.
(f) The terms of this Section 23.8 shall not apply to Transfers of
Conveyed Rights (i) to any Affiliate, (ii) to any transfers by inter vivos gift
or by testamentary transfer to any spouse, parent, sibling, in-law, child or
grandchild or any holder of a direct or indirect interest in Tenant, to a trust
for the benefit of any holder of a direct or indirect interest in Tenant or such
spouse, parent, sibling, in-law, child or grandchild of a holder of a direct or
indirect interest in Tenant, or (ii) to any person or entity that is a
constituent member, partner or shareholder of Tenant or of any entity that has a
direct or indirect interest in Tenant, or (iii) to any transfer to any entity
acquiring all or substantially all of the assets of Landlord or any Affiliate of
Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon either party's receipt of not less than ten (10) days' prior written
request by the other party hereto, such party will furnish to the other party an
Officer's Certificate certifying that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
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(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant (or Landlord,
as the case may be), Tenant (or Landlord) is in default in the performance
of any covenant, agreement or condition contained in this Lease and, if so,
specifying each such default of which Tenant (or Landlord) may have
knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
(or Landlord) before or by any court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant (or Landlord); and
(e) responding to such other questions or statements of fact as
Landlord (or Tenant) shall reasonably request.
Either party's failure to deliver such Officer's Certificate within
such time shall constitute an acknowledgement by such party that this Lease is
unmodified and in full force and effect except as may be represented to the
contrary by the requesting party, the requesting party is not in default in the
performance of any covenant, agreement or condition contained in this Lease and
the other matters set forth in such request, if any, are true and correct. Any
such Officer's Certificate furnished pursuant to this Section 24.1 may be relied
upon by the requesting party and any prospective lender or purchaser or other
transferee of the requesting party.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
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ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. Provided Tenant receives a
non-disturbance agreement in a form and substance customarily agreed to by
sophisticated parties from any party holding an interest in the Property or any
portion thereof superior to that of Tenant under this Lease, this Lease is and
at all times shall be subject and subordinate to any ground or underlying
leases, mortgages, trust deeds or like encumbrances, which may now or hereafter
affect the Property and to all renewals, modifications, consolidations,
replacements and extensions of any such lease, mortgage, trust deed or like
encumbrance. This clause shall be self-operative and no further instrument of
subordination shall be required by any ground or underlying lessor or by any
mortgagee or beneficiary, affecting any lease or the Property. In confirmation
of such subordination, Tenant shall execute promptly any certificate that
Landlord may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease prior to becoming
the Landlord, but that in the event of Landlord's default with respect to any
such obligation, Tenant will give any such holder whose name and address have
been furnished Tenant in writing for such purpose notice of Landlord's default
and allow such holder thirty (30) days following receipt of such notice for the
cure of said default before invoking any remedies Tenant may have by reason
thereof.
ARTICLE 26
SALE OF FEE INTEREST
If Landlord shall convey the Property in accordance with the terms
hereof, and subject to Tenant's rights under Section 23.8 other than as security
for a debt, Landlord shall, upon the written assumption by the transferee of the
Property of all liabilities and obligations of the Lease be released from all
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future liabilities and obligations under this Lease arising or accruing from and
after the date of such conveyance or other transfer as to the Property; provided
Landlord's transferee agrees in writing to assume all of Landlord's obligations
under this Lease arising from and after the date of such transfer. All such
future liabilities and obligations shall thereupon be binding upon the new
owner.
ARTICLE 27
DISPUTE RESOLUTION
27.1 DISPUTE RESOLUTION PROCEDURE. Any dispute, controversy or
claim arising out of or relating to this Lease ("DISPUTE") shall be resolved in
the following manner, which shall be in lieu of litigation in any court:
(a) NEGOTIATION. The parties will attempt in good faith to
resolve the Dispute promptly by negotiations between senior representatives of
the parties who have authority to settle the Dispute (each a "REPRESENTATIVE")
in accordance with the following procedures:
(i) The party raising the Dispute ("DISPUTING PARTY") shall
give the other party written notice of the Dispute ("DISPUTE NOTICE").
Within ten (10) days after receipt of a Dispute Notice, the receiving
party shall submit to the Disputing Party a written response. The
Dispute Notice and the response shall include (A) a statement of the
nature of the Dispute or the party's position relative to the Dispute,
as applicable, (B) a summary of the information supporting the party's
position, and (C) the name and title of the individual who will be
that party's Representative in the resolution of the Dispute. The
Representatives shall meet at a mutually acceptable time and place
within ten (10) days after the date of the other party's response to
the Dispute Notice and thereafter as often as they reasonably deem
necessary to exchange relevant information and to attempt to resolve
the Dispute.
(ii) The Representatives shall discuss the Dispute and
negotiate in good faith in an effort to resolve the Dispute without
the need for mediation or arbitration. During the course of such
negotiations, all reasonable requests made by one party to the other
for information will be honored in order that each of the parties may
be fully advised. The specified format for such discussions shall be
left to the discretion of the Representatives, but may include the
preparation of agreed upon statements of fact or of positions urnished
to the other party. All verbal and written
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communications between the parties and issued or prepared in
connection with this Section 27.1(a) shall be deemed prepared and
communicated in furtherance, and in the context, of dispute
settlement, and shall be exempt from discovery and production, and
shall not be admissible in evidence (whether as admission or
otherwise), in any arbitration or other proceedings for the resolution
of the Dispute.
(b) MEDIATION. If the Dispute is not resolved within forty-five
(45) days of the date of the Dispute Notice, or if the party receiving the
Dispute Notice does not respond in writing to the Dispute Notice within ten (10)
days after receiving the same, or if either party will not meet with the other
party within ten (10) days after delivery of such response to the Disputing
Party, then either party may refer the Dispute to the Judicial Arbitration &
Mediation Services, Inc. ("JAMS") for mediation in accordance with the following
procedures:
(i) A party may commence the mediation process with JAMS by
notifying JAMS and the other party in writing ("MEDIATION NOTICE") of
such party's desire that the Dispute be resolved through mediation,
including therewith a copy of the Dispute Notice and the response
thereto, if any.
(ii) The mediation shall be conducted through, by and at the
JAMS' office located closest to the Property.
(iii) The mediation shall be conducted by a single mediator.
The parties may select any mutually acceptable member from the panel
of retired judges at JAMS as a mediator. If the parties cannot agree
on a mediator within five (5) days after the date of the Mediation
Notice, then the JAMS' Arbitration Administrator shall send a list and
resumes of three (3) available mediators to the parties, each of whom
shall strike one name, and the remaining person shall be appointed as
the mediator. If more than one name remains, either because one or
both parties has failed to respond to the JAMS' Arbitration
Administrator within five (5) days of receiving the list or because
one or both parties have failed to strike a name from the list or
because both parties strike the same name, the JAMS' Arbitration
Administrator will choose the mediator from the remaining names. If
the designated mediator shall die, become incapable of, unwilling to,
or unable to serve or proceed with the mediation, a substitute
mediator shall be appointed in accordance with the selection procedure
described above in this Section 27.1(b)(iii), and such substituted
mediator shall have
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all such powers as if he or she had been originally appointed herein.
(iv) The mediation shall consist of one or more informal,
non-binding meetings between the Representatives and the mediator,
jointly and in separate caucuses, out of which the mediator will seek
to guide the parties to a resolution of the Dispute. The mediation
process shall continue until the resolution of the Dispute, or the
termination of the mediation process pursuant to Section 27.1(b)(vii).
(v) The costs of the mediation, including fees and
expenses, shall be borne equally by the parties.
(vi) All verbal and written communications between the
parties and issued or prepared in connection with this Section 27.1(b)
shall be deemed prepared and communicated in furtherance, and in the
context, of dispute settlement, and shall be exempt from discovery and
production, and shall not be admissible in evidence (whether as
admission or otherwise) in any arbitration or other proceedings for
the resolution of the Dispute.
(vii) The initial mediation meeting between the
Representatives and the mediator shall be held within twenty (20) days
after the Mediation Notice. Either party may terminate the mediation
process and commence the arbitration procedures described in Section
27.1(c) below upon the earlier to occur of (A) the failure of the
initial mediation meeting to occur within twenty (20) days after the
date of the Mediation Notice, (B) the passage of thirty (30) days from
the date of the Mediation Notice without the Dispute having been
resolved, or (C) such time as the mediator makes a finding that there
is no possibility of resolution through mediation.
(c) ARBITRATION. If the Dispute is not resolved through the
mediation process, then upon termination of the mediation process pursuant to
Section 27.1(b)(vii), the Dispute shall be resolved by a final and binding
arbitration administered by JAMS according to its Rules of Practice and
Procedure then in effect and the following procedures:
(i) Unless barred by the statute of limitations, either
party may initiate the arbitration process by serving, as in a civil
action, the other party with notice of the nature of the Dispute and a
demand for arbitration ("ARBITRATION DEMAND"), which Arbitration
Demand shall include a description of the Dispute, the amount involved
and the remedy sought. The Dispute shall be waived and forever barred
if on the date of the
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Dispute Notice, the claim, if asserted in a civil action, would be
barred by the applicable state or federal statute of limitations.
(ii) The party commencing the arbitration process shall file
a copy of the Arbitration Demand at the regional office of JAMS
located closest to the Property, together with the appropriate filing
fee as provided in JAMS' existing fee schedule.
(iii) If the responding party desires to file a response or
counterclaim, it must do so within twenty (20) days of service of the
Arbitration Demand. Failure to file a counterclaim or response will
not operate to delay the arbitration proceedings.
(iv) After the filing of the Arbitration Demand, response
and counterclaim, no further claims or counterclaims may be made
except on motion to the arbitrator.
(v) The case shall be submitted to a single arbitrator. The
parties may select any mutually acceptable member from the panel of
retired judges at JAMS as arbitrator. If the parties cannot agree on
an arbitrator within five (5) days after the date of the Arbitration
Demand, then the JAMS' Arbitration Administrator shall send a list and
resumes of three (3) available arbitrators to the parties, each of
whom shall strike one name, and the remaining person shall be
appointed as the arbitrator. If more than one name remains, either
because one or both parties has failed to respond to the JAMS'
Arbitration Administrator within five (5) days of receiving the list
or because one or both parties have failed to strike a name from the
list or because both parties strike the same name, the JAMS'
Arbitration Administrator will choose the arbitrator from the
remaining names. If the designated arbitrator shall die, become
incapable of, unwilling to, or unable to serve or proceed with the
arbitration, a substitute arbitrator shall be appointed in accordance
with the procedure described in this Section 27.1(c)(v), and such
substituted arbitrator shall have all such powers as if he or she had
been originally appointed herein.
(vi) arbitrator with any papers or information demanded or
in the event that either party shall fail to attend hearings before
him or her, the arbitrator is empowered by both parties to proceed ex
parte.
(vii) The JAMS' Arbitration Administrator shall schedule a
pre-hearing conference with the parties
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within twenty (20) days after the date of the Arbitration Demand for
the purpose of narrowing the issues, establishing a discovery
schedule, arranging an acceptable procedure for any law and motion
proceedings and in all respects arranging for the most expeditious
hearing possible of the matters in dispute.
(viii) Discovery shall be at the discretion of the arbitrator
and allowed only upon a showing of good cause utilizing the following
guidelines:
(A) The arbitrator shall have discretion to order
pre-hearing exchange of information, including but not limited
to, the production of requested documents and exchanges of
summaries of testimony of proposed witnesses; provided,
however, that under all circumstances a party shall be
entitled to receive from the other party any information or
documents which it is entitled to receive or review under this
Agreement and the right to receive the same shall not be
subject to the arbitrator's discretion.
(B) Each party may propound only one interrogatory
requesting the names and addresses of the witnesses to be
called at the arbitration hearing.
(C) On a date to be determined at the pre-hearing
conference, each party may serve one request for the
production of documents. The documents are to be exchanged
within five (5) days of such request.
(D) Each party may depose up to six (6) witnesses.
Each deposition must be concluded within four (4) hours and
all depositions must be taken within twenty (20) days of the
pre-hearing conference. Any party deposing an opponent's
expert must pay the expert's fee for attending the deposition.
(ix) The arbitration hearing shall commence within thirty
(30) days of the pre-hearing conference and shall be conducted in
accordance with the following:
(A) The parties must file briefs with the
arbitrator at least three (3) days before the hearing,
specifying the facts each intends to prove and analyzing the
applicable law.
(B) The parties have the right to representation by
legal counsel throughout the arbitration proceedings.
(C) Within reasonable limitations, both sides at
the hearing may call and examine witnesses for
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relevant testimony, introduce relevant exhibits or other
documents, cross-examine or impeach witnesses who shall have
testified orally on any matter relevant to the issues, and
otherwise rebut evidence, as long as these rights are
exercised in an efficient and expeditious manner.
(D) A court reporter shall attend the arbitration
proceedings and keep a stenographic record thereof.
(E) Any party may request that oral evidence be
given under oath.
(F) The judicial rules in effect in the Central
District of the Superior Court of the State of California for
the conduct of non-jury trials, including, but not limited to,
the order of proof, the conduct of the hearing and the
presentation and admissibility of evidence, shall apply in the
arbitration proceeding.
(x) The issue of whether a Dispute is arbitrable hereunder
shall also be subject to arbitration under this Section 27.1. The
arbitrator shall apply the substantive laws of the State of
California, other than the law of conflicts, and U.S. federal laws, to
the resolution of each Dispute and to the issue of ax of any Dispute,
including, but not limited to, the provisions of California statutory
laws dealing with arbitration and the United States Arbitration Act, 9
U.S.C. Section 1-16, as they may exist at the time of the Arbitration
Demand, but only insofar as such statutes are not in conflict with
this Agreement, and specifically excepting therefrom sections of such
statutes dealing with discovery. Judgment upon the award rendered by
the arbitrator may be entered by any court having jurisdiction
thereof.
(xi) The arbitrator's award shall be made in accordance with
the following:
(A) The decision shall be based on the evidence
introduced at the hearing, including all logical and
reasonable inferences therefrom. The arbitrator may grant any
remedy or relief which is just and equitable, including, but
not limited to, injunctive relief or specific performance.
(B) The award must be made in writing and signed by
the arbitrator and shall contain a concise statement of the
reasons in support of the decision.
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(C) The award must be mailed promptly to the
parties, but no later than thirty (30) days from the closing
of the hearing.
(D) The award can be judicially enforced pursuant
to Section 1285, ET SEQ. of the Code of Civil Procedure. The
award shall be final and binding and there shall be no direct
appeal from the award on the grounds of error in the
application of the law.
(E) The arbitrator shall award to the prevailing
party in the arbitration all of its reasonable costs and
expenses in connection with the arbitration, including, but
not limited to, reasonable attorneys' fees and costs. If the
arbitration involves more than one Dispute and the same party
does not prevail in each of the Disputes, the arbitrator shall
award such reasonable costs and expenses, equitably and
ratably, for each Dispute on the basis of which party has
prevailed in such Dispute.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Upon Landlord giving Tenant
reasonable advance notice, Tenant shall permit Landlord and its authorized
representatives to inspect the Property during usual business hours subject to
any security, health, safety or confidentiality requirements of Tenant or any
governmental agency or insurance requirement relating to the Property, or
imposed by law or applicable regulations. Landlord shall indemnify Tenant for
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against Tenant by reason of
Landlord's inspection pursuant to this Section 28.1.
28.2 LANDLORD'S GOLFING PRIVILEGES. The members of Landlord's or
Landlord's Affiliates senior executive staff (not to exceed a total of seven (7)
persons) and their guests (if accompanied by same) shall have the right, upon
reasonable notice to Tenant, to play an 18-hole round of golf and utilize the
clubhouse and other Improvements located on the Property free of charge on any
day on which the Property is open for golf to the general public or the
membership, as applicable.
28.3 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such
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failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed to continue if Landlord, within
said thirty (30)-day period, proceeds promptly and with due diligence to cure
the failure and diligently completes the curing thereof. The time within which
Landlord shall be obligated to cure any such failure shall also be subject to
extension of time due to the occurrence of any Unavoidable Delay.
28.4 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.5 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
28.6 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.7 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.8 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate
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created hereby or any interest in this Lease or such leasehold estate and
(b) the fee estate in the Property.
28.9 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.10 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
If to Tenant: EGSB, LLC
c/o Environmental Industries
24121 Ventura Boulevard
Calabasas, California 91302
Attention: Michael Dingman
and: SBCR GOLF, LLC
c/o River Bank America
645 Fifth Avenue, 8th Floor
New York, New York 10022
Attention: Ilyne Mendelson, Esq.
With a copy to: Paul, Hastings, Janofsky and Walker
555 South Flower Street
23rd Floor
Los Angeles, California 90071
Attention: M. Guy Maisnik, Esq.
28.11 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.12 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
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28.13 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.14 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.15 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.16 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.17 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.18 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.19 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.20 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease, express
or implied, is intended to confer any rights or remedies under or by reason of
this Lease on any Person other than the parties to this Lease and their
respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any party
hereto or give any third Person any right of subrogation or action against any
party to this Lease.
28.21 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any
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other assets, properties or funds of (a) Landlord, (b) any director, officer,
general partner, limited partner, employee or agent of Landlord, or any general
partner of Landlord, any of their respective general partners or stockholders
(or any legal representative, heir, estate, successor or assign of any thereof),
(c) any predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of their respective general partners, either directly or
through either Landlord or their respective general partners or any predecessor
or successor partnership or corporation or their stockholders, officers,
directors, employees or agents (or other entity), or (d) any other Person
affiliated with any of the foregoing, or any director, officer, employee or
agent of any thereof.
28.22 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.23 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
28.24 CONSENT/DUTY TO ACT REASONABLY. Whenever the consent of
Landlord or Tenant is required under the Lease, such consent shall not be
unreasonably withheld or delayed, unless another standard is specifically stated
otherwise herein. Except as otherwise provided, whenever the Lease grants
Landlord or Tenant the right to take action, exercise discretion, establish
rules and regulations, or make an allocation or other determination, Landlord
and Tenant shall reasonably act in good faith and take no action which might
result in the frustration of the other party's reasonable expectations
concerning the benefits to be enjoyed under the Lease.
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LANDLORD: SANDPIPER-GOLF TRUST, LLC,
a Delaware limited liability company
By: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland
corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
---------------------------------
W. Bradley Blair, II
President and CEO
TENANT: SANDPIPER AT SBCR, LLC,
a Delaware limited liability company
By: SBCR GOLF, LLC
a Delaware limited liability company
By: Prescott Management Corp.,
a Delaware corporation, its
authorized signatory
By: /s/ Stephen Mann
-----------------------------------
Stephen Mann
President
By: EGSB, LLC
a Delaware limited liability company
By: /s/ Michael L. Dingman
-----------------------------------
Michael L. Dingman
Its Authorized Signatory
S-1
<PAGE>
- --------------------------------------------------------------------------------
[Persimmon Ridge Golf Club]
[Louisville]
[Shelby County]
[Kentucky]
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
GRANITE RIDGE, INC.,
TENANT
DATED AS OF MARCH 9, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
LEASED PROPERTY . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Initial Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Extension Options . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Right of First Offer to Lease . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Increase in Initial Base Rent . . . . . . . . . . . . . . . . . . . 17
4.3 Percentage Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Annual Reconciliation of Percentage Rent. . . . . . . . . . . . . . 18
4.5 Increase in Base Rent Following Conversion Date . . . . . . . . . . 19
4.6 Record-keeping. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7 Additional Charges. . . . . . . . . . . . . . . . . . . . . . . . . 19
4.8 Late Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . 19
4.9 Net Lease; Capital Replacement Reserve. . . . . . . . . . . . . . . 20
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . . 20
4.11 Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Pledge of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5 2 Obligation to Withhold Distributions. . . . . . . . . . . . . . . . 21
5 3 Cross-Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Landlord's Lien . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5 Collateral Conversion and Termination Payment . . . . . . . . . . . 22
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Payment of Impositions. . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Information and Reporting . . . . . . . . . . . . . . . . . . . . . 22
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6.3 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Assessment Districts. . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 No Termination, Abatement, Etc .. . . . . . . . . . . . . . . . . . 23
7.2 Condition of the Property . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . 26
8.1 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Tenant's Personal Property. . . . . . . . . . . . . . . . . . . . . 26
8.3 Tenant's Obligations. . . . . . . . . . . . . . . . . . . . . . . . 26
8.4 Landlord's Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Specific Prohibited Uses. . . . . . . . . . . . . . . . . . . . . . 27
9.3 Membership Sales. . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Landlord to Grant Easements, Etc. . . . . . . . . . . . . . . . . . 28
9.5 Tenant's Additional Covenants . . . . . . . . . . . . . . . . . . . 29
9.6 Valuation of Remainder Interest in Lease. . . . . . . . . . . . . . 29
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . 31
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . . 31
10.9 Environmental Violations at Expiration
or Termination of Lease. . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . 32
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . . 33
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS;
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FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . . 34
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . . 35
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . . 36
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . . 36
12.6 Landlord's Right to Audit Calculation
of Gross Golf Revenue. . . . . . . . . . . . . . . . . . . . . . . 37
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . 40
13 1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . . 41
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . . 44
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . 44
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . 46
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . . 46
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 47
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . . 48
15.10 Excess Proceeds, Deficiency of Proceeds . . . . . . . . . . . . . 49
15.11 Reconstruction Covered by Insurance . . . . . . . . . . . . . . . 49
15.12 Reconstruction Not Covered by Insurance . . . . . . . . . . . . . 51
15.13 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . . 51
15.14 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.15 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 52
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . . 52
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 55
17.2 Payment of Costs and Closing Costs . . . . . . . . . . . . . . . . 55
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 55
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . 57
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . . 57
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . 57
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . 58
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . 60
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . . 61
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . . 61
22.4 Survival of Indemnification Obligations
Available Insurance Proceeds . . . . . . . . . . . . . . . . . . 62
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 62
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . . 62
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 65
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . . 65
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . . 65
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . 68
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . 68
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . . 68
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ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . 69
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . . 69
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . . 70
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . . 70
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . . 72
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . . 72
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . . 72
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 73
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . . 73
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . 73
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . 73
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
28.10 Survival of Claims. . . . . . . . . . . . . . . . . . . . . . . . 74
28.11 Invalidity of Terms or Provisions . . . . . . . . . . . . . . . . 74
28.12 Prohibition Against Usury . . . . . . . . . . . . . . . . . . . . 74
28.13 Amendments to Lease . . . . . . . . . . . . . . . . . . . . . . . 74
28.14 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 74
28.15 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
28.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.17 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . 75
28.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.19 Non-Recourse as to Landlord . . . . . . . . . . . . . . . . . . . 75
28.20 No Relationship . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.21 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
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Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Granite Shares Pledge Agreement
Exhibit E - Adjustments to Gross Golf Revenue for Private Clubs
Exhibit F - Calculation of Gross Golf Revenue for the
Base Year by Quarter
Exhibit K - Contingent Purchase Price Formula
Exhibit K-1 - Example of Contingent Purchase Price
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[Persimmon Ridge Golf Club]
[Louisville]
[Shelby County]
[Kentucky]
LEASE
THIS LEASE (this "Lease"), dated as of March 9, 1998, is entered into by
and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and GRANITE RIDGE, INC., a Kentucky corporation ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement (the
"Agreement") dated as of February 26, 1998 by and between Landlord and
Persimmon Ridge Golf Club, L.P., a Delaware limited partnership
("Transferor"), Transferor has or will transfer to Landlord all of its right,
title and interest in and to the Property (as hereafter defined): and
B. Tenant, desires to lease the Property from Landlord, and Landlord
desires to lease the Property to Tenant, on the terms set forth herein
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
rights and interest (to the extent acquired from Transferor) in and to the
following real property, improvements, personal property and related rights
(collectively the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land and
the Improvements, if any, including, without limitation, all of Landlord's
right, title and interest, if any, in and to all mineral and water rights and
all easements, rights-of-way and other appurtenances used or connected with
the beneficial use or enjoyment of the Land and the Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
1
<PAGE>
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of
Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded, paid
or received on a total or partial Condemnation.
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of Annual Rase Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on January 1,
1997, and ending on December 31, 1997; PROVIDED, HOWEVER, that the Base Year
shall refer to the Fiscal Year immediately preceding the Conversion Date if
the Base Rent is increased as provided in Section 4.5. A quarter-by-quarter
calculation of Gross Golf Revenue in the Base Year is attached hereto as
EXHIBIT F.
2
<PAGE>
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York,
New York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the Capital
Replacement Reserve accrued by Landlord, together with interest thereon as
provided in Section 12.4, less amounts withdrawn from the Capital Replacement
Fund as provided in Section 12.4.
"CAPITAL REPLACEMENT RESERVE" means, on an annual basis, the greater of
(i) an amount equal to 3% of each Fiscal Quarter's Gross Golf Revenue, to be
accrued monthly by Landlord as part of the Capital Replacement Fund, as
provided in Section 12.4 hereof, based on the Officer's Certificate, or (ii)
Forty Five Thousand and No/100 Dollars ($45,000.00).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person
other than to a Person that is an Affiliate of Tenant as of the date
hereof;
(b) the sale, conveyance or other transfer of all or
substantially all of the assets of Tenant (whether by operation of law
or otherwise):
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who control Tenant as
of the date hereof no longer having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and
Controlled by an Affiliate of Tenant as of the date hereof), and
Tenant is not the surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred for purposes of this Lease if the shareholders or partners
who Control Tenant as of the date hereof remain in Control of Tenant through
an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
3
<PAGE>
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes
of Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power, whether
by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary sale
or transfer by Landlord to any Condemnor, either under threat of condemnation
or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in EXHIBIT
K attached hereto.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor elects to
receive additional Owner's Shares in the Partnership as a Contingent Purchase
Price for the contribution of the Property, (ii) the date on which Transferor
elects in writing to waive its right to receive additional Owner's Shares, or
(iii) the date that is the one hundred fifth (105th) day following the end of
the fifth (5th) full Fiscal Year of the Initial Term.
"CPI" means the United States Consumer Price Index, All Urban Consumers,
U.S. City Average, All Items (1982-84 - 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section
1801, et seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub.
L. 99-499 and 99-563; the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42
U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as amended, 42
U.S.C. Section 201, et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and local
4
<PAGE>
environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in SECTION 17.1.
"EXPIRATION DATE" means the date that is the last day of the twentieth
(20th) full Fiscal Quarter following the Commencement Date, as such date may
be extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance
placed on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity
and address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from the first day of
the first Fiscal Quarter commencing after the Commencement Date to the last
day of the fourth Fiscal Quarter commencing after the Commencement Date.
"FIXTURES" means all permanently affixed equipment, machinery, fixtures,
and other items of real and/or personal property, including all components
thereof, now or hereafter located in, on or used in connection with and
permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which, to the
greatest extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property and any Tenant
Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance
policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
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"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT
E attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv)
fees to reserve a tee time, (v) guest fees, (vi) golf cart rentals, (vii)
parking lot fees, (viii) locker rentals, (ix) fees for golf club storage, (x)
fees for the use of swim, tennis or other facilities, (xi) charges for range
balls, range fees or other fees for golf practice facilities, (xii) fees or
other charges paid for golf or tennis lessons (except where retained by or
paid to a USTA or PGA professional in accordance with historical practice at
the Property), (xiii) fees or other charges for fitness centers, (xiv)
forfeited deposits with respect to any membership application, (xv) transfer
fees imposed on any member in connection with the transfer of any membership
interest, (xvi) fees or other charges paid to Tenant by sponsors of golf
tournaments at the Property (unless the terms under which Tenant is paid by
such sponsor do not comply with Section 23.4, in which event the gross
revenues received from such sponsor for the tournament shall be excluded from
Gross Golf Revenue and further provided that Tenant shall use commercially
reasonable efforts to structure such payment to comply with Section 23.4),
(xvii) advertising or placement fees paid by vendors in exchange for
exclusive use or name rights at the Property, and (xviii) fees received in
connection with any golf package sponsored by any hotel group, condominium
group, golf association, travel agency, tourist or travel association or
similar payments; provided, however, that Gross Golf Revenue shall not
include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price
and paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or
substance which is (i) defined as a "hazardous waste",
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"hazardous material", or "restricted hazardous waste" or words of similar
import under any provision of any Environmental Law; (ii) petroleum or
petroleum products; (iii) asbestos; (iv) polychlorinated biphenyl; (v)
radioactive material; (vi) radon gas; (vii) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section
1251, et seq. (42 U.S.C. Section 1317); (viii) defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is then
carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior
to the date hereof and whether or not to be completed within the
Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees): and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Property and/or
the Rent or Additional Charges (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time during or in
respect of the Term hereof may be assessed or imposed on or in respect of or
be a lien upon (i) Landlord or Landlord's interest in the Property; (ii) the
Property or any part thereof or any therefrom or any estate, right, title or
interest therein; or (iii) any operation, use or possession of, or sales from
or activity conducted on or in connection with the Property or the leasing or
use of the Property or any part thereof; provided, however, that Impositions
shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or
any other Person other than Tenant;
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(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant: or
(cc) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located
on the Land as more particularly described in Exhibit B attached hereto.
"INITIAL BASE RENT" means $711,750 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through the last day of the twentieth (20th) full Fiscal Quarter following
the Commencement Date.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy required
by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership,
operation, leasing or maintenance of the Real Property or the Tangible
Personal Property, and any and all trademarks and copyrights, guarantees,
Authorizations, general intangibles, business records, plans and
specifications, surveys, all licenses, permits and approvals solely with
respect to the construction, ownership, operation or maintenance of the
Property.
"LAND" means the land described in Exhibit A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title retention
agreement upon the Property, or any portion thereof or interest therein,
whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
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"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities
Act and any Environmental Laws), rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting either the Property or the
construction, use or alteration thereof, whether now or hereafter enacted and
in force, including any which may (i) require repairs, modifications, or
alterations in or to the Property; (ii) in any way adversely affect the use
and enjoyment thereof, and all permits, licenses and authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to
Tenant (other than encumbrances created by Landlord without the consent of
Tenant), at any time in force affecting the Property; or (iii) require the
cleanup or other treatment of any Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K of
the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if
Tenant is a partnership, by an officer authorized to so sign by the general
partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an
Affiliate of Landlord, other than pursuant to this Lease, which as of the
date hereof are the properties listed on Exhibit C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
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"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
forty percent (40%) of the positive difference, if any, between the current
year's Gross Golf Revenue and the Gross Golf Revenue for the Base Year, pro
rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person meeting
one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such
assignee in its reasonable discretion, based on, among other things,
the proposed assignee's reputation and experience in owning, operating
and managing golf courses similar in type to the Property and the
proposed assignee's net worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other
organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of the
date of this Lease, by and between Pledgor and Landlord, in the form attached
hereto as EXHIBIT D.
"PLEDGED SHARES" means the Pledgor's Shares pledged pursuant to the
Pledge Agreement.
"PLEDGOR" means Granite Golf Group, Inc., a Nevada corporation and
affiliated entity of Tenant.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on such
date announced by NationsBank, N.A., or its successor entity, to be its prime
rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
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"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used
solely in connection with the Real Property, including, but not limited to,
machinery, equipment, furniture, furnishings, movable walls or partitions,
phone systems, restaurant equipment, computers or trade fixtures, golf course
operation and maintenance equipment, including mowers, tractors, aerators,
sprinklers, sprinkler and irrigation facilities and equipment, valves or
rotors, driving range equipment, athletic training equipment, office
equipment or machines, antiques or other decorations, furniture, computers or
other control systems, and equipment or machinery of every kind or nature,
including all warranties and guaranties associated therewith, with the
exception of golf carts.
"TENANT" means Granite Ridge, Inc., a Kentucky corporation, an
affiliated entity of Granite Golf Group, Inc., a Nevada corporation, and any
successor thereto, or assignee thereof, as permitted by the terms of this
Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided in
Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms, as
the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration Date
equal to the positive difference, if any, between one hundred thirteen and
one-half percent (113.5%) of all rent due under this Lease and the Net
Operating Income for the prior Fiscal Year, divided by the initial
capitalization rate of nine and three-fourths percent (9.75%).
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"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil
commotion, fire, unavoidable casualty or other causes beyond the control of
the party responsible for performing an obligation hereunder, PROVIDED THAT
lack of funds shall not be deemed a cause beyond the control of either party
hereto unless such lack of funds is caused by the failure of the other party
hereto to perform any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition of
the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable
basis for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of
this Lease nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Lease or any exhibits hereto.
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ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the Commencement
Date and shall terminate on the last day of the twentieth (20th) full Fiscal
Quarter following the Commencement Date.
3.2 EXTENSION OPTIONS. Provided that (i) at the end of the Initial Term
of the Lease, the average trade price for the common stock of Pledgor for the
previous one (1) year exceeds $2.00 per share, and (ii) a majority of the
common stock of Pledgor or a substantial portion of its assets have not been
sold, transferred or conveyed to an entity other than Landlord or a Landlord
affiliate entity (collectively, Renewal Conditions"), Tenant shall have the
right to extend the Initial Term of this Lease five (5) consecutive times for
a period of five (5) years each (each such extension, an "Extended Term").
Tenant may exercise its option for an Extended Term solely by giving written
notice at least one hundred eighty (180) days prior to the termination of the
then-current term. Pledgor shall be entitled to exercise these options only
if at the time of the giving of such notice, Tenant is then the lessee of the
Property pursuant to this Lease, the Renewal Conditions have been met, and at
the time of the commencement of the applicable Term or Extended Term no Event
of Default shall then exist. During the Extended Term, all of the terms and
conditions of this Lease shall remain in full force and effect, as the same
may be amended, supplemented or modified. Notwithstanding anything else
contained herein, if a majority of the common stock of Pledgor or a
substantial portion of its assets are sold to an entity other than Landlord,
the Lease will terminate at the end of the Initial Term.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the Lease Term
and provided that Tenant has exercised each Extended Term and no Event of
Default then exists beyond any applicable notice and cure period, Tenant
shall have a right of first offer ("Tenant's Right of First Offer to Lease")
to lease the Property upon the same terms and conditions as Landlord, at its
election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if
at the time of the giving of such notice and at the time of the commencement
of the applicable term no Event of Default shall then exist and only if
Landlord elects to lease the Property at the expiration of the Lease Term.
Not more than nine (9) months and not less than three (3) months prior to the
expiration of the Lease Term, Landlord shall, if applicable, give Tenant
written notice of its intent to lease the Property and shall indicate the
terms and conditions upon which Landlord intends to lease the Property.
Tenant shall thereafter have a period of thirty (30) days to elect by
unequivocal written notice to Landlord to lease the Property on the same
terms and conditions as Landlord intends to offer to a third party; provided
prior to Tenant's acceptance Landlord shall retain the right to elect not to
lease the Property
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by giving Tenant written notice thereof. If Tenant elects not to lease the
Property, then Landlord shall be free to lease the Property to a third party.
However, if the Base Rent for such proposed lease is reduced by five percent
(5%) or more as compared to the Base Rent included in the lease that Tenant
rejected, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the United
States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the twenty-fifth (25th) day
of each month in arrears, at Landlord's address set forth in Section 28.9 or
at such other place or to such other Person as Landlord from time to time may
designate in writing. The first monthly installment shall be prorated as to
any partial month. If any payment owing hereunder shall otherwise be due on a
day that is not a Business Day, such payment shall be due on the next
succeeding Business Day. Tenant shall receive a credit against Rent (or be
paid directly, at Landlord's option) for any operating expense credits or
operating revenues credited to Landlord pursuant to the Agreement which are
applicable to any period in the Lease Term (E.G., credit for real property
taxes, membership dues, sublease rents, etc.) and conversely Tenant shall
reimburse Landlord for any operating expenses paid for by Landlord pursuant
to the Agreement which are the responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on the date (the
"Adjustment Date") that is the first day of the first Fiscal Quarter
commencing after the one (1) year anniversary of the Commencement Date, and
on each Adjustment Date thereafter through and including the fourth (4th)
Adjustment Date, the Annual Base Rent will increase by the lesser of (i)
three percent (3%) of the Annual Base Rent payable for the immediately
preceding year, or (ii) two hundred percent (200%) of the change in CPI from
the immediately preceding fiscal year (the "Base Rent Escalator"); provided
the April 1, 1998 increase shall be pro rated for the number of days in the
Lease Term in the first quarter of 1998 divided by 365 and multiplied by the
applicable Base Rent Escalator. In addition, if the Annual Base Rent is
increased as provided in Section 4.5, then the Base Rent Escalator shall
continue to apply to each of the five (5) years following such increase, with
the increase effective on the anniversary of the increase in Base Rent as
provided in Section 4.5 in lieu of increases on January of each year. In
addition to the Base Rent Escalator described above, the Annual Base Rent
will increase by
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$9,750 for each of the first two (2) Fiscal Years beginning on the Adjustment
Date.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the
Initial Term and continuing for the Initial Term and any Extended Term,
Tenant shall calculate the Gross Golf Revenue for each Fiscal Quarter (or
shorter period, if applicable) within twenty (20) days of the end of such
Fiscal Quarter (or shorter period, if applicable) and submit such calculation
in writing to Landlord by way of an Officer's Certificate. If the Gross Golf
Revenue for that Fiscal Quarter (or shorter period, if applicable) is greater
than the Gross Golf Revenue for the same Fiscal Quarter (or shorter period,
if applicable) in the Base Year (and, following the Fiscal Quarter ending
March 31, on a year-to-date basis), then Tenant shall pay to Landlord the
Percentage Rent upon submittal of the Officer's Certificate. The Percentage
Rent payable in any period in any Fiscal Year shall be adjusted to reflect
the Percentage Rent paid on a year-to-date cumulative basis for the Fiscal
Year (pro rated for any partial periods) and the limits set forth in the next
two sentences on a pro rated basis. The increase in Rent resulting from the
payment of Percentage Rent (together with any increase in Base Rent pursuant
to Section 4.2) payable, if any, during each of the first five (5) full
Fiscal Years of the Initial Term shall be limited to six percent (6%) of the
Rent payable for the prior Fiscal Year. Tenant shall receive a credit against
the payment of Percentage Rent in an amount equal to the increase in the Base
Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60) days
after the end of each Fiscal Year, or after the expiration or termination of
this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
comparison of the amount of the Percentage Rent actually paid during such
Fiscal Year versus the amount of Percentage Rent actually owing on the basis
of the annual calculation of the Gross Golf Revenue. If the Percentage Rent
for such Fiscal Year exceeds the sum of the quarterly payments of Percentage
Rent previously paid by Tenant, Tenant shall pay such deficiency to Landlord
along with such Officer's Certificate. If the Percentage Rent for such Fiscal
Year is less than the amount of Percentage Rent previously paid by Tenant,
Landlord shall, at Landlord's option, either (i) remit to Tenant its check in
an amount equal to such difference, or (ii) grant Tenant a credit against the
payment of Rent next coming due. Landlord shall have the right to audit all
of Tenant's business operations at the Property so as to determine the
calculation of Percentage Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the Fiscal Year
in which the Conversion Date occurs only as a result of the election by
Tenant to receive Owner's Shares in the Partnership as a Contingent Purchase
Price for the contribution of the Property, the Annual Base Rent shall be
increased, effective as of
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the date the additional Owner's Shares are issued to the Transferor, to an
amount equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for the
Property in accordance with its usual and customary practices and in
accordance with GAAP approved by Landlord, which will accurately record all
Gross Golf Revenue. Tenant shall retain all accounting records for each
Fiscal Year conforming to such accounting system until at least five (5)
years after the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and Percentage
Rent, (a) Tenant shall also pay and discharge when due and payable all other
amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above,
Tenant shall also pay and discharge every fine, penalty, interest and cost
which may be added for non-payment or late payment of such items (the items
referred to in clauses (a) and (b) above being referred to herein
collectively as the "Additional Charges"). Except as otherwise provided in
this Lease, all Additional Charges shall become due and payable at the
earlier of (i) thirty (30) days after either Landlord or the applicable third
party delivery of an invoice to Tenant, or (ii) the date of delinquency with
respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late payment
by Tenant to Landlord of Base Rent, Percentage Rent or Additional Charges
will cause Landlord to incur costs not contemplated under the terms of this
Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Property and other expenses of a
similar or dissimilar nature. Accordingly, if any installment of Base Rent,
Percentage Rent or Additional Charges (but only as to those Additional
Charges which are payable directly to Landlord) shall not be paid within ten
(10) days after the date such payment is due, Tenant will pay Landlord on
demand, as Additional Charges, a late charge equal to five percent (5%) of
such installment. The parties agree that this late charge represents a fair
and reasonable estimate of the costs that Landlord will incur by reason of
late payment by Tenant and is not a penalty. In addition, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within five (5) days after the due date with respect to Base Rent or
Percentage Rent or delivery of an invoice to Tenant with respect to the
Additional Charge, the amount unpaid shall bear interest, from such due date
to the date of payment thereof, computed at the Overdue Rate on the amount of
such installment, and Tenant will pay such interest to Landlord as Additional
Charges. The acceptance of
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any late charge or interest shall not constitute a waiver of, nor excuse or
cure, any default under this Lease, nor prevent Landlord from exercising any
other rights and remedies available to Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a triple
net lease and Rent shall be payable to Landlord without notice or demand and
without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term. Without limiting
the foregoing, Tenant shall pay to Landlord on a monthly basis along with
Base Rent, as additional rent, an amount equal to one-twelfth (1/12) of the
Capital Replacement Reserve. Such amounts shall be subject to reconciliation
at the end of each Fiscal Quarter and at the end of each Fiscal Year.
4.10 ALLOCATION OF REVENUES. In the event that individuals or groups
purchase for a single price items which are both included and excluded from
Gross Golf Revenue (E.G., green fees and dinner), then Tenant agrees that
revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
4.11 LINE OF CREDIT. Tenant shall receive an additional payment at
Closing of $150,000, which shall be capitalized and become Rent under the
Lease.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF PLEDGOR'S SHARES. On or prior to the Commencement Date,
Tenant shall cause the Pledge Agreement to be executed for the benefit of
Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the above
provisions, if the Net Operating Income for the Property falls below the
coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Pledge
Agreement, at any time following the release of any Pledged Shares (or
security deposit held by Landlord in lieu thereof), then Tenant shall
thereafter retain, and not make cash distributions (except as may be
necessary to pay any applicable taxes) to its shareholders, partners or
members, as applicable, until such time as Tenant has accumulated six (6)
months of Base Rent at the then current level. Cash distributions may be made
at such time as Tenant shall have again satisfied such coverage ratios for
two (2) consecutive Fiscal Years. Tenant shall provide Landlord with such
documentation, including Officer's Certificates and financial statements,
within forty-five (45) days after the end of each Fiscal Quarter as are
necessary to establish Tenant's compliance with the foregoing requirements.
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5.3 CROSS-COLLATERAL. The Pledged Shares shall also secure Tenant's or
Tenant's Affiliates obligations under each of the leases for the Other Leased
Properties and all collateral securing Tenant's or Tenant's Affiliates'
obligations under each of the leases related to the other Leased Properties
shall secure this Lease. Tenant agrees to execute amendments to existing
collateral documents with Landlord to effectuate such cross-collateralization.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by applicable law,
Landlord is granted a lien and security interest on all of Tenant's personal
property now or hereafter located on the Property, and such lien and security
interest shall remain attached to Tenant's personal property until payment in
full of all Rent and satisfaction of all of Tenant's obligations hereunder;
provided, however, Landlord shall subordinate its lien and security interest
only to that of any third party lender or seller which finances Tenant's
personal property, the terms and conditions of such subordination to be
satisfactory to Landlord in its reasonable discretion. Tenant shall, upon the
request of Landlord, execute such financing statements or other documents or
instruments reasonably requested by Landlord to perfect the lien and security
interests herein granted.
5.5 COLLATERAL CONVERSION AND TERMINATION PAYMENT. At the end of the
Initial Term, if the average trade price for the common stock of Pledgor
during the previous one (1) year did not exceed $2.00 per share, Tenant will
convert the number of remaining Pledged Shares to Owner's Shares, cash or
other security to be approved by Landlord. On the Expiration Date, unless
each option for an Extended Term is exercised, Tenant shall pay to Landlord
the Termination Payment, if any, provided the maximum Termination Payment
shall equal the amounts in the Security Fund (as defined in the Pledge
Agreement) then held by Landlord and shall be payable solely from the
proceeds thereof. For purposes of calculating the Termination Payment, the
Pledged Shares shall have a value deemed to equal the average closing share
price of common stock of Pledgor for the five (5) day period prior to the
Expiration Date.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section 17.9,
Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be
made directly to the taxing authorities where feasible. All payments of
Impositions shall be subject to Tenant's right of contest pursuant to the
provisions of Article 14. Upon request, Tenant shall promptly furnish to
Landlord copies of official receipts, if available, or other satisfactory
proof evidencing such payments, such as canceled checks
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice to
Tenant of all Impositions payable by Tenant hereunder of which Landlord at
any time has actual knowledge, but Landlord's
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failure to give any such notice shall in no way diminish Tenant's obligations
hereunder to pay such Impositions. Landlord and Tenant shall, upon reasonable
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Property as may be necessary to
prepare any required returns and reports. In the event any applicable
governmental authorities classify any property covered by this Lease as
personal property, Tenant shall file all personal property tax returns in
such jurisdictions where it must legally so file. Each party, to the extent
it possesses the same, will provide the other party, upon reasonable request,
with cost and depreciation records necessary for filing returns for any
property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal period
during which the Lease commences or terminates shall be adjusted and prorated
between Landlord and Tenant, whether or not such Imposition is imposed before
or after such commencement or termination, and Tenant's obligation to pay its
prorated share thereof shall survive such termination. If any Imposition may,
at the option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition), Tenant
may elect to pay in installments, in which event Tenant shall pay all
installments (and any accrued interest on the unpaid balance of the
Imposition) that are due during the Term hereof before any fine, penalty,
premium, further interest or cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing authority in
respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and
be continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior to
delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent to or
agree in writing to (i) any special assessment or (ii) the inclusion of any
material portion of the Leased Property into a special assessment district or
other taxing jurisdiction unless Tenant shall have consented thereto, which
consent shall not be unreasonably withheld or unless Landlord agrees to pay
the cost thereof.
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ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION ABATEMENT, ETC. Subject to Article 21 and except as
otherwise specifically provided in this Lease, and except for those causes
resulting from the willful misconduct or gross negligence of Landlord or any
person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and
shall neither take any action without the consent of Landlord to modify,
surrender or terminate the same, nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent by reason of, and
(ii) the respective obligations of Landlord and Tenant shall not be otherwise
affected by reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any
portion thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference
with such use by any Person, or by reason of eviction by paramount
title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under
this Lease or any other agreement between Landlord and Tenant, or to
which Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of
Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such
obligations as a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by
Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
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7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and delivery
of possession of the Property and that Tenant has examined and otherwise has
knowledge of the condition of the Property prior to the execution and
delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is
leasing the Property "as is" in its present condition. Tenant waives and
releases any claim or cause of action against Landlord with respect to the
condition of the Property including any defects or adverse conditions latent
or patent, matured or unmatured, known or unknown by Tenant or Landlord as of
the date hereof. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS
LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE,
NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING ANY WARRANTY OR
REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR
USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
(iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE
THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION,
(viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii)
DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE EXISTENCE OF ANY
MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING
ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE
PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PROPERTY
HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY
DEFECT OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT,
AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2 HAVE
BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED TO
BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS
OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING
OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to the
Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) fee simple title, except where the Property is held
under a ground lease, (both legal and equitable) is in Landlord and that
Tenant has only the leasehold right of possession and use of the Property as
provided herein, (B) to Tenant's knowledge the Improvements conform to all
material Legal Requirements and all material Insurance Requirements, and (C)
all easements necessary or appropriate for the use or operation of the
Property have been obtained.
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ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of
such Property during the Term of and upon the terms and conditions of this
Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of the
Property, whether initially included in the Lease or thereafter acquired by
Landlord or Tenant, in good condition and repair, normal wear and tear
excepted. Upon the loss, destruction or obsolescence of any Tangible Personal
Property, Tenant shall replace such property with replacements of the same
type and quality as initially in place, which such property will be owned by
Tenant except to the extent acquired with funds from the Capital Replacement
Fund ("Tenant's Personal Property"). Upon the expiration or sooner
termination of this Lease, the Tenant's Personal Property shall transfer to
Landlord without requirement of any bill of sale or assignment; provided
Landlord, at its election, may require Tenant to execute such documentation
as Landlord may require to evidence such transfer. Tenant shall not remove
any Tangible Personal Property from the Property upon termination of the
Lease. If any of such Tangible Personal Property is stored away from the
Property, Tenant will provide Landlord with proper access to the storage
facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or cause to
be provided and maintained, during the entire term of the Lease, all Tangible
Personal Property, as well as merchandise for sale to the public, and food
and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary
practices in the golf industry, (c) past practices of the Transferor, and (d)
such other reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property may,
upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant shall
use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion
thereof for any other use without the prior written consent of Landlord, in
Landlord's absolute
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discretion. No use shall be made or permitted to be made of the Property, and
no acts shall be done, which will cause the cancellation of any insurance
policy covering the Property or any part thereof, nor shall Tenant sell or
otherwise provide to patrons, or permit to be kept, used or sold in or about
the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to
be carried hereunder, or fire underwriters regulations. Tenant shall, at its
sole cost, comply with all of the requirements pertaining to the Property or
other improvements of any insurance board, association, organization or
company necessary for the maintenance of insurance, as herein provided,
covering the Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or permit
the Property to be used or occupied, nor do or permit anything to be done in
or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to
Article 12, cause structural injury to any of the Improvements or (iii)
constitute a public or private nuisance or waste. Tenant shall not allow any
Hazardous Material to be located in, on or under the Property, or any
adjacent property, or incorporated in the Property or any improvements
thereon except in compliance with applicable law (including any Environmental
Laws). Tenant shall not allow the Property to be used as a landfill or a
waste disposal site, or a manufacturing, distribution or disposal facility
for any Hazardous Materials. Tenant shall neither suffer nor permit the
Property or any portion thereof, including Tenant's Personal Property, to be
used in such a manner as (i) might reasonably tend to impair Landlord's title
thereto or to any portion thereof, or (ii) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as
such, or of implied dedication of the Property or any portion thereof, or
(iii) is in material violation of any applicable Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time to time
so long as no Event of Default has occurred and is continuing, at the request
of Tenant and at Tenant's cost and expense (but subject to the approval of
Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing
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easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of
the Property for road, highway or other public purposes; (iv) execute
petitions to have the Property annexed to any municipal corporation or
utility district; (v) execute amendments to any covenants and restrictions
affecting the Property; and (vi) execute and deliver to any person any
instrument appropriate to confirm or effect such grants, releases,
dedications and transfers (to the extent of its interest in the Property),
but only upon delivery to Landlord of an Officer's Certificate (which
Officer's Certificate, if contested by Landlord, shall not be binding on
Landlord) stating that such grant, release, dedication, transfer, petition or
amendment is not detrimental to the proper conduct of the business of Tenant
on the Property and does not reduce its value or usefulness for the Primary
Intended Use. Landlord shall not grant, release, dedicate or execute any of
the foregoing items in this Section 9.4 without obtaining Tenant's approval,
which approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the Advisory
Association and cooperate in the activities of such association; (b) at its
election, engage in reasonable cross-marketing endeavors with the members of
the Advisory association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which
signage may include an appropriate logo selected by Landlord. In addition, it
is the intent of the parties that Tenant be a single-purpose entity with no
business operations except for those related solely to the operation of the
Property for its Primary Intended Use and other property of Landlord which
may be leased to Tenant. Tenant shall, therefore, not engage in or undertake
any activities other than those respecting the operation of the Property for
its Primary Intended Use, including leasing, managing, and operating golf
courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby represents
that, at the end of the Term, including all Extended Terms, it expects that
the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement
Date. Tenant further represents that, at the end of the Term, including all
Extended Terms, it expects that the Land and each of the Improvements will
have a remaining useful life equal to at least twenty percent (20%) of its
expected useful life at the Commencement Date.
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ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain Phase I Environmental
Site Assessment of the Property dated February 20, 1998, prepared by ETI
Corradino, Tenant hereby represents, warrants, and covenants to Landlord as
follows:
10.1 OPERATIONS. Except as set forth in the Agreement, and to the best
of knowledge of Tenant, the Property is presently operated in compliance in
all material respects with all Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to the best
knowledge of Tenant, there are no Environmental Laws requiring any material
remediation, cleanup, repairs or construction (other than normal maintenance)
with respect to the Property.
10.3 VIOLATIONS: ORDERS. Except as set forth in the Agreement, and to
the best knowledge of Tenant, (a) no notices of any violation or alleged
violation of any Environmental Laws relating to the Property or its uses have
been received by either Tenant, or, to the best knowledge of Tenant, by any
prior owner, operator or occupant of the Property, and (b) there are no
writs, injunctions, decrees, orders or judgments outstanding, or any actions,
suits, claims, proceedings or investigations pending or threatened, relating
to the ownership, use, maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all material permits
and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with
the terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys, audits,
investigations and assessments relating to the Property in the possession or
control of Tenant, Transferor or their Affiliates are set forth or described
in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or
reporting under any Environmental Law in, on or under the Property or if
Tenant, Landlord, or the Property becomes subject to any order of any
federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant
shall, at its sole expense, but subject to the last sentence of Section 10.7,
carry out and complete any required investigation, removal, remediation,
repair, closure, detoxification,
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decontamination or other cleanup of the Property. If Tenant fails to
implement and diligently pursue any such repair, closure, detoxification,
decontamination or other cleanup of the Property in a timely manner, Landlord
shall have the right, but not the obligation, to carry out such action and to
recover its costs and expenses therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay, protect,
indemnify, save, hold harmless and defend Landlord, the Company, Affiliates
of the Company and Landlord (including, without limitation, their respective
officers, directors and controlling persons), and any Facility Mortgagee from
and against all liabilities, obligations, claims, damages (including punitive
or consequential damages), penalties, causes of action, demands, judgments,
costs and expenses (including reasonable attorneys' fees and expenses), to
the extent permitted by law, imposed upon or incurred by or asserted against
Landlord or the Property by reason of any Environmental Law (irrespective of
whether there has occurred any violation of any Environmental law) in respect
of the Property howsoever arising, without regard to fault on the part of
Tenant, including (a) liability for response costs and for costs of removal
and remedial action incurred by the United States Government, any state or
local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any
Environmental Law, (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying
on of a dangerous activity, or (d) by reason of a breach of a representation
or warranty in Sections 10.1 through 10.5 of this Lease. Notwithstanding the
foregoing or any other provision of this Lease (including, without
limitation, Section 7.2, Section 10.9 and Article 23),Tenant shall not be
liable, or otherwise be required to indemnify Landlord or the Company or any
Affiliates of the Company for (i) any matters or events that arise after the
Commencement Date that are not caused by any act or omission on the part of
Tenant, or (ii) any matters or events that arise after the Commencement Date
that are directly caused by a breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF LEASE.
Notwithstanding any other provision of this Lease (except the last sentence
of Section 10.7), if, at a time when the Term would otherwise terminate or
expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and
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Tenant's failure to have completed all action required to correct, abate or
remediate such a violation of any Environmental Law materially impairs the
leasability of the Property upon the expiration of the Term, then, at the
option of Landlord, the Term shall be automatically extended with respect to
the Property beyond the date of termination or expiration and this Lease
shall remain in full force and effect under the same terms and conditions
beyond such date with respect to the Property until the earlier to occur of
(i) the completion of all remedial action in accordance with applicable
Environmental Laws or (ii) 12 months beyond such expiration or Termination
date; PROVIDED, that Tenant may, upon any such extension of the Term,
terminate the Term by paying to Landlord such amount as is necessary in the
reasonable judgment of Landlord to complete or perform such remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate and
maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a result of Tenant's use, any prior use,
the elements or the age of the Property or any portion thereof) and in
accordance with any applicable Legal Requirements, and, except as otherwise
provided in Article 15, with reasonable promptness, make all necessary and
appropriate repairs thereto of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary, foreseen
or unforeseen or arising by reason of a condition existing prior to the
Commencement Date (concealed or otherwise). Tenant shall operate and maintain
the Property in accordance with the operation and maintenance practices of
the Property at the Commencement Date and otherwise in a manner comparable to
other comparable golf course facilities in the vicinity of the Property.
Landlord may consult with the Advisory Association from time to time with
respect to Tenant's compliance with its maintenance and operation obligations
under this Section 11.1, and Landlord and representatives of Advisory
Association shall have the right from time to time to enter the Property for
the purpose of inspecting the Property. If Landlord, in consultation with the
Advisory Association, determines that Tenant has failed to comply with its
maintenance and operation obligations under this Section 11.1, Landlord shall
provide written notice to Tenant setting forth a list of remedial work and/or
steps to be performed by Tenant. Tenant shall promptly and diligently perform
such remedial work and/or steps as recommended by Landlord, provided if
Tenant objects to one or more of the remedial obligations proposed by
Landlord, then the matter shall be submitted to the dispute resolution
procedure set forth in Section 12.7. Tenant will not take or omit to take any
action the taking or omission of which could reasonably be expected to impair
the value or the usefulness of the Property or any part thereof for its
Primary Intended Use.
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11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, in connection with this
Lease, or to maintain the Property in any way. Tenant hereby waives, to the
extent permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no action or
inaction by Landlord shall be construed as (i)constituting the consent or
request of Landlord expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the
Property or any part thereof; or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property, in either case, in such
fashion as would permit the making of any claim against Landlord in respect
thereof or to make any agreement that may create, or in any way be the basis
for, any right, title, interest, lien, claim or other encumbrance upon the
estate of Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been terminated
pursuant to the provisions of Article 15, Tenant shall, upon the expiration
or prior termination of the Term, vacate and surrender the Property to
Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property
in good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written approval
of Landlord in its reasonable discretion, during the Lease Term Tenant may
make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement,'' and collectively, "Tenant
Improvements"). Any such Tenant Improvement shall be made at Tenant's sole
expense and shall become the property of Landlord upon termination of this
Lease. Unless made on an emergency basis to prevent injury to Person or
property, Tenant will submit plans and specifications for any Tenant
Improvements, in the form necessary for any required building permits, to
Landlord for Landlord's prior written approval, such approval not to be
unreasonably withheld or delayed.
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Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G.,ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant
Improvement, Tenant shall diligently prosecute any such Tenant
Improvement to completion in accordance with applicable insurance
requirements and the laws, rules and regulations of all governmental
bodies or agencies having jurisdiction over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any
Tenant Improvement to be enforced against the Property or any part
thereof, and Tenant agrees to hold Landlord and the Property free and
harmless from all liability from any such liens, claims or demands,
together with all costs and expenses in connection therewith: and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that
Tenant requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant and
take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this
Lease within ten (10) Business Days following the later of (a) the date
Landlord receives Tenant's request, or (b) the date of delivery of any such
application or document to Landlord, so long as the taking of such action,
including the execution of said applications or documents, shall be without
cost to Landlord (or if there is a cost to Landlord, such cost shall be
reimbursed by Tenant), and will not
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cause Landlord to be in violation of any law, ordinance or regulation.
Landlord shall have the right at any time and from time to time to post
and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of additional
rent received pursuant to Section 4.9 of this Lease, Landlord shall be
obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall
be placed in the Capital Replacement Fund. Amounts in the Capital Replacement
Fund from time to time shall be deemed to accrue interest at a money market
rate as reasonably determined by landlord and such interest shall be credited
to the Capital Replacement Fund. Upon the written request by Tenant to
Landlord stating the specific use to be made and subject to the reasonable
approval of Landlord, the Capital Replacement Fund shall be made available to
Tenant for Capital Expenditures; PROVIDED, HOWEVER, no portion of amounts
credited to the Capital Replacement Fund shall be used to purchase property
to the extent that doing so would cause Landlord to recognize income other
than "rents from real property" as defined in Section 856(d) of the Code.
Tenant shall have no rights with respect to any amounts in the Capital
Replacement Fund except as provided herein. Subject to Landlord's approval of
the Capital Expenditures, Landlord shall make available to Tenant amounts
from the Capital Replacement Fund under the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement,
or qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget
submitted to and approved by Landlord in accordance with Section 12.7;
and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded
the opportunity to present such paid invoices for reimbursement at
later dates when the Tenant's reserve balance shall be replenished to
a level that can support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall be the
property of Landlord. However, Tenant shall be entitled to all federal and
state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts
credited to the Capital Replacement Fund, as to which Landlord shall be
entitled all income tax benefits.
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12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or through its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's
work papers). If any such audit discloses a deficiency in the payment of
Percentage Rent, Tenant shall forthwith pay to Landlord the amount of the
deficiency as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the
date of payment thereof; PROVIDED, HOWEVER, that as to any audit that is
commenced more than twelve (12) months after the date Gross Golf Revenue for
any Fiscal Year is reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Golf Revenue
shall bear interest as permitted herein only from the date such determination
of deficiency is made unless such deficiency is the result of gross
negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue actually received by Tenant for any
Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay
all reasonable costs of such audit and examination; provided Tenant shall
have the right to submit the audit determination to arbitration in accordance
with the procedures set forth in Article 28. Landlord shall also have the
right to review and audit from time to time Tenant's business operations
including all books, records and financial statements of Tenant. Tenant shall
promptly provide to Landlord copies of all such books, records, financial
statements or any other documentation of Tenant's business operations
reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45)days prior to the
commencement of each Fiscal Year, Tenant shall prepare and submit to Landlord
an operating budget (the"Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this
Section 12.7 The Operating Budget and the Capital Budget (together,
the"Annual Budget") shall be prepared in a form approved by Landlord for use
throughout the Lease Term and show by quarter and for the year as a whole the
following:
(a) Tenant's reasonable estimate of Gross Golf Revenue
(including membership dues, daily use fees and other sources of Gross
Golf Revenue) and other revenue for the forthcoming Fiscal Year
itemized on schedules on a quarterly basis as approved by Landlord and
Tenant, together with assumptions, in narrative form, forming the
basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years,
subject to the limitations set forth in Section 12 4.
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(c) A cash flow projection.
(d) A narrative description of any anticipated significant
events, including, if requested by Landlord, a narrative description
of any category of operating expenses that decrease or increase by
five percent (5%) or more from the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it receives
the Annual Budget to review, approve or disapprove the Annual Budget. If the
parties are not able to reach agreement on the Annual Budget for any Fiscal
Year during landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and
one (1) meeting with the directors of the Advisory Association. In the event
the parties are still not able to reach agreement on the Annual Budget for
any particular Fiscal Year after complying with the foregoing requirements of
this Section 12.7, the parties shall adopt such portions of the Operating
Budget and the Capital Budget as they may have agreed upon, and any matters
not agreed upon shall be referred to a dispute resolution committee composed
of three (3) members of the Advisory Association unaffiliated with Tenant and
two (2) members of the board of directors of the Company. Such committee
shall be responsible for resolving any such disagreement and the parties
agree that the determination of such dispute resolution committee shall be
binding on the parties. Pending the results of such resolution or the earlier
agreement of the parties, (i) if the Operating Budget has not been agreed
upon, the Property will be operated in a manner consistent with the prior
year's Operating Budget until a new Operating Budget is adopted, and (ii) if
the Capital Budget has not been agreed upon, no Capital Expenditures shall be
made unless the same are set forth in a previously approved Capital Budget or
are specifically required by Landlord or are otherwise required to comply
with Legal Requirements or Insurance Requirements. Tenant shall operate the
Property in a manner reasonably consistent with the Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting system
for the Property in accordance with its usual and customary practice, and in
accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records
conforming to such accounting system showing all data necessary to compute
Percentage Rent. The books of account and all other records
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relating to or reflecting the operation of the Property shall be kept either
at the Property or at Tenant's offices in Scottsdale, Arizona. Such books and
records shall be available to Landlord and its representatives for
examination, audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of the end
of each Fiscal Quarter unaudited financial statements for the Fiscal Quarter
and year to date, together with the same information for the comparable prior
Fiscal Quarter and year to date, including the following: results of
operations, balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category
or operating expenses (by category) of more than ten percent (10%) from the
amounts set forth on the Annual Budget, together with, if appropriate a
revised Annual Budget, which budget shall be subject to Landlord's review and
approval as provided in Section 12.7. Each quarterly report shall also
forecast any projected Percentage Rent payable for the following Fiscal
Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within sixty
(60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved
by Landlord, in its reasonable discretion. Notwithstanding the foregoing,
Landlord shall only require audited financial statements of Gross Golf
Revenue if Tenant's financial statements are not required to be separately
stated by the Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to Landlord
and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably
cooperate with Landlord and the Company in effecting public or private debt
or equity financings by the Landlord or the Company, without any additional
cost to Tenant, modifications to this Lease or the requirement of additional
collateral from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
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(a) this Lease;
(b) the matters, if any, that existed as of the Commencement
Date, as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, or any easements granted pursuant
to the provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not
required to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (1) the same are not
yet payable or are payable without the addition of any fine or penalty
or (2) such liens are in the process of being contested as permitted
by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due;
and
(h) any liens which are the responsibility of Landlord pursuant
to the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21 and
excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any
property, street or right-of-way adjacent to the Property, or shall violate
the agreements or conditions contained in any lawful restrictive covenant or
other agreement affecting the Property, or any part thereof, or shall impair
the rights of others under any easement or right-of-way to which the Property
is subject, or the use of the Property is impaired, limited or interfered
with by reason of the exercise of the right of surface entry or any other
rights under a lease or reservation of any oil, gas, water or other minerals,
then promptly upon request of Landlord or at the behest of any person
affected by any such encroachment, violation or impairment, Tenant, at its
sole cost and expense (subject to its right to contest the existence of any
such encroachment, violation or impairment), shall protect, indemnify, save
harmless and defend landlord, the Company and Affiliates of the Company from
and against all losses, liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees
and expenses) based on or arising by reason of any such encroachment,
violation or impairment and in such case, in the event of an adverse final
determination, either (i) obtain valid and effective waivers or
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settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Landlord
or Tenant; or (ii) make such changes in the Improvements, and take such other
actions, as Tenant in the good faith exercise of its judgment deems
reasonably practicable, to remove such encroachment, and to end such
violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary
in order to be able to continue the operation of the Improvements for the
Primary Intended Use substantially in the manner and to the extent the
Improvements were operated prior to the assertion of such violation or
encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy
of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or in
Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or Insurance Requirement, or any lien, attachment, levy,
encumbrance, charge or claim not otherwise permitted by Section 13.1;
provided, however, that nothing in this Section 14.1 shall limit the right of
Landlord to contest the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, Insurance Requirement, or any lien,
attachment, levy, encumbrance, charge or claim with respect to the Property
(and Tenant shall reasonably cooperate with Landlord with respect to such
contest), and, FURTHER PROVIDED THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of
such proceedings shall suspend the collection thereof from Landlord
and from the Property, and neither the Property nor any Rent there
from nor any part thereof or interest therein would be in any danger
of being sold, forfeited, attached or lost pending the outcome of such
proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this
Section 14.1(b), however, shall permit Tenant to delay compliance with
any requirement of an Environmental Law to the extent such
non-compliance poses an immediate threat of injury to any Person or to
the public health or safety or of material damage to any real or
personal property;
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(c) in the case of a Legal Requirement and/or an Imposition,
lien, encumbrance or charge, Tenant shall give such reasonable
security, if any, as may be demanded by Landlord to insure ultimate
payment of the same and to prevent any sale or forfeiture of the
affected Property or the Rent by reason of such non-payment or
noncompliance, PROVIDED. HOWEVER, the provisions of this Article 14
shall not be construed to permit Tenant to contest the payment of Rent
(except as to contests concerning the method of computation or the
basis of levy of any Imposition or the basis for the assertion of any
other claim) or any other sums payable by Tenant to Landlord
hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage
required by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly
pay the amount required to be paid, together with all interest and
penalties accrued thereon, or comply with the applicable Legal
Requirement or Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may
reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost
or expense of any kind that may be imposed upon Landlord in connection with
any such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant shall
at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant
Improvements, insured with the kinds and amounts of insurance described
below. This insurance shall be written by companies authorized to do
insurance business in the State, and shall otherwise meet the requirements
set forth in Section 15.5 of this Lease. The policies must name Landlord as
an additional insured or loss payee, as applicable. Losses shall be payable
to Landlord and/or Tenant as provided in this Article 15. In addition, the
policies shall name as a loss payee any Facility Mortgagee by way of a
standard form of mortgagee's loss payable endorsement. Any loss adjustment
shall require the written consent of Landlord, Tenant, and each Facility
Mortgagee, if any. Evidence of insurance shall be deposited with Landlord
and, if requested,
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with any Facility Mortgagee(s). The policies on the Property, including the
Improvements, Fixtures, Tangible and Intangible Personal Property and any
Tenant Improvements, shall insure against the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than
100% of the then Full Replacement Cost thereof covering all structures
built on the Property and all Tangible Personal Property; and further
provided the Tangible Personal Property may be insured at its fair
market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance
with amounts not less than five million dollars ($5,000,000) per
occurrence and in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in
whole or in material part a designated floodplain area) in an amount
similar to the amount insured by comparable golf course properties in
the area. Notwithstanding the foregoing, Tenant shall not be required
to participate in the National Flood Insurance Program or otherwise
obtain flood insurance to the extent not available at commercially
reasonable rates; provided Tenant shall give landlord written notice
thereof prior to canceling or not obtaining any flood insurance.
Tenant may opt to insure the structures only, and not the Land,
subject to the approval of Landlord, in Landlord's reasonable
discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property
in accordance with the requirements of applicable federal, state and
local laws. Tenant shall have the option to self-insure up to five
thousand dollars ($5,000) of the amount of insurance required in the
event state law permits such self-insurance, subject to the approval
of Landlord, in Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection with any
of the Property as Landlord or any Facility Mortgagee may reasonably require,
which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and
located in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the Full
Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the
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right to have such Full Replacement Cost redetermined by the Impartial
Appraiser. The party desiring to have the Full Replacement Cost so
redetermined shall forthwith, on receipt of such determination by such
Impartial Appraiser, give written notice thereof to the other party hereto.
The determination of such Impartial Appraiser shall be final and binding on
the parties hereto, and Tenant shall forthwith increase, or may decrease, the
amount of the insurance carried pursuant to this Section 15.3, as the case
may be, to the amount so determined by the Impartial Appraiser. Each party
shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by either
party covering the Property including contents, fire and casualty insurance,
shall expressly waive any right of subrogation on the part of the insurer
against the other party(including any Facility Mortgagee). The parties hereto
agree that their policies will include such waiver clause or endorsement so
long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance referred
to in this Article 15 shall be written in a form reasonably satisfactory to
Landlord and by insurance companies rated not less than XV by A.M. Best's
Insurance Guide. Tenant shall pay all premiums for the policies of insurance
referred to in Sections 15.1 and 15.2 and shall deliver certificates thereof
to Landlord prior to their effective date(and with respect to any renewal
policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to
effect such insurance and pay the premiums therefore, which premiums shall be
repayable to Landlord upon written demand as Additional Charges. Each insurer
issuing policies pursuant to this Article 15 shall agree, by endorsement on
the policy or policies issued by it, or by independent instrument furnished
to Landlord, that it will give to Landlord thirty (30) days' written notice
before the policy or policies in question shall be altered, allowed to expire
or canceled. Each such policy shall also provide that any loss otherwise
payable thereunder shall be payable notwithstanding (i) any act or omission
of Landlord or Tenant which might, absent such provision, result in a
forfeiture of all or a part of such insurance payment, (ii) the occupation or
use of the Property for purposes more hazardous than those permitted by the
provisions of such policy, (iii) any foreclosure or other action or
proceeding taken by any Facility Mortgagee pursuant to any provision of a
mortgage, note, assignment or document evidencing or securing a loan upon the
happening of an event of default therein or (iv) any change in title to or
ownership of the Property
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any time
reasonably determine on the basis of prudent industry practice
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that the liability insurance carried by Tenant pursuant to Sections 15.1 and
15.2 is either excessive or insufficient, the parties shall endeavor to agree
on the proper and reasonable limits for such insurance to be carried; and
such insurance shall thereafter be carried with the limits thus agreed on
until further changed pursuant to the provisions of this Article 15;
provided, however, that the deductibles for such insurance or the amount of
such insurance which is self-retained by Tenant shall be as reasonably
determined by Tenant so long as Tenant can reasonably demonstrate its ability
to satisfy such deductible or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary contained
in this Article 15, Tenant's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Tenant; PROVIDED, HOWEVER,
that the coverage afforded Landlord will not be reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of
this Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less
than the amounts required pursuant to Sections 15.1 and 15.2, shall be
specified either (i) in each such "blanket" or umbrella policy or (ii) in a
written statement, which Tenant shall deliver to Landlord and Facility
Mortgagee, from the insurer thereunder. A certificate of each such "blanket"
or umbrella policy shall promptly be delivered to Landlord and Facility
Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by reason of
any loss or damage to the Property, or any portion thereof, and insured under
any policy of insurance required by this Article 15 shall (i) if greater than
$100,000, be paid to Landlord and held by Landlord and (ii) if less than such
amount, be paid to Tenant and held by Tenant. All such proceeds shall be held
in trust and shall be made available for reconstruction or repair, as the
case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by landlord or Tenant
shall be paid out by Landlord or Tenant from time to time for the reasonable
costs of such reconstruction or repair; PROVIDED, HOWEVER, that Landlord
shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration
shall have been approved by Landlord, which approval shall not be
unreasonably withheld or delayed and (ii) appropriate waivers of
mechanics' and materialmen liens shall have been filed;
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(b) Tenant shall have obtained and delivered to Landlord copies
of all necessary governmental and private approvals necessary to
complete the reconstruction or repair, including building permits,
licenses, conditional use Permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of
the Property and remain undischarged, unless a satisfactory bond shall
have been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last
disbursement, upon receipt of (i) satisfactory evidence of the stage
of completion, the estimated total cost of completion and performance
of the work to date in a good and workmanlike manner in accordance
with the contracts, plans and specifications, (ii) waivers of liens,
(iii) a satisfactory bring down of title insurance and (iv) other
evidence of cost and payment so that Landlord and Facility Mortgagee
can verify that the amounts disbursed from time to time are
represented by work that is completed, in place and free and clear of
mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not
previously received payment for such work and, upon completion of the
work, also stating that the work has been fully completed and complies
with the applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and
shall not be commingled with Landlord's other funds, and (2) interest
shall accrue on funds so held at the money market rate of interest and
such interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation,
Payment by Tenant of reasonable costs of administration imposed by or
on behalf of Facility Mortgagee should the proceeds be held by
Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to
or elects to repair and
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restore) shall be paid to Landlord and deposited in the Capital Replacement
Fund except for any portion specifically applicable to Tenant's merchandise
and inventory. All salvage resulting from any risk covered by insurance shall
belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover
some or all of such excess, subject to the approval of Landlord in Landlord's
sole and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15 and the
Property thereby is rendered Unsuitable For Its Primary Intended Use
as reasonably determined by Landlord, Tenant shall, at its election,
either (i) diligently restore the Property to substantially the same
condition as existed immediately before the damage or destruction, or
(ii) terminate the Lease as provided in Section 21.2 and assign all of
its rights to any insurance proceeds required under this Lease to
Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article
15, but the Real Property is not thereby rendered Unsuitable For Its
Primary Intended Use, Tenant shall diligently restore the Property to
substantially the same condition as existed immediately before the
damage or destruction; PROVIDED, HOWEVER, Tenant shall not be required
to restore certain Tangible Personal Property and/or any Tenant
Improvements if failure to do so does not adversely affect the amount
of Rent payable hereunder or the Primary Intended Use in substantially
the same manner immediately prior to such damage or destruction. Such
damage or destruction shall not terminate this Lease; PROVIDED
FURTHER, HOWEVER, if Tenant cannot within eighteen (18) months obtain
all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need. after
diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its
Primary Intended Use in substantially the same manner immediately
prior to such damage or destruction, Tenant may terminate the Lease.
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15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term, the
Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed
immediately before the damage or destruction. Tenant shall have the right to
use proceeds from the Capital Replacement Fund to perform such work, subject
to the conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force and
effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period
required for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Property which
Landlord or Tenant is obligated to restore or may restore under any of the
provisions of this lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision to
the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to
the end of the then-applicable Term, then either Landlord or Tenant shall
have the right to terminate the Lease on thirty (30) days' prior notice to
the other by giving notice thereof within sixty (60) days after the date of
such damage or destruction. Upon any such termination, Landlord shall be
entitled to retain all insurance proceeds, grossed up by Tenant to account
for the deductible or any self-insured retention. If Landlord shall give
Tenant a notice under this Section 15.15 that it seeks to terminate this
Lease at a time when Tenant has a remaining Extended Term, then such
termination notice shall be of no effect if Tenant shall exercise its rights
to extend the Term not later than the earlier of the time required by Section
3.2 or thirty (30) days after Landlord's notice given under this Section
15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on
the Date of Taking and Tenant shall promptly pay all outstanding rent and
other charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not
thereby rendered Unsuitable For Its Primary Intended Use, but if the Property
is thereby rendered Unsuitable For Its Primary Intended Use, this Lease shall
terminate on the date of Taking.
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16.3 RESTORATION. If there is a partial taking of the Property and this
Lease remains in full force and effect pursuant to Section 16.2, Landlord at
its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any
Tenant Improvements up to but not exceeding the amount of the Award payable
to Tenant therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be paid to
Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if
any, of: (i) the loss of Tenant's business during the remaining term, (ii)
any Tenant Improvements and (iii) the leasehold interest of Tenant under this
Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part thereof,
by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month
period, which shall be a temporary taking, all the provisions of this Lease
shall remain in full force and effect with no abatement of rent payable by
Tenant hereunder. In the event of any such temporary taking, the entire
amount of any such Award made for such temporary taking allocable to the
Lease Term, whether paid by way of damages, rent or otherwise shall be paid
to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12)
month period and that such notice shall be in lieu of and not in
addition to any notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by
Tenant within a period of thirty (30) days after receipt by Tenant of
notice thereof from landlord, unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case
such failure shall not be deemed to continue if Tenant proceeds
promptly and with due
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diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty (30)
days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination
that Tenant is not undertaking remedial steps that Landlord would cause
to be taken if this lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or
of the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against
it, be adjudicated as bankrupt or a court of competent jurisdiction
shall enter an order or decree appointing, without the consent of
Tenant, a receiver of Tenant or of the whole or substantially all of
its property, or approving a petition filed against it seeking
reorganization or arrangement of Tenant under the federal bankruptcy
laws or any other applicable law or statute of the United States of
America or any state thereof, and such judgment, order or decree shall
not be vacated or set aside or stayed within sixty (60) days from the
date of the entry thereof;
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(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the property or any
part thereof shall be levied upon or attached in any proceeding and
the same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt
by Tenant of notice thereof from Landlord (unless Tenant shall be
contesting such lien or attachment in accordance with Article 14);
PROVIDED, HOWEVER, that such notice shall be in lieu of and not in
addition to any notice required under applicable law;
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation or other Unavoidable delays, Tenant
voluntarily ceases operations on the property;
(h) any representation or warranty made by Tenant herein or in
any certificate, demand or request made pursuant hereto proves to be
incorrect, now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease)by Tenant or
any Affiliate of Tenant in any other lease by and between such party
and Landlord or any Affiliate of Landlord, or an "Event of Default"
under the Pledge Agreement;
THEN, Tenant shall be declared to have breached this lease. Landlord may
terminate this Lease by giving Tenant not less than ten (10) days' notice (or
no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall
terminate and all rights of Tenant under this Lease shall cease. Landlord
shall have all rights at law and in equity available to Landlord as a result
of Tenant's breach of this Lease.
17.2 PAYMENT OF COSTS AND CLOSING COSTS. Tenant shall, to the extent
permitted by law, pay as Additional Charges all costs and expenses incurred
by or on behalf of Landlord, including reasonable attorneys' fees and
expenses, as a result of any Event of Default hereunder. Additionally,
Tenant shall pay all Closing costs pursuant to Section 6.5 of the Purchase
Agreement which are the responsibility of Landlord (except for legal
expenses) and such costs shall be capitalized as Rent under the Lease.
Further, Landlord shall make a cash payment to the order of Tenant for
Tenant's acquisition costs. The amount of the payment shall be the greater
of $36,500 or 50 basis points of the purchase price, and such amount shall be
capitalized as Rent under the Lease.
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17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred and
be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon
and repossess the Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Tenant and all other Persons and any
and all Tenant's Personal Property from the Property subject to any
requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the
failure of landlord, notwithstanding reasonable good faith efforts, to relet
the Property, (d) the reletting of all or any portion thereof, nor (e) the
failure of Landlord to collect or receive any rentals due upon any such
reletting. In the event of any such termination, Tenant shall forthwith pay
to Landlord all Rent due and payable with respect to the Property to, and
including, the date of such termination. Thereafter, Tenant shall forthwith
pay to Landlord, at Landlord's option, as and for liquidated and agreed
current damages for Tenant's default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which the
unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.
In making the above determinations, the "worth at the time of the award"
in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate
of the Federal Reserve
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Bank of San Francisco at the time of the award plus one percent (1%) and the
Percentage Rent shall be deemed to be the same as for the then-current Fiscal
Year or, if not determinable, the immediately preceding Fiscal Year, for the
remainder of the Term, or such other amount as either party shall prove
reasonably could have been earned during the remainder of the Term or any
portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent another sums payable by Tenant
to Landlord under the Lease as the same becomes due and payable, which
Rent and other sums shall bear interest at the Overdue Rate from the
date when due until paid, and Landlord may enforce, by action or
otherwise, any other term or covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may be
available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial
proceedings to enforce the rights of Landlord hereunder, Landlord shall be
entitled, as a matter or right, to the appointment of a receiver or receivers
acceptable to Landlord of the Property and of the revenues, earnings, income,
products and profits thereof, pending such proceedings, with such powers as
the court making such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under any
of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due
to the existence of an Event of Default) shall be applied to Tenant's
obligations in the order which Landlord may determine or as maybe prescribed
by the laws of the State.
17.9 IMPOUNDS. Landlord shall have the right during the continuance of
an Event of Default to require Tenant to pay to Landlord an additional
monthly sum (each an "Impound Payment")sufficient to pay the Impound Charges
(as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be
commingled with other funds of Landlord and interest thereon shall be held
for the account of Tenant. Landlord shall apply the Impound Payments to the
payment
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of the Impound Charges in such order or priority as Landlord shall
determine or as required by law. If at any time the Impound payments
theretofore paid to Landlord shall be insufficient for the payment of the
Impound Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act required
to be made or performed under this Lease, and to cure the same within the
relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter
make such payment or perform such act for the account and at the expense of
Tenant. Landlord may, to the extent permitted by law, enter upon the Property
for such purpose and take all such action thereon as, in Landlord's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of Tenant. All sums so paid by Landlord and all costs and
expenses(including reasonable attorneys' fees and expenses, to the extent
permitted by law) so incurred, together with a late charge thereon at the
Overdue Rate from the date on which such sums or expenses are paid or
incurred by Landlord, shall be paid by Tenant to Landlord on demand. The
obligations of Tenant and rights of Landlord contained in this Article 18
shall survive the expiration or earlier termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall
require structural changes in any of the Improvements or interfere with the
use and enjoyment of the Property; and (b) procure, maintain and comply with
all licenses and other authorizations required for any use of the Property
then being made, and for the proper erection, installation, operation and
maintenance of the Property or any part thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof,
such possession shall be deemed to be a Tenant at sufferance during which
time Tenant shall pay as rental each month, 125% of the aggregate of (i) the
aggregate base Rent and monthly portion of the Percentage Rent payable with
respect to that month in the last Fiscal Year; (ii) all additional Charges
accruing
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during the month; and (iii) all other sums, if any, payable by Tenant
pursuant to the provisions of this Lease with respect to the Property. During
such period of month-to-month tenancy, Tenant shall be obligated to perform
and observe all of the terms, covenants and conditions of this Lease, but
shall have no rights hereunder other than the right, to the extent given by
law to month-to-month tenancies, to continue its occupancy and use of the
Property. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the enjoyment
and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or inconsequence of foreclosures, attachments, levies or
executions(other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall
any of the events mentioned in this Article 21 entitle Tenant to any
abatement of Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise provided
in Section 10.7 and notwithstanding the existence of any insurance provided
for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses(including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord, the Company or Affiliates of the Company by reason
of:
(a) any accident, injury to or death of persons or loss of or damage
to property occurring on or about the Property or adjoining property,
including, but not limited to, any accident, injury to or death of Person
or loss of or damage to property resulting from golf balls, golf clubs,
golf shoes, lawn mowers or other equipment, pesticides, fertilizers or
other substances, golf carts, tractors or other motorized vehicles present
on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of the
Property;
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(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with any
of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any and
all existing and future subleases of the Property to be performed by the
landlord (Tenant)thereunder;
(g) the negligence or alleged negligence of Landlord with respect to
the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed
upon or incurred by or asserted against Tenant as a result of Landlord's
active, gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably practicable
after receipt by the indemnified party of notice of any liability or claim
incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give
notice thereof to the indemnifying party. The indemnified party may at its
option demand indemnity under this Article 22 as soon as a claim has been
threatened by a third party, regardless of whether an actual loss has been
suffered, so long as the indemnified party shall in good faith determine that
such claim is not frivolous and that the indemnified party may be liable for,
or otherwise incur, a loss as a result thereof and shall give notice of such
determination to the indemnifying party. The indemnified party shall permit
the indemnifying party, at its option and expense, to assume the defense of
any such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the
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indemnifying party. If the indemnifying party shall fail to undertake such
defense within thirty (30) days after such notice, or within such shorter
time as may be reasonable under the circumstances, then the indemnified party
shall have the right to undertake the defense, compromise or settlement of
such liability or claim on behalf of and for the account of the indemnifying
party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination
of this Lease. Notwithstanding anything herein to the contrary, each party
agrees to look first to the available proceeds from any insurance it carries
in connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then
to seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its sole
discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease
or any interest therein, all or any part of the Property, whether
voluntarily, involuntarily or by operation of law. For purposes of this
Article 23, a Change in Control of the Tenant shall constitute an assignment
of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior written
consent of Landlord, which consent Landlord may withhold in its sole
discretion, further sublease or license portions of the Property to third
parties, including concessionaires or licensees. Without limiting the
foregoing, Tenant's proposed sublease or any of the following transfers shall
require Landlord's prior written consent, which consent Landlord may withhold
in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals' shops;
(iii) sublease or license to operate golf driving ranges
(iv) sublease or license to provide golf lessons by other than a
resident professional;
(v) sublease or license to operate restaurants;
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(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs and
(viii) sublease or license to operate any other portions(but not the
entirety) of the property customarily associated with or incidental to the
operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce
any of the obligations of Tenant hereunder, and all such obligations
shall continue in full force and effect as if no sublease had been
made. No sublease shall impose any additional obligations on Landlord
under this Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to
any proposed assignment or sublease, deliver to Landlord written
notice of its intent to assign or sublease, which notice shall
identify the intended assignee or sublessee by name and address, shall
specify the effective date of the intended assignment or sublease, and
shall be accompanied by an exact copy of the proposed assignment or
sublease. Tenant shall provide Landlord with such additional
information or documents reasonably requested by Landlord with respect
to the proposed transaction and the proposed assignee or subtenant,
and an opportunity to meet and interview the proposed assignee or
subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of
Tenant in and to all subleases now in existence or hereinafter entered
into for any or all of the Property, and all extensions, modifications
and renewals thereof and all rents, issues and profits therefrom.
Landlord hereby grants to Tenant a license to collect and enjoy all
rents and other sums of money payable under any sublease of any of the
Property; provided, however, that Landlord shall have the absolute
right at any time after the occurrence and continuance of an Event of
Default upon notice to Tenant and any subtenants to revoke said
license and to collect such rents and sums of money and to retain the
same. Tenant shall not (i) consent to, cause or allow any material
modification or alteration of any of the terms, conditions or
covenants of any of the subleases or the termination thereof, without
the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the
doing of which, nor omit or refrain from
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doing anything, the omission of which, will or could be a breach of or
default in the terms of any of the subleases.
(e) LICENSES ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of
the Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair the
continuing primary liability of Tenant hereunder, as a principal and not as a
surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set
forth in section 23.1. Any assignment shall be solely of Tenant's entire
interest in this Lease. Any assignment or other transfer of all or any
portion of Tenant's interest in the Lease in contravention of the terms of
this Lease shall be voidable at Landlord's option. Anything in this Lease to
the contrary notwithstanding, Tenant shall not sublet all or any portion of
the Property or enter into any other agreement which has the effect of
reducing the Percentage Rent payable to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the contrary
notwithstanding, Tenant shall not (i)sublet or assign or enter into other
arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits
derived by the business activities of the sublessee or assignee; (ii) sublet
or assign the Property or this Lease to any person that Landlord owns,
directly or indirectly (by applying constructive ownership rules set forth in
Section 856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or
assign the Property or this Lease in any other manner or otherwise derive any
income which could cause any portion of the amounts received by Landlord
pursuant to this Lease or any sublease to fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or which could
cause any other income received by Landlord to fail to qualify as income
described in Section 856(c)(2) of the Code. The requirements of this Section
23.4 shall likewise apply to any further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In addition
to Landlord's rights in Section 23.1, Landlord or its designee shall have,
for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase
the leasehold interest on the terms and conditions at which Tenant proposes
to sell or assign its interest. If landlord or its designee elects not to
purchase such interest of Tenant, then
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Tenant shall be free to sell its interest to a third party, subject to
Landlord's prior written consent as provided in Section 23.1. However, if (i)
the price at which Tenant intends to sell its interest is reduced by five
percent (5%) or more, or (ii) the assignment to the third party is not
completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease,
then Tenant shall again offer Landlord the right to acquire its interest;
provided, however, that in the case of a change in price, Landlord shall have
only fifteen (15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of nonresidential
real property and therefore agrees that Tenant, as the debtor in possession,
or the trustee for Tenant(collectively, the "Trustee") in any proceeding
under Title 11 of the United States Bankruptcy Code relating to Bankruptcy,
as amended (the "Bankruptcy Code"), shall not seek or request any extension
of time to assume or reject this Lease or to perform any obligations of this
Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or sublet
the Property (or any portion thereof) to any Person which shall have made a
bona fide offer to accept an assignment of this Lease or a subletting on
terms acceptable to the Trustee, the Trustee shall give Landlord, and lessors
and mortgagees of Landlord of which Tenant has notice, written notice setting
forth the name and address of such person and the terms and conditions of
such offer, no later than twenty (20) days after receipt of such offer, but
in any event no later than ten (10) days prior to the date on which the
Trustee makes application to the bankruptcy court for authority and approval
to enter into such assumption and assignment or subletting. Landlord shall
have the prior right and option, to be exercised by written notice to the
Trustee given at any time prior to the effective date of such proposed
assignment or subletting, to receive-and assignment of this Lease or
subletting of the property to Landlord or Landlord's designee upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions which may be
payable out of the consideration to be paid by such person for the assignment
or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any
Event of Default then existing or provides adequate assurance that the
Trustee will promptly compensate Landlord for any actual pecuniary loss
incurred by Landlord as a result of Tenant's default under this Lease; and
(c) provides adequate assurance of future performance under this Lease.
Adequate assurance of future performance by the proposed assignee shall
include, as a minimum, that: (i) any proposed assignee of this Lease shall
provide to Landlord an audited financial statement, dated no later than six
(6) months prior to the effective date of
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such proposed assignment or sublease, with no material change therein as of
the effective date, which financial statement shall show the proposed
assignee to have a net worth reasonably satisfactory to Landlord or, in the
alternative, the proposed assignee shall provide a guarantor of such proposed
assignee's obligations under this Lease, which guarantor shall provide an
audited financial statement meeting the requirements of (i) above and shall
execute and deliver to Landlord a guaranty agreement in form and substance
acceptable to Landlord; and (ii) any proposed assignee shall grant to
Landlord a security interest in favor of Landlord in all furniture, fixtures,
and other personal property to be used by such proposed assignee in the
Property. All payments required of Tenant under this Lease, whether or not
expressly denominated as such in this Lease, shall constitute rent for the
purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance
that the Trustee will "promptly" cure defaults and compensate Landlord for
actual pecuniary loss, the word "promptly" shall mean that cure of defaults
and compensation will occur no later than sixty (60) days following the
filing of any motion or application to assume this Lease; and (b) the
obligation of the Trustee to compensate or to provide adequate assurance that
the Trustee will promptly compensate Landlord for "actual pecuniary loss."
The term "actual pecuniary loss" shall mean, in addition to any other
provisions contained herein relating to Landlord's damages upon default,
obligations of Tenant to pay money under this Lease and all attorneys' fees
and related costs of Landlord incurred in connection with any default of
Tenant in connection with Tenant's bankruptcy proceedings).
(e) Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and
each of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance
acceptable to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any management
agreement that provides for the management and operation of the entire
Property by an unaffiliated third party without the prior written consent of
Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time upon
Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
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(a) this Lease is unmodified and in full force and effect (or
that this Lease is in full force and effect as modified and setting
forth the modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is
in default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of
which Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against
Tenant before or by any court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant; and
(e) responding to such other questions or statements of fact
as Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such time
shall constitute an acknowledgment by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set
forth in such request, if any, are true and correct. Any such Officer's
Certificate furnished pursuant to this Section 24.1 may be relied upon by
Landlord and any prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning, or
having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is
located in, on or under the Property or any adjacent property, Tenant shall
notify Landlord in writing of (a) the existence of any such Hazardous
Material; (b) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened; (c) any claim made or
threatened by any Person against Tenant or the Property relating to damage,
contribution, cost recovery, compensation, loss, or injury resulting from or
claimed to result from any Hazardous Material; and (d) any reports made to
any federal, state or local environmental agency arising out of or in
connection with any Hazardous Material in or removed from the Property,
including any complaints, notices, warnings or asserted violations in
connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without the
consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any
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Landlord's Encumbrance upon the Property, or any portion thereof or interest
therein, whether to secure any borrowing or other means of financing or
refinancing. This Lease is and at all times shall be subject and subordinate
to any ground or underlying leases, mortgages, trust deeds or like
encumbrances, which may now or hereafter affect the Property and to all
renewals, modifications, consolidations, replacements and extensions of any
such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required
by any ground or underlying lessor or by any mortgagee or beneficiary,
affecting any lease or the Property. In confirmation of such subordination,
Tenant shall execute promptly any certificate that landlord may request for
such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay all
Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's
rights under this Lease shall be disturbed by the holder of any Landlord's
Encumbrance which is created or otherwise comes into existence after the
Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder of any
Landlord Encumbrance shall have no duty, liability or obligation to perform
any of the obligations of Landlord under this Lease, but that in the event of
Landlord's default with respect to any such obligation, Tenant will give any
such holder whose name and address have been furnished Tenant in writing for
such purpose notice of Landlord's default and allow such holder thirty (30)
days following receipt of such notice for the cure of said default before
invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell the
Property during the Lease Term, and provided no Event of Default then exists,
Tenant shall have a right of first offer to purchase the Property ("Tenant's
Right of First Offer to Purchase") on the terms and conditions at which
Landlord proposes to sell the Property to a third party. Landlord shall give
Tenant written notice of its intent to sell and shall indicate the terms and
conditions (including the sale price) upon which Landlord intends to sell the
Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days
to close on the acquisition of the Property on the terms and conditions set
forth in the notice provided by Landlord to Tenant; provided that prior to
the execution of a binding purchase and sale agreement, Landlord shall retain
the right to elect not to sell the Property. If Tenant
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does not elect to purchase the Property, then Landlord shall be free to sell
the property to a third party. However, if the price at which Landlord
intends to sell the Property to a third party is less than 95% of the price
set forth in the notice provided by Landlord to Tenant, then Landlord shall
again offer Tenant the right to acquire the Property upon the same terms and
conditions, provided that Tenant shall have only thirty (30) days thereafter
to complete the acquisition at such price, terms and conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property in
accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future
liabilities and obligations under this Lease arising or accruing from and
after the date of such conveyance or other transfer as to the Property. All
such future liabilities and obligations shall thereupon be binding upon the
new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it shall
become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by
the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant to
Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party")
to comply with his decision, the arbitrator shall be empowered, at the
request of the other party, to order such compliance by the non-complying
party and to supervise or arrange for the supervision of the non-complying
party. To the maximum extent practicable, the arbitrator and the parties, and
the AAA if applicable, shall take any action necessary to insure that the
arbitration shall be concluded within ninety (90) days of the filing of such
dispute. The fees and expenses of the arbitrator shall be shared equally by
Landlord and Tenant. Unless otherwise agreed in writing by the parties or
required by the arbitrator or AAA, if applicable, arbitration proceedings
hereunder shall be conducted in the State. Notwithstanding formal rules of
evidence, each party may submit such evidence as each party deems appropriate
to support its position and the arbitrator shall have access to and right to
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examine all books and records of Landlord and Tenant regarding the Property
during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and its
authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements
of Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall
indemnify Tenant for all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed-on, incurred by, or asserted
against Tenant by reason of Landlord's inspection pursuant to this Section
28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if Landlord
shall fail to observe or perform any material term, covenant or condition of
this Lease on its part to be performed and such failure shall continue for a
period of thirty (30) days after notice thereof from Tenant, unless such
failure cannot with due diligence be cured within a period of thirty (30)
days, in which case such failure shall not be deemed to continue if Landlord,
within said thirty (30) day period, proceeds promptly and with due diligence
to cure the failure and diligently completes the curing thereof. The time
within which Landlord shall be obligated to cure any such failure shall also
be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate
this Lease or permit Tenant to offset any Rent due and owing hereunder or
otherwise excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant agree
that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or
manage other golf courses that are not affiliated with Landlord, provided
that such other ownership, leasing or management arrangements are disclosed
to Landlord in writing. Landlord may acquire or own golf courses that may be
geographically proximate to one or more golf courses that Tenant or
Affiliates of Tenant may own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by
law, no waiver of any breach shall affect or alter this Lease, which shall
continue in full force and effect with respect to any other then existing or
subsequent breach.
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28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each legal,
equitable or contractual rights, power and remedy of Landlord or Tenant now
or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not
preclude the simultaneous or subsequent exercise by Landlord or Tenant of any
or all of such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this Lease or
of the Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than
such a written acceptance by Landlord, shall constitute an acceptance of any
such surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or
the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the same
becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord,
but subject to all liens and encumbrances of record as of the date hereof or
any Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage
prepaid), addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
If to Tenant: Granite Golf Group, Inc.
15170 N. Hayden Road, Suite 106
Scottsdale, AZ 85260-2512
Attention: T. Marney Edwards
With a Copy to: Mr. Mark Nesvig
Fennemore Craig
3003 N. Central Avenue
Phoenix, AZ 85012-2913
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28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision of
this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for in any
provision of this Lease are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision hereof
may be changed, waived, discharged or terminated except by an instrument in
writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and
provisions of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon the
request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein,
shall be made. Tenant shall pay all costs and expenses of recording such
Memorandum of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the parties
hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall
be entitled to recover against the other party reasonable attorneys' fees and
court costs.
28.19 NO THIRD PARTY BENEFICIARIES. Nothing in this Lease, express or
implied, is intended to confer any rights or remedies under or by reason of
this Lease on any Person other than the parties to this Lease and their
respective permitted successors and assigns, nor is anything in this Lease
intended to relieve or discharge any obligation of any third Person to any
party hereto or
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give any third Person any right of subrogation or action against any party to
this Lease.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability
of Landlord under this Lease shall be enforced only against the Property and
not against any other assets, properties or funds of (a) Landlord, (b) any
director, officer, general partner, limited partner, employee or agent of
Landlord, or any general partner of Landlord, any of their respective general
partners or stockholders (or any legal representative, heir, estate,
successor or assign of any thereof), (c) any predecessor or successor
partnership or corporation (or other entity) of Landlord, or any of their
respective general partners, either directly or through either Landlord or
their respective general partners or any predecessor or successor partnership
or corporation or their stockholders, officers, directors, employees or
agents (or other entity), or (d) any other Person affiliated with any of the
foregoing, or any director, officer, employee or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed for any
purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend or
further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting
and to show the Property to prospective purchasers or tenants or their agents
at such reasonable times as Landlord may elect.
SIGNATURES ON FOLLOWING PAGE
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LANDLORD: GOLF TRUST OF AMERICA, L.P.
A Delaware limited Partnership
By: GTA GP, Inc., a Maryland
corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
------------------------------
Name: W. Bradley Blair, II
Title: President and CEO
TENANT: GRANITE RIDGE, INC.
a Kentucky corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
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Tiburon Golf Course
Omaha
Sarpy County
Nebraska
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
GRANITE TIBURON, INC.,
TENANT
DATED AS OF AUGUST 18, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . 13
3.3 Right of First Offer to Lease. . . . . . . . . . . . . . . 14
ARTICLE 4 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . 15
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . 15
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . 16
4.5 Increase in Base Rent Following Conversion Date. . . . . . 16
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . 16
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . 16
4.9 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . 17
5.1 Pledge of Owner's Shares and Granite Shares. . . . . . . . 17
5.2 Obligation to . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Cross-Collateral . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6 IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . 18
6.2 Information and Reporting. . . . . . . . . . . . . . . . . 19
6.3 Prorations . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Utility Charges. . . . . . . . . . . . . . . . . . . . . . 19
6.6 Assessment Districts . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7 TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . 20
7.1 No Termination, Abatement, Etc.. . . . . . . . . . . . . . 20
7.2 Condition of the Property. . . . . . . . . . . . . . . . . 21
ARTICLE 8 OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . 22
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . 22
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . 22
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . 23
(i)
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ARTICLE 9 USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . 23
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . 23
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . 24
9.4 Landlord to Grant Easements, Etc.. . . . . . . . . . . . . 24
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . 24
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . 25
ARTICLE 10 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . 25
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . 25
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . 26
10.8 Survival of Indemnification Obligations. . . . . . . . . . 27
10.9 Environmental Violations at Expiration or Termination of
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11 MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . 27
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . 27
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . 28
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . 28
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . 29
ARTICLE 12 TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 29
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . 29
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . 30
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . 30
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . 30
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . 31
12.6 Landlord's Right to Audit Calculation of Gross Golf Revenue 31
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . 32
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . 33
ARTICLE 13 LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . 34
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.2 Encroachments and Other Title Matters. . . . . . . . . . . 35
ARTICLE 14 PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . 36
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . 36
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . 37
ARTICLE 15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 37
15.1 General Insurance Requirements . . . . . . . . . . . . . . 37
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . 38
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . 38
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . 39
15.5 Form Satisfactory, Etc.. . . . . . . . . . . . . . . . . . 39
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . 39
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . 40
(ii)
<PAGE>
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . 40
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . 40
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . 41
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . 42
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . 42
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . 43
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . 43
ARTICLE 16 CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . 43
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . 43
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . 43
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . 44
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . 44
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 17 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . 44
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . 44
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . 46
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . 46
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . 48
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . 48
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 18 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . 49
ARTICLE 19 LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 20 HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 21 RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 22 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 50
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . 50
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . 51
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . 51
22.4 Survival of Indemnification Obligations; Available
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 23 SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . 52
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . 52
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . 52
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . 54
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . 54
23.5 Right of First . . . . . . . . . . . . . . . . . . . . . . 55
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . 57
ARTICLE 24 OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . 57
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . 57
24.2 Environmental Statements . . . . . . . . . . . . . . . . . 58
(iii)
<PAGE>
ARTICLE 25 LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . 58
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . 58
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . 58
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . 58
ARTICLE 26 SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . 59
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . 59
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . 59
ARTICLE 27 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . 60
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . 60
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . 60
ARTICLE 28 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 60
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . 60
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . 61
28.3 Competition Between Landlord and Tenant. . . . . . . . . . 61
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 61
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . 61
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . 62
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . 62
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . 62
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.10 Survival of Claims . . . . . . . . . . . . . . . . . . . . 62
28.11 Invalidity of Terms or Provisions. . . . . . . . . . . . . 62
28.12 Prohibition Against Usury. . . . . . . . . . . . . . . . . 63
28.13 Amendments to Lease. . . . . . . . . . . . . . . . . . . . 63
28.14 Successors and Assigns . . . . . . . . . . . . . . . . . . 63
28.15 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 63
28.17 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . 63
28.18 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . 63
28.19 Non-Recourse as to Landlord. . . . . . . . . . . . . . . . 63
28.20 No Relationship. . . . . . . . . . . . . . . . . . . . . . 64
28.21 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . 64
Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Owner's Shares Pledge Agreement
Exhibit E - Granite Shares Pledge Agreement
Exhibit F - Adjustments to Gross Golf Revenue for Private Clubs
Exhibit G - Calculation of Gross Golf Revenue for the Base Year by Quarter
(iv)
<PAGE>
Tiburon Golf Course
Omaha
Sarpy County
Nebraska
LEASE
THIS LEASE (this "Lease"), dated as of August 18, 1997, is
entered into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Landlord"), and GRANITE TIBURON, INC., a Nebraska corporation
("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement dated as
of May 19, 1997, by and between Granite Golf Group, Inc., a Nevada
corporation ("Granite"), as buyer, and Tiburon Limited Partnership, a
Nebraska limited partnership ("Transferor"), as seller, as amended by that
certain Amendment to Purchase Agreement dated as of August 18, 1997 (as
amended, the "Agreement"), the right, title and interest of Tenant thereunder
being transferred to Landlord pursuant to that certain Assignment and
Assumption of Purchase and Sale Agreement dated as of August 18, 1997,
Transferor transferred to Landlord all of its right, title and interest in
and to the Property (as hereafter defined); and
B. Tenant, an Affiliate of Granite, desires to lease the Property
from Landlord, and Landlord desires to lease the Property to Tenant, on the
terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the
covenants and agreements to be performed by Tenant and Landlord hereunder,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord's rights and interest (to the extent acquired from Transferor) in
and to the following real property, improvements, personal property and
related rights (collectively the "Property"):
(a) the Land;
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(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
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<PAGE>
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the calendar year 1996; provided, however, that
the Base Year shall refer to the calendar year immediately preceding the
Conversion Date if the Base Rent is increased as provided in Section 4.5. A
quarter-by-quarter calculation of Gross Golf Revenue in the Base Year is
attached hereto as EXHIBIT G.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York,
New York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the amount of the Capital
Replacement Reserve, together with interest thereon as provided in Section
12.4, less amounts withdrawn from the Capital Replacement Fund as provided in
Section 12.4
"CAPITAL REPLACEMENT RESERVE" means the greater of (i) an amount
equal to 3% of each Fiscal Quarter's Gross Golf Revenue, to be accrued
quarterly by Landlord as part of the Capital Replacement Fund, as provided in
Section 12.4 hereof, based on the Officer's Certificate, or (ii) Fifty
Thousand Eight Hundred Eighty Dollars ($50,880) per Fiscal Year.
"CHANGE IN CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person
other than to a Person that is an Affiliate of Tenant as of the date
hereof;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
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<PAGE>
(c) any other transaction, or series of transactions, which
results in the shareholders or partners who control Tenant as of the date
hereof no longer having Control of Tenant; or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means August 18, 1997.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes
of Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat
of condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Granite elects to
receive additional Owner's Shares as a Contingent Purchase Price for the
contribution of the Property, (ii) the date on which Granite elects in writing
to waive its
4
<PAGE>
right to receive additional Owner's Shares, or (iii) April 30, 2003.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Section 1801, et seq.; the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. 99-499 and 99-563; the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act,
as amended, 42 U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 201, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and
local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2007, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other
security agreement securing any indebtedness or any other Landlord's
Encumbrance placed on the Property in accordance with the provisions of
Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity
and address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable
portions thereof) in any Fiscal Year from January 1 through March 31, April 1
through June 30, July 1 through September 30 and October 1 through December
31.
"FISCAL YEAR" means the twelve (12) month period from January 1 to
December 31 of each year; provided that for purposes of the Lease Term and
the Pledge Agreement, the first Fiscal Year shall be deemed to include the
period from the Commencement Date to December 31, 1997.
5
<PAGE>
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time
to time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance
policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GRANITE SHARES" means common stock of Granite Golf Group, Inc., a
Nevada corporation, par value $0.01 per share.
"GRANITE SHARES PLEDGE AGREEMENT" means that certain pledge
agreement dated as of the date of this Lease by and between Granite and
Landlord, in the form attached hereto as EXHIBIT E.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant
or any subtenants, assignees, concessionaires or licensees) from or by reason
of the operation of the golf operations at the Property calculated in
accordance with GAAP (but excluding reasonable reserves for refunds,
allowances and bad debts applicable to such operations), including, without
limitation, (i) revenues from membership initiation fees (to the extent
described in EXHIBIT F attached hereto), (ii) periodic membership dues, (iii)
greens fees, (iv) fees to reserve a tee time, (v) guest fees, (vi) golf cart
rentals, (vii) parking lot fees, (viii) locker rentals, (ix) fees for golf
club storage, (x) fees for the use of swim, tennis or other facilities, (xi)
charges for range balls, range fees or other fees for golf practice
facilities, (xii) fees or other charges paid for golf or tennis lessons
(except where retained by or paid to a USTA or PGA professional in accordance
with historical practice at the Property), (xiii) fees or other charges for
fitness centers, (xiv) forfeited deposits with respect to any membership
application, (xv) transfer fees imposed on any member in connection with the
transfer of any membership interest, (xvi) fees or other charges paid to
Tenant by sponsors of golf
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tournaments at the Property (unless the terms under which Tenant is paid by
such sponsor do not comply with Section 23.4, in which event the gross
revenues received from such sponsor for the tournament shall be excluded from
Gross Golf Revenue and further provided that Tenant shall use commercially
reasonable efforts to structure such payment to comply with Section 23.4),
(xvii) advertising or placement fees paid by vendors in exchange for
exclusive use or name rights at the Property, and (xviii) fees received in
connection with any golf package sponsored by any hotel group, condominium
group, golf association, travel agency, tourist or travel association or
similar payments; PROVIDED, HOWEVER, that Gross Golf Revenue shall not
include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or
substance which is (i) defined as a "hazardous waste", "hazardous material",
or "restricted hazardous waste" or words of similar import under any
provision of any Environmental Law; (ii) petroleum or petroleum products;
(iii) asbestos; (iv) polychlorinated biphenyl; (v) radioactive material; (vi)
radon gas; (vii) designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C.
Section 1317); (viii) defined as a "hazardous waste" pursuant to Section 1004
of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. (42 U.S.C. Section 6903); or (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C.
Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the
Property.
"IMPOSITIONS" means collectively:
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(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Property and/or
the Rent or Additional Charges (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time during or in
respect of the Term hereof may be assessed or imposed on or in respect of or
be a lien upon (i) Landlord or Landlord's interest in the Property; (ii) the
Property or any part thereof or any therefrom or any estate, right, title or
interest therein; or (iii) any operation, use or possession of, or sales from
or activity conducted on or in connection with the Property or the leasing or
use of the Property or any part thereof; PROVIDED, HOWEVER, that Impositions
shall not include:
(aa) any taxes based on net income (whether denominated as an income,
franchise, capital stock or other tax) imposed on Landlord or any other
Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other Person
other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on any
indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, Fixtures and other items of real
estate located on the Land as more particularly described in EXHIBIT B
attached hereto.
"INITIAL BASE RENT" means $631,575 per year.
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"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2007.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal
property owned by Landlord and used solely in connection with the ownership,
operation, leasing or maintenance of the Real Property or the Tangible
Personal Property, and any and all trademarks and copyrights, guarantees,
Authorizations, general intangibles, business records, plans and
specifications, surveys, all licenses, permits and approvals solely with
respect to the construction, ownership, operation or maintenance of the
Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or
refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through
and including the Expiration Date (or the termination date, if earlier
terminated pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal
and other governmental statutes, laws (including the Americans with
Disabilities Act and any Environmental Laws), rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting either the Property
or the construction, use or alteration thereof, whether now or hereafter
enacted and in force, including any which may (i) require repairs,
modifications, or alterations in or to the Property; (ii) in any way
adversely affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments,
either of record or known to Tenant (other than encumbrances created by
Landlord without the consent of Tenant), at any time in force affecting the
Property; or (iii) require the cleanup or other treatment of any Hazardous
Material.
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"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if
Tenant is a partnership, by an officer authorized to so sign by the general
partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased
or hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an
Affiliate of Landlord, other than pursuant to this Lease, which as of the
date hereof are the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate
plus an additional five percent (5%) per annum, but in no event greater than
the maximum rate then permitted under applicable law.
"OWNER'S SHARES" means common stock of Golf Trust of America, Inc.,
a Maryland corporation, par value $0.01 per share.
"OWNER'S SHARES PLEDGE AGREEMENT" means that certain pledge
agreement dated as of the date of this Lease, by and between Granite and
Landlord, in the form attached hereto as EXHIBIT D.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (331/3%) of the positive difference, if
any, between the current year's Gross Golf Revenue and the Gross Golf Revenue
for the Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
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(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other
organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"PLEDGED GRANITE SHARES" means the Granite Shares pledged pursuant
to the Granite Shares Pledge Agreement.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant
to the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and
other activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property
and the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all
easements and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
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"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used
solely in connection with the Real Property, including, but not limited to,
machinery, equipment, furniture, furnishings, movable walls or partitions,
phone systems, restaurant equipment, computers or trade fixtures, golf course
operation and maintenance equipment, including mowers, tractors, aerators,
sprinklers, sprinkler and irrigation facilities and equipment, valves or
rotors, driving range equipment, athletic training equipment, office
equipment or machines, antiques or other decorations, furniture, computers or
other control systems, and equipment or machinery of every kind or nature,
including all warranties and guaranties associated therewith, with the
exception of golf carts.
"TENANT" means Granite Tiburon, Inc., a Nebraska corporation, and
any successor thereto, or assignee thereof, as permitted by the terms of this
Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section
8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided
in Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning
provided in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended
Terms, as the context may require, unless earlier terminated pursuant to the
provisions hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen
and one-half percent (113.5%) of the Rent and the Net Operating Income for
the prior Fiscal Year, divided by ten and one-half percent (10.5%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil
commotion, fire, unavoidable casualty or other causes beyond the control of
the party responsible for performing an obligation hereunder, PROVIDED THAT
lack of funds shall not be deemed a cause beyond the control of either party
hereto unless such lack of funds is caused by the failure of the
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other party hereto to perform any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of
condition of the Property such that in the good faith judgment of Landlord,
reasonably exercised, the Property cannot be operated on a commercially
practicable basis for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to
the construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2007.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease six (6) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-
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current term. Tenant shall be entitled to exercise these options only if at
the time of the giving of such notice, Tenant is then the lessee of the
Property pursuant to this Lease, and at the time of the commencement of the
applicable Term or Extended Term no Event of Default shall then exist.
During the Extended Term, all of the terms and conditions of this Lease shall
continue in full force and effect, as the same may be amended, supplemented
or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord,
at its election, intends to offer to lease the Property to a third party.
Tenant shall be entitled to exercise Tenant's Right of First Offer to Lease
only if at the time of the giving of such notice and at the time of the
commencement of the applicable term no Event of Default shall then exist and
only if Landlord elects to lease the Property at the expiration of the Lease
Term. Not more than nine (9) months and not less than three (3) months prior
to the expiration of the Lease Term, Landlord shall, if applicable, give
Tenant written notice of its intent to lease the Property and shall indicate
the terms and conditions upon which Landlord intends to lease the Property.
Tenant shall thereafter have a period of thirty (30) days to elect by
unequivocal written notice to Landlord to lease the Property on the same
terms and conditions as Landlord intends to offer to a third party; provided
prior to Tenant's acceptance Landlord shall retain the right to elect not to
lease the Property by giving Tenant written notice thereof. If Tenant elects
not to lease the Property, then Landlord shall be free to lease the Property
to a third party. However, if the Base Rent for such proposed lease is
reduced by five percent (5%) or more as compared to the Base Rent included in
the lease that Tenant rejected, then Landlord shall again offer Tenant the
right to acquire the Property upon the same terms and conditions, provided
that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month
in arrears, at Landlord's address set forth in Section 28.9 or at such other
place or to such other Person as Landlord from time to time may designate in
writing. The first monthly installment shall be prorated as to any partial
month. If any payment owing hereunder shall otherwise be due on a day that
is not a Business Day, such
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payment shall be due on the next succeeding Business Day. No payment in
addition to the payment of Rent shall be required in order to require
Landlord to accrue the Capital Replacement Fund as provided in Section 12.4.
Tenant shall receive a credit against Rent (or be paid directly, at
Landlord's option) for any operating expense credits or operating revenues
credited to Landlord pursuant to the Agreement which are applicable to any
period in the Lease Term (E.G., credit for real property taxes, membership
dues, sublease rents, etc.) and conversely Tenant shall reimburse Landlord
for any operating expenses paid for by Landlord pursuant to the Agreement
which are the responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1, 1998
and on each January 1 thereafter through and including January 1, 2002, the
Annual Base Rent will increase by the lesser of (i) three percent (3%) of the
Annual Base Rent payable for the immediately preceding year, or (ii) two
hundred percent (200%) of the change in CPI from the immediately preceding
fiscal year (the "Base Rent Escalator"); provided the January 1, 1998
increase shall be pro rated for the number of days in the Lease Term in 1997
divided by 365 and multiplied by the applicable Base Rent Escalator. In
addition, if the Annual Base Rent is increased as provided in Section 4.5,
then the Base Rent Escalator shall continue to apply to each of the five (5)
years following such increase, with the increase effective on the anniversary
of the increase in Base Rent as provided in Section 4.5 in lieu of increases
on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the
Initial Term and continuing for the Initial Term and any Extended Term,
Tenant shall calculate the Gross Golf Revenue for each Fiscal Quarter (or
shorter period, if applicable) within twenty (20) days of the end of such
Fiscal Quarter (or shorter period, if applicable) and submit such calculation
in writing to Landlord by way of an Officer's Certificate. If the Gross Golf
Revenue for that Fiscal Quarter (or shorter period, if applicable) is greater
than the Gross Golf Revenue for the same Fiscal Quarter (or shorter period,
if applicable) in the Base Year (and, following the Fiscal Quarter ending
March 31, on a year-to-date basis), then Tenant shall pay to Landlord the
Percentage Rent upon submittal of the Officer's Certificate. The Percentage
Rent payable in any period in any Fiscal Year shall be adjusted to reflect
the Percentage Rent paid on a year-to-date cumulative basis for the Fiscal
Year (pro rated for any partial periods) and the limits set forth in the next
two sentences on a pro rated basis. The increase in Rent resulting from the
payment of Percentage Rent (together with any increase in Base Rent pursuant
to Section 4.2) payable, if any, during each of the first five (5) full
calendar years of the Initial Term shall be limited to five percent (5%) of
the Rent payable for the prior calendar year, or in the case of 1997, of the
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Initial Base Rent prorated. Tenant shall receive a credit against the
payment of Percentage Rent in an amount equal to the increase in the Base
Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or
termination of this Lease, Tenant shall deliver to Landlord an Officer's
Certificate setting forth (i) the Gross Golf Revenue for the Fiscal Year just
ended, and (ii) a comparison of the amount of the Percentage Rent actually
paid during such Fiscal Year versus the amount of Percentage Rent actually
owing on the basis of the annual calculation of the Gross Golf Revenue. If
the Percentage Rent for such Fiscal Year exceeds the sum of the quarterly
payments of Percentage Rent previously paid by Tenant, Tenant shall pay such
deficiency to Landlord along with such Officer's Certificate. If the
Percentage Rent for such Fiscal Year is less than the amount of Percentage
Rent previously paid by Tenant, Landlord shall, at Landlord's option, either
(i) remit to Tenant its check in an amount equal to such difference, or (ii)
grant Tenant a credit against the payment of Rent next coming due. Landlord
shall have the right to audit all of Tenant's business operations at the
Property so as to determine the calculation of Percentage Rent as provided in
Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs, the Annual Base Rent shall
be increased, effective as of the date the additional Owner's Shares are
issued to Granite, to an amount equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system
for the Property in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Golf Revenue.
Tenant shall retain all accounting records for each Fiscal Year conforming to
such accounting system until at least five (5) years after the expiration of
such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant
assumes or agrees to pay under this Lease, and (b) in the event of any
failure on the part of Tenant to pay any of those items referred to in clause
(a) above, Tenant shall also pay and discharge every fine, penalty, interest
and cost which may be added for non-payment or late payment of such items
(the items referred to in clauses (a) and (b) above being referred to herein
collectively as the "Additional Charges"). Except as otherwise provided in
this Lease, all Additional Charges shall become due and payable at the
earlier of (i) thirty (30) days after either Landlord or the applicable third
party
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delivery of an invoice to Tenant, or (ii) the date of delinquency with
respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms
of this Lease, the exact amount of which is presently anticipated to be
extremely difficult to ascertain. Such costs may include processing and
accounting charges and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering the Property and other
expenses of a similar or dissimilar nature. Accordingly, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within ten (10) days after the date such payment is due, Tenant will pay
Landlord on demand, as Additional Charges, a late charge equal to five
percent (5%) of such installment. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant and is not a penalty. In addition,
if any installment of Base Rent, Percentage Rent or Additional Charges (but
only as to those Additional Charges which are payable directly to Landlord)
shall not be paid within five (5) days after the due date with respect to
Base Rent or Percentage Rent or delivery of an invoice to Tenant with respect
to the Additional Charge, the amount unpaid shall bear interest, from such
due date to the date of payment thereof, computed at the Overdue Rate on the
amount of such installment, and Tenant will pay such interest to Landlord as
Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Lease, nor
prevent Landlord from exercising any other rights and remedies available to
Landlord.
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be
a triple net lease and Rent shall be payable to Landlord without notice or
demand and without set-off, counterclaim, recoupment, abatement, suspension,
determent, deduction or defense, except as expressly provided herein, so that
this Lease shall yield to Landlord the full amount of the installments of
Base Rent, Percentage Rent and Additional Charges throughout the Term. In
addition, Tenant shall pay to Landlord at the end of each calendar quarter,
as additional rent, an amount equal to the Capital Replacement Reserve.
Such amount shall be subject to annual reconcilation.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees
that revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
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ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES AND GRANITE SHARES. On or prior to
the Commencement Date, Tenant shall cause the Owner's Shares Pledge Agreement
and the Granite Shares Pledge Agreement to be executed for the benefit of
Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for the Property falls below
the coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Owner's
Shares Pledge Agreement, at any time following the release of any Pledged
Owner's Shares (or security deposit held by Landlord in lieu thereof), then
Tenant shall thereafter retain, and not make cash distributions (except as
may be necessary to pay any applicable taxes) to its shareholders, partners
or members, as applicable, until such time as Tenant has accumulated six (6)
months of Base Rent at the then current level. Cash distributions may be
made at such time as Tenant shall have again satisfied such coverage ratios
for two (2) consecutive Fiscal Years. Tenant shall provide Landlord with
such documentation, including Officer's Certificates and financial
statements, within forty-five (45) days after the end of each Fiscal Quarter
as are necessary to establish Tenant's compliance with the foregoing
requirements. In addition, until such time as Tenant has fully satisified
the Post-Closing Payments (as defined in the Granite Shares Pledge
Agreement), Tenant shall retain, and not make cash distributions (except as
may be necessary to pay any applicable taxes) to its shareholders, partners
or members, as applicable.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares and the
Pledged Granite Shares shall also secure Tenant's or Tenant's Affiliates
obligations under each of the leases for the Other Leased Properties.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal
property until payment in full of all Rent and satisfaction of all of
Tenant's obligations hereunder; provided, however, Landlord shall subordinate
its lien and security interest only to that of any third party lender or
seller which finances Tenant's personal property, the terms and conditions of
such subordination to be satisfactory to Landlord in its reasonable
discretion. Tenant shall, upon the request of Landlord, execute such
financing statements or other documents or instruments reasonably requested
by Landlord to perfect the lien and security interests herein granted.
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5.5 TERMINATION PAYMENT. On the Expiration Date (unless the
Expiration Date is December 31, 2037), Tenant shall pay to Landlord the
Termination Payment, if any, provided the maximum Termination Payment shall
equal the amounts in the Security Funds (as defined in the Owner's Shares
Pledge Agreement and as defined in the Granite Shares Pledge Agreement) then
held by Landlord and shall be payable solely from the proceeds thereof. For
purposes of calculating the Termination Payment, the shares of Common Stock
of GTA shall have a value deemed to equal $28.00 per share, regardless of the
value of such shares evidenced in any public market.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Section 6.3 or Article 14. Upon request, Tenant shall promptly furnish to
Landlord copies of official receipts, if available, or other satisfactory proof
evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay
such Impositions. Landlord and Tenant shall, upon reasonable request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Property as may be necessary to prepare any required
returns and reports. In the event any applicable governmental authorities
classify any property covered by this Lease as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it
must legally so file. Each party, to the extent it possesses the same, will
provide the other party, upon reasonable request, with cost and depreciation
records necessary for filing returns for any property so classified as
personal property.
6.3 PRORATIONS. Impositions imposed in respect of the
tax-fiscal period during which the Lease commences or terminates shall be
adjusted and prorated between Landlord and Tenant, whether or not such
Imposition is imposed before or after such commencement or termination, and
Tenant's obligation to pay its prorated share thereof shall survive such
termination. If any Imposition may, at the option of the taxpayer, lawfully
be paid in installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may elect to pay in installments, in
which event Tenant shall pay all installments
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(and any accrued interest on the unpaid balance of the Imposition) that are
due during the Term hereof before any fine, penalty, premium, further
interest or cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the Leased Property into a special
assessment district or other taxing jurisdiction unless Tenant shall have
consented thereto, which consent shall not be unreasonably withheld or unless
Landlord agrees to pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord
or any person whose claim arose under Landlord, (i) Tenant, to the extent
permitted by law, shall remain bound by this Lease in accordance with its
terms and shall neither take any action without the consent of Landlord to
modify, surrender or terminate the same, nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent by
reason of, and (ii) the respective obligations of Landlord and Tenant shall
not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement
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between Landlord and Tenant, or to which Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by
Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the
execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purposes hereunder. Regardless,
however of any inspection made by Tenant of the Property and whether or not
any patent or latent defect or condition was revealed or discovered thereby,
Tenant is leasing the Property "as is" in its present condition. Tenant
waives and releases any claim or cause of action against Landlord with
respect to the condition of the Property including any defects or adverse
conditions latent or patent, matured or unmatured, known or unknown by Tenant
or Landlord as of the date hereof. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER
ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL
NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING
ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT,
(iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x)
MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv)
OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi) COMPLIANCE
OF THE PROPERTY WITH ANY LAW
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(INCLUDING ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES
THAT THE PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE
EVENT OF ANY DEFECT OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER
LATENT OR PATENT, AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS
OF THIS SECTION 7.2 HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL
COUNSEL, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY,
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found
the same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously
operated the Property and has knowledge of its condition which is superior to
that of Landlord, (B) fee simple title, except where the Property is held
under a ground lease, (both legal and equitable) is in Landlord and that
Tenant has only the leasehold right of possession and use of the Property as
provided herein, (C) to Tenant's knowledge the Improvements conform to all
material Legal Requirements and all material Insurance Requirements, (D) all
easements necessary or appropriate for the use or operation of the Property
have been obtained, (E) all contractors and subcontractors retained by Tenant
who have performed work on or supplied materials to the Property have been
fully paid, and all materials to the Property have been fully paid for, (F)
the Improvements constructed by Tenant or any Affiliate of Tenant have been
completed in all material respects in a workmanlike manner of first class
quality, and (G) all equipment necessary or appropriate for the use or
operation of the Property has been installed and is presently operative in
all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of
such Property during the Term of and upon the terms and conditions of this
Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired
by Landlord or Tenant, in good condition and repair, normal wear and tear
excepted. Upon the loss, destruction or obsolescence of any Tangible Personal
Property, Tenant shall replace such property with replacements of the same
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type and quality as initially in place, which such property will be owned by
Tenant except to the extent acquired with funds from the Capital Replacement
Fund ("Tenant's Personal Property"). Upon the expiration or sooner
termination of this Lease, the Tenant's Personal Property shall transfer to
Landlord without requirement of any bill of sale or assignment; provided
Landlord, at its election, may require Tenant to execute such documentation
as Landlord may require to evidence such transfer. Tenant shall not remove
any Tangible Personal Property from the Property upon termination of the
Lease. If any of such Tangible Personal Property is stored away from the
Property, Tenant will provide Landlord with proper access to the storage
facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, (c) past practices of the Transferor, and (d) such other
reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, in Landlord's
absolute discretion. No use shall be made or permitted to be made of the
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property or other
improvements of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Property and Tenant's Personal Property.
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9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be
done in or on the Property, in a manner which would (i) violate or fail to
comply with any law, rule or regulation or Legal Requirement, (ii) subject to
Article 12, cause structural injury to any of the Improvements or (iii)
constitute a public or private nuisance or waste. Tenant shall not allow any
Hazardous Material to be located in, on or under the Property, or any
adjacent property, or incorporated in the Property or any improvements
thereon except in compliance with applicable law (including any Environmental
Laws). Tenant shall not allow the Property to be used as a landfill or a
waste disposal site, or a manufacturing, distribution or disposal facility
for any Hazardous Materials. Tenant shall neither suffer nor permit the
Property or any portion thereof, including Tenant's Personal Property, to be
used in such a manner as (i) might reasonably tend to impair Landlord's title
thereto or to any portion thereof, or (ii) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as
such, or of implied dedication of the Property or any portion thereof, or
(iii) is in material violation of any applicable Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as approved by
Landlord, which approval shall not be unreasonably withheld or delayed, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld or delayed.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the
approval of Landlord, which approval shall not be unreasonably withheld or
delayed): (i) grant easements and other rights in the nature of easements;
(ii) release existing easements or other rights in the nature of easements
which are for the benefit of the Property; (iii) dedicate or transfer
unimproved portions of the Property for road, highway or other public
purposes; (iv) execute petitions to have the Property annexed to any
municipal corporation or utility district; (v) execute amendments to any
covenants and restrictions affecting the Property; and (vi) execute and
deliver to any person any instrument appropriate to confirm or effect such
grants, releases, dedications and transfers (to the extent of its interest in
the Property), but only upon delivery to Landlord of an Officer's Certificate
(which Officer's
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Certificate, if contested by Landlord, shall not be binding on Landlord)
stating that such grant, release, dedication, transfer, petition or amendment
is not detrimental to the proper conduct of the business of Tenant on the
Property and does not reduce its value or usefulness for the Primary Intended
Use. Landlord shall not grant, release, dedicate or execute any of the
foregoing items in this Section 9.4 without obtaining Tenant's approval,
which approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which signage
may include an appropriate logo selected by Landlord. In addition, it is the
intent of the parties that Tenant be a single-purpose entity with no business
operations except for those related solely to the operation of the Property for
its Primary Intended Use and other property of Landlord which may be leased to
Tenant. Tenant shall, therefore, not engage in or undertake any activities
other than those respecting the operation of the Property for its Primary
Intended Use, including leasing, managing, and operating golf courses in
accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including all Extended
Terms, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as set forth in that certain Phase I Environmental Site
Assessment dated July 2, 1997 (GSI #2501123), prepared by Geotechnical Services
Inc. which Granite delivered to Landlord prior to the Commencement Date, Tenant
hereby represents, warrants, and covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with all
Environmental Laws.
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10.2 REMEDIATION. Except as set forth in the Agreement, and to the
best knowledge of Tenant, there are no Environmental Laws requiring any material
remediation, cleanup, repairs or construction (other than normal maintenance)
with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement,
and to the best knowledge of Tenant, (a) no notices of any violation or
alleged violation of any Environmental Laws relating to the Property or its
uses have been received by either Tenant, or, to the best knowledge of
Tenant, by any prior owner, operator or occupant of the Property, and (b)
there are no writs, injunctions, decrees, orders or judgments outstanding, or
any actions, suits, claims, proceedings or investigations pending or
threatened, relating to the ownership, use, maintenance or operation of the
Property.
10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with
the terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth
or described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or
reporting under any Environmental Law in, on or under the Property or if
Tenant, Landlord, or the Property becomes subject to any order of any
federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant
shall, at its sole expense, but subject to the last sentence of Section 10.7,
carry out and complete any required investigation, removal, remediation,
repair, closure, detoxification, decontamination or other cleanup of the
Property. If Tenant fails to implement and diligently pursue any such
repair, closure, detoxification, decontamination or other cleanup of the
Property in a timely manner, Landlord shall have the right, but not the
obligation, to carry out such action and to recover its costs and expenses
therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
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(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees
and expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any
Environmental Law) in respect of the Property howsoever arising, without
regard to fault on the part of Tenant, including (a) liability for response
costs and for costs of removal and remedial action incurred by the United
States Government, any state or local governmental unit to any other Person,
or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory,
including damages assessed for the maintenance of a public or private
nuisance or for carrying on of a dangerous activity, or (d) by reason of a
breach of a representation or warranty in Sections 10.1 through 10.5 of this
Lease. Notwithstanding the foregoing or any other provision of this Lease
(including, without limitation, Section 7.2, Section 10.9 and Article 23),
Tenant shall not be liable, or otherwise be required to indemnify Landlord or
the Company or any Affiliates of the Company for (i) any matters or events
that arise after the Commencement Date that are not caused by any act or
omission on the part of Tenant, or (ii) any matters or events that arise
after the Commencement Date that are directly caused by a breach by Landlord
of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise
terminate or expire, a violation of any Environmental Law has been asserted
by Landlord and has not been resolved in a manner reasonably satisfactory to
Landlord, or has been acknowledged by Tenant to exist or has been found to
exist at the Property or has been asserted by any governmental authority and
Tenant's failure to have completed all action required to correct, abate or
remediate such a violation of any Environmental Law materially impairs the
leasability of the Property upon the expiration of the Term, then, at the
option of Landlord, the Term shall be automatically extended with respect to
the Property beyond the date of termination or expiration and this Lease
shall remain in full force and effect under the same terms and conditions
beyond such date with respect
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to the Property until the earlier to occur of (i) the completion of all
remedial action in accordance with applicable Environmental Laws or (ii) 12
months beyond such expiration or termination date; PROVIDED, that Tenant may,
upon any such extension of the Term, terminate the Term by paying to Landlord
such amount as is necessary in the reasonable judgment of Landlord to
complete or perform such remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or
not the need for such repairs occurs as a result of Tenant's use, any prior
use, the elements or the age of the Property or any portion thereof) and in
accordance with any applicable Legal Requirements, and, except as otherwise
provided in Article 15, with reasonable promptness, make all necessary and
appropriate repairs thereto of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary, foreseen
or unforeseen or arising by reason of a condition existing prior to the
Commencement Date (concealed or otherwise). Tenant shall operate and
maintain the Property in accordance with the operation and maintenance
practices of the Property at the Commencement Date and otherwise in a manner
comparable to other comparable golf course facilities in the vicinity of the
Property. Landlord may consult with the Advisory Association from time to
time with respect to Tenant's compliance with its maintenance and operation
obligations under this Section 11.1, and Landlord and representatives of
Advisory Association shall have the right from time to time to enter the
Property for the purpose of inspecting the Property. If Landlord, in
consultation with the Advisory Association, determines that Tenant has failed
to comply with its maintenance and operation obligations under this Section
11.1, Landlord shall provide written notice to Tenant setting forth a list of
remedial work and/or steps to be performed by Tenant. Tenant shall promptly
and diligently perform such remedial work and/or steps as recommended by
Landlord, provided if Tenant objects to one or more of the remedial
obligations proposed by Landlord, then the matter shall be submitted to the
dispute resolution procedure set forth in Section 12.7. Tenant will not take
or omit to take any action the taking or omission of which could reasonably
be expected to impair the value or the usefulness of the Property or any part
thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under
any circumstances be required to build or rebuild any improvements on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect
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thereto, in connection with this Lease, or to maintain the Property in any
way. Tenant hereby waives, to the extent permitted by law, the right to make
repairs at the expense of Landlord pursuant to any law in effect at the time
of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of
any labor or services or the furnishing of any materials or other property
for the construction, alteration, addition, repair or demolition of or to the
Property or any part thereof; or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property, in either case, in such
fashion as would permit the making of any claim against Landlord in respect
thereof or to make any agreement that may create, or in any way be the basis
for, any right, title, interest, lien, claim or other encumbrance upon the
estate of Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the
Property to Landlord in the condition in which the Property was originally
received from Landlord, except as repaired, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Lease and except
for ordinary wear and tear (subject to the obligation of Tenant to maintain
the Property in good order and repair during the entire Term of the Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term
Tenant may make alterations, additions, changes and/or improvements to the
Property (individually, a "Tenant Improvement," and collectively, "Tenant
Improvements"). Any such Tenant Improvement shall be made at Tenant's sole
expense and shall become the property of Landlord upon termination of this
Lease. Unless made on an emergency basis to prevent injury to Person or
property, Tenant will submit plans and specifications for any Tenant
Improvements, in the form necessary for any required building permits, to
Landlord for Landlord's prior written approval, such approval not to be
unreasonably withheld or delayed.
Upon approval by Landlord:
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(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost
and expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with
Tenant and take such actions, including the execution and delivery to Tenant
of any applications or other documents, reasonably requested by Tenant in
order to obtain any governmental approvals sought by Tenant to construct any
Tenant Improvement approved by Landlord in accordance with Section 12.1 of
this Lease within ten (10) Business Days following the later of (a) the date
Landlord receives Tenant's request, or (b) the date of delivery of any such
application or document to Landlord, so long as the taking of such action,
including the execution of said applications or documents, shall be without
cost to Landlord (or if there is a cost to Landlord, such cost shall be
reimbursed by Tenant), and will not cause Landlord to be in violation of any
law, ordinance or regulation.
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Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to
protect Landlord's interest from mechanics' liens, materialmen's liens or
liens of a similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of Rent
received hereunder, Landlord shall be obligated to accrue the Capital
Replacement Reserve. The Capital Replacement Reserve shall accrue quarterly
based on the Officer's Certificate and shall be placed in the Capital
Replacement Fund. Amounts in the Capital Replacement Fund from time to time
shall be deemed to accrue interest at a money market rate as reasonably
determined by Landlord and such interest shall be credited to the Capital
Replacement Fund. Upon the written request by Tenant to Landlord stating the
specific use to be made and subject to the reasonable approval of Landlord,
the Capital Replacement Fund shall be made available to Tenant for Capital
Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the
Capital Replacement Fund shall be used to purchase property to the extent
that doing so would cause Landlord to recognize income other than "rents from
real property" as defined in Section 856(d) of the Code. Tenant shall have
no rights with respect to any amounts in the Capital Replacement Fund except
as provided herein. Subject to Landlord's approval of the Capital
Expenditures, Landlord shall make available to Tenant amounts from the
Capital Replacement Fund under the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements
shall be the property of Landlord. However, Tenant shall be entitled to all
federal and state income tax benefits associated with any Tenant Improvement
during the Lease Term exclusive of any Capital Expenditures paid for from
amounts credited to the Capital Replacement Fund, as to which Landlord shall
be entitled all income tax benefits.
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12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's
work papers). If any such audit discloses a deficiency in the payment of
Percentage Rent, Tenant shall forthwith pay to Landlord the amount of the
deficiency as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the
date of payment thereof; PROVIDED, HOWEVER, that as to any audit that is
commenced more than twelve (12) months after the date Gross Golf Revenue for
any Fiscal Year is reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Golf Revenue
shall bear interest as permitted herein only from the date such determination
of deficiency is made unless such deficiency is the result of gross
negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue actually received by Tenant for any
Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay
all reasonable costs of such audit and examination; provided Tenant shall
have the right to submit the audit determination to arbitration in accordance
with the procedures set forth in Article 28. Landlord shall also have the
right to review and audit from time to time Tenant's business operations
including all books, records and financial statements of Tenant. Tenant
shall promptly provide to Landlord copies of all such books, records,
financial statements or any other documentation of Tenant's business
operations reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget
(the "Capital Budget") prepared in accordance with the requirements of this
Section 12.7. The Operating Budget and the Capital Budget (together, the
"Annual Budget") shall be prepared in a form approved by Landlord for use
throughout the Lease Term and show by quarter and for the year as a whole the
following:
(a) Tenant's reasonable estimate of Gross Golf Revenue
(including membership dues, daily use fees and other sources of Gross Golf
Revenue) and other revenue for the forthcoming Fiscal Year itemized on
schedules on a quarterly basis as approved by Landlord and Tenant, together
with assumptions, in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next
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four Fiscal Years, subject to the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant
events, including, if requested by Landlord, a narrative description of any
category of operating expenses that decrease or increase by five percent (5%)
or more from the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual
Budget, and Landlord's approval shall not be unreasonably withheld. If the
parties are not able to reach agreement on the Annual Budget for any Fiscal
Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and
one (1) meeting with the directors of the Advisory Association. In the event
the parties are still not able to reach agreement on the Annual Budget for
any particular Fiscal Year after complying with the foregoing requirements of
this Section 12.7, the parties shall adopt such portions of the Operating
Budget and the Capital Budget as they may have agreed upon, and any matters
not agreed upon shall be referred to a dispute resolution committee composed
of three (3) members of the Advisory Association unaffiliated with Tenant and
two (2) members of the board of directors of the Company. Such committee
shall be responsible for resolving any such disagreement and the parties
agree that the determination of such dispute resolution committee shall be
binding on the parties. Pending the results of such resolution or the
earlier agreement of the parties, (i) if the Operating Budget has not been
agreed upon, the Property will be operated in a manner consistent with the
prior year's Operating Budget until a new Operating Budget is adopted, and
(ii) if the Capital Budget has not been agreed upon, no Capital Expenditures
shall be made unless the same are set forth in a previously approved Capital
Budget or are specifically required by Landlord or are otherwise required to
comply with Legal Requirements or Insurance Requirements. Tenant shall
operate the Property in a manner reasonably consistent with the Annual
Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will
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accurately record all data necessary to compute Percentage Rent, and Tenant
shall retain for at least five (5) years after the expiration of each Fiscal
Year, reasonably adequate records conforming to such accounting system
showing all data necessary to compute Percentage Rent. The books of account
and all other records relating to or reflecting the operation of the Property
shall be kept either at the Property or at Tenant's offices in Phoenix,
Arizona. Such books and records shall be available to Landlord and its
representatives for examination, audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter (i) unaudited financial statements for the
Fiscal Quarter and year to date, together with the same information for the
comparable prior Fiscal Quarter and year to date, including the following:
results of operations, a balance sheet, statements of cash flows and
statement of changes in owner's equity. If Landlord requests, Tenant shall
provide reviewed financial statements for such Fiscal Quarter; provided,
however, such review (except as provided for in clause (ii)) shall be at
Landlord's expense. Each quarterly report shall also include a narrative
explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the
amounts set forth on the Annual Budget, together with, if appropriate a
revised Annual Budget, which budget shall be subject to Landlord's review and
approval as provided in Section 12.7. Each quarterly report shall also
forecast any projected Percentage Rent payable for the following Fiscal
Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord
within sixty (60) days of the end of such Fiscal Year financial statements
prepared in accordance with GAAP and audited by an independent accounting
firm approved by Landlord, in its reasonable discretion. Notwithstanding the
foregoing, Landlord shall only require audited financial statements of Gross
Golf Revenue if Tenant's financial statements are not required to be
separately stated by the Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably
cooperate with Landlord and the Company in effecting public or private debt
or equity financings by the Landlord or the Company, without any additional
cost to Tenant, modifications to this Lease or the requirement of additional
collateral from Tenant.
ARTICLE 13
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LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article
21 and excepting any matters granted or created by Landlord after the
Commencement Date, if any of the Improvements shall, at any time, encroach
upon any property, street or right-of-way adjacent to the Property, or shall
violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting the Property, or any part thereof, or
shall impair the rights of others under any easement or right-of-way to which
the Property is subject, or the use of the Property is impaired, limited or
interfered with by reason of the exercise of the right of surface entry or
any other rights under a lease or reservation of any oil, gas, water or other
minerals, then promptly upon request of Landlord or at the behest of any
person
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affected by any such encroachment, violation or impairment, Tenant, at its
sole cost and expense (subject to its right to contest the existence of any
such encroachment, violation or impairment), shall protect, indemnify, save
harmless and defend Landlord, the Company and Affiliates of the Company from
and against all losses, liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees
and expenses) based on or arising by reason of any such encroachment,
violation or impairment and in such case, in the event of an adverse final
determination, either (i) obtain valid and effective waivers or settlements
of all claims, liabilities and damages resulting from each such encroachment,
violation or impairment, whether the same shall affect Landlord or Tenant; or
(ii) make such changes in the Improvements, and take such other actions, as
Tenant in the good faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, and to end such violation or
impairment, including, if necessary, the alteration of any of the
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the
Primary Intended Use substantially in the manner and to the extent the
Improvements were operated prior to the assertion of such violation or
encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy
of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf
(or in Landlord's name) but at Tenant's expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or Insurance Requirement, or any lien, attachment, levy,
encumbrance, charge or claim not otherwise permitted by Section 13.1;
provided, however, that nothing in this Section 14.1 shall limit the right of
Landlord to contest the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, Insurance Requirement, or any lien,
attachment, levy, encumbrance, charge or claim with respect to the Property
(and Tenant shall reasonably cooperate with Landlord with respect to such
contest), and, FURTHER PROVIDED THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any
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danger of being sold, forfeited, attached or lost pending the outcome
of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this
Section 14.1(b), however, shall permit Tenant to delay compliance with
any requirement of an Environmental Law to the extent such non-compliance
poses an immediate threat of injury to any Person or to the public health
or safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
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ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term,
Tenant shall at all times keep the Property, and all property located in or
on the Property, including all Tenant's Personal Property and any Tenant
Improvements, insured with the kinds and amounts of insurance described
below. This insurance shall be written by companies authorized to do
insurance business in the State, and shall otherwise meet the requirements
set forth in Section 15.5 of this Lease. The policies must name Landlord as
an additional insured or loss payee, as applicable. Losses shall be payable
to Landlord and/or Tenant as provided in this Article 15. In addition, the
policies shall name as a loss payee any Facility Mortgagee by way of a
standard form of mortgagee's loss payable endorsement. Any loss adjustment
shall require the written consent of Landlord, Tenant, and each Facility
Mortgagee, if any. Evidence of insurance shall be deposited with Landlord
and, if requested, with any Facility Mortgagee(s). The policies on the
Property, including the Improvements, Fixtures, Tangible and Intangible
Personal Property and any Tenant Improvements, shall insure against the
following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements
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of applicable federal, state and local laws. Tenant shall have the option
to self-insure up to five thousand dollars ($5,000) of the amount of
insurance required in the event State law permits such self-insurance,
subject to the approval of Landlord, in Landlord's sole and absolute
discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and
located in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that
the Full Replacement Cost of the insured property has increased or decreased
at any time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring
to have the Full Replacement Cost so redetermined shall forthwith, on receipt
of such determination by such Impartial Appraiser, give written notice
thereof to the other party hereto. The determination of such Impartial
Appraiser shall be final and binding on the parties hereto, and Tenant shall
forthwith increase, or may decrease, the amount of the insurance carried
pursuant to this Section 15.3, as the case may be, to the amount so
determined by the Impartial Appraiser. Each party shall pay one-half of the
fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The
parties hereto agree that their policies will include such waiver clause or
endorsement so long as the same are obtainable without extra cost, and in the
event of such an extra charge the other party, at its election, may pay the
same, but shall not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies
of insurance referred to in Sections 15.1 and 15.2 and shall deliver
certificates thereof to Landlord prior to their effective date (and with
respect to any renewal policy, at least ten (10) days prior to the expiration
of the existing policy). In the event Tenant fails to satisfy its
obligations under this Article 15, Landlord shall be entitled, but shall have
no obligation, to effect such insurance and pay the premiums therefore, which
premiums shall be repayable to Landlord upon written demand as
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Additional Charges. Each insurer issuing policies pursuant to this Article
15 shall agree, by endorsement on the policy or policies issued by it, or by
independent instrument furnished to Landlord, that it will give to Landlord
thirty (30) days' written notice before the policy or policies in question
shall be altered, allowed to expire or cancelled. Each such policy shall
also provide that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Landlord or Tenant which might,
absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes
more hazardous than those permitted by the provisions of such policy, (iii)
any foreclosure or other action or proceeding taken by any Facility Mortgagee
pursuant to any provision of a mortgage, note, assignment or other document
evidencing or securing a loan upon the happening of an event of default
therein or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such
insurance which is self-retained by Tenant shall be as reasonably determined
by Tenant so long as Tenant can reasonably demonstrate its ability to satisfy
such deductible or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided further that the
requirements of this Article 15 are otherwise satisfied. The amount of this
total insurance allocated to each of the Leased Properties, which amount
shall be not less than the amounts required pursuant to Sections 15.1 and
15.2, shall be specified either (i) in each such "blanket" or umbrella policy
or (ii) in a written statement, which Tenant shall deliver to Landlord and
Facility Mortgagee, from the insurer thereunder. A certificate of each such
"blanket" or umbrella policy shall promptly be delivered to Landlord and
Facility Mortgagee.
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15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i)
if greater than $100,000, be paid to Landlord and held by Landlord and (ii)
if less than such amount, be paid to Tenant and held by Tenant. All such
proceeds shall be held in trust and shall be made available for
reconstruction or repair, as the case may be, of any damage to or destruction
of the Property, or any portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is
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requested, stating the cost incurred in connection therewith, stating
that Tenant has not previously received payment for such work and,
upon completion of the work, also stating that the work has been
fully completed and complies with the applicable requirements of this
Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction of the Property (or in the event neither Landlord nor Tenant
is required to or elects to repair and restore) shall be paid to Landlord and
deposited in the Capital Replacement Fund except for any portion specifically
applicable to Tenant's merchandise and inventory. All salvage resulting from
any risk covered by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover
some or all of such excess, subject to the approval of Landlord in Landlord's
sole and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15 and
the Property thereby is rendered Unsuitable For Its Primary Intended Use as
reasonably determined by Landlord, Tenant shall, at its election, either
(i) diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is
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totally or partially destroyed from a risk covered by the insurance
described in Article 15, but the Real Property is not thereby rendered
Unsuitable For Its Primary Intended Use, Tenant shall diligently restore
the Property to substantially the same condition as existed immediately
before the damage or destruction; PROVIDED, HOWEVER, Tenant shall not
be required to restore certain Tangible Personal Property and/or any
Tenant Improvements if failure to do so does not adversely affect the
amount of Rent payable hereunder or the Primary Intended Use in
substantially the same manner immediately prior to such damage or
destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18)
months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the
Term, the Property is totally or materially destroyed from a risk not covered
by the insurance described in Article 15, whether or not such damage or
destruction renders the Property Unsuitable For Its Primary Intended Use,
Tenant shall restore the Property to substantially the same condition as
existed immediately before the damage or destruction. Tenant shall have the
right to use proceeds from the Capital Replacement Fund to perform such work,
subject to the conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all
other charges required by this Lease shall remain unabated during the period
required for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore
under any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other
provision to the contrary in this Article 15, if damage to or destruction of
the Property occurs during the last twenty-four (24) months of the Lease
Term, and if such damage or destruction cannot reasonably be expected by
Landlord to be fully repaired or restored prior to the date that is twelve
(12) months prior to the end of the then-applicable Term, then either
Landlord or Tenant shall have the right to terminate the Lease on thirty (30)
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days' prior notice to the other by giving notice thereof within sixty (60)
days after the date of such damage or destruction. Upon any such
termination, Landlord shall be entitled to retain all insurance proceeds,
grossed up by Tenant to account for the deductible or any self-insured
retention. If Landlord shall give Tenant a notice under this Section 15.15
that it seeks to terminate this Lease at a time when Tenant has a remaining
Extended Term, then such termination notice shall be of no effect if Tenant
shall exercise its rights to extend the Term not later than the earlier of
the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property
is totally and permanently taken by Condemnation, this Lease shall terminate
on the Date of Taking and Tenant shall promptly pay all outstanding rent and
other charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not
thereby rendered Unsuitable For Its Primary Intended Use, but if the Property
is thereby rendered Unsuitable For Its Primary Intended Use, this Lease shall
terminate on the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property
and this Lease remains in full force and effect pursuant to Section 16.2,
Landlord at its cost shall accomplish all necessary restoration up to but not
exceeding the amount of the Award payable to Landlord, as provided herein.
If Tenant receives an Award under Section 16.4, Tenant shall repair or
restore any Tenant Improvements up to but not exceeding the amount of the
Award payable to Tenant therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility
Mortgagee, Tenant shall be entitled to receive from the Award, if and to the
extent such Award specifically includes such items, a sum attributable to the
value, if any, of: (i) the loss of Tenant's business during the remaining
term, (ii) any Tenant Improvements and (iii) the leasehold interest of Tenant
under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month
period, which shall be a temporary taking, all the provisions of this Lease
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shall remain in full force and effect with no abatement of rent payable by
Tenant hereunder. In the event of any such temporary taking, the entire
amount of any such Award made for such temporary taking allocable to the
Lease Term, whether paid by way of damages, rent or otherwise, shall be paid
to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
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(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or
of the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of
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Landlord, or an "Event of Default" under the Owner's Shares Pledge
Agreement or the Granite Shares Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's breach
of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount
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of such unpaid Rent that Tenant proves could have been reasonably
avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate
of the Federal Reserve Bank of San Francisco at the time of the award plus
one percent (1%) and the Percentage Rent shall be deemed to be the same as
for the then-current Fiscal Year or, if not determinable, the immediately
preceding Fiscal Year, for the remainder of the Term, or such other amount as
either party shall prove reasonably could have been earned during the
remainder of the Term or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due
until paid, and Landlord may enforce, by action or otherwise, any other term
or covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that
may be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial
proceedings to enforce the rights of Landlord hereunder, Landlord shall be
entitled, as a matter or right, to the appointment of a receiver or receivers
acceptable to Landlord of the Property and of the revenues, earnings, income,
products and profits thereof, pending such proceedings, with such powers as
the court making such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section
17.1, Tenant waives, to the extent permitted by applicable law (a) any right
of redemption, re-entry or repossession and (b) any right to a trial by jury.
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17.8 APPLICATION OF FUNDS. Any payments received by Landlord
under any of the provisions of this Lease during the existence or continuance
of any Event of Default (and such payment is made to Landlord rather than
Tenant due to the existence of an Event of Default) shall be applied to
Tenant's obligations in the order which Landlord may determine or as may be
prescribed by the laws of the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the
Impound Charges (as hereinafter defined) as they become due. As used herein,
"Impound Charges" shall mean real estate taxes on the Property or payments in
lieu thereof and premiums on any insurance required by this Lease. Landlord
shall determine the amount of the Impound Charges and of each Impound
Payment. The Impound Payments shall be held in a separate account and shall
not be commingled with other funds of Landlord and interest thereon shall be
held for the account of Tenant. Landlord shall apply the Impound Payments to
the payment of the Impound Charges in such order or priority as Landlord
shall determine or as required by law. If at any time the Impound Payments
theretofore paid to Landlord shall be insufficient for the payment of the
Impound Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same
within the relevant time periods provided in Article 17, Landlord, after
notice to and demand upon Tenant, and without waiving or releasing any
obligation or default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Tenant. Landlord may, to the extent permitted by law, enter upon
the Property for such purpose and take all such action thereon as, in
Landlord's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Tenant. All sums so paid by Landlord and all
costs and expenses (including reasonable attorneys' fees and expenses, to the
extent permitted by law) so incurred, together with a late charge thereon at
the Overdue Rate from the date on which such sums or expenses are paid or
incurred by Landlord, shall be paid by Tenant to Landlord on demand. The
obligations of Tenant and rights of Landlord contained in this Article 18
shall survive the expiration or earlier termination of this Lease.
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ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall
require structural changes in any of the Improvements or interfere with the
use and enjoyment of the Property; and (b) procure, maintain and comply with
all licenses and other authorizations required for any use of the Property
then being made, and for the proper erection, installation, operation and
maintenance of the Property or any party thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof,
such possession shall be deemed to be a tenant at sufferance during which
time Tenant shall pay as rental each month, 125% of the aggregate of (i) the
aggregate Base Rent and monthly portion of the Percentage Rent payable with
respect to that month in the last Fiscal Year; (ii) all Additional Charges
accruing during the month; and (iii) all other sums, if any, payable by
Tenant pursuant to the provisions of this Lease with respect to the Property.
During such period of month-to-month tenancy, Tenant shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given
by law to month-to-month tenancies, to continue its occupancy and use of the
Property. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage
or destruction thereof by fire, flood, the elements, casualties, thefts,
riots, wars or otherwise, or in consequence of foreclosures, attachments,
levies or executions (other than by Landlord and those claiming from, through
or under Landlord) is assumed by Tenant. In the absence of gross negligence,
willful misconduct or breach of this Lease by Landlord pursuant to Section
28.2, Landlord shall in no event be answerable or accountable therefor nor
shall any of the events mentioned in this Article 21 entitle Tenant to any
abatement of Rent.
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ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses),
to the extent permitted by law, imposed upon or incurred by or asserted against
Landlord, the Company or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect
to the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall
protect, indemnify, save harmless and defend Tenant from
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and against all liabilities, obligations, claims, actual or consequential
damages, penalties, causes of action, costs and expenses (including
reasonable attorneys' fees) imposed upon or incurred by or asserted against
Tenant as a result of Landlord's active, gross negligence or willful
misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability
or claim incurred by or asserted against the indemnified party that is
subject to indemnification under this Article 22, the indemnified party shall
give notice thereof to the indemnifying party. The indemnified party may at
its option demand indemnity under this Article 22 as soon as a claim has been
threatened by a third party, regardless of whether an actual loss has been
suffered, so long as the indemnified party shall in good faith determine that
such claim is not frivolous and that the indemnified party may be liable for,
or otherwise incur, a loss as a result thereof and shall give notice of such
determination to the indemnifying party. The indemnified party shall permit
the indemnifying party, at its option and expense, to assume the defense of
any such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying
party shall fail to undertake such defense within thirty (30) days after such
notice, or within such shorter time as may be reasonable under the
circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination
of this Lease. Notwithstanding anything herein to the contrary, each party
agrees to look first to the available proceeds from any insurance it carries
in connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then
to seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
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ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without
the prior written consent of Landlord, which consent Landlord may withhold in
its sole discretion, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer (except to an Affiliate of Tenant or a Permitted Assignee)
the Lease or any interest therein, all or any part of the Property, whether
voluntarily, involuntarily or by operation of law. For purposes of this
Article 23, a Change in Control of the Tenant shall constitute an assignment
of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in
its sole discretion as to subsection (i) below, and which consent shall
Landlord shall not unreasonably withhold as to subsections (ii) through
(viii) below, further sublease or license portions of the Property to third
parties, including concessionaires or licensees. Without limiting the
foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by
other than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health
clubs; and
(viii) sublease or license to operate any other portions
(but not the entirety) of the Property customarily
associated with or incidental to the operation of
the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the
Property shall be subject and subordinate to the provisions of this Lease.
No sublease made as permitted by
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this Section 23.2 shall affect or reduce any of the obligations of
Tenant hereunder, and all such obligations shall continue in full force
and effect as if no sublease had been made. No sublease shall impose
any additional obligations on Landlord under this Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days
prior to any proposed assignment or sublease, deliver to Landlord written
notice of its intent to assign or sublease, which notice shall identify the
intended assignee or sublessee by name and address, shall specify the
effective date of the intended assignment or sublease, and shall be
accompanied by an exact copy of the proposed assignment or sublease.
Tenant shall provide Landlord with such additional information or documents
reasonably requested by Landlord with respect to the proposed transaction
and the proposed assignee or subtenant, and an opportunity to meet and
interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2,
subleases shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way
impair the continuing primary liability of Tenant
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hereunder, as a principal and not as a surety or guarantor, and no consent to
any assignment or sublease in a particular instance shall be deemed to be a
waiver of the prohibition set forth in Section 23.1. Any assignment shall be
solely of Tenant's entire interest in this Lease. Any assignment or other
transfer of all or any portion of Tenant's interest in the Lease in
contravention of the terms of this Lease shall be voidable at Landlord's
option. Anything in this Lease to the contrary notwithstanding, Tenant shall
not sublet all or any portion of the Property or enter into any other
agreement which has the effect of reducing the Percentage Rent payable to
Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or
assignee thereunder would be based, in whole or in part, on the income or
profits derived by the business activities of the sublessee or assignee; (ii)
sublet or assign the Property or this Lease to any person that Landlord owns,
directly or indirectly (by applying constructive ownership rules set forth in
Section 856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or
assign the Property or this Lease in any other manner or otherwise derive any
income which could cause any portion of the amounts received by Landlord
pursuant to this Lease or any sublease to fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or which could
cause any other income received by Landlord to fail to qualify as income
described in Section 856(c)(2) of the Code. The requirements of this Section
23.4 shall likewise apply to any further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice
of Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase
the leasehold interest on the terms and conditions at which Tenant proposes
to sell or assign its interest. If Landlord or its designee elects not to
purchase such interest of Tenant, then Tenant shall be free to sell its
interest to a third party, subject to Landlord's prior written consent as
provided in Section 23.1. However, if (i) the price at which Tenant intends
to sell its interest is reduced by five percent (5%) or more, or (ii) the
assignment to the third party is not completed within one hundred eighty
(180) days of Landlord's receipt of written notice of Tenant's intention to
assign its interest in the Lease, then Tenant shall again offer Landlord the
right to acquire its interest; provided, however, that in the case of a
change in price, Landlord shall have only fifteen (15) days to accept such
revised offer.
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23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor
in possession, or the trustee for Tenant (collectively, the "Trustee") in
any proceeding under Title 11 of the United States Bankruptcy Code relating
to Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request
any extension of time to assume or reject this Lease or to perform any
obligations of this Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have
made a bona fide offer to accept an assignment of this Lease or a subletting
on terms acceptable to the Trustee, the Trustee shall give Landlord, and
lessors and mortgagees of Landlord of which Tenant has notice, written notice
setting forth the name and address of such person and the terms and
conditions of such offer, no later than twenty (20) days after receipt of
such offer, but in any event no later than ten (10) days prior to the date on
which the Trustee makes application to the bankruptcy court for authority and
approval to enter into such assumption and assignment or subletting.
Landlord shall have the prior right and option, to be exercised by written
notice to the Trustee given at any time prior to the effective date of such
proposed assignment or subletting, to receive and assignment of this Lease or
subletting of the Property to Landlord or Landlord's designee upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions which may be
payable out of the consideration to be paid by such person for the assignment
or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights
and obligations under this Lease only if the Trustee: (a) promptly cures any
Event of Default then existing or provides adequate assurance that the
Trustee will promptly compensate Landlord for any actual pecuniary loss
incurred by Landlord as a result of Tenant's default under this Lease; and
(c) provides adequate assurance of future performance under this Lease.
Adequate assurance of future performance by the proposed assignee shall
include, as a minimum, that: (i) any proposed assignee of this Lease shall
provide to Landlord an audited financial statement, dated no later than six
(6) months prior to the effective date of such proposed assignment or
sublease, with no material change therein as of the effective date, which
financial statement shall show the proposed assignee to have a net worth
equal to at least $1,000,000 or, in the alternative, the proposed assignee
shall provide a guarantor of such proposed assignee's obligations under this
Lease, which guarantor shall
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provide an audited financial statement meeting the requirements of (i) above
and shall execute and deliver to Landlord a guaranty agreement in form and
substance acceptable to Landlord; and (ii) any proposed assignee shall grant
to Landlord a security interest in favor of Landlord in all furniture,
fixtures, and other personal property to be used by such proposed assignee in
the Property. All payments required of Tenant under this Lease, whether or
not expressly denominated as such in this Lease, shall constitute rent for
the purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy
code relating to (a) the obligation of the Trustee to provide adequate
assurance that the Trustee will "promptly" cure defaults and compensate
Landlord for actual pecuniary loss, the word "promptly" shall mean that cure
of defaults and compensation will occur no later than sixty (60) days
following the filing of any motion or application to assume this Lease; and
(b) the obligation of the Trustee to compensate or to provide adequate
assurance that the Trustee will promptly compensate Landlord for "actual
pecuniary loss", (the term "actual pecuniary loss" shall mean, in addition to
any other provisions contained herein relating to Landlord's damages upon
default obligations of Tenant to pay money under this Lease and all
attorneys' fees and related costs of Landlord incurred in connection with any
default of Tenant in connection with Tenant's bankruptcy proceedings).
(e) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed, without
further act or deed, to have assumed all of the obligations arising under
this Lease and each of the conditions and provisions hereof on and after the
date of such assignment. Any such assignee shall, upon the request of
Landlord, forthwith execute and deliver to Landlord an instrument, in form
and substance acceptable to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written
consent of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request
by Landlord, Tenant will furnish to Landlord an Officer's Certificate
certifying that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
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(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is
unmodified and in full force and effect except as may be represented to the
contrary by Landlord, Landlord is not in default in the performance of any
covenant, agreement or condition contained in this Lease and the other
matters set forth in such request, if any, are true and correct. Any such
Officer's Certificate furnished pursuant to this Section 24.1 may be relied
upon by Landlord and any prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's
learning, or having reasonable cause to believe, that any Hazardous Material
in a quantity sufficient to require remediation or reporting under applicable
law is located in, on or under the Property or any adjacent property, Tenant
shall notify Landlord in writing of (a) the existence of any such Hazardous
Material; (b) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened; (c) any claim made or
threatened by any Person against Tenant or the Property relating to damage,
contribution, cost recovery, compensation, loss, or injury resulting from or
claimed to result from any Hazardous Material; and (d) any reports made to
any federal, state or local environmental agency arising out of or in
connection with any Hazardous Material in or removed from the Property,
including any complaints, notices, warnings or asserted violations in
connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion
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thereof or interest therein, whether to secure any borrowing or other means
of financing or refinancing. This Lease is and at all times shall be subject
and subordinate to any ground or underlying leases, mortgages, trust deeds or
like encumbrances, which may now or hereafter affect the Property and to all
renewals, modifications, consolidations, replacements and extensions of any
such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required
by any ground or underlying lessor or by any mortgagee or beneficiary,
affecting any lease or the Property. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Landlord may request for
such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall
pay all Rent as the same becomes due and shall fully comply with all of the
terms of this Lease and fully perform its obligations hereunder, none of
Tenant's rights under this Lease shall be disturbed by the holder of any
Landlord's Encumbrance which is created or otherwise comes into existence
after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said
default before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to
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purchase the Property, then Landlord shall be free to sell the Property to a
third party. However, if the price at which Landlord intends to sell the
Property to a third party is less than 95% of the price set forth in the
notice provided by Landlord to Tenant, then Landlord shall again offer Tenant
the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only thirty (30) days thereafter to complete
the acquisition at such price, terms and conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the
Property in accordance with the terms hereof other than as security for a
debt, Landlord shall, upon the written assumption by the transferee of the
Property of all liabilities and obligations of the Lease be released from all
future liabilities and obligations under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Property.
All such future liabilities and obligations shall thereupon be binding upon
the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which
it shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by
the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced
pursuant to Section 27.1 a single arbitrator shall be designated and shall
resolve the dispute. The arbitrator's decision shall be binding on all
parties and shall not be subject to further review or appeal except as
otherwise allowed by applicable law. Upon the failure of either party (the
"non-complying party") to comply with his decision, the arbitrator shall be
empowered, at the request of the other party, to order such compliance by the
non-complying party and to supervise or arrange for the supervision of the
non-complying party. To the maximum extent practicable, the arbitrator and
the parties, and the AAA if applicable, shall take any action necessary to
insure that the arbitration shall be concluded within ninety (90) days of the
filing of such dispute. The fees and expenses of the arbitrator shall be
shared equally by Landlord and Tenant except as otherwise specified above in
this Section 27.2. Unless
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otherwise agreed in writing by the parties or required by the arbitrator or
AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit
such evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Landlord and Tenant regarding the Property during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord
and its authorized representatives to inspect the Property during usual
business hours subject to any security, health, safety or confidentiality
requirements of Tenant or any governmental agency or insurance requirement
relating to the Property, or imposed by law or applicable regulations.
Landlord shall indemnify Tenant for all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against Tenant by reason of Landlord's inspection
pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of
thirty (30) days, in which case such failure shall not be deemed to continue
if Landlord, within said thirty (30)-day period, proceeds promptly and with
due diligence to cure the failure and diligently completes the curing
thereof. The time within which Landlord shall be obligated to cure any such
failure shall also be subject to extension of time due to the occurrence of
any Unavoidable Delay. In no event shall any breach by Landlord permit
Tenant to terminate this Lease or permit Tenant to offset any Rent due and
owing hereunder or otherwise excuse Tenant from any of its obligations
hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and
Tenant agree that neither party shall be restricted as to other relationships
and competition. Affiliates of Tenant shall be allowed to own, lease and/or
manage other golf courses that are not affiliated with Landlord, provided
that such other ownership, leasing or management arrangements are disclosed
to Landlord in writing. Landlord may acquire or own golf courses that may be
geographically proximate to one or more golf courses that Tenant or
Affiliates of Tenant may own, manage or lease.
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28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by
law, no waiver of any breach shall affect or alter this Lease, which shall
continue in full force and effect with respect to any other then existing or
subsequent breach.
28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or
Tenant now or hereafter provided either in this Lease or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power and remedy. The exercise or beginning of the
exercise by Landlord or Tenant of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by
Landlord or Tenant of any or all of such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein,
shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an
acceptance of any such surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or
the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as
the same becomes due and shall fully comply with all of the terms of this
Lease and fully perform its obligations hereunder, Tenant shall peaceably and
quietly have, hold and enjoy the Property for the Term hereof, free of any
claim or other action by Landlord or anyone claiming by, through or under
Landlord, but subject to all liens and encumbrances of record as of the date
hereof or any Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and
delivered or mailed (by registered or certified mail, return receipt
requested and postage prepaid), addressed to the respective parties, as set
forth below:
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If to Landlord: Golf Trust of America, L.P.
190 King Street
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
If to Tenant: Granite Tiburon, Inc.
c/o Granite Golf Group, Inc.
7226 N. 16th Street, Suite 200
Phoenix, Arizona 85020
Attention: T. Marney Edwards
With a copy to: Ms. Lesa J. Storey
Fennemore Craig
3003 N. Central Avenue 85012-2913
Phoenix, Arizona 85012-2913
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable,
the remainder of this Lease and any other application of such term or
provision shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall
be fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an
instrument in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties
hereto. All permitted assignees or sublessees shall be subject to the terms
and provisions of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and
construed in accordance with the laws of the State (but not including its
conflict of laws rules).
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28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly
upon the request of either, enter into a short form memorandum of this Lease,
in form and substance satisfactory to Landlord and suitable for recording
under the State, in which reference to this Lease, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording
such Memorandum of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease
or arising out of the subject matter of this Lease, the prevailing party
shall be entitled to recover against the other party reasonable attorneys'
fees and court costs.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein to
the contrary notwithstanding, any claim based on or in respect of any
liability of Landlord under this Lease shall be enforced only against the
Property and not against any other assets, properties or funds of (a)
Landlord, (b) any director, officer, general partner, limited partner,
employee or agent of Landlord, or any general partner of Landlord, any of
their respective general partners or stockholders (or any legal
representative, heir, estate, successor or assign of any thereof), (c) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of their respective general partners, either directly or
through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer,
employee or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed
for any purpose to be a partner, joint venturer or associate of Tenant or of
any subtenant, operator, concessionaire or licensee of Tenant with respect to
the Property or any of the Other Leased Properties or otherwise in the
conduct of their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default
occurs, then Landlord shall have the right during the remainder of the Term
then in effect to advertise the availability of the Property for sale or
reletting and to show the Property to prospective purchasers or tenants or
their agents at such reasonable times as Landlord may elect.
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LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
--------------------------
W. Bradley Blair, II
CEO and President
TENANT: GRANITE TIBURON, INC.,
a Nebraska corporation
By: /s/ T. Marney Edwards
--------------------------
Its: Vice President
-------------------------
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- --------------------------------------------------------------------------------
Raintree Country Club
Uniontown
Summit County
Ohio
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
RAINTREE COUNTRY CLUB, INC.,
TENANT
DATED AS OF AUGUST 29, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S><C>
ARTICLE 1
LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 INITIAL TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 EXTENSION OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 RIGHT OF FIRST OFFER TO LEASE. . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 INCREASE IN INITIAL BASE RENT. . . . . . . . . . . . . . . . . . . . . 15
4.3 PERCENTAGE RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 FB&M RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 ANNUAL RECONCILIATION OF PERCENTAGE RENT AND FB&M RENT . . . . . . . . 16
4.6 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. . . . . . . . . . . . 17
4.7 RECORD-KEEPING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 ADDITIONAL CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 LATE PAYMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 NET LEASE; CAPITAL REPLACEMENT RESERVE . . . . . . . . . . . . . . . . 18
4.11 ALLOCATION OF REVENUES . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 PLEDGE OF OWNER'S SHARES . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 OBLIGATION TO . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 CROSS-COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 PAYMENT OF IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 INFORMATION AND REPORTING. . . . . . . . . . . . . . . . . . . . . . . 20
6.3 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 REFUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 UTILITY CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 ASSESSMENT DISTRICTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 NO TERMINATION, ABATEMENT, ETC.. . . . . . . . . . . . . . . . . . . . 21
7.2 CONDITION OF THE PROPERTY. . . . . . . . . . . . . . . . . . . . . . . 22
(i)
<PAGE>
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . 23
8.1 PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 TENANT'S PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . 23
8.3 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 LANDLORD'S WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 SPECIFIC PROHIBITED USES . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 MEMBERSHIP SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4 LANDLORD TO GRANT EASEMENTS, ETC.. . . . . . . . . . . . . . . . . . . 25
9.5 TENANT'S ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . 25
9.6 VALUATION OF REMAINDER INTEREST IN LEASE . . . . . . . . . . . . . . . 26
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 REMEDIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 VIOLATIONS; ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 REMEDIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.7 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . . . . . 27
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. . . . . . . . . . . . . . . . 28
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF LEASE . . . . 28
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.2 WAIVER OF STATUTORY OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 29
11.3 MECHANIC'S LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 SURRENDER OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . . . . . 30
12.1 TENANT'S RIGHT TO CONSTRUCT. . . . . . . . . . . . . . . . . . . . . . 30
12.2 SCOPE OF RIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 COOPERATION OF LANDLORD. . . . . . . . . . . . . . . . . . . . . . . . 31
12.4 CAPITAL REPLACEMENT FUND . . . . . . . . . . . . . . . . . . . . . . . 31
12.5 RIGHTS IN TENANT IMPROVEMENTS. . . . . . . . . . . . . . . . . . . . . 32
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE. . . . . . 32
12.7 ANNUAL BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.8 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . . . . 35
13.1 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. . . . . . . . . . . . . . . . . 36
(ii)
<PAGE>
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.1 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.2 INDEMNIFICATION OF LANDLORD. . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 GENERAL INSURANCE REQUIREMENTS . . . . . . . . . . . . . . . . . . . . 38
15.2 OTHER INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 REPLACEMENT COST . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . . . . . . . . . . 40
15.5 FORM SATISFACTORY, ETC.. . . . . . . . . . . . . . . . . . . . . . . . 40
15.6 CHANGE IN LIMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.7 BLANKET POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
15.8 INSURANCE PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . 41
15.9 DISBURSEMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 41
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. . . . . . . . . . . . . . . . 42
15.11 RECONSTRUCTION COVERED BY INSURANCE. . . . . . . . . . . . . . . . . . 43
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. . . . . . . . . . . . . . . . 43
15.13 NO ABATEMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.14 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.15 DAMAGE NEAR END OF TERM. . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 TOTAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 PARTIAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.3 RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.4 AWARD-DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.5 TEMPORARY TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.2 PAYMENT OF COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 CERTAIN REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.4 DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.5 ADDITIONAL REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.6 APPOINTMENT OF RECEIVER. . . . . . . . . . . . . . . . . . . . . . . . 49
17.7 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.8 APPLICATION OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.9 IMPOUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(iii)
<PAGE>
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
22.1 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . . . . . 51
22.2 LANDLORD'S INDEMNIFICATION OF TENANT . . . . . . . . . . . . . . . . . 52
22.3 MECHANICS OF INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 52
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.1 PROHIBITION AGAINST ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 53
23.2 SUBLEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.3 TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.4 REIT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. . . . . . . . . 56
23.6 BANKRUPTCY LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 56
23.7 MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . . . . 58
24.1 OFFICER'S CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 58
24.2 ENVIRONMENTAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
25.1 LANDLORD MAY GRANT LIENS . . . . . . . . . . . . . . . . . . . . . . . 59
25.2 TENANT'S NON-DISTURBANCE RIGHTS. . . . . . . . . . . . . . . . . . . . 59
25.3 FACILITY MORTGAGE PROTECTION . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
26.1 RIGHT OF FIRST OFFER TO PURCHASE . . . . . . . . . . . . . . . . . . . 60
26.2 CONVEYANCE BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.1 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.2 ARBITRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.1 LANDLORD'S RIGHT TO INSPECT. . . . . . . . . . . . . . . . . . . . . . 61
28.2 BREACH BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. . . . . . . . . . . . . . . . 62
28.4 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.5 REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.6 ACCEPTANCE OF SURRENDER. . . . . . . . . . . . . . . . . . . . . . . . 62
28.7 NO MERGER OF TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.8 QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.9 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.10 SURVIVAL OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.11 INVALIDITY OF TERMS OR PROVISIONS. . . . . . . . . . . . . . . . . . . 63
28.12 PROHIBITION AGAINST USURY. . . . . . . . . . . . . . . . . . . . . . . 63
28.13 AMENDMENTS TO LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . 64
(iv)
<PAGE>
28.14 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . 64
28.15 TITLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.16 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.17 MEMORANDUM OF LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.18 ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.19 NON-RECOURSE AS TO LANDLORD. . . . . . . . . . . . . . . . . . . . . . 64
28.20 NO RELATIONSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.21 RELETTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
Exhibits
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Property
Exhibit D - Pledge Agreement
Exhibit E - Adjustments to Gross Golf Revenue for Private Clubs
Exhibit F - Calculation of Gross Golf Revenue for the Base Year by
Quarter
(v)
<PAGE>
Raintree Country Club
Uniontown
Summit County
Ohio
LEASE
THIS LEASE (this "Lease"), dated as of August 29, 1997, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and RAINTREE COUNTRY CLUB, INC., an Ohio corporation ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback Agreement
(the "Agreement") dated as of August ___, 1997 by and between Landlord and John
J. Rainieri, Sr. and Betty Rainieri, husband and wife, and Tenant (collectively,
"Transferor"), Transferor transferred to Landlord all of its right, title and
interest in and to the Property (as hereafter defined); and
B. Tenant, an Affiliate of Transferor, desires to lease the
Property from Landlord, and Landlord desires to lease the Property to Tenant, on
the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements to be performed by Tenant and Landlord hereunder, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
rights and interest (to the extent acquired from Transferor) in and to the
following real property, improvements, personal property and related rights
(collectively the "Property"):
(a) the Land;
(b) the Improvements;
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<PAGE>
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in
Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be adjusted
annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
2
<PAGE>
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the calendar year 1996; provided, however, that the
Base Year shall refer to the calendar year immediately preceding the Conversion
Date if the Base Rent is increased as provided in Section 4.5. A
quarter-by-quarter calculation of Gross Golf Revenue and FB&M Revenue in the
Base Year is attached hereto as EXHIBIT F.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the amount of the Capital Replacement
Reserve, together with interest thereon as provided in Section 12.4, less
amounts withdrawn from the Capital Replacement Fund as provided in Section 12.4
"CAPITAL REPLACEMENT RESERVE" means the greater of (i) an amount equal
to 5% of each Fiscal Quarter's Gross Golf Revenue, to be accrued quarterly by
Landlord as part of the Capital Replacement Fund, as provided in Section 12.4
hereof, based on the Officer's Certificate, or (ii) Forty-One Thousand Dollars
($41,000).
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders or partners who control Tenant as of the date
hereof no longer having Control of Tenant; or
3
<PAGE>
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred for purposes of this Lease if the shareholders or partners who
Control Tenant as of the date hereof remain in Control of Tenant through an
agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the later of (i) August 29, 1997, or (ii)
the date on which Landlord acquires fee simple title to the Property.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes of
Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor elects
to receive additional Owner's Shares in the Partnership as a Contingent Purchase
Price for the contribution of the Property, (ii) the date on which Transferor
elects in writing to waive its right to receive additional Owner's Shares, or
(iii) April 30, 2003.
4
<PAGE>
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2007, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FB&M REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, and (ii) the sale of merchandise and
inventory on the Property; PROVIDED, HOWEVER, that FB&M Revenue shall not
include:
(a) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in FB&M Revenue,
which is both added to or incorporated in the selling price and paid to the
taxing authority by Tenant; and
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"FB&M RENT" means for any Fiscal Year during the Lease Term, ten
percent (10%) of the positive difference, if any,
5
<PAGE>
between the current year's FB&M Revenue and the FB&M Revenue for the Base Year,
pro rated for any partial periods.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from January 1 to
December 31 of each year; provided that for purposes of the Lease Term and the
Pledge Agreement, the first Fiscal Year shall be deemed to include the period
from the Commencement Date to December 31, 1997.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without
6
<PAGE>
limitation, (i) revenues from membership initiation fees (to the extent
described in EXHIBIT E attached hereto), (ii) periodic membership dues, (iii)
greens fees, (iv) fees to reserve a tee time, (v) guest fees, (vi) golf cart
rentals, (vii) parking lot fees, (viii) locker rentals, (ix) fees for golf club
storage, (x) fees for the use of swim, tennis or other facilities, (xi) charges
for range balls, range fees or other fees for golf practice facilities, (xii)
fees or other charges paid for golf or tennis lessons (except where retained by
or paid to a USTA or PGA professional in accordance with historical practice at
the Property), (xiii) fees or other charges for fitness centers, (xiv) forfeited
deposits with respect to any membership application, (xv) transfer fees imposed
on any member in connection with the transfer of any membership interest, (xvi)
fees or other charges paid to Tenant by sponsors of golf tournaments at the
Property (unless the terms under which Tenant is paid by such sponsor do not
comply with Section 23.4, in which event the gross revenues received from such
sponsor for the tournament shall be excluded from Gross Golf Revenue and further
provided that Tenant shall use commercially reasonable efforts to structure such
payment to comply with Section 23.4), (xvii) advertising or placement fees paid
by vendors in exchange for exclusive use or name rights at the Property, and
(xviii) fees received in connection with any golf package sponsored by any hotel
group, condominium group, golf association, travel agency, tourist or travel
association or similar payments; PROVIDED, HOWEVER, that Gross Golf Revenue
shall not include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive
7
<PAGE>
material; (vi) radon gas; (vii) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251, et seq. (42
U.S.C. Section 1317); (viii) defined as a "hazardous waste" pursuant to Section
1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. (42 U.S.C. Section 6903); or (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C.
Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for
public improvements or benefits, whether or not commenced or completed
prior to the date hereof and whether or not to be completed within the
Term);
(c) excises;
(d) fees (including license, permit, inspection,
authorization and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an income,
franchise, capital stock or other tax) imposed on Landlord or any other
Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other Person
other than Tenant; or
8
<PAGE>
(cc) any tax imposed with respect to any principal or interest on any
indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $477,750 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2007.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
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"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property; or (iii) require the cleanup or other treatment of any
Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
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"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (331/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the Property and the proposed assignee's net
worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord
from time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of the
date of this Lease, by and between Transferor and Landlord, in the form attached
hereto as EXHIBIT D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A., or its successor entity, to be its
prime rate or, if the prime rate is
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discontinued, the base rate for 90-day unsecured loans to its corporate
borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent, Percentage Rent, and FB&M
Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic training equipment, office equipment or machines,
antiques or other decorations, furniture, computers or other control systems,
and equipment or machinery of every kind or nature, including all warranties and
guaranties associated therewith, with the exception of golf carts.
"TENANT" means Raintree Country Club, Inc., a _____________
corporation and any successor thereto, or assignee thereof, as permitted by the
terms of this Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one-half percent (113.5%) of the Rent
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and the Net Operating Income for the prior Fiscal Year, divided by ten and
one-half percent (10.5%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be
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applicable in the construction and interpretation of this Lease or any
exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2007.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease six (6) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-current term.
Tenant shall be entitled to exercise these options only if at the time of the
giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord, at
its election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if at
the time of the giving of such notice and at the time of the commencement of the
applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided
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that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.9 or at such other place
or to such other Person as Landlord from time to time may designate in writing.
The first monthly installment shall be prorated as to any partial month. If any
payment owing hereunder shall otherwise be due on a day that is not a Business
Day, such payment shall be due on the next succeeding Business Day. No payment
in addition to the payment of Rent shall be required in order to require
Landlord to accrue the Capital Replacement Fund as provided in Section 12.4.
Tenant shall receive a credit against Rent (or be paid directly, at Landlord's
option) for any operating expense credits or operating revenues credited to
Landlord pursuant to the Agreement which are applicable to any period in the
Lease Term (E.G., credit for real property taxes, membership dues, sublease
rents, etc.) and conversely Tenant shall reimburse Landlord for any operating
expenses paid for by Landlord pursuant to the Agreement which are the
responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1, 1998
and on each January 1 thereafter through and including January 1, 2003, the
Annual Base Rent will increase by the lesser of (i) three percent (3%) of the
Annual Base Rent payable for the immediately preceding year, or (ii) two hundred
percent (200%) of the change in CPI from the immediately preceding fiscal year
(the "Base Rent Escalator"); provided the January 1, 1998 increase shall be pro
rated for the number of days in the Lease Term in 1997 divided by 365 and
multiplied by the applicable Base Rent Escalator. In addition, if the Annual
Base Rent is increased as provided in Section 4.5, then the Base Rent Escalator
shall continue to apply to each of the five (5) years following such increase,
with the increase effective on the anniversary of the increase in Base Rent as
provided in Section 4.5 in lieu of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent and FB&M Rent,
Tenant shall pay Percentage Rent as provided herein. Beginning in the first
year of the Initial Term and continuing for the Initial Term and any Extended
Term, Tenant shall calculate the Gross Golf Revenue for each Fiscal Quarter (or
shorter period, if applicable) within twenty (20) days of the end of such Fiscal
Quarter (or shorter period, if applicable) and submit such calculation in
writing to Landlord by way of an Officer's Certificate. If the Gross Golf
Revenue for that Fiscal
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Quarter (or shorter period, if applicable) is greater than the Gross Golf
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the Fiscal Quarter ending March 31, on a year-to-date
basis), then Tenant shall pay to Landlord the Percentage Rent upon submittal of
the Officer's Certificate. The Percentage Rent payable in any period in any
Fiscal Year shall be adjusted to reflect the Percentage Rent paid on a
year-to-date cumulative basis for the Fiscal Year (pro rated for any partial
periods) and the limits set forth in the next two sentences on a pro rated
basis.
4.4 FB&M RENT. In addition to Base Rent and Percentage Rent,
Tenant shall pay FB&M Rent as provided herein. Beginning in the first year of
the Initial Term and continuing for the Initial Term and any Extended Term,
Tenant shall calculate the FB&M Revenue for each Fiscal Quarter (or shorter
period, if applicable) within twenty (20) days of the end of such Fiscal Quarter
(or shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If the FB&M Revenue for that
Fiscal Quarter (or shorter period, if applicable) is greater than the FB&M
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the Fiscal Quarter ending March 31, on a year-to-date
basis), then Tenant shall pay to Landlord the FB&M Rent upon submittal of the
Officer's Certificate. The FB&M Rent payable in any period in any Fiscal Year
shall be adjusted to reflect the FB&M Rent paid on a year-to-date cumulative
basis for the Fiscal Year (pro rated for any partial periods) and the limits set
forth in the next two sentences on a pro rated basis. The increase in Rent
resulting from the payment of Percentage Rent and FB&M Rent (together with any
increase in Base Rent pursuant to Section 4.2) payable, if any, during each of
the first five (5) full calendar years of the Initial Term shall be limited to
five percent (5%) of the Rent payable for the prior calendar year, or in the
case of 1997, of the Initial Base Rent prorated. Tenant shall receive a credit
against the payment of Percentage Rent and FB&M Rent in an amount equal to the
increase in the Base Rent over the Initial Base Rent.
4.5 ANNUAL RECONCILIATION OF PERCENTAGE RENT AND FB&M RENT.
Within sixty (60) days after the end of each Fiscal Year, or after the
expiration or termination of this Lease, Tenant shall deliver to Landlord an
Officer's Certificate setting forth (i) the Gross Golf Revenue and FB&M Revenue
for the Fiscal Year just ended, and (ii) a comparison of the amount of the
Percentage Rent and FB&M Rent actually paid during such Fiscal Year versus the
amount of the
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Percentage Rent and FB&M Rent actually owing on the basis of the annual
calculation of the Gross Golf Revenue and FB&M Revenue, respectively. If the
sum of the Percentage Rent and FB&M Rent for such Fiscal Year exceeds the sum of
the quarterly payments of Percentage Rent and FB&M Rent previously paid by
Tenant, Tenant shall pay such deficiency to Landlord along with such Officer's
Certificate. If the sum of the Percentage Rent and FB&M Rent for such Fiscal
Year is less than the amount of the sum of the Percentage Rent and FB&M Rent
previously paid by Tenant, Landlord shall, at Landlord's option, either (i)
remit to Tenant its check in an amount equal to such difference, or (ii) grant
Tenant a credit against the payment of Rent next coming due. Landlord shall
have the right to audit all of Tenant's business operations at the Property so
as to determine the calculation of Percentage Rent and FB&M Rent as provided in
Section 12.6.
4.6 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs, the Annual Base Rent shall be
increased, effective as of the date the additional Owner's Shares are issued to
the Transferor, to an amount equal to the Adjusted Net Operating Income.
4.7 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Golf Revenue.
Tenant shall retain all accounting records for each Fiscal Year conforming to
such accounting system until at least five (5) years after the expiration of
such Fiscal Year.
4.8 ADDITIONAL CHARGES. In addition to the Base Rent, Percentage
Rent and FB&M Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.9 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent, FB&M Rent or
Additional Charges will cause Landlord to incur costs not contemplated under the
terms of this Lease, the exact amount of which is presently anticipated to be
extremely difficult to ascertain. Such costs may include processing and
accounting charges and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering the Property and other expenses
of a similar or dissimilar nature. Accordingly, if any installment of Base
Rent, Percentage Rent, FB&M Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within ten (10) days after the date such payment is
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due, Tenant will pay Landlord on demand, as Additional Charges, a late charge
equal to five percent (5%) of such installment. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of late payment by Tenant and is not a penalty. In
addition, if any installment of Base Rent, Percentage Rent, FB&M Rent or
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid within five (5) days after the due date
with respect to Base Rent, Percentage Rent or FB&M Rent or delivery of an
invoice to Tenant with respect to the Additional Charge, the amount unpaid shall
bear interest, from such due date to the date of payment thereof, computed at
the Overdue Rate on the amount of such installment, and Tenant will pay such
interest to Landlord as Additional Charges. The acceptance of any late charge
or interest shall not constitute a waiver of, nor excuse or cure, any default
under this Lease, nor prevent Landlord from exercising any other rights and
remedies available to Landlord.
4.10 NET LEASE; CAPITAL REPLACEMENT RESERVE. This Lease shall be a
triple net lease and Rent shall be payable to Landlord without notice or demand
and without set-off, counterclaim, recoupment, abatement, suspension, determent,
deduction or defense, except as expressly provided herein, so that this Lease
shall yield to Landlord the full amount of the installments of Base Rent,
Percentage Rent, FB&M Rent and Additional Charges throughout the Term. In
addition, Tenant shall pay to Landlord at the end of each calendar quarter, as
additional rent, an amount equal to the Capital Replacement Reserve. Such
amount shall be subject to annual reconciliation.
4.11 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees that
revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES. On or prior to the Commencement
Date, Tenant shall cause the Pledge Agreement to be executed for the benefit of
Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income for the Property falls below the
coverage ratio set forth in Section 2(a) of EXHIBIT D-1 to the Pledge Agreement,
at any time following the release of any Pledged Owner's Shares (or security
deposit held by Landlord in lieu thereof), then Tenant shall thereafter retain,
and not make cash distributions (except as may be necessary to pay any
applicable taxes) to its shareholders,
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partners or members, as applicable, until such time as Tenant has accumulated
six (6) months of Base Rent at the then current level. Cash distributions may
be made at such time as Tenant shall have again satisfied such coverage ratios
for two (2) consecutive Fiscal Years. Tenant shall provide Landlord with such
documentation, including Officer's Certificates and financial statements, within
forty-five (45) days after the end of each Fiscal Quarter as are necessary to
establish Tenant's compliance with the foregoing requirements.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares shall also
secure Tenant's or Tenant's Affiliates obligations under each of the leases for
the Other Leased Properties (so long as the commencement date for such leases is
no later than one hundred twenty (120) days after the Commencement Date).
5.4 LANDLORD'S LIEN. To the fullest extent permitted by applicable
law, Landlord is granted a lien and security interest on all of Tenant's
personal property now or hereafter located on the Property, and such lien and
security interest shall remain attached to Tenant's personal property until
payment in full of all Rent and satisfaction of all of Tenant's obligations
hereunder; provided, however, Landlord shall subordinate its lien and security
interest only to that of any third party lender or seller which finances
Tenant's personal property, the terms and conditions of such subordination to be
satisfactory to Landlord in its reasonable discretion. Tenant shall, upon the
request of Landlord, execute such financing statements or other documents or
instruments reasonably requested by Landlord to perfect the lien and security
interests herein granted.
5.5 TERMINATION PAYMENT. On the Expiration Date (unless the
Expiration Date is December 31, 2037), Tenant shall pay to Landlord the
Termination Payment, if any, provided the maximum Termination Payment shall
equal the amounts in the Security Fund (as defined in the Pledge Agreement) then
held by Landlord and shall be payable solely from the proceeds thereof. For
purposes of calculating the Termination Payment, the shares of Common Stock of
GTA shall have a value deemed to equal $28.00 per share, regardless of the value
of such shares evidenced in any public market.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Section 6.3 or Article 14. Upon request, Tenant
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shall promptly furnish to Landlord copies of official receipts, if available, or
other satisfactory proof evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt notice
to Tenant of all Impositions payable by Tenant hereunder of which Landlord at
any time has actual knowledge, but Landlord's failure to give any such notice
shall in no way diminish Tenant's obligations hereunder to pay such Impositions.
Landlord and Tenant shall, upon reasonable request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Property as may be necessary to prepare any required returns and reports.
In the event any applicable governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it must legally so file. Each
party, to the extent it possesses the same, will provide the other party, upon
reasonable request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property.
6.3 PRORATIONS. Impositions imposed in respect of the tax-fiscal
period during which the Lease commences or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such commencement or termination, and Tenant's obligation to pay
its prorated share thereof shall survive such termination. If any Imposition
may, at the option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition), Tenant may
elect to pay in installments, in which event Tenant shall pay all installments
(and any accrued interest on the unpaid balance of the Imposition) that are due
during the Term hereof before any fine, penalty, premium, further interest or
cost may be added thereto.
6.4 REFUNDS. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 17.
6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily consent
to or agree in writing to (i) any special assessment or (ii) the inclusion of
any material portion of the Leased Property into a special assessment district
or other taxing jurisdiction unless Tenant shall have consented thereto,
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which consent shall not be unreasonably withheld or unless Landlord agrees to
pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall
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continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR
PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE
EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY
LAW (INCLUDING ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES
THAT THE PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT
OF ANY DEFECT OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR
PATENT, AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF
THIS SECTION 7.2 HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL,
AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY
LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO
THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found the
same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously operated
the Property and has knowledge of its condition which is superior to that of
Landlord, (B) fee simple title, except where the Property
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is held under a ground lease, (both legal and equitable) is in Landlord and that
Tenant has only the leasehold right of possession and use of the Property as
provided herein, (C) to Tenant's knowledge the Improvements conform to all
material Legal Requirements and all material Insurance Requirements, (D) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, (E) all contractors and subcontractors retained by Tenant who
have performed work on or supplied materials to the Property have been fully
paid, and all materials to the Property have been fully paid for, (F) the
Improvements constructed by Tenant or any Affiliate of Tenant have been
completed in all material respects in a workmanlike manner of first class
quality, and (G) all equipment necessary or appropriate for the use or operation
of the Property has been installed and is presently operative in all material
respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has been
transferred to Landlord and leased to Tenant, (ii) the Property is the property
of Landlord and (iii) that Tenant has only the right to the use of such Property
during the Term of and upon the terms and conditions of this Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of the
Property, whether initially included in the Lease or thereafter acquired by
Landlord or Tenant, in good condition and repair, normal wear and tear excepted.
Upon the loss, destruction or obsolescence of any Tangible Personal Property,
Tenant shall replace such property with replacements of the same type and
quality as initially in place, which such property will be owned by Tenant
except to the extent acquired with funds from the Capital Replacement Fund
("Tenant's Personal Property"). Upon the expiration or sooner termination of
this Lease, the Tenant's Personal Property shall transfer to Landlord without
requirement of any bill of sale or assignment; provided Landlord, at its
election, may require Tenant to execute such documentation as Landlord may
require to evidence such transfer. Tenant shall not remove any Tangible
Personal Property from the Property upon termination of the Lease. If any of
such Tangible Personal Property is stored away from the Property, Tenant will
provide Landlord with proper access to the storage facility.
8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public, and
food and beverage, as shall be necessary in order to operate the Property in
compliance with (a) all applicable Legal Requirements, (b) customary practices
in the golf industry, (c) past practices of the Transferor, and (d) such other
reasonable requirements imposed by Landlord from time to time.
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8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal Property
may, upon notice to Landlord and during reasonable hours, enter the Property and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion upon a default by Tenant, provided that such lessor
provide Landlord with the opportunity to cure the defaults of Tenant on terms
and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term, Tenant
shall use or cause to be used the Property and the improvements thereon for its
Primary Intended Use. Tenant shall not use the Property or any portion thereof
for any other use without the prior written consent of Landlord, in Landlord's
absolute discretion. No use shall be made or permitted to be made of the
Property, and no acts shall be done, which will cause the cancellation of any
insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patrons, or permit to be kept, used or sold in or
about the Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property or other
improvements of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Property and Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be done
in or on the Property, in a manner which would (i) violate or fail to comply
with any law, rule or regulation or Legal Requirement, (ii) subject to Article
12, cause structural injury to any of the Improvements or (iii) constitute a
public or private nuisance or waste. Tenant shall not allow any Hazardous
Material to be located in, on or under the Property, or any adjacent property,
or incorporated in the Property or any improvements thereon except in compliance
with applicable law (including any Environmental Laws). Tenant shall not allow
the Property to be used as a landfill or a waste disposal site, or a
manufacturing, distribution or disposal facility for any Hazardous Materials.
Tenant shall neither suffer nor permit the Property or any portion thereof,
including Tenant's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law.
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9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (iii) dedicate or transfer unimproved portions of the
Property for road, highway or other public purposes; (iv) execute petitions to
have the Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants and restrictions affecting the Property; and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interest in the Property), but only upon delivery to Landlord of an Officer's
Certificate (which Officer's Certificate, if contested by Landlord, shall not be
binding on Landlord) stating that such grant, release, dedication, transfer,
petition or amendment is not detrimental to the proper conduct of the business
of Tenant on the Property and does not reduce its value or usefulness for the
Primary Intended Use. Landlord shall not grant, release, dedicate or execute
any of the foregoing items in this Section 9.4 without obtaining Tenant's
approval, which approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b) at
its election, engage in reasonable cross-marketing endeavors with the members of
the Advisory Association; and (c) at its election, provide signage on the
Property which references that the Property is owned by Landlord, which signage
may include an appropriate logo selected by Landlord. In addition, it is the
intent of the parties that Tenant be a single-purpose entity with no business
operations except for those related solely to the operation of the Property for
its Primary Intended Use and other property of Landlord which may be leased to
Tenant. Tenant shall, therefore, not engage in or undertake any activities
other than those respecting the operation of the Property for its Primary
Intended Use, including leasing, managing, and operating golf courses in
accordance with this Lease.
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9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including all Extended
Terms, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain Phase I Environmental
Site Assessment dated July 31, 1997 (Project Code RAINTREECC0791), prepared by
American Analytical Laboratories, Inc., Tenant hereby represents, warrants, and
covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with all
Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to the
best knowledge of Tenant, there are no Environmental Laws requiring any material
remediation, cleanup, repairs or construction (other than normal maintenance)
with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement, and
to the best knowledge of Tenant, (a) no notices of any violation or alleged
violation of any Environmental Laws relating to the Property or its uses have
been received by either Tenant, or, to the best knowledge of Tenant, by any
prior owner, operator or occupant of the Property, and (b) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending or threatened, relating to the
ownership, use, maintenance or operation of the Property.
10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with the
terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the
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Property in the possession or control of Tenant, Transferor or their Affiliates
are set forth or described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Property or if Tenant, Landlord,
or the Property becomes subject to any order of any federal, state or local
agency to investigate, remove, remediate, repair, close, detoxify, decontaminate
or otherwise clean up the Property, Tenant shall, at its sole expense, but
subject to the last sentence of Section 10.7, carry out and complete any
required investigation, removal, remediation, repair, closure, detoxification,
decontamination or other cleanup of the Property. If Tenant fails to implement
and diligently pursue any such repair, closure, detoxification, decontamination
or other cleanup of the Property in a timely manner, Landlord shall have the
right, but not the obligation, to carry out such action and to recover its costs
and expenses therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action incurred by the United States Government, any state
or local governmental unit to any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to any
Environmental Law, (b) liability for costs and expenses of abatement,
investigation, removal, remediation, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any Environmental
Law, (c) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity, or (d) by reason of a breach of a representation or warranty in
Sections 10.1 through 10.5 of this Lease. Notwithstanding the foregoing or any
other provision of this Lease (including, without limitation, Section 7.2,
Section 10.9 and Article 23), Tenant shall not be liable, or otherwise be
required to indemnify
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Landlord or the Company or any Affiliates of the Company for (i) any matters or
events that arise after the Commencement Date that are not caused by any act or
omission on the part of Tenant, or (ii) any matters or events that arise after
the Commencement Date that are directly caused by a breach by Landlord of the
terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's obligations
and/or liability under this Article 10 arising during the Term hereof shall
survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a result of Tenant's use, any prior use, the
elements or the age of the Property or any portion thereof) and in accordance
with any applicable Legal Requirements, and, except as otherwise provided in
Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date
(concealed or otherwise). Tenant shall operate and maintain the Property in
accordance with the operation and maintenance practices of the Property at the
Commencement Date and otherwise in a manner comparable to other comparable golf
course facilities in the
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vicinity of the Property. Landlord may consult with the Advisory Association
from time to time with respect to Tenant's compliance with its maintenance and
operation obligations under this Section 11.1, and Landlord and representatives
of Advisory Association shall have the right from time to time to enter the
Property for the purpose of inspecting the Property. If Landlord, in
consultation with the Advisory Association, determines that Tenant has failed to
comply with its maintenance and operation obligations under this Section 11.1,
Landlord shall provide written notice to Tenant setting forth a list of remedial
work and/or steps to be performed by Tenant. Tenant shall promptly and
diligently perform such remedial work and/or steps as recommended by Landlord,
provided if Tenant objects to one or more of the remedial obligations proposed
by Landlord, then the matter shall be submitted to the dispute resolution
procedure set forth in Section 12.7. Tenant will not take or omit to take any
action the taking or omission of which could reasonably be expected to impair
the value or the usefulness of the Property or any part thereof for its Primary
Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under any
circumstances be required to build or rebuild any improvements on the Property,
or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Property in any way. Tenant hereby waives, to the extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the
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Term, vacate and surrender the Property to Landlord in the condition in which
the Property was originally received from Landlord, except as repaired, rebuilt,
restored, altered or added to as permitted or required by the provisions of this
Lease and except for ordinary wear and tear (subject to the obligation of Tenant
to maintain the Property in good order and repair during the entire Term of the
Lease).
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
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(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of Rent
received hereunder, Landlord shall be obligated to accrue the Capital
Replacement Reserve. The Capital Replacement Reserve shall accrue quarterly
based on the Officer's Certificate and shall be placed in the Capital
Replacement Fund. Amounts in the Capital Replacement Fund from time to time
shall be deemed to accrue interest at a money market rate as reasonably
determined by Landlord and such interest shall be credited to the Capital
Replacement Fund. Upon the written request by Tenant to Landlord stating the
specific use to be made and subject to the reasonable approval of Landlord, the
Capital Replacement Fund shall be made available to Tenant for Capital
Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the Capital
Replacement Fund shall be used to purchase property to the extent that doing so
would cause Landlord to recognize income other than "rents from real property"
as defined in Section 856(d) of the Code. Tenant shall have no rights with
respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
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(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.5
and in connection with such audits to examine Tenant's book and records with
respect thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of Percentage
Rent or FB&M Rent, Tenant shall forthwith pay to Landlord the amount of the
deficiency as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the date
of payment thereof; PROVIDED, HOWEVER, that as to any audit that is commenced
more than twelve (12) months after the date Gross Golf Revenue and FB&M Revenue
for any Fiscal Year are reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Golf Revenue and
FB&M Revenue shall bear interest as permitted herein only from the date such
determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue and FB&M Revenue actually received by
Tenant for any Fiscal Year exceeds the Gross Golf Revenue and FB&M Revenue
reported by Tenant in the Officer's Certificate by more than two percent (2%),
then Tenant shall pay all reasonable costs of such audit and examination;
provided Tenant shall have the right to submit the audit determination to
arbitration in accordance with the procedures set forth in Article 28. Landlord
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shall also have the right to review and audit from time to time Tenant's
business operations including all books, records and financial statements of
Tenant. Tenant shall promptly provide to Landlord copies of all such books,
records, financial statements or any other documentation of Tenant's business
operations reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Golf Revenue (including
membership dues, daily use fees and other sources of Gross Golf Revenue) and
other revenue for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Landlord and Tenant, together with assumptions,
in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent and FB&M Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the
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foregoing requirements of this Section 12.7, the parties shall adopt such
portions of the Operating Budget and the Capital Budget as they may have agreed
upon, and any matters not agreed upon shall be referred to a dispute resolution
committee composed of three (3) members of the Advisory Association unaffiliated
with Tenant and two (2) members of the board of directors of the Company. Such
committee shall be responsible for resolving any such disagreement and the
parties agree that the determination of such dispute resolution committee shall
be binding on the parties. Pending the results of such resolution or the
earlier agreement of the parties, (i) if the Operating Budget has not been
agreed upon, the Property will be operated in a manner consistent with the prior
year's Operating Budget until a new Operating Budget is adopted, and (ii) if the
Capital Budget has not been agreed upon, no Capital Expenditures shall be made
unless the same are set forth in a previously approved Capital Budget or are
specifically required by Landlord or are otherwise required to comply with Legal
Requirements or Insurance Requirements. Tenant shall operate the Property in a
manner reasonably consistent with the Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent and FB&M Rent, and Tenant shall retain for at least five
(5) years after the expiration of each Fiscal Year, reasonably adequate records
conforming to such accounting system showing all data necessary to compute
Percentage Rent and FB&M Rent. The books of account and all other records
relating to or reflecting the operation of the Property shall be kept at the
Property. Such books and records shall be available to Landlord and its
representatives for examination, audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter (i) unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
(except as provided for in clause (ii)) shall be at Landlord's expense. Each
quarterly report shall also include a narrative explaining any deviation in any
major revenue or expense category or operating expenses (by category) of more
than ten percent (10%) from the amounts set forth on the Annual Budget, together
with, if appropriate a revised Annual Budget, which budget shall be subject to
Landlord's review and approval as provided in Section
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12.7. Each quarterly report shall also forecast any projected Percentage Rent
and FB&M Rent payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Golf Revenue if
Tenant's financial statements are not required to be separately stated by the
Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Tenant's actions or
negligence, not including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
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(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord, the
Company and Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment and in such case, in
the event of an adverse final determination, either (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Landlord or Tenant; or (ii) make such changes in the Improvements,
and take such other actions, as Tenant in the good faith exercise of its
judgment deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or encroachment. Tenant's
obligation under this Section 13.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and Tenant
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shall be entitled to a credit for any sums recovered by Landlord under any such
policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however, shall permit Tenant to delay compliance with any
requirement of an Environmental Law to the extent such non-compliance poses
an immediate threat of injury to any Person or to the public health or
safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
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(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord as an additional insured or loss payee,
as applicable. Losses shall be payable to Landlord and/or Tenant as provided in
this Article 15. In addition, the policies shall name as a loss payee any
Facility Mortgagee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment shall require the written consent of Landlord,
Tenant, and each Facility Mortgagee, if any. Evidence of insurance shall be
deposited with Landlord and, if requested, with any Facility Mortgagee(s). The
policies on the Property, including the Improvements, Fixtures, Tangible and
Intangible Personal Property and any Tenant Improvements, shall insure against
the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on
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the Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
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15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written notice before the policy
or policies in question shall be altered, allowed to expire or cancelled. Each
such policy shall also provide that any loss otherwise payable thereunder shall
be payable notwithstanding (i) any act or omission of Landlord or Tenant which
might, absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by any Facility Mortgagee
pursuant to any provision of a mortgage, note, assignment or other document
evidencing or securing a loan upon the happening of an event of default therein
or (iv) any change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as
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Tenant can reasonably demonstrate its ability to satisfy such deductible or
amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less than
the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $100,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
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(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
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If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15 and
the Property thereby is rendered Unsuitable For Its Primary Intended Use as
reasonably determined by Landlord, Tenant shall, at its election, either
(i) diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15, but
the Real Property is not thereby rendered Unsuitable For Its Primary
Intended Use, Tenant shall diligently restore the Property to substantially
the same condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant shall not be required to restore certain Tangible
Personal Property and/or any Tenant Improvements if failure to do so does
not adversely affect the amount of Rent payable hereunder or the Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen (18)
months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have
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the right to use proceeds from the Capital Replacement Fund to perform such
work, subject to the conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the then-applicable Term, then either Landlord or Tenant shall have the
right to terminate the Lease on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
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16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with no abatement of rent payable by Tenant hereunder.
In the event of any such temporary taking, the entire amount of any such Award
made for such temporary taking allocable to the Lease Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case
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such failure shall not be deemed to continue if Tenant proceeds promptly
and with due diligence to cure the failure and diligently completes the
curing thereof within one hundred twenty (120) days of receipt of notice
from Landlord of the default; PROVIDED, HOWEVER, that such notice shall be
in lieu of and not in addition to any notice required under applicable law;
PROVIDED FURTHER, HOWEVER, that the cure period shall not extend beyond
thirty (30) days as otherwise provided by this Section 17.1(b) if the facts
or circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they become
due,
(ii) file a petition in bankruptcy or a petition to take advantage
of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or arrangement
under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
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(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of Landlord, or an "Event of Default" under the
Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the expiration of the time fixed in such notice, the Term shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's breach
of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
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17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which had
been earned at the time of termination,
(ii)the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the time of
award exceeds the amount of such unpaid Rent that Tenant proves could
have been reasonably avoided,
(iii)the worth at the time of award of the amount by which the
unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
(iv)any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent and FB&M Rent shall be deemed to be the
same as for the then-current Fiscal Year or, if not determinable, the
immediately preceding Fiscal Year, for the remainder of the Term, or such other
amount as either party shall prove reasonably could have been earned during the
remainder of the Term or any portion thereof; or
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(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
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ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any party thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent and FB&M Rent payable with
respect to that month in the last Fiscal Year; (ii) all Additional Charges
accruing during the month; and (iii) all other sums, if any, payable by Tenant
pursuant to the provisions of this Lease with respect to the Property. During
such period of month-to-month tenancy, Tenant shall be obligated
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to perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to month-to-month tenancies, to continue its occupancy and use of the
Property. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses),
to the extent permitted by law, imposed upon or incurred by or asserted against
Landlord, the Company or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
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(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect
to the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the indemnified party may at all times participate in such defense
at its expense, and PROVIDED FURTHER, HOWEVER, that the indemnifying party shall
not, in defense of any such claim, except with the prior written consent of the
indemnified party, consent to the entry of any judgment or to enter into any
settlement that does not include as an
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unconditional term thereof the giving by the claimant or plaintiff in question
to the indemnified party and its affiliates a release of all liabilities in
respect of such claims, or that does not result only in the payment of money
damages by the indemnifying party. If the indemnifying party shall fail to
undertake such defense within thirty (30) days after such notice, or within such
shorter time as may be reasonable under the circumstances, then the indemnified
party shall have the right to undertake the defense, compromise or settlement of
such liability or claim on behalf of and for the account of the indemnifying
party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease or
any interest therein, all or any part of the Property, whether voluntarily,
involuntarily or by operation of law. For purposes of this Article 23, a Change
in Control of the Tenant shall constitute an assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole discretion, further sublease or license portions of the Property to
third parties, including concessionaires or licensees. Without limiting
the foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
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(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs;
and
(viii) sublease or license to operate any other portions (but
not the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to
any proposed assignment or sublease, deliver to Landlord written notice of
its intent to assign or sublease, which notice shall identify the intended
assignee or sublessee by name and address, shall specify the effective date
of the intended assignment or sublease, and shall be accompanied by an
exact copy of the proposed assignment or sublease. Tenant shall provide
Landlord with such additional information or documents reasonably requested
by Landlord with respect to the proposed transaction and the proposed
assignee or subtenant, and an opportunity to meet and interview the
proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon
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notice to Tenant and any subtenants to revoke said license and to collect
such rents and sums of money and to retain the same. Tenant shall not (i)
consent to, cause or allow any material modification or alteration of any
of the terms, conditions or covenants of any of the subleases or the
termination thereof, without the prior written approval of Landlord nor
(ii) accept any rents (other than customary security deposits) more than
ninety (90) days in advance of the accrual thereof nor permit anything to
be done, the doing of which, nor omit or refrain from doing anything, the
omission of which, will or could be a breach of or default in the terms of
any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent or FB&M Rent payable to Landlord hereunder.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
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23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive and assignment of this Lease or subletting of the Property to Landlord
or Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage
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commissions which may be payable out of the consideration to be paid by such
person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth equal to at least One Million Dollars ($1,000,000) or, in the
alternative, the proposed assignee shall provide a guarantor of such proposed
assignee's obligations under this Lease, which guarantor shall provide an
audited financial statement meeting the requirements of (i) above and shall
execute and deliver to Landlord a guaranty agreement in form and substance
acceptable to Landlord; and (ii) any proposed assignee shall grant to Landlord a
security interest in favor of Landlord in all furniture, fixtures, and other
personal property to be used by such proposed assignee in the Property. All
payments required of Tenant under this Lease, whether or not expressly
denominated as such in this Lease, shall constitute rent for the purposes of
Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure defaults and compensate Landlord for actual
pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss", (the term "actual
pecuniary loss" shall mean, in addition to any other provisions contained herein
relating to Landlord's damages upon default obligations of Tenant to pay money
under this Lease and all attorneys' fees and related costs of Landlord incurred
in connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
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assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that
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any Hazardous Material in a quantity sufficient to require remediation or
reporting under applicable law is located in, on or under the Property or any
adjacent property, Tenant shall notify Landlord in writing of (a) the existence
of any such Hazardous Material; (b) any enforcement, cleanup, removal, or other
governmental or regulatory action instituted, completed or threatened; (c) any
claim made or threatened by any Person against Tenant or the Property relating
to damage, contribution, cost recovery, compensation, loss, or injury resulting
from or claimed to result from any Hazardous Material; and (d) any reports made
to any federal, state or local environmental agency arising out of or in
connection with any Hazardous Material in or removed from the Property,
including any complaints, notices, warnings or asserted violations in connection
therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee or beneficiary, affecting
any lease or the Property. In confirmation of such subordination, Tenant shall
execute promptly any certificate that Landlord may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for
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the cure of said default before invoking any remedies Tenant may have by reason
thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party.
However, if the price at which Landlord intends to sell the Property to a third
party is less than 95% of the price set forth in the notice provided by Landlord
to Tenant, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future liabilities
and obligations under this Lease arising or accruing from and after the date of
such conveyance or other transfer as to the Property. All such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
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cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant
except as otherwise specified above in this Section 27.2. Unless otherwise
agreed in writing by the parties or required by the arbitrator or AAA, if
applicable, arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Landlord and Tenant
regarding the Property during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of
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thirty (30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold,
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directly or indirectly, (a) this Lease or the leasehold estate created hereby or
any interest in this Lease or such leasehold estate and (b) the fee estate in
the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
190 King Street
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
With a copy to:
---------------------------
---------------------------
---------------------------
If to Tenant: Raintree Country Club, Inc.
---------------------------
---------------------------
---------------------------
With a copy to:
---------------------------
---------------------------
---------------------------
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the
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parties agree that such charges shall be fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or
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(d) any other Person affiliated with any of the foregoing, or any director,
officer, employee or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair,
------------------------------
W. Bradley Blair, II
President and CEO
TENANT: RAINTREE COUNTRY CLUB, INC.,
an Ohio corporation
By: /s/ John J. Rainieri
------------------------------
Its: President
------------------------------
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--------------------------------
PURCHASE AND SALE AGREEMENT
--------------------------------
Seller: Meghan Associates, LLC,
a Limited Liability Company, and Tarpon Woods Restaurant
Corporation
Buyer: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
Property: Tarpon Woods Golf Course
Purchase
Price: $5,700,000
Effective
Date: August 31, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) "Act of Bankruptcy" . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) "Authorizations" . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) "Bill of Sale - Personal Property". . . . . . . . . . . . . . . . . 3
(d) "Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) "Closing Date". . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) "Closing Statements". . . . . . . . . . . . . . . . . . . . . . . . 3
(g) Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . 3
(h) "Deed". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(i) "Disclosure Schedule" . . . . . . . . . . . . . . . . . . . . . . . 4
(l) "Employment Agreements" . . . . . . . . . . . . . . . . . . . . . . 4
(m) "Environmental Claim" . . . . . . . . . . . . . . . . . . . . . . . 4
(n) "Environmental Laws". . . . . . . . . . . . . . . . . . . . . . . . 4
(o) "Escrow Agent". . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(p) "FIRPTA Certificate". . . . . . . . . . . . . . . . . . . . . . . . 5
(q) "Golf Club" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(r) Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . 5
(s) "Governmental Body" . . . . . . . . . . . . . . . . . . . . . . . . 5
(t) "Hazardous Substances". . . . . . . . . . . . . . . . . . . . . . . 5
(u) "Improvements". . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(v) "Intangible Personal Property". . . . . . . . . . . . . . . . . . . 5
(w) Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . 5
(x) "Land". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(y) "Mortgage Indebtedness" . . . . . . . . . . . . . . . . . . . . . . 6
(z) "Operating Agreements". . . . . . . . . . . . . . . . . . . . . . . 6
(aa) "Owner's Title Policy". . . . . . . . . . . . . . . . . . . . . . . 6
(ab) "Permitted Title Exceptions". . . . . . . . . . . . . . . . . . . . 6
(ac) "Preliminary Title Report". . . . . . . . . . . . . . . . . . . . . 6
(ad) "Property". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ae) "Purchase Price". . . . . . . . . . . . . . . . . . . . . . . . . . 6
(af) "Real Property" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ag) "Restaurant Supplies" . . . . . . . . . . . . . . . . . . . . . . . 6
(ah) "SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ai) "State" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(aj) "Summary Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ak) "Survey". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(al) "Tangible Personal Property". . . . . . . . . . . . . . . . . . . . 7
(am) "Title Company" . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(an) "Title Objections". . . . . . . . . . . . . . . . . . . . . . . . . 7
(ao) "Seller's Organizational Documents" . . . . . . . . . . . . . . . . 7
(ap) "Utilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(aq) "WARN Act". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Section References. . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
i
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ARTICLE II - PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE. . . . . . . . . . . . . 8
2.1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Site Inspection.. . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Inspection of Documents.. . . . . . . . . . . . . . . . . . . . . . 8
(c) Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Preliminary Title Report. . . . . . . . . . . . . . . . . . . . . . 9
(e) Disclosure Schedule.. . . . . . . . . . . . . . . . . . . . . . . . 10
(f) UCC Search. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(g) Audit.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Earnest Money Deposit.. . . . . . . . . . . . . . . . . . . . . . . 10
(b) Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III - SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . 11
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . . . . . 12
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . . . . . 14
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . . . . . 15
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . 15
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.21 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.22 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.23 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . . . . . 17
3.24 Additional Representations and Warranties. . . . . . . . . . . . . . . . 17
3.25 Survival of Representations. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV - BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . 18
4.1 Organization and Power.. . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V - CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . 19
5.1 As to Buyer's Obligations. . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Seller's Deliveries.. . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Representations, Warranties and Covenants.. . . . . . . . . . . . . 19
(c) Title Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Title to Property.. . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Condition of Property.. . . . . . . . . . . . . . . . . . . . . . . 20
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(f) Utilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) Liquor License. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(h) The Operation Permit. . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 As to Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Buyer's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Representations, Warranties and Covenants.. . . . . . . . . . . . . 20
ARTICLE VI - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Seller's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Seller's Certificate. . . . . . . . . . . . . . . . . . . . . . . . 21
(b) The Deed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) The Bill of Sale - Personal Property. . . . . . . . . . . . . . . . 21
(d) Evidence of Title.. . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Title Requirements. . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) The FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . . . 21
(g) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(h) Organizational Documents. . . . . . . . . . . . . . . . . . . . . . 22
(i) Board Resolutions.. . . . . . . . . . . . . . . . . . . . . . . . . 22
(j) Certificate of Occupancy. . . . . . . . . . . . . . . . . . . . . . 22
(k) Evidence of Bulk Sales Compliance.. . . . . . . . . . . . . . . . . 22
(l) Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . . 22
(m) Improvement Plans.. . . . . . . . . . . . . . . . . . . . . . . . . 22
(n) Communication; Addresses. . . . . . . . . . . . . . . . . . . . . . 22
(o) Tax Bills.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(p) Surveys.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(q) Tournament Schedule.. . . . . . . . . . . . . . . . . . . . . . . . 22
(r) Accounts Receivable.. . . . . . . . . . . . . . . . . . . . . . . . 23
(s) Payoff Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 23
(t) Tenant Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(u) Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Buyer's Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Closing Statements. . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Liquor License Transfer Documents.. . . . . . . . . . . . . . . . . 23
(c) Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . . . . . 24
(a) Rents and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Utilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Municipal Improvement Liens.. . . . . . . . . . . . . . . . . . . . 24
(f) License and Permit Fees.. . . . . . . . . . . . . . . . . . . . . . 24
(g) Income and Expenses.. . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Miscellaneous Prorations. . . . . . . . . . . . . . . . . . . . . . 25
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Accounts Receivable.. . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Availability of Bills.. . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VIII - LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Liability of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Termination by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Termination by Seller. . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IX -MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . 30
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.15 Like Kind Exchange Treatment . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Description of Improvements
Exhibit C - Tangible Personal Property
Exhibit C-1 Leases and Installment Agreements
Exhibit C-2 Inventory
Exhibit D - Intangible Personal Property
Exhibit E - Bill of Sale - Personal Property
Exhibit F - Deed
Exhibit G - FIRPTA Affidavit of Seller
Exhibit H - Contracts and Operating Agreements
Exhibit I - Letters from Spring Engineering and the County of Pinellas
Exhibit J - Warranty Disclosure Schedule
Exhibit K - Seller's Certificate
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PURCHASE AGREEMENT
SUMMARY SHEET
Buyer: GOLF TRUST OF AMERICA, L.P., a Delaware partnership
Seller: Meghan Associates, LLC, a Limited Liability Company, and Tarpon
Woods Restaurant Corporation, hereafter collectively referred to
Seller as their interests may appear
Effective
Date: August 31, 1997
Golf Course: Tarpon Woods Golf
Purchase
Price: Five Million Seven Hundred Thousand Dollars
($5,700,000)
Notice Address
of Seller: Michael S. Muraco
Tarpon Woods
3001 James Street, 2nd Floor
Syracuse, NY 13206
Notice Address
of Buyer: Golf Trust of America, Inc.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair II
cc: David J. Dick
with a
copy to: O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
Attention: Peter T. Healy, Esq.
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<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into by
and between Buyer and Seller.
RECITALS:
A. Seller is the owner of that certain Tarpon Woods Golf Courses and
related improvements located on the real property more particularly described in
EXHIBIT A attached hereto (the "Land").
B. Subject to the terms of this Agreement, Seller hereby agrees to
sell to Buyer, and Buyer hereby agrees to buy from Seller, all of Seller's
right, title and interest in and to the following:
I. The Land, together with the golf course, driving range,
putting greens, clubhouse facilities, snack bar, restaurant, pro shop,
buildings, structures, parking lots, improvements, fixtures and other items
of real estate located on the Land, as more particularly described in EXHIBIT
B attached hereto (the "Improvements").
1. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of Seller's
right, title and interest, if any, in and to all mineral and water rights and
all easements, rights-of-way and other appurtenances used or connected with the
beneficial use or enjoyment of the Land and the Improvements, including, without
limitation, concession agreements for spas and the like (the Land, the
Improvements and all such easements and appurtenances are sometimes collectively
hereinafter referred to as the "Real Property").
2. All items of tangible personal property and fixtures (if any)
owned by Seller and located on or used in connection with the Real Property,
including, but not limited to, machinery, equipment, furniture, furnishings,
movable walls or partitions, phone systems and other control systems, restaurant
equipment and supplies, computers, with the exception of the Point of Sale
software, trade fixtures, golf course operation and maintenance equipment (with
the exception of the GMC truck), including mowers with the exception of the
Woods mower, tractors, aerators, sprinklers, sprinkler and irrigation facilities
and valves or rotors, driving range equipment, training equipment, office
equipment or machines, other decorations, and equipment or machinery of every
kind or nature located on or used in connection with the operation of the Real
Property whether on or off-site, including all warranties and guaranties
associated therewith (the "Tangible Personal Property"). A schedule of the
Tangible Personal Property is attached to this Agreement as
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<PAGE>
EXHIBIT C, indicating whether such Tangible Personal Property is owned or
leased.
3.1 In addition to the Tangible Personal Property of paragraph 3
above, Buyer shall assume and be responsible for the payment of those leases and
installment agreements set forth in the attached Exhibit C-1 for the period
commencing on the Closing Date.
3.2 In addition to the purchase price as hereinafter set forth,
Buyer shall pay to the Seller for the inventory as set forth on Exhibit C-2.
4. All intangible personal property owned or possessed by Seller and
used in connection with the ownership, operation, leasing or maintenance of the
Real Property or the Tangible Personal Property, all goodwill attributed to the
Property, and any and all trademarks and copyrights, tradenames (including
Tarpon Woods), guarantees, Authorizations (as hereinafter defined), general
intangibles, business records, plans and specifications, surveys and title
insurance policies pertaining to the Property, all licenses, permits and
approvals with respect to the construction, ownership, operation or maintenance
of the Property, any unpaid award for taking by condemnation or any damage to
the Real Property by reason of a change of grade or location of or access to any
street or highway, excluding any of the aforesaid rights that Buyer elects not
to acquire (collectively, the "Intangible Personal Property"). A schedule of
the Intangible Personal Property is attached to this Agreement as EXHIBIT D.
(The Real Property, Tangible Personal Property and Intangible Personal Property
are sometimes collectively referred to as the "Property".)
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the meanings set forth on the Summary Sheet. The following terms
shall have the indicated meanings:
(a) "ACT OF BANKRUPTCY" shall mean if a party to this agreement or any
general partner or member thereof shall (a) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (b)
admit in writing its inability to pay its debts as they become due, (c) make a
general assignment for the benefit of its creditors, (d)
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<PAGE>
file a voluntary petition or commence a voluntary case or proceeding under the
Federal Bankruptcy Code (as now or hereafter in effect) or any new bankruptcy
statute, (e) be adjudicated bankrupt or insolvent, (f) file a petition seeking
to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, (g) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case or proceeding under the Federal
Bankruptcy Code (as now or hereafter in effect) or any new bankruptcy statute,
or (h) take any corporate or partnership action for the purpose of effecting any
of the foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof, in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner, (2) the appointment of a receiver, custodian, trustee
or liquidator or such party or general partner or all or any substantial part of
its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed; or an order (including
an order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for a
period of sixty (60) consecutive days.
(b) "AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
(c) "BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale
conveying title to the Tangible Personal Property and Intangible Personal
Property from Seller to Buyer, substantially in the form of EXHIBIT E attached
hereto.
(d) "CLOSING" shall mean the time the Deed and each of the deliveries
to be made by Seller (as provided in Section 6.2) and Buyer (as provided in
Section 6.3) are made and each of the Closing conditions of Buyer and Seller in
Sections 5.1 and 5.2, respectively, have been satisfied or waived.
(e) "CLOSING DATE" shall mean the date on which the Closing occurs.
(f) "CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
(g) Intentionally Omitted
3
<PAGE>
(h) "DEED" shall mean a grant deed or special warranty deed,
substantially in the form of EXHIBIT F attached hereto (or lease assignment, if
the Property is owned by Seller pursuant to a ground lease), in form and
substance satisfactory to Buyer, conveying the title of Seller to the Real
Property, with such grant or warranty covenants of title from Seller to Buyer as
are customary in the state in which the Property is located, subject only to
Permitted Title Exceptions. If there is any difference between the description
of the Land, as shown on EXHIBIT A attached hereto and the description of the
Land as shown on the Survey, the description of the Land to be contained in the
Deed and the description of the Land set forth in the Owner's Title Policy (as
defined herein) shall conform to the description shown on the Survey.
(i) "DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
(j) "DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00
a.m., California time, on the Effective Date, and continuing through 5:00 p.m.,
California time, on September 30, 1997.
(k) "EARNEST MONEY DEPOSIT" shall mean $250,000, as such amount may
be increased as provided herein.
(l) "EMPLOYMENT AGREEMENTS" shall mean all employment agreements,
written or oral, between Seller or its managing agent and the persons employed
with respect to the Property in effect as of the Effective Date.
(m) "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory
or judicial action, suit, demand, letter, claim, lien, notice of non-compliance
or violation, investigation or proceeding relating in any way to any
Environmental Laws or any permit issued under any Environmental Law including,
without limitation, (i) by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Laws, and (ii) by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to health, safety or the environment.
(n) "ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as amended,
29 U.S.C. Section 651, et seq.; the Clean Air Act, as
4
<PAGE>
amended, 42 U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 201, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and
local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability or
standards concerning or in connection with Hazardous Substances.
(o) "ESCROW AGENT" shall mean the Title Company.
(p) "FIRPTA CERTIFICATE" shall mean the affidavit of Seller under
Section 1445 of the Internal Revenue Code certifying that Seller is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT G attached hereto.
(q) "GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Seller for purchase in connection with golfing
privileges at the Property.
(r) Intentionally Omitted
(s) "GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(t) "HAZARDOUS SUBSTANCES" shall mean any substance, material, waste,
gas or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
(u) "IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
(v) "INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth
in Recital B(4).
(w) Intentionally Omitted
5
<PAGE>
(x) "LAND" shall have the meaning set forth in Recital A.
(y) "MORTGAGE INDEBTEDNESS" shall mean any indebtedness of Seller
which is secured by a mortgage on the Property.
(z) "OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the Effective Date, as more particularly set forth on EXHIBIT H attached hereto.
(aa) "OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land
Title Association extended coverage owner's policy of title insurance issued to
Buyer by the Title Company, pursuant to which the Title Company insures Buyer's
ownership of fee simple title (or ground lease interest, as applicable) to the
Real Property (including the marketability thereof) subject only to Permitted
Title Exceptions and shall include those title endorsements required by Buyer.
The Owner's Title Policy shall insure Buyer in the amount designated by Buyer
and shall be acceptable in form and substance to Buyer.
(ab) "PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title
to the Real Property that are satisfactory to Buyer as determined under this
Agreement, and as evidenced by the Commitment for Title Insurance dated August
15, 1997, on behalf of Commonwealth Land Title Insurance Company (the"Title
Report"), but excluding Exception Numbers 2,3,4 and 17, showing the easement
referred to in Exception 18 as a separately insured parcel, and clarifying that
the legal and beneficial interests under the water and sewer agreements with
Pinellas County (as referred to in Exceptions 10 and 11) are owned free and
clear of all liens and incumbrances by Seller and are being conveyed to the
Buyer pursuant hereto.
(ac) "PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
(ad) "PROPERTY" shall have the meaning set forth in Recital B(4).
(ae) "PURCHASE PRICE" shall mean Five Million Seven Hundred Thousand
Dollars ($5,700,000).
(af) "REAL PROPERTY" shall have the meaning set forth in Recital B(2).
(ag) "RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages but excluding unopened liquor bottles) and all silverware,
glassware, napkins, tablecloths, papers goods and related goods necessary to
6
<PAGE>
efficiently operate the restaurant, bar, lounge or snack shop located upon or
within the Improvements.
(ah) "SEC" shall mean the United States Securities and Exchange
Commission.
(ai) "STATE" shall mean the state or commonwealth in which the
Property is located.
(aj) "SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
(ak) "SURVEY" shall mean the survey prepared pursuant to Section
2.2(c).
(al) "TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
(am) "TITLE COMPANY" shall mean a title insurance company selected by
Buyer and authorized to conduct a title insurance business in the State.
(an) "TITLE OBJECTIONS" shall have the meaning set forth in Section
2.2(d).
(ao) "SELLER'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Seller.
(ap) "UTILITIES" shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of the
Property.
(aq) "WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) GENDER. Singular words shall connote the plural number as well
as the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) SECTION REFERENCES. All references herein to particular
articles, sections, subsections, clauses or exhibits are references to articles,
sections, subsections, clauses or exhibits of this Agreement.
(c) HEADINGS. The table of contents and headings contained herein
are solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
7
<PAGE>
(d) CONSTRUCTION. Each party hereto and its counsel have reviewed
and revised (or requested revisions of) this Agreement and have participated in
the preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement or
any exhibits hereto.
ARTICLE II
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND SALE. Seller agrees to sell and Buyer agrees to
acquire the Property for the Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) SITE INSPECTION. Buyer shall have the right, during the Due
Diligence Period, and thereafter if Buyer notifies Seller that Buyer has elected
to proceed to Closing in the manner described below, to enter upon the Real
Property and to perform, at Buyer's expense, such surveying, engineering, and
environmental studies and investigations as Buyer may deem appropriate. If such
tests, studies and investigations warrant, in Buyer's sole, absolute and
unreviewable discretion, the purchase of the Property for the purposes
contemplated by Buyer, then Buyer may elect to proceed to Closing and shall so
notify Seller and the Escrow Agent, in writing, prior to the expiration of the
Due Diligence Period. If for any reason Buyer does not so notify Seller and
Escrow Agent of its determination to proceed to Closing prior to the expiration
of the Due Diligence Period, or if Buyer notifies Seller and Escrow Agent, in
writing, prior to the expiration of the Due Diligence Period that it has
determined not to proceed to Closing, this Agreement automatically shall
terminate and Buyer and Escrow Agent shall be released from any further
liability or obligation under this Agreement and, if requested by Seller, Buyer
will deliver such reports and materials to Seller. Unless the Buyer provides
notice to Seller and Escrow Agent of a violation of any of the conditions set
forth in paragraph 2.3(a) below, Escrow Agent is directed to deliver to Seller
the Earnest Money Deposit being held by Escrow Agent.
(b) INSPECTION OF DOCUMENTS. During the Due Diligence Period, Seller
shall make available to Buyer, its agents, auditors, engineers, attorneys and
other designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies, zoning
and site plan materials, correspondence, environmental audits and reviews,
books, records, tax returns, bank statements, financial statements, fee
schedules and any and all other material or information relating to the Property
which are in, or come into, Seller's possession or control, or which Seller may
attain.
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(c) SURVEY. Prior to the Closing, Buyer shall obtain an ALTA/ACSM
survey or a boundary survey, as reasonably required by Buyer, of the Land and
the Improvements, prepared by a surveyor licensed to practice as such in the
State, bearing a date not earlier than sixty (60) days from the date of its
delivery and certified to both Buyer, Seller and the Title Company (and any
lender or other party designated by Buyer), showing the legal description of the
Land, all dimensions thereof, and showing the location of Improvements on the
Land and the setbacks thereof from the property line, as well as the setbacks
required by applicable zoning laws or regulations (the "Survey"). The Survey
shall locate all easements which serve and affect the Land. The Survey shall
reflect that no buildings or improvements located on any other property encroach
upon the Land and that the Improvements located upon the Land do not encroach
upon any other property. The surveyor preparing the Survey shall certify that
(i) the Survey is an accurate Survey of the Land and the Improvements, (ii) that
the Survey was made under the surveyor's supervision, (iii) that the Survey
meets (a) the requirements of the Title Company for the issuance of the Owner's
Title Policy free of any general survey exception, and (b) the minimum technical
standards for land boundary surveys with improvements, set forth by applicable
statutes or applicable professional organizations, and (iv) all buildings and
other structures and their relation to the property lines are shown and that
there are no encroachments, overlaps, boundary line disputes, easements, or
claims of easements visible on the ground, other than those shown on the Survey.
(d) PRELIMINARY TITLE REPORT. Seller agrees to provide to Buyer,
within five (5) business days following the Effective Date, a copy of any
existing title insurance policies which Seller may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Buyer, at its expense, shall cause an examination of title to the Property to be
made and a preliminary title report to be issued (the "Preliminary Title
Report"), and, prior to the expiration of the Due Diligence Period, shall notify
Seller of any defects in title shown by such examination that Buyer is unwilling
to accept by delivering a pro forma copy of the Preliminary Title Report that
reflects such unacceptable defects in title, which shall be designated as the
Title Objections. Within ten (10) days after such notification, Seller shall
notify Buyer whether Seller is willing to cure such defects. If Seller is
willing to cure such defects, Seller shall act promptly and diligently to cure
such defects at its expense. If any of such defects consist of mortgages, deeds
of trust, construction or mechanics' liens, tax liens or other liens or charges
in a fixed sum or capable of computation as a fixed sum, then, to that extent,
and notwithstanding the foregoing, Seller shall be obligated to pay and
discharge such defects at Closing. For such purposes, Seller may use all or a
portion of the cash to close. If Seller is unable to cure such defects by
Closing, after having attempted to
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do so diligently and in good faith, Buyer shall elect (1) to waive such defects
and proceed to Closing without any abatement in the Purchase Price, or (2) to
terminate this Agreement. Seller shall not, after the date of this Agreement,
subject the Property to any liens, encumbrances, leases, covenants, conditions,
restrictions, easements or other title matters or seek any zoning changes or
take any other action which may affect or modify the status of title without
Buyer's prior written consent. All title matters revealed by Buyer's title
examination and not objected to by Buyer as provided above shall be deemed
Permitted Title Exceptions. If Buyer shall fail to examine title and notify
Seller of any such Title Objections by the end of the Due Diligence Period, all
such title exceptions (other than those rendering title unmarketable and those
that are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions. Notwithstanding the foregoing, Buyer shall not be required to
take title to the Property subject to any matters which may arise subsequent to
the effective date of its examination of title to the Property made during the
Due Diligence Period.
(e) DISCLOSURE SCHEDULE. Seller has delivered to Buyer a disclosure
schedule that accurately and completely identifies and describes (a) all
Employment Agreements (including name of employee, social security number, wage
or salary, accrued vacation benefits, other fringe benefits, etc.), and (b) an
updated Golf Club membership list, setting forth the names of the members of the
Golf Club, the length of their membership, the payment obligations of the
members and a summary of the terms of the memberships (the "Disclosure
Schedule"). At Buyer's request, Seller shall cancel membership program at
closing, effective December 31, 1997, and Seller shall discontinue member cart
program and tournament schedule at closing, effective December 31, 1997.
(f) UCC SEARCH. Seller shall deliver to Buyer at least ten (10) days
prior to Closing current searches of all Uniform Commercial Code financing
statements filed with the Secretary of State of the State respecting Seller,
together with searches for pending litigation, tax liens and bankruptcy filings
in all appropriate jurisdictions.
(g) AUDIT. Seller shall deliver to Buyer financial statements
prepared by Seller's accountant based upon compilations for each of the Golf
Course within fifteen (15) days after the Effective Date.
2.3 PAYMENT OF PURCHASE PRICE.
(a) EARNEST MONEY DEPOSIT. Upon the execution of this Agreement,
Buyer will deliver to escrow with the Title Company the sum of $250,000 (the
"Earnest Money Deposit"), which sum shall be refundable to Buyer only if:
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(i) Seller has materially misrepresented any fact that was and
is the basis upon which the Buyer has entered into this Agreement, or
(ii) Buyer gives notice to Seller that Buyer reasonably objects
to any matters which appear on the UCC Search referred to in Section 2.2(f) or
which appear on the current survey (other than the deletion of 3.5(+/-) acres
previously disclosed to Buyer) or an update of the Environmental Phase I report
(other than items which appeared on the Phase I report dated March 20, 1994, and
matters which are removed prior to closing) within seven (7) business days from
each of their receipt by Buyer, but not later than September 30, 1997. If Buyer
objects within the time periods as provided above to any environmental or survey
matters which Seller does not satisfy or remove prior to October 15, 1997, this
Agreement shall terminate with no further liability of the parties and Seller
shall cause the Escrow Agent to return to Buyer the Earnest Money Deposit.
Closing shall occur no later than October 15, 1997. Time is of the essence.
(b) PAYMENT. The Purchase Price shall be paid to Seller at closing.
ARTICLE III
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Buyer to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, Seller hereby makes the
following representations, warranties and covenants with respect to the
Property, subject to the Warranty Disclosure Schedule attached hereto as EXHIBIT
J, upon each of which Seller acknowledges and agrees that Buyer is entitled to
rely and has relied:
3.1 ORGANIZATION AND POWER. Seller is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and under any document or
instrument required to be executed and delivered by or on behalf of Seller under
this Agreement.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Seller to be delivered to Buyer at Closing
as provided in Section 5.1 will be, duly authorized by all necessary action on
the part of Seller, has been duly executed and delivered by Seller, constitutes
the valid and binding agreement of Seller and is enforceable against Seller in
accordance with its terms. There is no other person or entity who has an
ownership interest in the Property or whose consent is required in connection
with Seller's performance of its obligations under this Agreement. All action
required
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pursuant to this Agreement necessary to effectuate the transactions contemplated
herein has been, or will at Closing be, taken promptly and in good faith by
Seller and its representatives and agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the
performance by Seller of its obligations under, this Agreement do not and will
not contravene, or constitute a default under, any provision of applicable law
or regulation, Seller's Organizational Documents or any agreement, judgment,
injunction, order, decree or other instrument binding upon Seller, or result in
the creation of any lien or other encumbrance on any asset of Seller. There are
no outstanding agreements (written or oral) pursuant to which Seller (or any
predecessor to or representative of Seller) has agreed to contribute or has
granted an option or right of first refusal to purchase the Property or any part
thereof. Other than the rights of tenants, as tenants only, under the Leases,
there are no purchase contracts, options or other agreements of any kind,
written or oral, recorded or unrecorded, whereby any person or entity other than
Seller will have acquired or will have any basis to assert any right, title or
interest in, or right to possession, use, enjoyment or proceeds of, all or any
portion of the Property. There are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or to
otherwise acquire any interest or profit participation of any kind in the
Property or any part thereof.
3.4 NO SPECIAL TAXES. Seller has no knowledge of, nor has it
received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Seller's knowledge, there is not any
proposed increase in the assessed valuation of the Real Property for tax
purposes (except as may relate to the transfer contemplated by this Agreement).
3.5 COMPLIANCE WITH EXISTING LAWS. Seller possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Seller has not misrepresented or failed to disclose any
relevant fact in obtaining all Authorizations, and Seller has no knowledge of
any change in the circumstances under which any of those Authorizations were
obtained that result in their termination, suspension, modification or
limitation. Seller has not taken any action (or failed to take any action), the
omission of which would result in the revocation of any of the Authorizations.
Seller has no knowledge, nor has it received notice within the past three years,
of any existing or threatened violation of any provision of any applicable
building, zoning, subdivision, environmental or other governmental ordinance,
resolution,
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statute, rule, order or regulation, including but not limited to those of
environmental agencies or insurance boards of underwriters, with respect to the
ownership, operation, use, maintenance or condition of the Property or any part
thereof, or requiring any repairs or alterations other than those that have been
made prior to the Effective Date.
3.6 REAL PROPERTY. To the best of Seller's knowledge, (i) the
Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, (iii) all contractors and subcontractors retained by Seller who
have performed work on or supplied materials to the Property have been fully
paid, and all materials used at or on the Property have been fully paid for,
(iv) the Improvements have been completed in all material respects in a
workmanlike manner of first-class quality, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and
(except for the irrigation wiring) is presently operative in good working order.
Seller has not received any written notice which is still in effect that there
is, and, to the best of Seller's knowledge, there does not exist, any violation
of a condition or agreement contained in any easement, restrictive covenant or
any similar instrument or agreement effecting the Real Property, or any portion
thereof. Subject to the foregoing, the condition of the Improvements and the
equipment is acceptable to Buyer as of the Effective Date.
3.7 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Seller to Buyer is free and clear
of all liens and encumbrances and will be so on the Closing Date and Seller has
good, merchantable title thereto and the right to convey same in accordance with
the terms of this Agreement.
3.8 OPERATING AGREEMENTS. Other than the contracts referred to in
item (1) on Exhibit C-1, each of the Operating Agreements may be terminated upon
not more than thirty (30) days prior written notice and without the payment of
any penalty, fee, premium or other amount. Seller has performed all of its
obligations under each of the Operating Agreements and no fact or circumstance
has occurred which, by itself or with the passage of time or the giving of
notice or both, would constitute a default under any of the Operating
Agreements. Seller shall not enter into any new Operating Agreements, supply
contract, vending or service contract or other agreements with respect to the
Property, nor shall Seller enter into any agreements modifying the Operating
Agreements, unless (a) any such agreement or modification will not bind Buyer or
the Property after the Closing Date, or (b) Seller has obtained Buyer's prior
written consent to such agreement or modification. Other than the contracts
referred to in item (1) on Exhibit C-1, Seller acknowledges that Buyer will not
assume any of the Operating
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Agreements and none of the Operating Agreements will be binding on Buyer or the
Property after Closing.
3.9 WARRANTIES AND GUARANTIES. Seller shall not before or after
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
Buyer.
3.10 INSURANCE. All of Seller's insurance policies are valid and in
full force and effect, all premiums for such policies were paid when due and all
future premiums for such policies (and any replacements thereof) shall be paid
by Seller on or before the due date therefor. Seller shall pay all premiums on,
and shall not cancel or voluntarily allow to expire, any of Seller's insurance
policies unless such policy is replaced, without any lapse of coverage, by
another policy or policies providing coverage at least as extensive as the
policy or policies being replaced. Seller has not received any notice from any
insurance company of any defect or inadequacies in the Property to any part
thereof which would adversely affect the insurability of the Property, or which
would increase the cost of insurance beyond that which would ordinarily and
customarily be charged for similar properties in the vicinity of the Real
Property. The Property is fully insured in accordance with prudent and
customary practice. At closing, Seller may cancel all insurance policies and any
refunds of premiums resulting therefrom shall be the property of the Seller.
3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Seller has received no
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Seller has no knowledge of any change
or proposed change in the route, grade or width of, or otherwise affecting, any
street or road adjacent to or serving the Real Property. To the best of
Seller's knowledge, no fact or condition exists which would result in the
termination or material impairment of access to the Real Property from adjoining
public or private streets or ways or which could result in discontinuation of
presently available or otherwise necessary sewer, water, electric, gas,
telephone or other utilities or services.
3.12 LITIGATION. Except as disclosed in writing to Seller, there is
no action, suit or proceeding pending or known to be threatened against or
affecting Seller or any of its properties in any court, before any arbitrator or
before or by any Governmental Body which (a) in any manner raises any question
affecting the validity or enforceability of this Agreement or any other
agreement or instrument to which Seller is a party or by which it is bound and
that is or is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of Seller, (c) could materially and adversely
affect the ability of Seller to perform its obligations under
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this Agreement, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Property, any part thereof or any interest therein, (e) the
subject matter of which concerns any past or present employee of Seller or its
managing agent, or (f) could otherwise adversely materially affect the Property,
any part thereof or any interest therein or the use, operation, condition or
occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes
pending or, to the best of Seller's knowledge, threatened as to the operation or
maintenance of the Property or any part thereof. Seller is not a party to any
union or other collective bargaining agreement with employees employed in
connection with the ownership, operation or maintenance of the Property. Seller
is not a party to any employment contracts or agreements, other than the
Employment Agreements, and neither Seller nor its managing agent will, between
the Effective Date and the Closing Date, enter into any new employment contracts
or agreements, amend any existing Employment Agreement, except with the prior
written consent of Buyer. Seller acknowledges that Buyer will not assume any of
the Employment Agreements and Seller has complied with and shall be responsible
for compliance with the WARN Act and any other applicable employment-related
laws or ordinances. Seller has complied with the requirements of the federal
Immigration and Reform Control Act respecting the employment of undocumented
workers.
3.14 FINANCIAL INFORMATION. To the best of Seller's knowledge, all of
Seller's financial information, including, without limitation, all books and
records and financial statements, is correct and complete in all material
respects and presents accurately the results of the operations of the Property
for the periods indicated.
3.15 ORGANIZATIONAL DOCUMENTS. Seller's Organizational Documents are
in full force and effect and have not been modified or supplemented, and no fact
or circumstance has occurred that, by itself or with the giving of notice or the
passage of time or both, would constitute a default thereunder.
3.16 OPERATION OF PROPERTY. Seller covenants, that between the
Effective Date and the Closing Date, it will (a) operate the Property in the
usual, regular and ordinary manner consistent with Seller's prior practice, (b)
maintain its books of account and records in the usual, regular and ordinary
manner, in accordance with sound accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years and (c) use
all reasonable efforts to preserve intact its present business organization,
keep available the services of its present officers, partners and employees and
preserve its relationships with suppliers and others having business dealings
with it. Except as otherwise permitted hereby, from the Effective Date until
Closing, Seller shall not take any action or fail to take action the result of
which would have a material
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adverse effect on the Property or Buyer's ability to continue the operation
thereof after the Closing Date in substantially the same manner as presently
conducted, or which would cause any of the representations and warranties
contained in this Article III to be untrue as of Closing.
From and after the execution and delivery of this Agreement, Seller
shall not, other than in the ordinary course of business, (a) make any
agreements which shall be binding upon Buyer with respect to the Property, or
(b) reduce or cause to be reduced any green fees, membership fees, tournament
fees, driving range fees or any other charges over which Seller has operational
control. Between the Effective Date and the Closing Date, if and to the extent
requested by Buyer, Seller shall deliver to Buyer such periodic information with
respect to the above information as Seller customarily keeps internally for its
own use. Seller agrees that it will operate the Property in accordance with the
provisions of this Section 3.16 between the Effective Date and the Closing Date.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Seller.
3.18 LAND USE. The current use and occupancy of the Property for
golfing and all other related purposes (including, without limitation, the sale
of merchandise and food and beverages) are permitted as a principal use under
all laws and regulations applicable thereto without the necessity of any special
use permit, special exception or other special permit (other than the Operation
Permit referred to below) permission or consent and Seller is not aware of any
proposal to change or restrict such use. Seller has all necessary certificates
of occupancy or completion to operate the Property as presently operated and
there are no unfulfilled conditions respecting the development of the Property.
Seller has a valid permit to operate the Property within the zone of protection
from the County of Pinellas, Florida (the "Operation Permit"). The Operation
Permit is assignable to Buyer without the consent of Pinellas County, or any
other party.
3.19 HAZARDOUS SUBSTANCES. Except as may be disclosed in the Phase I
environmental assessment report dated March 20, 1994 for the Property, to the
best of Seller's knowledge, (i) no Hazardous Substances are or have been located
on (except in immaterial amounts used in the ordinary course for the operation
or maintenance of the Property by Seller in accordance with all applicable
laws), in or under the Property or have been released into the environment, or
discharged, placed or disposed of at, on or under the Property; (ii) no
underground storage tanks are, or have been, located at the Property; (ii) the
Property has never been used to store, treat or dispose of Hazardous Substances;
and (iv) the Property and its prior uses comply with, and at all times have
complied with all applicable Environmental Laws or any other governmental law,
regulation or requirement relating to
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environmental and occupational health and safety matters and Hazardous
Substances. To the best of Seller's knowledge, there currently exist no facts
or circumstances that could reasonably be expected to give rise to a material
non-compliance with Environmental Laws, material environmental liability or
material Environmental Claim.
3.20 UTILITIES. All Utilities required for the operation of the
Property either enter the Property through adjoining streets, or they pass
through adjoining land and do so in accordance with valid public easements or
private easements, and all of said Utilities are installed and are in good
working order and repair and operating as necessary for the operation of the
Property and all installation and connection charges therefor have been paid in
full. The sewage, sanitation, plumbing, water retention and detention, refuse
disposal and utility facilities in and on and/or servicing the Real Property are
adequate to service the Real Property as it is currently being used and the Real
Property's utilization of such facilities is in compliance with all applicable
governmental and environmental protection authorities' laws, rules, regulations
and requirements.
3.21 CURB CUTS. All curb cut street opening permits or licenses
required for vehicular access to and from the Property from any adjoining public
street have been obtained and paid for and are in full force and effect.
3.22 LEASED PROPERTY. The Personal Property identified on EXHIBIT C
is all of the leased property at the Property, and such exhibit reflects the
date of each such lease, the name of the lessor, the name of the lessee, the
term of each such lease, the lease payment terms and a description of the
property demised by each such lease. All leases of such property are in good
standing and free from default.
3.23 SUFFICIENCY OF CERTAIN ITEMS. The Property contains an amount of
equipment and supplies, which is sufficient to efficiently operate and maintain
the Property in the manner in which it is normally operated and maintained.
3.24 ADDITIONAL REPRESENTATIONS AND WARRANTIES.
(a) There are no Employment Agreements, contracts or
understandings that are binding on Buyer, its successors,
assignees or lessees.
(b) There is a bona fide, valid, binding and enforceable water
contract benefitting the Property with the local
municipality which will survive the closing pursuant to
which the Property will receive so long as it continues to
take a minimum number gallons per day of reclaimed water so
long as a golf course is operated on the Property.
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(c) No membership program exists or will exist after December
31, 1997.
3.25 SURVIVAL OF REPRESENTATIONS. Each of the representations,
warranties and covenants contained in this Article III are intended for the
benefit of Buyer. Each of said representations, warranties and covenants shall
survive the Closing for a period of one (1) year, at which time they shall
expire unless prior to such time Buyer has made a formal, written claim alleging
a breach of one or more of the representations, warranties or covenants. No
investigation, audit, inspection, review or the like conducted by or on behalf
of Buyer shall be deemed to terminate the effect of any such representations,
warranties and covenants, it being understood that Buyer has the right to rely
thereon and that each such representation, warranty and covenant constitutes a
material inducement to Buyer to execute this Agreement and to close the
transaction contemplated hereby and to pay the Purchase Price to Seller.
ARTICLE IV
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Seller to enter into this Agreement and to sell the
Property, Buyer hereby makes the following representations, warranties and
covenants, upon each of which Buyer acknowledges and agrees that Seller is
entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. Buyer is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and has all governmental licenses, Authorizations, consents and
approvals required to carry on its business as now conducted and to enter
into and perform its obligations under this Agreement and any document or
instrument required to be executed and delivered on behalf of Buyer under
this Agreement.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement
and the performance by Buyer of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Buyer or result in the creation of any lien or other
encumbrance on any asset of Buyer.
4.3 LITIGATION. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting Buyer in any court or before any
arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely affect the business, financial position or results of
operations of Buyer, or (b) could materially and adversely affect the ability of
Buyer to perform its obligations under this Agreement, or under any document to
be delivered pursuant hereto.
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4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Buyer.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Buyer to be delivered to Seller at Closing
as provided in Section 5.2 will be, duly authorized by all necessary action on
the part of Buyer, has been duly executed and delivered by Buyer, constitutes
the valid and binding agreement of Buyer and is enforceable against Buyer in
accordance with its terms. All action required pursuant to this Agreement
necessary to effectuate the transactions contemplated herein has been, or will
at Closing be, taken promptly and in good faith by Buyer and its representatives
and agents.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO BUYER'S OBLIGATIONS. Buyer's obligations under this
Agreement are subject to the satisfaction of the following conditions precedent
and the compliance by Seller with the following covenants:
(a) SELLER'S DELIVERIES. Seller shall have delivered to or for the
benefit of Buyer, as the case may be, on or before the Closing Date, all of the
documents and instruments and other information required of Seller pursuant to
this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Seller's
representations and warranties made in this Agreement shall be true and correct
as of the Effective Date and as of the Closing Date as if then made, there shall
have occurred no material adverse change in the condition or financial results
of the operation of the Property since the Effective Date. Seller shall have
performed all of its covenants and other obligations under this Agreement and
Seller shall have executed and delivered to Buyer on the Closing Date a
certificate dated as of the Closing Date to the foregoing effect in the form of
EXHIBIT K attached hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
(d) TITLE TO PROPERTY. Buyer shall have determined that Seller is
the sole owner of good and marketable fee simple title (or ground lease
interest, as applicable) to the Real Property, to the Intangible Personal
Property, and to the Tangible Personal Property, free and clear of all liens,
encumbrances, restrictions, conditions and agreements except for Permitted Title
Exceptions. Seller shall not have taken any action or permitted or suffered any
action to be taken by others from the Effective Date and through and including
the Closing
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Date that would adversely affect the status of title to the Real Property or to
the Tangible Personal Property.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving range,
putting greens, mechanical systems, plumbing, electrical wiring, appliances,
fixtures, heating, air conditioning and ventilating equipment, elevators,
boilers, equipment, roofs, structural members and furnaces) shall be in the same
condition at Closing as they are as of the Effective Date, reasonable wear and
tear excepted. Prior to Closing, Seller shall not have diminished the quality
or quantity of maintenance and upkeep services heretofore provided to the Real
Property and the Tangible Personal Property. Seller shall not have removed or
caused or permitted to be removed any part or portion of the Real Property or
the Tangible Personal Property unless the same is replaced, prior to Closing,
with similar items of at least equal quality and acceptable to Buyer.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property. Between the Effective Date and the
Closing Date, Seller shall have received no notice of any material increase or
proposed material increase in the rates charged for the Utilities from the rates
in effect as of the Effective Date.
(g) LIQUOR LICENSE. Seller shall have performed its obligations
under Section 7.5 below.
(h) THE OPERATION PERMIT. Seller shall have delivered to Buyer The
Operation Permit.
Each of the conditions and additional covenants contained in this
Section are intended for the benefit of Buyer and may be waived in whole or in
part by Buyer, but only by an instrument in writing signed by Buyer.
5.2 AS TO SELLER'S OBLIGATIONS. Seller's obligations under this are
subject to the satisfaction of the following conditions precedent and the
compliance by Buyer with the following covenants:
(a) BUYER'S DELIVERIES. Buyer shall have delivered to or for the
benefit of Seller, on or before the Closing Date, all of the documents and
payments required of Buyer pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Buyer's
representations and warranties made in this Agreement shall be true and correct
as of the Effective Date and as of the Closing Date as if then made and Buyer
shall have performed all of its covenants and other obligations under this
Agreement.
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Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Seller and may be waived in whole or in part, by
Seller, but only by an instrument in writing signed by Seller.
ARTICLE VI
CLOSING
6.1 CLOSING. Closing shall be held at 9:00 a.m., New York time, at
the offices of the Company (or counsel to the Company) on or before October 15,
1997; provided, however Buyer in its sole discretion, may extend the Closing for
up to an additional fifteen (15) days upon the payment of an additional
non-refundable deposit of Two Hundred Fifty Thousand Dollars ($250,000.00),
which sum shall constitute an increase in the Earnest Money Deposit. Time is of
the essence. If the Closing Date falls on a Saturday, Sunday or other legal
holiday, the Closing shall take place on the first following business day
thereafter. Possession of the Property shall be delivered to Buyer at Closing,
subject only to Permitted Title Exceptions.
6.2 SELLER'S DELIVERIES. At Closing, Seller shall deliver to Buyer
all of the following instruments, each of which shall have been duly executed
and, where applicable, acknowledged and/or sworn on behalf of Seller and shall
be dated as of the Closing Date:
(a) SELLER'S CERTIFICATE. The certificate required by Section 5.1
(b).
(b) THE DEED.
(c) THE BILL OF SALE - PERSONAL PROPERTY.
(d) EVIDENCE OF TITLE. Evidence of title acceptable to Buyer for any
vehicle owned by Seller and used in connection with the Property.
(e) TITLE REQUIREMENTS. Such agreements, affidavits or other
documents as may be required by the Title Company to issue the Owner's Title
Policy including those endorsements requested by Buyer, and to eliminate the
standard exceptions as exceptions thereto, so that the Owner's Title Policy will
be subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and gap
affidavit.
(f) THE FIRPTA CERTIFICATE.
(g) WARRANTIES. To the extent available, true, correct and complete
copies of all warranties, if any, of manufacturers, suppliers and installers
possessed by Seller and relating to the Property, or any part thereof.
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(h) ORGANIZATIONAL DOCUMENTS. Certified copies of Seller's
Organizational Documents.
(i) BOARD RESOLUTIONS. Appropriate resolutions of the board of
directors or partners, as the case may be, of Seller, certified by the secretary
or an assistant secretary of Seller or a general partner, as the case may be,
together with all other necessary approvals and consents of Seller, authorizing
(i) the execution on behalf of Seller of this Agreement and the documents to be
executed and delivered by Seller prior to, at or otherwise in connection with
Closing, and (ii) the performance by Seller of its obligations under this
Agreement and under such documents, or appropriate resolutions of the partners
of Seller, as the case may be.
(j) CERTIFICATE OF OCCUPANCY. Original copies of the letters from
Spring Engineering, Inc. and the County of Pinellas in the form attached as
Exhibit I, and a zoning certification letter issued by the County of Pinellas
allowing for the use of the Real Property as a golf course and permitting the
continued operation of the improvements as presently operated.
(k) EVIDENCE OF BULK SALES COMPLIANCE. Such proof as Buyer may
reasonably require with respect to Seller's compliance (or indemnity with
respect to compliance) with the bulk sales laws or similar statutes.
(l) INSURANCE POLICIES. Copy of each and every existing insurance
policy covering the Property and certificates evidencing such coverage.
(m) IMPROVEMENT PLANS. To the extent available, a set or copies of
the plans and specifications for the Improvements.
(n) COMMUNICATION; ADDRESSES. A written instrument executed by
Seller, conveying and transferring to Buyer all of Seller's right, title and
interest in any telephone numbers, fax numbers or internet or electronic mail
addresses (if applicable) relating solely to the Property, and, if Seller
maintains a post office box solely with respect to the Property, conveying to
Buyer all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.
(o) TAX BILLS. All current real estate and personal property tax
bills in Seller's possession or under its control.
(p) SURVEYS. All surveys and plot plans of the Real Property in
possession of or in the control of Seller.
(q) TOURNAMENT SCHEDULE. A complete list of all scheduled
tournaments, functions and the like, in reasonable detail.
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(r) ACCOUNTS RECEIVABLE. A list of Seller's outstanding accounts
receivable as of midnight on the date prior to the Closing, specifying the name
of each account and the amount due Seller.
(s) PAYOFF STATEMENT. A payoff statement prepared by any holder of
Mortgage Indebtedness setting forth the amount, including accrued interest and
prepayment penalties, to pay off the Mortgage Indebtedness.
(t) TENANT NOTICES. Written notice executed by Seller notifying all
interested parties, including all tenants under any leases of the Property, that
the Property has been conveyed to Buyer and directing that all payments,
inquiries and the like be forwarded to Buyer at the address to be provided by
Buyer.
(u) MISCELLANEOUS. Any other document or instrument reasonably
requested by Buyer with respect to the Property, or in connection with the
Registered Offering.
6.3 BUYER'S DELIVERIES. At Closing, Buyer shall pay or deliver to
Seller the following:
(a) PURCHASE PRICE. The Purchase Price (as adjusted pursuant hereto)
by federal funds wire to the Escrow Agent.
(b) MISCELLANEOUS. Any other document or instrument reasonably
requested by Seller relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Buyer and Seller shall mutually
execute and deliver each to the other:
(a) CLOSING STATEMENTS. A closing statement for Seller and a closing
statement for Buyer (collectively, the "Closing Statements") reflecting the
Purchase Price and the adjustments and prorations required under this Agreement
and the allocation of income and expenses required hereby.
(b) LIQUOR LICENSE TRANSFER DOCUMENTS. Such other documents,
instruments and undertakings as may be required by the liquor authorities of the
State or of any county or municipality or Governmental Body having jurisdiction
with respect to the transfer or issue of any liquor licenses or alcoholic
beverage licenses or permits for the Property, to the extent not theretofore
executed and delivered.
(c) MISCELLANEOUS. Such other and further documents, papers and
instruments as may be reasonably required by the parties hereto or their
respective counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this
Agreement, each party hereto shall pay its own legal fees and expenses. All
filing fees for the Deed and the real estate
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transfer, recording or other similar taxes due with respect to the transfer of
title and all charges for title insurance premiums shall be paid by Buyer.
Seller shall pay for preparation of the documents to be delivered by Seller
under this Agreement, and for the releases of any deeds of trust, mortgages and
other financing encumbering the Property and for any costs associated with any
corrective instruments. Buyer shall pay for all third party due diligence
reports. Buyer to pay for survey costs except 3.5+ acre tract currently
encompassing the pool and tennis areas not presently being used.
6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Seller and Buyer (or, at
Buyer's election, between Seller and the lessee under the Golf Course Lease to
the extent such income or expenses will be payable by or attributable to such
lessee). Seller shall be entitled to all income and shall be responsible for
all expenses for the period of time up to but not including the Closing Date,
and Buyer shall be entitled to all income and shall be responsible for all
expenses for the period of time from, after and including the Closing Date.
Such adjustments shall be shown on the Closing Statements (with such supporting
documentation as the parties hereto may require being attached as exhibits to
the Closing Statements) and shall increase or decrease (as the case may be) the
Purchase Price payable by Buyer. Without limiting the generality of the
foregoing, the following items of income and expense shall be prorated at
Closing:
(a) RENTS AND FEES. With the exception of prepaid annual dues and
prepaid Golf Club membership fees, all current and prepaid rents or fees,
function receipts and other reservation receipts.
(b) TAXES. Real estate and personal property taxes.
(c) UTILITIES. Utility charges (including but not limited to charges
for water, sewer and electricity).
(d) FUEL. Value of fuel stored on the Property at the price paid for
such fuel by Seller, including any taxes.
(e) MUNICIPAL IMPROVEMENT LIENS. Municipal improvement liens where
the work has physically commenced (certified liens) shall be paid by Seller at
Closing. Municipal improvement liens which have been authorized, but where the
work has not commenced (pending liens) shall be assumed by Buyer.
(f) LICENSE AND PERMIT FEES. License and permit fees, where
transferable.
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(g) INCOME AND EXPENSES. All other income and expenses of the
Property, including, but not being limited to such things as restaurant and
snack bar income and expenses and the like.
(h) MISCELLANEOUS PRORATIONS. Such other items as are usually and
customarily prorated between Buyers and Sellers of golf course properties in the
area in which the Property is located shall be prorated as of the Closing Date.
6.7 SALES TAXES. Seller shall be required to pay all sales taxes and
like impositions arising from the ownership and operation of the Property
currently through the Closing Date.
6.8 POST-CLOSING ADJUSTMENTS.
(a) ACCOUNTS RECEIVABLE. Buyer shall not be obligated to collect any
accounts receivable or revenues accrued prior to the Closing Date for Seller,
but if Buyer collects same, such amounts will be promptly remitted to Seller in
the form received. Buyer shall receive a credit at Closing for the amount of
any security deposits held by Seller under any lease of any portion of the
Property that is being assigned to Buyer in accordance herewith.
(b) AVAILABILITY OF BILLS. If accurate allocations and prorations
cannot be made at Closing because current bills are not obtainable (as, for
example, in the case of utility bills and/or real estate or personal property
taxes), the parties shall allocate such income or expenses at Closing on the
best available information, subject to adjustment outside of escrow upon receipt
of the final bill or other evidence of the applicable income or expense. Any
income received or expense incurred by Seller or Buyer with respect to the
Property after the Closing Date shall be promptly allocated in the manner
described herein and the parties shall promptly pay or reimburse any amount due.
Seller shall pay at Closing all accrued special assessments and taxes applicable
to the Property.
ARTICLE VII
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Seller shall give written notice
thereof to Buyer promptly after Seller learns or receives notice thereof. If
all or any part of the Real Property is, or is to be, so condemned or sold,
Buyer shall have the right to terminate this Agreement pursuant to Section 8.3.
If Buyer elects not to terminate this Agreement, all proceeds, awards and other
payments arising out of such condemnation or sale (actual or threatened) shall
be paid or assigned, as applicable, to Buyer at Closing. Seller will not
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settle or compromise any such proceeding without Buyer's prior written consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the Property
prior to the Closing Date shall remain upon Seller. If any such loss or damage
occurs prior to Closing, Buyer shall have the right to terminate this Agreement
pursuant to Section 8.3. If Buyer elects not to terminate this Agreement, all
insurance proceeds and rights to proceeds arising out of such loss or damage
shall be paid or assigned, as applicable, to Buyer at Closing.
7.3 REAL ESTATE BROKER. Except for a broker or finder who may have
been engaged by Buyer (including, without limitation, Hallmark Partners/Alex
Coley) for whom Buyer accepts sole financial responsibility, and except for any
broker or finder who may have been engaged by Seller and for whom Seller accepts
sole financial responsibility, there is no real estate broker involved in this
transaction. Seller warrants and represents to Buyer that Seller has not dealt
with any other real estate broker in connection with this transaction, nor has
Seller been introduced to the Property or to Buyer by any other real estate
broker, and Seller shall indemnify Buyer and save and hold Buyer harmless from
and against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation to
a real estate brokerage commission or a finder's fee as a result of having dealt
with Seller, or as a result of having introduced Seller to Buyer or to the
Property. In like manner, Buyer warrants and represents to Seller that Buyer
has not dealt with any real estate broker in connection with this transaction,
nor has Buyer been introduced to Seller by any real estate broker, and Buyer
shall indemnify Seller and save and hold Seller harmless from and against any
claims, suits, demands or liabilities of any kind or nature whatsoever arising
on account of the claim of any person, firm or corporation to a real estate
brokerage commission or a finder's fee as a result of having dealt with Buyer in
connection with this transaction. Buyer acknowledges that David J. Dick, an
officer of the Buyer, is a licensed California real estate broker but is not
acting as a broker in relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and after
the execution of this Agreement, Buyer and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
except to their respective attorneys, accountants, engineers, surveyors,
financiers and bankers. Notwithstanding the foregoing, it is acknowledged that
Buyer and/or its affiliates is subject to continuing disclosure requirements
under the Securities and Exchange Act of 1934 and that in connection with the
foregoing, Buyer will have the absolute right to prepare and file all necessary
or required registration statements,
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annual, quarterly and current reports and other papers, documents and
instruments necessary or required in Buyer's judgment and that of its attorneys
and underwriters to comply with applicable SEC rules. The obligations of this
Section 7.4 shall survive any termination of this Agreement.
7.5 LIQUOR LICENSES. Seller shall transfer or cause to be
transferred to Buyer or, at Buyer's discretion, Buyer's nominee (which may
include the lessee under the Golf Course Lease), all liquor licenses and
alcoholic beverage licenses, if any, necessary to operate the restaurant, bars,
snack bars and lounges presently located within the Property, if any. To that
end, Seller and Buyer, or Buyer's nominee, shall cooperate each with the other,
and each shall execute such transfer forms, license applications and other
documents as may be necessary to effect such transfer. If permitted under the
laws of the jurisdiction in which the Property is located, the parties shall
execute and file all necessary transfer forms, applications and papers with the
appropriate liquor and alcoholic beverage authorities prior to Closing, to the
end that the transfer shall take effect, if possible, on the Closing Date,
simultaneously with Closing. If not so permitted, then the parties agree each
with the other that they will promptly execute all transfer forms, applications
and other documents required by the liquor authorities in order to effect such
transfer at the earliest date in time possible consistent with the laws of the
State in order that all liquor licenses may be transferred from Seller to Buyer,
or Buyer's nominee, at the earliest possible time. If under the laws of the
State such licenses cannot be transferred until after the Closing of the
transaction contemplated hereby, then Seller covenants and agrees that Seller
will cooperate with Buyer, or Buyer's nominee, in keeping open the bars and
liquor facilities of the Property between the Closing Date and the time when
such liquor license transfers actually become effective (but not to exceed 180
days), by exercising management and supervision of such facilities until such
time under Seller's licenses, provided, however, that: (i) Buyer shall
indemnify and hold Seller harmless from any costs, liability, damages or claims
encountered in connection with such operations during said period of time,
except for Seller's gross negligence or willful misconduct and (ii) Tarpon Woods
Restaurant Corporation shall be named as an additional insured on Buyer's
insurance policy.
ARTICLE VIII
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS
8.1 LIABILITY OF BUYER. Except for any obligation expressly assumed
or agreed to be assumed by Buyer under this Agreement, Buyer does not assume any
obligation of Seller or any liability for claims arising out of any occurrence
prior to Closing.
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8.2 INDEMNIFICATION BY SELLER. Seller hereby indemnifies and holds
Buyer harmless from and against any and all claims, costs, penalties, damages,
losses, liabilities and expenses (including reasonable attorneys' fees) that may
at any time be incurred by Buyer, whether before or after Closing, as a result
of any breach by Seller of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Seller
pursuant hereto, for a period of one (1) year following the Closing. The
provisions of this section shall survive termination of this Agreement by Buyer
or Seller.
8.3 TERMINATION BY BUYER. If any condition set forth herein for the
benefit of Buyer under Section 5.1 above cannot or will not be satisfied prior
to Closing, or upon the occurrence of any other event that would entitle Buyer
to terminate this Agreement and its obligations under this Agreement, and Seller
fails to cure any such matter within ten (10) business days after notice thereof
from Buyer, Buyer, at its option, may elect either (a) to terminate this
Agreement and all other rights and obligations of Seller and Buyer under this
Agreement shall terminate immediately, and Seller shall cause the Earnest Money
Deposit to be immediately returned to Buyer, or (b) to waive its right to
terminate (but without waiving any breach or default on the part of Seller) and,
instead, to proceed to Closing, reserving any and all remedies Buyer may have,
including, without limitation, specific performance. If Buyer terminates this
Agreement as a consequence of a misrepresentation or breach of a warranty or
covenant by Seller, or a failure by Seller to perform its obligations under this
Agreement, then Buyer shall retain all remedies accruing as a result thereof.
8.4 TERMINATION BY SELLER. If any condition set forth herein for the
benefit of Seller under Section 5.2 above cannot or will not be satisfied prior
to Closing, and Buyer fails to cure any such matter within ten (10) business
days after notice thereof from Seller, Seller may, at its option, elect either
(a) to terminate this Agreement, in which event the rights and obligations of
Seller and Buyer hereunder shall terminate immediately, or (b) to waive its
right to terminate, and instead, to proceed to Closing. If, prior to Closing,
Buyer defaults in performing any of its obligations under this Agreement
(including its obligation to purchase the Property), and Buyer fails to cure any
such default within ten (10) business days after notice thereof from Seller,
then Seller's sole remedy for such default shall be to terminate this Agreement
and Seller waives any claims for damages, actual, consequential or otherwise,
that it may possess against Buyer.
8.5 COSTS AND ATTORNEYS' FEES. In the event of any litigation or
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, arbitration or other form of dispute
resolution, then the prevailing party in such litigation shall be entitled to
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recover its costs of prosecuting and/or defending same, including, without
limitation, reasonable attorneys' fees at trial and all appellate levels.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 ASSIGNMENTS. Buyer may assign its rights under this Agreement to
an affiliate of Buyer without the consent of Seller. Buyer may not otherwise
assign its interest herein without the prior written consent of Seller. Seller
may not assign any of its rights pursuant to this Agreement without the prior
written consent of Buyer, which may be withheld in Buyer's sole and absolute
discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
9.4 DAYS. If any action is required to be performed, or if any
notice, consent or other communication is given, on a day that is a Saturday or
Sunday or a legal holiday in the jurisdiction in which the action is required to
be performed or in which is located the intended recipient of such notice,
consent or other communication, such performance shall be deemed to be required,
and such notice, consent or other communication shall be deemed to be given, on
the first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to
herein shall be governed by and construed and interpreted in accordance with the
laws of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement. Facsimile signatures shall be deemed to have the same legal effect
as original signatures. Original executed copies shall thereafter be exchanged
between the parties.
9.7 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application thereof to any person or
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circumstance, shall to any extent be invalid or unenforceable, the remainder of
this Agreement, or the application of such term, covenant or condition to other
persons or circumstances, shall not be affected thereby, and each term, covenant
or condition of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
9.8 COSTS. Regardless of whether Closing occurs under this
Agreement, and except as otherwise expressly provided in this Agreement, each
party to this Agreement shall be responsible for its own costs in connection
with this Agreement and the transactions contemplated hereby, including without
limitation, fees of attorneys, engineers and accountants.
9.9 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be delivered by hand,
transmitted by facsimile transmission, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States mail,
certified, postage prepaid, return receipt requested, at the addresses and with
such copies as on the Summary Sheet or to such other address as the intended
recipient may have specified in a notice to the other party. Any party hereto
may change its address or designate different or other persons or entities to
receive copies by notifying the other party and Escrow Agent in a manner
described in this Section. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all of the
representations, warranties, covenants and agreements of Seller and Buyer made
in, or pursuant to, this Agreement shall survive Closing and shall not merge
into the Deed or any other document or instrument executed and delivered in
connection herewith.
9.12 FURTHER ASSURANCES. Seller and Buyer each covenant and agree to
sign, execute and deliver, or cause to be signed, executed and delivered, and to
do or make, or cause to be done or made, upon the written request of the other
party, any and all agreements, instruments, papers, deeds, acts or things,
supplemental, confirmatory or otherwise, as may be reasonably required by either
party hereto for the purpose of or in connection with consummating the
transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Seller and Buyer
specifically established hereby.
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9.14 CONFIDENTIALITY. Any confidential information delivered by
Seller to Buyer under this Agreement shall be used solely for the purpose of
acquiring the Property and Buyer will keep such information confidential;
provided Buyer shall have the right to provide such information to its
consultants and advisors and to disclose such information as Buyer determines is
necessary or appropriate in connection with filing with the Securities and
Exchange Commission. If Buyer does not acquire the Property, it shall deliver
to Seller copies of all proprietary information delivered to Buyer by Seller.
Seller agrees to keep confidential the terms and conditions of this Agreement
and the Registered Offering; provided, Seller shall have the right to provide
such information to its consultants and advisors.
9.15 LIKE KIND EXCHANGE TREATMENT. Buyer hereby acknowledges and
agrees that it is the intention of the Seller that any gain recognized by Seller
on the sale of the premises will be eligible for nonrecognition treatment
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended.
Consistent with the foregoing, Seller anticipates entering into a Deferred
Exchange Agreement ("Exchange Agreement") with a party to be designated by
Seller and which Exchange Agreement will contemplate that the party designated
by Seller will be deemed to have conveyed the premises to Purchaser in
accordance with the terms and conditions provided for herein. Seller hereby
acknowledges and agrees that, in no event, will the Seller's execution of the
Exchange Agreement adversely affect Buyer to any extent under any of the other
terms and conditions set forth herein.
9.16 JOINT AND SEVERAL OBLIGATIONS. All obligations and liabilities
of Seller hereunder shall be the joint and several obligations of both Meghan
Associates, LLC and Tarpon Woods Restaurant Corporation.
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IN WITNESS WHEREOF, Seller and Buyer have hereunder affixed their
signatures to this Purchase and Sale Agreement, all as of the 31st day of
August, 1997.
"BUYER"
GOLF TRUST OF AMERICA, L.P., A DELAWARE LIMITED
PARTNERSHIP
By: Golf Trust of America, Inc., a Maryland
corporation
Its: General Partner
By: /s/ W. Bradley Blair
------------------------------------
Its: President
------------------------------------
By:
------------------------------------
Its:
------------------------------------
"SELLER"
MEGHAN ASSOCIATES, LLC, A LIMITED LIABILITY
COMPANY,
By: /s/ Michael S. Muraco
------------------------------------
Michael S. Muraco
Its: President
------------------------------------
TARPON WOODS RESTAURANT CORPORATION
By: /s/ Michael S. Muraco
------------------------------------
Its: President
------------------------------------
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CONTRIBUTION AND LEASEBACK AGREEMENT
dated as of September 18, 1997
by and between
EAGLE WATCH GOLF CLUB LIMITED PARTNERSHIP,
an Illinois limited partnership,
as Transferor,
and
GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership,
as Transferee
Eagle Watch Golf Club
Woodstock, Georgia
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE . . . . . . 8
2.1 Purchase and Contribution. . . . . . . . . . . . . . . . . . . . 8
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Payment of Base Purchase Price . . . . . . . . . . . . . . . . . 10
ARTICLE III TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 11
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 11
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . 11
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . 12
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . 13
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . 13
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . 14
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . 14
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . 14
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . 14
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Public Offering; Preparation of S-11 . . . . . . . . . . . . . . 15
3.20 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . 16
3.21 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.22 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.23 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . 16
3.24 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . 16
3.25 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . 17
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ARTICLE IV TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 17
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 17
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . 18
4.6 Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . 18
5.1 As to Transferee's Obligations . . . . . . . . . . . . . . . . . 18
5.2 As to Transferor's Obligations . . . . . . . . . . . . . . . . . 20
ARTICLE VI CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Transferor's Deliveries. . . . . . . . . . . . . . . . . . . . . 21
6.3 Transferee's Deliveries. . . . . . . . . . . . . . . . . . . . . 23
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . 24
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Liability of Transferee. . . . . . . . . . . . . . . . . . . . . 27
8.2 Indemnification by Transferor. . . . . . . . . . . . . . . . . . 27
8.3 Termination by Transferee. . . . . . . . . . . . . . . . . . . . 27
8.4 Termination by Transferor. . . . . . . . . . . . . . . . . . . . 28
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 28
ARTICLE IX MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . 28
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . 28
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 28
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9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . 29
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 30
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 30
EXHIBITS
Exhibit A-Legal Description of the Land
Exhibit B-Description of Improvements
Exhibit C-Tangible Personal Property
Exhibit D-Intangible Personal Property
Exhibit E-Golf Course Lease
Exhibit F-Bill of Sale - Personal Property
Exhibit G-Deed
Exhibit H-FIRPTA Affidavit of Transferor
Exhibit I-Contracts and Operating Agreements
Exhibit J-Partnership Agreement
Exhibit K-Calculation of Purchase Price
Exhibit L-Due Diligence List
Exhibit M-Schedule of Mortgages
Exhibit N-Accredited Investor Questionnaire
Exhibit O-Transferor's Certificate
Exhibit P-Warranty Disclosure Schedule
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CONTRIBUTION AND LEASEBACK AGREEMENT
SUMMARY SHEET
Transferee: GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
Transferor: EAGLE WATCH GOLF CLUB LIMITED PARTNERSHIP,
an Illinois limited partnership
Date of
Agreement: September 18, 1997
Golf Course: Eagle Watch Golf Club
(address): Woodstock, Georgia
Trade Name: Eagle Watch Golf Club
Notice Address
of Transferor: E. Neal Trogdon
The Crescent Company
1580 South Milwaukee Avenue, Suite 208
Libertyville, Illinois 60048
with a copy to: David Grossberg, Esquire
Sachoff and Weaver
30 South Wacker Drive
Chicago, Illinois 60606-7484
Notice Address
of Transferee: W. Bradley Blair, II
Golf Trust of America, Inc.
14 N. Adger's Wharf
Charleston, South Carolina 29401
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with a copy to: Peter T. Healy, Esq.
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
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CONTRIBUTION AND LEASEBACK AGREEMENT
THIS CONTRIBUTION AND LEASEBACK AGREEMENT (this "Agreement") is
entered into by and between Transferee and Transferor.
RECITALS:
A. Transferor is the owner of that certain Golf Course and related
improvements located on the real property more particularly described in EXHIBIT
A attached hereto (the "Land").
B. Subject to the terms of this Agreement, Transferor hereby agrees
to contribute, assign and convey to Transferee, and Transferee hereby agrees to
acquire from Transferor, all of Transferor's right, title and interest in and to
the following:
1. The Land, together with the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, fixtures and other items of real
estate located on the Land (the "Improvements"), as more particularly
described in EXHIBIT B attached hereto.
2. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Transferor's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements, including, without limitation, concession agreements for spas
and the like (the Land, the Improvements and all such easements and
appurtenances are sometimes collectively hereinafter referred to as the
"Real Property").
3. All items of tangible personal property and fixtures (if any)
owned or leased by Transferor and located on or used in connection with
the Real Property, including, but not limited to, machinery, equipment,
furniture, furnishings, movable walls or partitions, phone systems and
other control systems, restaurant equipment, computers or trade fixtures,
golf course operation and maintenance equipment, including mowers,
tractors, aerators, sprinklers, sprinkler and irrigation facilities and
equipment, valves or rotors, driving range equipment, athletic training
equipment, office equipment or machines, other decorations, and equipment
or machinery of every kind or nature located on or used in connection with
the operation of the Real Property whether on or off-site, including all
warranties and guaranties associated therewith (the "Tangible Personal
Property"), excluding all golf carts, whether owned or leased, which shall
be retained by Transferor. A schedule of the Tangible Personal Property is
attached to this Agreement as EXHIBIT C, indicating whether such Tangible
Personal Property is owned or leased. The schedule of Tangible Personal
Property shall also indicate
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those items of personal property, such as art and antiques, which is
excluded from the personal property being conveyed hereby.
4. All intangible personal property owned or possessed by Transferor
and used in connection with the ownership, operation, leasing or
maintenance of the Real Property or the Tangible Personal Property, all
goodwill attributed to the Property, and any and all trademarks and
copyrights, guarantees, Authorizations (as hereinafter defined), general
intangibles, business records, plans and specifications, surveys and title
insurance policies pertaining to the Property, all licenses, permits and
approvals with respect to the construction, ownership, operation or
maintenance of the Property, any unpaid award for taking by condemnation or
any damage to the Real Property by reason of a change of grade or location
of or access to any street or highway, excluding (a) any of the aforesaid
rights that Transferee elects not to acquire and (b) the Current Assets, as
hereinafter defined (collectively, the "Intangible Personal Property"). A
schedule of the Intangible Personal Property is attached to this Agreement
as EXHIBIT D. The Intangible Personal Property shall not include the right
to use the Trade Name, which shall be retained by Transferor and
transferred to the lessee of the Golf Course (and further provided in no
event shall Transferee have the right to use such trade name in connection
with any other property owned by Transferee or any affiliate of
Transferee). (The Real Property, Tangible Personal Property and Intangible
Personal Property are sometimes collectively referred to as the
"Property".)
C. Upon the acquisition by the Transferee of the Property, the
Transferee will lease the Property to an affiliate of Transferor pursuant to a
lease (the "Golf Course Lease"), substantially in the form attached hereto as
EXHIBIT E.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
"ACT OF BANKRUPTCY" shall mean if a party hereto or any general
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its Property, (b) admit in writing its
inability to pay its debts as they become due, (c) make
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a general assignment for the benefit of its creditors, (d) file a voluntary
petition or commence a voluntary case or proceeding under the Federal
Bankruptcy Code (as now or hereafter in effect) or any new bankruptcy
statute, (e) be adjudicated bankrupt or insolvent, (f) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or
proceeding under the Federal Bankruptcy Code (as now or hereafter in effect)
or any new bankruptcy statute, or (h) take any corporate or partnership
action for the purpose of effecting any of the foregoing; or if a proceeding
or case shall be commenced, without the application or consent of a party
hereto or any general partner thereof, in any court of competent jurisdiction
seeking (1) the liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of debts, of such party or general partner,
(2) the appointment of a receiver, custodian, trustee or liquidator or such
party or general partner or all or any substantial part of its assets, or (3)
other similar relief under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, and such
proceeding or case shall continue undismissed; or an order (including an
order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect,
for a period of sixty (60) consecutive days.
"AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
"BASE PURCHASE PRICE" shall mean Six Million Four Hundred Thousand
Dollars ($6,400,000).
"BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale
conveying title to the Tangible Personal Property and Intangible Personal
Property from Transferor to Transferee, substantially in the form of EXHIBIT F
attached hereto.
"CLOSING" shall mean the time the Deed and each of the deliveries
to be made by Transferor (as provided in Section 6.2) and Transferee (as
provided in Section 6.3) are made and each of the Closing conditions of
Transferee and Transferor in Sections 5.1 and 5.2, respectively, have been
satisfied or waived.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
"CONTINGENT PURCHASE PRICE" shall mean the amount as calculated by
the procedure set forth in Exhibit K attached hereto.
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"CURRENT ASSETS" shall mean cash, accounts receivable, Inventory
and Restaurant Supplies (each as hereinafter defined) held by Transferor prior
to the Closing Date.
"DEED" shall mean a grant deed or special warranty deed,
substantially in the form of EXHIBIT G attached hereto (or lease assignment, if
the Property is owned by Transferor pursuant to a ground lease), in form and
substance satisfactory to Transferee, conveying the title of Transferor to the
Real Property, with such grant or warranty covenants of title from Transferor to
Transferee as are customary in the state in which the Property is located,
subject only to Permitted Title Exceptions. If there is any difference between
the description of the Land, as shown on EXHIBIT A attached hereto and the
description of the Land as shown on the Survey, the description of the Land to
be contained in the Deed and the description of the Land set forth in the
Owner's Title Policy, as defined herein, shall conform to the description shown
on the Survey.
"DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
"DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00
a.m., Eastern time, on the date hereof, and continuing through 5:00 p.m.,
Eastern time, on the date that is thirty (30) days from the date hereof.
"EMPLOYMENT AGREEMENTS" shall mean all employment agreements,
written or oral, between Transferor or its managing agent and the persons
employed with respect to the Property in effect as of the date hereof.
"ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or
judicial action, suit, demand, letter, claim, lien, notice of non-compliance or
violation, investigation or proceeding relating in any way to any Environmental
Laws or any permit issued under any Environmental Law including, without
limitation, (i) by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Laws, and (ii) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Substances or arising from alleged injury or threat of
injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42
U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as amended, 42
U.S.C. Section 201, et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and local
environmental health and safety statutes, ordinance, codes,
4
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rules, regulations, orders and decrees regulating, relating to or imposing
liability or standards concerning or in connection with Hazardous Substances.
"ESCROW AGENT" shall mean the Title Company.
"FIRPTA CERTIFICATE" shall mean the affidavit of Transferor under
Section 1445 of the Internal Revenue Code certifying that Transferor is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT H attached hereto.
"GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Transferor for purchase in connection with golfing
privileges at the Property.
"GOLF COURSE LEASE" shall have the meaning set forth in Recital C.
"GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"HAZARDOUS SUBSTANCES" shall mean any substance, material, waste,
gas or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(4).
"INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Transferor's
business.
"LAND" shall have the meaning set forth in Recital A.
"MORTGAGE INDEBTEDNESS" shall have the meaning set forth in Section
2.2(d).
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"OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the date hereof, as more particularly set forth on EXHIBIT I attached hereto.
"OWNER'S SHARES" shall mean limited partnership interests in the
Partnership.
"OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land Title
Association extended coverage owner's policy of title insurance issued to
Transferee by the Title Company, pursuant to which the Title Company insures
Transferee's ownership of fee simple title (or ground lease interest, as
applicable) to the Real Property (including the marketability thereof) subject
only to Permitted Title Exceptions and shall include those title endorsements
required by Transferee. The Owner's Title Policy shall insure Transferee in the
amount designated by Transferee and shall be acceptable in form and substance to
Transferee.
"PARTNERSHIP AGREEMENT" shall mean that certain amended and
restated limited partnership agreement relating to Transferee, which shall be
substantially in the form attached hereto as EXHIBIT J.
"PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title
to the Real Property that are satisfactory to Transferee as determined under
this Agreement, and as evidenced by a pro forma title report.
"PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
"PROPERTY" shall have the meaning set forth in Recital B(4).
"PURCHASE PRICE" shall mean the sum of the Base Purchase Price and
the Contingent Purchase Price.
"REAL PROPERTY" shall have the meaning set forth in Recital B(2).
"RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECURITIES" shall have the meaning set forth in Section 7.4.
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"STATE" shall mean the state or commonwealth in which the
Property is located.
"SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
"SURVEY" shall mean the survey prepared pursuant to Section
2.2(c).
"TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
"TITLE COMPANY" shall mean a title insurance company selected by
Transferee and authorized to conduct a title insurance business in the State.
"TITLE OBJECTIONS" shall have the meaning set forth in Section
2.2(d).
"TRANSFEROR'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Transferor.
"UTILITIES" shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of
the Property.
"WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Agreement or any exhibits hereto.
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ARTICLE II
PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND CONTRIBUTION. Transferor agrees to contribute and
Transferee agrees to acquire the Property for the Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) Transferee shall have the right, during the Due Diligence
Period, and thereafter if Transferee notifies Transferor that Transferee
has elected to proceed to Closing in the manner described below, to enter
upon the Real Property and to perform, at Transferor's expense, such
surveying, engineering, and environmental studies and investigations as
Transferee may deem appropriate. If such tests, studies and investigations
warrant, in Transferee's sole, absolute and unreviewable discretion, the
purchase of the Property for the purposes contemplated by Transferee, then
Transferee may elect to proceed to Closing and shall so notify Transferor
and the Escrow Agent, in writing, prior to the expiration of the Due
Diligence Period. If for any reason Transferee does not so notify
Transferor and Escrow Agent of its determination to proceed to Closing
prior to the expiration of the Due Diligence Period, or if Transferee
notifies Transferor and Escrow Agent, in writing, prior to the expiration
of the Due Diligence Period that it has determined not to proceed to
Closing, this Agreement automatically shall terminate and Transferee and
Escrow Agent shall be released from any further liability or obligation
under this Agreement and, if requested by Transferor, Transferee will
deliver such reports and materials to Transferor.
(b) During the Due Diligence Period, Transferor shall make
available to Transferee, its agents, auditors, engineers, attorneys and
other designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies,
zoning and site plan materials, correspondence, environmental audits and
reviews, books, records, tax returns, bank statements, financial
statements, fee schedules and any and all other material or information
relating to the Property which are in, or come into, Transferor's
possession or control, or which Transferor may attain. Such information is
more particularly described in EXHIBIT L attached hereto, as the same may
be amended or supplemented by Transferor from time to time.
(c) Within thirty (30) days from the date hereof, if requested
by Transferee, Transferor shall deliver to Transferee an ALTA/ACSM survey
or a boundary survey, as reasonably required by Transferee, of the Land and
the Improvements, prepared by a surveyor licensed to practice as such in
the State, bearing a date not earlier than sixty (60) days from the date of
its delivery and certified to both Transferee, Transferor and the Title
Company (and any lender or other party designated by Transferee), showing
the legal description of the Land, all dimensions thereof, and showing the
location of Improvements on the Land and the setbacks thereof from the
property line, as well as the setbacks
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required by applicable zoning laws or regulations (the "Survey"). The
Survey shall locate all easements which serve and affect the Land. The
Survey shall reflect that no buildings or improvements located on any other
property encroach upon the Land and that the Improvements located upon the
Land do not encroach upon any other property. The surveyor preparing the
Survey shall certify that (i) the Survey is an accurate Survey of the Land
and the Improvements, (ii) that the Survey was made under the surveyor's
supervision, (iii) that the Survey meets (a) the requirements of the Title
Company for the issuance of the Owner's Title Policy free of any general
survey exception, and (b) the minimum technical standards for land boundary
surveys with improvements, set forth by applicable statutes or applicable
professional organizations, and (iv) all buildings and other structures and
their relation to the property lines are shown and that there are no
encroachments, overlaps, boundary line disputes, easements, or claims of
easements visible on the ground, other than those shown on the Survey. If
Transferee has any objection to Survey matters, the same shall be treated
for all purposes as Title Objections within the provisions of this
Agreement.
(d) Transferor agrees to provide to Transferee, within five (5)
business days following the date of this Agreement, a copy of any existing
title insurance policies which Transferor may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Transferee, at its expense, shall cause an examination of title to the
Property to be made and a preliminary title report to be issued (the
"Preliminary Title Report"), and, prior to the expiration of the Due
Diligence Period, shall notify Transferor of any defects in title shown by
such examination that Transferee is unwilling to accept by delivering a pro
forma copy of the Preliminary Title Report that reflects such unacceptable
defects in title, which shall be designated as the Title Objections.
Within ten (10) days after such notification, Transferor shall notify
Transferee whether Transferor is willing to cure such defects. If
Transferor is willing to cure such defects, Transferor shall act promptly
and diligently to cure such defects at its expense. If any of such defects
consist of mortgages, deeds of trust, construction or mechanics' liens, tax
liens or other liens or charges in a fixed sum or capable of computation as
a fixed sum, then, to that extent, and notwithstanding the foregoing,
Transferor shall be obligated to pay and discharge such defects at Closing,
except for the mortgages scheduled and set forth in EXHIBIT M attached
hereto (the "Mortgage Indebtedness") which Transferee shall take subject to
as provided in Section 2.3(a). For such purposes, Transferor may use all
or a portion of the cash to close. If Transferor is unable to cure such
defects by Closing, after having attempted to do so diligently and in good
faith, Transferee shall elect (1) to waive such defects and proceed to
Closing without any abatement in the Purchase Price, or (2) to terminate
this Agreement. Transferor shall not, after the date of this Agreement,
subject the Property to any liens, encumbrances, leases, covenants,
conditions, restrictions, easements or other title matters or seek any
zoning changes or take any other action which may affect or modify the
status of title without Transferee's prior written consent. All title
matters revealed by
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Transferee's title examination and not objected to by Transferee as
provided above shall be deemed Permitted Title Exceptions. If Transferee
shall fail to examine title and notify Transferor of any such Title
Objections by the end of the Due Diligence Period, all such title
exceptions (other than those rendering title unmarketable and those that
are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions. Notwithstanding the foregoing, Transferee shall not be
required to take title to the Property subject to any matters which may
arise subsequent to the effective date of its examination of title to the
Property made during the Due Diligence Period.
(e) Transferor shall deliver to Transferee within fourteen (14)
days after the date of the execution of this Agreement by Transferor and
Transferee a disclosure schedule that accurately and completely identifies
and describes (a) all Employment Agreements (including name of employee,
social security number, wage or salary, accrued vacation benefits, other
fringe benefits, etc.), and (b) an updated Golf Club membership list,
setting forth the names of the members of the Golf Club, the length of
their membership, the payment obligations of the members and a summary of
the terms of the memberships (the "Disclosure Schedule").
(f) Transferor shall deliver to Transferee within thirty (30)
days after the date of execution of this Agreement by Transferor and
Transferee current searches of all Uniform Commercial Code financing
statements filed with the Secretary of State of the State respecting
Transferor, together with searches for pending litigation, tax liens and
bankruptcy filings in all appropriate jurisdictions.
2.3 PAYMENT OF BASE PURCHASE PRICE. The Base Purchase Price shall be
paid to Transferor in the following manner:
(a) Transferee shall (i) take subject to the Mortgage
Indebtedness in an aggregate amount not in excess of the Base Purchase
Price and (ii) receive a credit against the Base Purchase Price in an
amount equal to a sum necessary to pay off in full the Mortgage
Indebtedness, including any prepayment premium, and to obtain a release of
such deeds of trust or mortgages evidencing the Mortgage Indebtedness as of
the Closing Date, as evidenced by a payoff letter from the beneficiary of
each such deed of trust or mortgage in form and substance satisfactory to
Transferee and the Title Company.
(b) Transferee shall pay in cash an amount necessary to pay for
certain tax liabilities of Transferor and the cost incurred by Transferor
in connection with the preparation of certain audited financial statements,
due diligence costs and closing costs and to permit the liquidation of
certain third party interests in Transferor, as set forth in a schedule to
be prepared by Transferor and delivered to Transferee prior to the
expiration of the Due Diligence Period, which schedule shall be subject to
Transferee's review and approval, which approval shall not be unreasonably
withheld.
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(c) Transferee shall pay the balance of the Base Purchase Price
to Transferor in Owner's Shares. The number of Owner's Shares required for
such payment shall be the quotient obtained by dividing the balance of the
Base Purchase Price by the lesser of (i) $27.00 or (ii) the closing price
of the common stock of Golf Trust of America, Inc. on the business day
immediately preceding the Closing Date.
ARTICLE III
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferee to enter into this Agreement and to purchase
the Property, and to pay the Purchase Price therefor, Transferor hereby makes
the following representations, warranties and covenants with respect to the
Property, subject to the Warranty Disclosure Schedule attached hereto as
EXHIBIT P, upon each of which Transferor acknowledges and agrees that
Transferee is entitled to rely and has relied:
3.1 ORGANIZATION AND POWER. Transferor is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document or instrument
required to be executed and delivered by or on behalf of Transferor hereunder.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Transferor to be delivered to
Transferee at Closing as provided in Section 5.1 will be, duly authorized by
all necessary action on the part of Transferor, has been duly executed and
delivered by Transferor, constitutes the valid and binding agreement of
Transferor and is enforceable against Transferor in accordance with its
terms. There is no other person or entity who has an ownership interest in
the Property or whose consent is required in connection with Transferor's
performance of its obligations hereunder. All action required pursuant to
this Agreement necessary to effectuate the transactions contemplated herein
has been, or will at Closing be, taken promptly and in good faith by
Transferor and its representatives and agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the
performance by Transferor of its obligations under, this Agreement do not and
will not contravene, or constitute a default under, any provision of
applicable law or regulation, Transferor's Organizational Documents or any
agreement, judgment, injunction, order, decree or other instrument binding
upon Transferor, or result in the creation of any lien or other encumbrance
on any asset of Transferor. There are no outstanding agreements (written or
oral) pursuant to which Transferor (or any predecessor to or representative
of Transferor) has agreed to contribute or has granted an option or right of
first refusal to purchase the Property or any part thereof. Other than the
rights of tenants, as tenants only, under the Leases, there are no purchase
contracts, options or other agreements of any kind, written or oral, recorded
or unrecorded, whereby any person or entity other
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than Transferor will have acquired or will have any basis to assert any right,
title or interest in, or right to possession, use, enjoyment or proceeds of,
all or any portion of the Property. There are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
purchase or to otherwise acquire any interest or profit participation of any
kind in the Property or any part thereof.
3.4 NO SPECIAL TAXES. Transferor has no knowledge of, nor has it
received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax
or assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Transferor's knowledge, there is
not any proposed increase in the assessed valuation of the Real Property for
tax purposes (except as may relate to the transfer contemplated by this
Agreement).
3.5 COMPLIANCE WITH EXISTING LAWS. Transferor possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Transferor has not misrepresented or failed to
disclose any relevant fact in obtaining all Authorizations, and Transferor
has no knowledge of any change in the circumstances under which any of those
Authorizations were obtained that result in their termination, suspension,
modification or limitation. Transferor has not taken any action (or failed
to take any action), the omission of which would result in the revocation of
any of the Authorizations. Transferor has no knowledge, nor has it received
notice within the past three years, of any existing or threatened violation
of any provision of any applicable building, zoning, subdivision,
environmental or other governmental ordinance, resolution, statute, rule,
order or regulation, including but not limited to those of environmental
agencies or insurance boards of underwriters, with respect to the ownership,
operation, use, maintenance or condition of the Property or any part thereof,
or requiring any repairs or alterations other than those that have been made
prior to the date hereof.
3.6 REAL PROPERTY. To the best of Transferor's knowledge, (i) the
Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property
have been obtained, (iii) all contractors and subcontractors retained by
Transferor who have performed work on or supplied materials to the Property
have been fully paid, and all materials used at or on the Property have been
fully paid for, (iv) the Improvements have been completed in all material
respects in a workmanlike manner of first-class quality, and (v) all
equipment necessary or appropriate for the use or operation of the Property
has been installed and is presently operative in good working order.
Transferor has not received any written notice which is still in effect that
there is, and, to the best of Transferor's knowledge, there does not exist,
any violation of a condition or agreement contained in any easement,
restrictive covenant or any similar instrument or agreement effecting the
Real Property, or any portion thereof.
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3.7 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Transferor to Transferee is
free and clear of all liens and encumbrances and will be so on the Closing
Date and Transferor has good, merchantable title thereto and the right to
convey same in accordance with the terms of this Agreement.
3.8 OPERATING AGREEMENTS. Each of the Operating Agreements may be
terminated upon not more than thirty (30) days prior written notice and
without the payment of any penalty, fee, premium or other amount. Transferor
has performed all of its obligations under each of the Operating Agreements
and no fact or circumstance has occurred which, by itself or with the passage
of time or the giving of notice or both, would constitute a default under any
of the Operating Agreements. Transferor shall not enter into any new
Operating Agreements, supply contract, vending or service contract or other
agreements with respect to the Property, nor shall Transferor enter into any
agreements modifying the Operating Agreements, unless (a) any such agreement
or modification will not bind Transferee or the Property after the Closing
Date, or (b) Transferor has obtained Transferee's prior written consent to
such agreement or modification. Transferor acknowledges that Transferee will
not assume any of the Operating Agreements and none of the Operating
Agreements will be binding on Transferee or the Property after Closing.
3.9 WARRANTIES AND GUARANTIES. Transferor shall not before or after
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent
of Transferee.
3.10 INSURANCE. All of Transferor's insurance policies are valid and
in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof)
shall be paid by Transferor on or before the due date therefor. Transferor
shall pay all premiums on, and shall not cancel or voluntarily allow to
expire, any of Transferor's insurance policies unless such policy is
replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being
replaced. Transferor has not received any notice from any insurance company
of any defect or inadequacies in the Property to any part thereof which would
adversely affect the insurability of the Property, or which would increase
the cost of insurance beyond that which would ordinarily and customarily be
charged for similar properties in the vicinity of the Real Property. The
Property is fully insured in accordance with prudent and customary practice.
3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Transferor has received no
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Transferor has no knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real Property. To
the best of Transferor's knowledge, no fact or condition exists which would
result in the termination or material impairment of access to the Real
Property from adjoining public or private streets or ways or which
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could result in discontinuation of presently available or otherwise necessary
sewer, water, electric, gas, telephone or other utilities or services.
3.12 LITIGATION. Except as disclosed in writing to Transferor, there
is no action, suit or proceeding pending or known to be threatened against or
affecting Transferor or any of its properties in any court, before any
arbitrator or before or by any Governmental Body which (a) in any manner
raises any question affecting the validity or enforceability of this
Agreement or any other agreement or instrument to which Transferor is a party
or by which it is bound and that is or is to be used in connection with, or
is contemplated by, this Agreement, (b) could materially and adversely affect
the business, financial position or results of operations of Transferor, (c)
could materially and adversely affect the ability of Transferor to perform
its obligations hereunder, or under any document to be delivered pursuant
hereto, (d) could create a lien on the Property, any part thereof or any
interest therein, (e) the subject matter of which concerns any past or
present employee of Transferor or its managing agent, or (f) could otherwise
adversely materially affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes
pending or, to the best of Transferor's knowledge, threatened as to the
operation or maintenance of the Property or any part thereof. Transferor is
not a party to any union or other collective bargaining agreement with
employees employed in connection with the ownership, operation or maintenance
of the Property. Transferor is not a party to any employment contracts or
agreements, other than the Employment Agreements, and neither Transferor nor
its managing agent will, between the date hereof and the Closing Date, enter
into any new employment contracts or agreements, amend any existing
Employment Agreement, except with the prior written consent of Transferee.
Transferor acknowledges that Transferee will not assume any of the Employment
Agreements and Transferor has complied with and shall be responsible for
compliance with the WARN Act and any other applicable employment-related laws
or ordinances. Transferor has complied with the requirements of the federal
Immigration and Reform Control Act respecting the employment of undocumented
workers.
3.14 FINANCIAL INFORMATION. To the best of Transferor's knowledge,
all of Transferor's financial information, including, without limitation, all
books and records and financial statements, is correct and complete in all
material respects and presents accurately the results of the operations of
the Property for the periods indicated.
3.15 ORGANIZATIONAL DOCUMENTS. Transferor's Organizational Documents
are in full force and effect and have not been modified or supplemented, and
no fact or circumstance has occurred that, by itself or with the giving of
notice or the passage of time or both, would constitute a default thereunder.
3.16 OPERATION OF PROPERTY. Transferor covenants, that between the
date hereof and the Closing Date, it will (a) operate the Property in the
usual, regular and ordinary manner consistent with Transferor's prior
practice, (b) maintain its books of
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account and records in the usual, regular and ordinary manner, in accordance
with sound accounting principles applied on a basis consistent with the basis
used in keeping its books in prior years and (c) use all reasonable efforts
to preserve intact its present business organization, keep available the
services of its present officers, partners and employees and preserve its
relationships with suppliers and others having business dealings with it.
Except as otherwise permitted hereby, from the date hereof until Closing,
Transferor shall not take any action or fail to take action the result of
which would have a material adverse effect on the Property or Transferee's
ability to continue the operation thereof after the Closing Date in
substantially the same manner as presently conducted, or which would cause
any of the representations and warranties contained in this Article III to be
untrue as of Closing.
From and after the execution and delivery of this Agreement, Transferor
shall not, other than in the ordinary course of business, (a) make any
agreements which shall be binding upon Transferee with respect to the
Property, or (b) reduce or cause to be reduced any green fees, membership
fees, tournament fees, driving range fees or any other charges over which
Transferor has operational control. Between the date hereof and the Closing
Date, if and to the extent requested by Transferee, Transferor shall deliver
to Transferee such periodic information with respect to the above information
as Transferor customarily keeps internally for its own use. Transferor
agrees that it will operate the Property in accordance with the provisions of
this Section 3.16 between the date hereof and the Closing Date.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferor.
3.18 LAND USE. The current use and occupancy of the Property for
golfing and all other related purposes (including, without limitation, the
sale of merchandise and food and beverages) are permitted as a matter of
right as a principal use under all laws and regulations applicable thereto
without the necessity of any special use permit, special exception or other
special permit, permission or consent and Transferor is not aware of any
proposal to change or restrict such use. Transferor has all necessary
certificates of occupancy or completion to operate the Property as presently
operated and there are no unfulfilled conditions respecting the development
of the Property.
3.19 PUBLIC OFFERING; PREPARATION OF S-11. Transferor shall cooperate
in the preparation by an affiliate of Transferee of a Form S-11 or, if
applicable, a Form S-3 under the Securities Act of 1933, as amended, to be
filed with the SEC in connection with any public offering (the "Registered
Offering"). The Registered Offering shall be for purposes of selling shares
of common stock in an affiliate of Transferee. Transferor shall provide
Transferee access to all financial and other information relating to the
Property which would be sufficient to enable them to prepare financial
statements in conformity with Regulation S-X of the SEC and to enable the
Transferee to prepare a registration statement, report or disclosure
statement for filing with the SEC. Transferor shall also provide to
Transferee's representatives a signed representation letter which
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would be sufficient to enable an independent public accountant to render an
opinion on the financial statements related to the Property.
3.20 HAZARDOUS SUBSTANCES. Except as may be disclosed in the Phase I
environmental assessment report for the Property, to the best of Transferor's
knowledge, (i) no Hazardous Substances are or have been located on (except in
immaterial amounts used in the ordinary course for the operation or
maintenance of the Property by Transferor in accordance with all applicable
laws), in or under the Property or have been released into the environment,
or discharged, placed or disposed of at, on or under the Property; (ii) no
underground storage tanks are, or have been, located at the Property; (iii)
the Property has never been used to store, treat or dispose of Hazardous
Substances; and (iv) the Property and its prior uses comply with, and at all
times have complied with all applicable Environmental Laws or any other
governmental law, regulation or requirement relating to environmental and
occupational health and safety matters and Hazardous Substances. To the best
of Transferor's knowledge, there currently exist no facts or circumstances
that could reasonably be expected to give rise to a material non-compliance
with Environmental Laws, material environmental liability or material
Environmental Claim.
3.21 UTILITIES. All Utilities required for the operation of the
Property either enter the Property through adjoining streets, or they pass
through adjoining land and do so in accordance with valid public easements or
private easements, and all of said Utilities are installed and are in good
working order and repair and operating as necessary for the operation of the
Property and all installation and connection charges therefor have been paid
in full. The sewage, sanitation, plumbing, water retention and detention,
refuse disposal and utility facilities in and on and/or servicing the Real
Property are adequate to service the Real Property as it is currently being
used and the Real Property's utilization of such facilities is in compliance
with all applicable governmental and environmental protection authorities'
laws, rules, regulations and requirements.
3.22 CURB CUTS. All curb cut street opening permits or licenses
required for vehicular access to and from the Property from any adjoining
public street have been obtained and paid for and are in full force and
effect.
3.23 LEASED PROPERTY. The Personal Property identified on EXHIBIT C
is all of the leased property at the Property, and such exhibit reflects the
date of each such lease, the name of the lessor, the name of the lessee, the
term of each such lease, the lease payment terms and a description of the
property demised by each such lease. All leases of such property are in good
standing and free from default.
3.24 SUFFICIENCY OF CERTAIN ITEMS. The Property, together with the
Current Assets, contain an amount of equipment and supplies, which is
sufficient to efficiently operate and maintain the Property in the manner in
which it is normally operated and maintained.
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3.25 ACCREDITED INVESTOR. Transferor and all equity owners of
Transferor are as of the date hereof, and as of the Closing Date shall be,
Accredited Investors. Concurrent herewith Transferor shall execute and
deliver to Transferee the Accredited Investor Questionnaire attached hereto
as EXHIBIT N.
Each of the representations, warranties and covenants contained in this
Article III are intended for the benefit of Transferee. Each of said
representations, warranties and covenants shall survive the Closing for a
period of one (1) year, at which time they shall expire unless prior to such
time Transferee has made a formal, written claim alleging a breach of one or
more of the representations, warranties or covenants. No investigation,
audit, inspection, review or the like conducted by or on behalf of Transferee
shall be deemed to terminate the effect of any such representations,
warranties and covenants, it being understood that Transferee has the right
to rely thereon and that each such representation, warranty and covenant
constitutes a material inducement to Transferee to execute this Agreement and
to close the transaction contemplated hereby and to pay the Purchase Price to
Transferor.
ARTICLE IV
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferor to enter into this Agreement and to contribute the
Property, Transferee hereby makes the following representations, warranties
and covenants, upon each of which Transferee acknowledges and agrees that
Transferor is entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. Transferee is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and has all governmental licenses, Authorizations, consents and
approvals required to carry on its business as now conducted and to enter
into and perform its obligations under this Agreement and any document or
instrument required to be executed and delivered on behalf of Transferee
hereunder.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement
and the performance by Transferee of its obligations hereunder do not and
will not contravene, or constitute a default under, any provisions of
applicable law or regulation, Partnership Agreement or any agreement,
judgment, injunction, order, decree or other instrument binding upon
Transferee or result in the creation of any lien or other encumbrance on any
asset of Transferee.
4.3 LITIGATION. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting Transferee in any court or
before any arbitrator or before any administrative panel or otherwise that
(a) could materially and adversely affect the business, financial position or
results of operations of Transferee, or (b) could materially and adversely
affect the ability of Transferee to perform its obligations hereunder, or
under any document to be delivered pursuant hereto.
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4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferee.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Transferee to be delivered to
Transferor at Closing as provided in Section 5.2 will be, duly authorized by
all necessary action on the part of Transferee, has been duly executed and
delivered by Transferee, constitutes the valid and binding agreement of
Transferee and is enforceable against Transferee in accordance with its
terms. All action required pursuant to this Agreement necessary to
effectuate the transactions contemplated herein has been, or will at Closing
be, taken promptly and in good faith by Transferee and its representatives
and agents.
4.6 TRADE NAME. Transferee shall not use the trade name referenced
in Recital B(4) in connection with any other property owned by Transferee or
any affiliate of Transferee.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO TRANSFEREE'S OBLIGATIONS. Transferee's obligations
hereunder are subject to the satisfaction of the following conditions
precedent and the compliance by Transferor with the following covenants:
(a) TRANSFEROR'S DELIVERIES. Transferor shall have delivered to
or for the benefit of Transferee, as the case may be, on or before the
Closing Date, all of the documents and other information required of
Transferor pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
Transferor's representations and warranties made in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as if
then made, there shall have occurred no material adverse change in the
condition or financial results of the operation of the Property since the
date hereof. Transferor shall have performed all of its covenants and
other obligations under this Agreement and Transferor shall have executed
and delivered to Transferee on the Closing Date a certificate dated as of
the Closing Date to the foregoing effect in the form of EXHIBIT O attached
hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
(d) TITLE TO PROPERTY. Transferee shall have determined that
Transferor is the sole owner of good and marketable fee simple title (or
ground lease interest, as applicable) to the Real Property and to the
Tangible Personal Property, free and clear of all liens, encumbrances,
restrictions, conditions and agreements except for Permitted Title
Exceptions. Transferor shall not have taken
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any action or permitted or suffered any action to be taken by others from
the date hereof and through and including the Closing Date that would
adversely affect the status of title to the Real Property or to the
Tangible Personal Property.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving
range, putting greens, mechanical systems, plumbing, electrical wiring,
appliances, fixtures, heating, air conditioning and ventilating equipment,
elevators, boilers, equipment, roofs, structural members and furnaces)
shall be in the same condition at Closing as they are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, Transferor
shall not have diminished the quality or quantity of maintenance and upkeep
services heretofore provided to the Real Property and the Tangible Personal
Property. Transferor shall not have removed or caused or permitted to be
removed any part or portion of the Real Property or the Tangible Personal
Property unless the same is replaced, prior to Closing, with similar items
of at least equal quality and acceptable to Transferee.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal
of garbage and other waste from the Property. Between the date hereof and
the Closing Date, Transferor shall have received no notice of any material
increase or proposed material increase in the rates charged for the
Utilities from the rates in effect as of the date hereof.
(g) LIQUOR LICENSE. Transferee, or Transferee's nominee, shall
have obtained all liquor licenses, alcoholic beverage licenses and other
permits and Authorizations necessary to operate the restaurant, bars, snack
shops and lounges presently located at the Property. To that end,
Transferor and Transferee, or Transferee's nominee, shall have cooperated
with each other, and each shall have executed such transfer forms, license
applications and other documents as may be necessary to effect the
obtaining of the liquor licenses, alcoholic beverage licenses and other
Authorizations required hereby.
(h) PARTNERSHIP AGREEMENT. Transferor shall have delivered to
Transferee a countersigned copy of the Partnership Agreement in a form
prepared by Transferee, which shall be in substantially the form attached
hereto as EXHIBIT J.
(i) GOLF COURSE LEASE. An Affiliate of Transferor shall have
delivered to Transferee a countersigned copy of the Golf Course Lease in a
form prepared by Transferee, which shall be in substantially the form
attached hereto as EXHIBIT E.
(j) APPROVAL BY BOARD OF DIRECTORS. Within twenty-five (25)
days from the date of this Agreement, the Board of Directors of the Company
must approve the transaction contemplated by this Agreement by an
affirmative vote.
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Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferee and may be waived in whole or in part by
Transferee, but only by an instrument in writing signed by Transferee.
5.2 AS TO TRANSFEROR'S OBLIGATIONS. Transferor's obligations
hereunder are subject to the satisfaction of the following conditions precedent
and the compliance by Transferee with the following covenants:
(a) TRANSFEREE'S DELIVERIES. Transferee shall have delivered to
or for the benefit of Transferor, on or before the Closing Date, all of the
documents and payments required of Transferee pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
Transferee's representations and warranties made in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as if
then made and Transferee shall have performed all of its covenants and
other obligations under this Agreement.
(c) COUNTERSIGNED COPIES OF PARTNERSHIP AGREEMENT AND GOLF
COURSE LEASE. Transferee shall have delivered to Transferor countersigned
copies of the Partnership Agreement and Golf Course Lease.
(d) APPROVAL BY LIMITED PARTNERS. Within twenty-five (25) days
from the date of this Agreement, the limited partners of Transferor must
approve the transaction contemplated by this Agreement by an affirmative
vote.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferor and may be waived in whole or in part, by
Transferor, but only by an instrument in writing signed by Transferor.
ARTICLE VI
CLOSING
6.1 CLOSING. Closing shall be held at 9:00 a.m., Eastern time, at the
offices of the Company (or counsel to the Company) on the date that is ten (10)
days after the expiration of the Due Diligence Period; provided, however, that
such ten (10) day period may be extended for an additional twenty (20) days by
Transferee, at its sole discretion, by providing written notice to Transferor
prior to the expiration of such ten (10) day period. If the Closing Date falls
on a Saturday, Sunday or other legal holiday, the Closing shall take place on
the first following business day thereafter. Possession of the Property shall be
delivered to Transferee at Closing, subject only to Permitted Title Exceptions.
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6.2 TRANSFEROR'S DELIVERIES. At Closing, Transferor shall deliver to
Transferee all of the following instruments, each of which shall have been duly
executed and, where applicable, acknowledged and/or sworn on behalf of
Transferor and shall be dated as of the Closing Date:
(a) The certificate required by Section 5.1(b).
(b) The Deed.
(c) The Bill of Sale - Personal Property.
(d) The Partnership Agreement.
(e) The Golf Course Lease.
(f) Evidence of title acceptable to Transferee for any vehicle
owned by Transferor and used in connection with the Property.
(g) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy including
those endorsements requested by Transferee, and to eliminate the standard
exceptions as exceptions thereto, so that the Owner's Title Policy will be
subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and
gap affidavit.
(h) The FIRPTA Certificate.
(i) To the extent available, true, correct and complete copies
of all warranties, if any, of manufacturers, suppliers and installers
possessed by Transferor and relating to the Property, or any part thereof.
(j) Certified copies of Transferor's Organizational Documents.
(k) Appropriate resolutions of the board of directors or
partners, as the case may be, of Transferor, certified by the secretary or
an assistant secretary of Transferor or a general partner, as the case may
be, together with all other necessary approvals and consents of Transferor,
authorizing (i) the execution on behalf of Transferor of this Agreement and
the documents to be executed and delivered by Transferor prior to, at or
otherwise in connection with Closing, and (ii) the performance by
Transferor of its obligations hereunder and under such documents, or
appropriate resolutions of the partners of Transferor, as the case may be.
(l) A valid, final and unconditional certificate of occupancy
for the Real Property and Improvements, issued by the appropriate
Governmental Body
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allowing for the use of the Real Property as a golf course and permitting
the continued operation of the improvements as presently operated.
(m) Such proof as Transferee may reasonably require with respect
to Transferor's compliance (or indemnity with respect to compliance) with
the bulk sales laws or similar statutes.
(n) Copy of each and every existing insurance policy covering
the Property and certificates evidencing such coverage.
(o) To the extent available, a set or copies of the plans and
specifications for the Improvements.
(p) A written instrument executed by Transferor, conveying and
transferring to Transferee all of Transferor's right, title and interest in
any telephone numbers, fax numbers or internet or electronic mail addresses
(if applicable) relating solely to the Property, and, if Transferor
maintains a post office box solely with respect to the Property, conveying
to Transferee all of its interest in and to such post office box and the
number associated therewith, so as to assure a continuity in operation and
communication.
(q) All current real estate and personal property tax bills in
Transferor's possession or under its control.
(r) All surveys and plot plans of the Real Property in
possession of or in the control of Transferor.
(s) A complete list of all scheduled tournaments, functions and
the like, in reasonable detail.
(t) A list of Transferor's outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each
account and the amount due Transferor.
(u) A pay off statement prepared by any holder of Mortgage
Indebtedness setting forth the amount, including accrued interest and
prepayment penalties, to pay off the Mortgage Indebtedness.
(v) Written notice executed by Transferor notifying all
interested parties, including all tenants under any leases of the Property,
that the Property has been conveyed to Transferee and directing that all
payments, inquiries and the like be forwarded to Transferee at the address
to be provided by Transferee.
(w) Any other document or instrument reasonably requested by
Transferee with respect to the Property.
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6.3 TRANSFEREE'S DELIVERIES. At Closing, Transferee shall pay or
deliver to Transferor the following:
(a) The cash portion of the Purchase Price by federal funds wire
to an account designated by Transferor.
(b) The non-cash portion of the Purchase Price payable in
Owner's Shares issued to such holders and in such denominations to such
holders as specified by Transferor.
(c) Any other document or instrument reasonably requested by
Transferor relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Transferee and Transferor shall
mutually execute and deliver each to the other:
(a) A closing statement for Transferor and a closing statement
for Transferee (collectively, the "Closing Statements") reflecting the
Purchase Price and the adjustments and prorations required hereunder and
the allocation of income and expenses required hereby.
(b) Such other documents, instruments and undertakings as may be
required by the liquor authorities of the State or of any county or
municipality or Governmental Body having jurisdiction with respect to the
transfer or issue of any liquor licenses or alcoholic beverage licenses or
permits for the Property, to the extent not theretofore executed and
delivered.
(c) The Golf Course Lease.
(d) The Partnership Agreement.
(e) Such other and further documents, papers and instruments as
may be reasonably required by the parties hereto or their respective
counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this Agreement,
each party hereto shall pay its own legal fees and expenses, and Transferor
shall pay for the cost of any audit required by Transferee with respect to the
Property. All filing fees for the Deed and the real estate transfer, recording
or other similar taxes due with respect to the transfer of title and all charges
for title insurance premiums shall be paid by Transferor. Transferor shall pay
for preparation of the documents to be delivered by Transferor hereunder, and
for the releases of any deeds of trust, mortgages and other financing
encumbering the Property and for any costs associated with any corrective
instruments, and for the cost of any due diligence reports and surveys prepared
by or for Transferee with respect to the Property. Transferor shall receive a
cash payment at closing to pay for such closing costs as provided in Section
2.3(c).
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6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Transferor and Transferee (or,
at Transferee's election, between Transferor and the lessee under the Golf
Course Lease to the extent such income or expenses will be payable by or
attributable to such lessee). Transferor shall be entitled to all income and
shall be responsible for all expenses for the period of time up to but not
including the Closing Date, and Transferee shall be entitled to all income and
shall be responsible for all expenses for the period of time from, after and
including the Closing Date. Such adjustments shall be shown on the Closing
Statements (with such supporting documentation as the parties hereto may require
being attached as exhibits to the Closing Statements) and shall increase or
decrease (as the case may be) the Purchase Price payable by Transferee. Without
limiting the generality of the foregoing, the following items of income and
expense shall be prorated at Closing:
(a) Current and prepaid rents or fees, including, without
limitation, prepaid Golf Club membership fees, function receipts and other
reservation receipts.
(b) Real estate and personal property taxes.
(c) Utility charges (including but not limited to charges for
water, sewer and electricity).
(d) Value of fuel stored on the Property at the price paid for
such fuel by Transferor, including any taxes.
(e) Municipal improvement liens where the work has physically
commenced (certified liens) shall be paid by Transferor at Closing.
Municipal improvement liens which have been authorized, but where the work
has not commenced (pending liens) shall be assumed by Transferee.
(f) License and permit fees, where transferable.
(g) All other income and expenses of the Property, including,
but not being limited to such things as restaurant and snack bar income and
expenses and the like.
(h) Such other items as are usually and customarily prorated
between Transferees and Transferors of golf course properties in the area
in which the Property is located shall be prorated as of the Closing Date.
6.7 SALES TAXES. Transferor shall be required to pay all sales taxes
and like impositions arising from the ownership and operation of the Property
currently through the Closing Date.
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6.8 POST-CLOSING ADJUSTMENTS.
(a) Transferee shall not be obligated to collect any accounts
receivable or revenues accrued prior to the Closing Date for Transferor,
but if Transferee collects same, such amounts will be promptly remitted to
Transferor in the form received. Transferee shall receive a credit at
Closing for the amount of any security deposits held by Transferor under
any lease of any portion of the Property that is being assigned to
Transferee in accordance herewith.
(b) If accurate allocations and prorations cannot be made at
Closing because current bills are not obtainable (as, for example, in the
case of utility bills and/or real estate or personal property taxes), the
parties shall allocate such income or expenses at Closing on the best
available information, subject to adjustment outside of escrow upon receipt
of the final bill or other evidence of the applicable income or expense.
Any income received or expense incurred by Transferor or Transferee with
respect to the Property after the Closing Date shall be promptly allocated
in the manner described herein and the parties shall promptly pay or
reimburse any amount due. Transferor shall pay at Closing all accrued
special assessments and taxes applicable to the Property.
ARTICLE VII
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Transferor shall give written
notice thereof to Transferee promptly after Transferor learns or receives notice
thereof. If all or any part of the Real Property is, or is to be, so condemned
or sold, Transferee shall have the right to terminate this Agreement pursuant to
Section 8.3. If Transferee elects not to terminate this Agreement, all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to Transferee
at Closing. Transferor will not settle or compromise any such proceeding
without Transferee's prior written consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the Property prior
to the Closing Date shall remain upon Transferor. If any such loss or damage
occurs prior to Closing, Transferee shall have the right to terminate this
Agreement pursuant to Section 8.3. If Transferee elects not to terminate this
Agreement, all insurance proceeds and rights to proceeds arising out of such
loss or damage shall be paid or assigned, as applicable, to Transferee at
Closing.
7.3 REAL ESTATE BROKER. Except for a broker or finder who may have
been engaged by Transferor and for whom Transferor accepts sole financial
responsibility, and except for any broker or finder who may have been engaged by
Transferee and for whom Transferee accepts sole financial responsibility, there
is no real estate broker involved in this transaction. Transferee warrants and
represents to
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Transferor that Transferee has not dealt with any other real estate broker in
connection with this transaction, nor has Transferee been introduced to the
Property or to Transferor by any other real estate broker, and Transferee
shall indemnify Transferor and save and hold Transferor harmless from and
against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation
to a real estate brokerage commission or a finder's fee as a result of having
dealt with Transferee, or as a result of having introduced Transferee to
Transferor or to the Property. In like manner, Transferor warrants and
represents to Transferee that Transferor has not dealt with any real estate
broker in connection with this transaction, nor has Transferor been introduced
to Transferee by any real estate broker, and Transferor shall indemnify
Transferee and save and hold Transferee harmless from and against any claims,
suits, demands or liabilities of any kind or nature whatsoever arising on
account of the claim of any person, firm or corporation to a real estate
brokerage commission or a finder's fee as a result of having dealt with
Transferor in connection with this transaction. Transferee acknowledges that
David J. Dick, an officer of the Transferee, is a licensed California real
estate broker but is not acting as a broker in relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and after
the execution of this Agreement, Transferee and Transferor shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
except to their respective attorneys, accountants, engineers, surveyors,
financiers and bankers. Notwithstanding the foregoing, it is acknowledged that
the Company is a public company and will make a public announcement concerning
this transaction and that the Company anticipates that it will seek to sell
shares of its common stock and other securities (collectively, the "Securities")
to the general public pursuant to a public offering and that in connection
therewith, Transferee will have the absolute right to market the Securities and
prepare and file all necessary or required registration statements and other
papers, documents and instruments necessary or required in Transferee's judgment
and that of its attorneys and underwriters to file a registration statement with
respect to the Securities with the SEC and/or similar state authorities and to
cause same to become effective and to disclose therein and thus to its
underwriters, to the SEC and/or to similar state authorities and to the public
all of the terms, conditions and provisions of this Agreement. The obligations
of this Section 7.4 shall survive any termination of this Agreement.
7.5 LIQUOR LICENSES. Transferor shall transfer or cause to be
transferred to Transferee or, at Transferee's discretion, Transferee's nominee
(which may include the lessee under the Golf Course Lease), all liquor licenses
and alcoholic beverage licenses, if any, necessary to operate the restaurant,
bars, snack bars and lounges presently located within the Property, if any. To
that end, Transferor and Transferee, or Transferee's nominee, shall cooperate
each with the other, and each shall execute such transfer forms, license
applications and other documents as may be necessary to effect such transfer.
If permitted under the laws of the jurisdiction in which the Property is
located, the parties shall execute and file all necessary transfer forms,
applications and
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papers with the appropriate liquor and alcoholic beverage authorities prior to
Closing, to the end that the transfer shall take effect, if possible, on the
Closing Date, simultaneously with Closing. If not so permitted, then the
parties agree each with the other that they will promptly execute all transfer
forms, applications and other documents required by the liquor authorities in
order to effect such transfer at the earliest date in time possible consistent
with the laws of the State in order that all liquor licenses may be
transferred from Transferor to Transferee, or Transferee's nominee, at the
earliest possible time. If under the laws of the State such licenses cannot
be transferred until after the Closing of the transaction contemplated hereby,
then Transferor covenants and agrees that Transferor will cooperate with
Transferee, or Transferee's nominee, in keeping open the bars and liquor
facilities of the Property between the Closing Date and the time when such
liquor license transfers actually become effective, by exercising management
and supervision of such facilities until such time under Transferor's
licenses, provided, however, that Transferee shall indemnify and hold
Transferor harmless from any liability, damages or claims encountered in
connection with such operations during said period of time, except for
Transferor's gross negligence or willful misconduct.
ARTICLE VIII
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS
8.1 LIABILITY OF TRANSFEREE. Except for any obligation expressly
assumed or agreed to be assumed by Transferee hereunder, Transferee does not
assume any obligation of Transferor or any liability for claims arising out of
any occurrence prior to Closing.
8.2 INDEMNIFICATION BY TRANSFEROR. Transferor hereby indemnifies and
holds Transferee harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and expenses (including reasonable attorneys' fees)
that may at any time be incurred by Transferee, whether before or after Closing,
as a result of any breach by Transferor of any of its representations,
warranties, covenants or obligations set forth herein or in any other document
delivered by Transferor pursuant hereto, for a period of one (1) year following
the Closing. The provisions of this section shall survive termination of this
Agreement by Transferee or Transferor.
8.3 TERMINATION BY TRANSFEREE. If any condition set forth herein for
the benefit of Transferee cannot or will not be satisfied prior to Closing, or
upon the occurrence of any other event that would entitle Transferee to
terminate this Agreement and its obligations hereunder, and Transferor fails to
cure any such matter within ten (10) business days after notice thereof from
Transferee, Transferee, at its option, may elect either (a) to terminate this
Agreement and all other rights and obligations of Transferor and Transferee
hereunder shall terminate immediately, or (b) to waive its right to terminate
(but without waiving any breach or default on the part of Transferor) and,
instead, to proceed to Closing. If Transferee terminates this Agreement as a
consequence of a misrepresentation or breach of a warranty or covenant by
Transferor,
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or a failure by Transferor to perform its obligations hereunder, then
Transferee shall retain all remedies accruing as a result thereof, including,
without limitation, specific performance.
8.4 TERMINATION BY TRANSFEROR. If any condition set forth herein for
the benefit of Transferor (other than a default by Transferee) cannot or will
not be satisfied prior to Closing, and Transferee fails to cure any such matter
within ten (10) business days after notice thereof from Transferor, Transferor
may, at its option, elect either (a) to terminate this Agreement, in which event
the rights and obligations of Transferor and Transferee hereunder shall
terminate immediately, or (b) to waive its right to terminate, and instead, to
proceed to Closing. If, prior to Closing, Transferee defaults in performing any
of its obligations under this Agreement (including its obligation to purchase
the Property), and Transferee fails to cure any such default within ten (10)
business days after notice thereof from Transferor, then Transferor's sole
remedy for such default shall be to terminate this Agreement and Transferor
waives any claims for damages, actual, consequential or otherwise, that it may
possess against Transferee.
8.5 COSTS AND ATTORNEYS' FEES. In the event of any litigation or
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, arbitration or other form of dispute
resolution, then the prevailing party in such litigation shall be entitled to
recover its costs of prosecuting and/or defending same, including, without
limitation, reasonable attorneys' fees at trial and all appellate levels.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 ASSIGNMENTS. Transferee may assign its rights hereunder to an
affiliate of Transferee without the consent of Transferor. Transferee may not
otherwise assign its interest herein without the prior written consent of
Transferor. Transferor may not assign any of its rights pursuant to this
Agreement without the prior written consent of Transferee, which may be withheld
in Transferee's sole and absolute discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
9.4 DAYS. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication,
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such performance shall be deemed to be required, and such notice, consent or
other communication shall be deemed to be given, on the first business day
following such Saturday, Sunday or legal holiday. Unless otherwise specified
herein, all references herein to a "day" or "days" shall refer to calendar
days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
9.7 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
9.8 COSTS. Regardless of whether Closing occurs hereunder, and except
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including without limitation, fees of attorneys, engineers
and accountants.
9.9 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as on the Summary Sheet or to such other address as the intended recipient may
have specified in a notice to the other party. Any party hereto may change its
address or designate different or other persons or entities to receive copies by
notifying the other party and Escrow Agent in a manner described in this
Section. Any notice, request, demand or other communication delivered or sent
in the manner aforesaid shall be deemed given or made (as the case may be) when
actually delivered to the intended recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all of the
representations, warranties, covenants and agreements of Transferor and
Transferee made in, or pursuant to, this Agreement shall survive Closing and
shall not merge into the Deed or any other document or instrument executed and
delivered in connection herewith.
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9.12 FURTHER ASSURANCES. Transferor and Transferee each covenant and
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be construed
to create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Transferor and Transferee specifically
established hereby.
9.14 CONFIDENTIALITY. Any confidential information delivered by
Transferor to Transferee hereunder shall be used solely for the purpose of
acquiring the Property and Transferee will keep such information confidential;
provided Transferee shall have the right to provide such information to its
consultants and advisors and to disclose such information as Transferee
determines is necessary or appropriate in connection with filing any public
offering of Securities. If Transferee does not acquire the Property, it shall
deliver to Transferor copies of all proprietary information delivered to
Transferee by Transferor. Transferor agrees to keep confidential the terms and
conditions of this Agreement; provided, Transferor shall have the right to
provide such information to its consultants and advisors.
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IN WITNESS WHEREOF, Transferor and Transferee have hereunder affixed their
signatures to this Contribution and Leaseback Agreement, all as of the 18th day
of September 1997.
"TRANSFEREE"
GOLF TRUST OF AMERICA, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: GTA GP, Inc. a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
----------------------------------
W. Bradley Blair, II
Its: CEO AND PRESIDENT
---------------------------------
"TRANSFEROR"
EAGLE WATCH GOLF CLUB LIMITED PARTNERSHIP, AN
ILLINOIS LIMITED PARTNERSHIP
By: The Crescent Company,
its General Partner
By: /s/ E. Neal Trogdon
----------------------------------
E. Neal Trogdon
PRESIDENT
----------------------------------
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- -------------------------------------------------------------------------------
EAGLE WATCH GOLF CLUB
Woodstock
Cherokee County
Georgia
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
E.W.G.C., LLC
TENANT
DATED AS OF SEPTEMBER 26, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS, RULES OF CONSTRUCTION . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Right of First Offer to Lease. . . . . . . . . . . . . . . . . . 14
ARTICLE 4 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . . 15
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . . 16
4.5 Increase in Base Rent Following Conversion Date. . . . . . . . . 16
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Pledge of Owner's Shares . . . . . . . . . . . . . . . . . . . . 18
5.2 Obligation to Withhold Distributions . . . . . . . . . . . . . . 18
5.3 Cross-Collateral . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Landlord's Lien. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Termination Payment. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . 19
6.2 Information and Reporting. . . . . . . . . . . . . . . . . . . . 19
6.3 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Assessment Districts . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7 TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 No Termination, Abatement, Etc.. . . . . . . . . . . . . . . . . 20
7.2 Condition of the Property. . . . . . . . . . . . . . . . . . . . 21
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ARTICLE 8 OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . 22
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . . 22
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9 USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . . 24
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Landlord to Grant Easements, Etc.. . . . . . . . . . . . . . . . 24
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . . 25
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . . 25
ARTICLE 10 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . 25
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 26
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . 27
10.9 Environmental Violations at Expiration or Termination of
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11 MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . 28
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . 28
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . 29
11.5 Bunker Repairs . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12 TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . 29
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . 30
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . 31
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . 31
12.6 Landlord's Right to Audit Calculation of Gross Golf Revenue. . . 32
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13 LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . 35
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . 35
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ARTICLE 14 PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . 36
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . 37
ARTICLE 15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . 38
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . 39
15.5 Form Satisfactory, Etc.. . . . . . . . . . . . . . . . . . . . . 39
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . 40
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 41
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . 41
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . . 42
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . . 42
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . . 43
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . 43
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 16 CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . 44
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 17 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 45
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 45
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . 47
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . 47
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . 48
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . 48
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . 48
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 18 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . 49
ARTICLE 19 LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 20 HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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ARTICLE 21 RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 22 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 51
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . 51
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . 51
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . 52
22.4 Survival of Indemnification Obligations; Available Insurance
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 23 SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . 53
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . 53
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . 55
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . 55
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . 56
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 24 OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . 57
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . 57
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 25 LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . 58
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . 58
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . 59
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . 59
ARTICLE 26 SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . 59
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . 59
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 27 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 28 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . 61
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . 61
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . 61
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 62
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . 62
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . 62
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . 62
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28.10 Survival of Claims . . . . . . . . . . . . . . . . . . . . . . . 63
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28.11 Invalidity of Terms or Provisions. . . . . . . . . . . . . . . . 63
28.12 Prohibition Against Usury. . . . . . . . . . . . . . . . . . . . 63
28.13 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . . 63
28.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 63
28.15 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.17 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . . . . 63
28.18 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.19 Non-Recourse as to Landlord. . . . . . . . . . . . . . . . . . . 64
28.20 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . 64
28.21 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Schedule of Improvements
Exhibit C - Other Leased Properties
Exhibit D - Pledge Agreement
Exhibit E - Adjustments to Calculation of Gross
Golf Revenue for Private Clubs
Exhibit F - Calculation of Gross Golf Revenue for the Base Year on a Quarter by
Quarter Basis
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EAGLE WATCH GOLF CLUB
Woodstock
Cherokee County
Georgia
LEASE
THIS LEASE (this "Lease"), dated as of September 26, 1997, is
entered into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Landlord"), and E.W.G.C., LLC, a Georgia limited liability
company ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Contribution and Leaseback Agreement
(the "Agreement") dated as of September 18, 1997 by and between Landlord and
EAGLE WATCH GOLF CLUB LIMITED PARTNERSHIP, an Illinois limited partnership
("Transferor"), Transferor transferred to Landlord all of its right, title
and interest in and to the Property (as hereafter defined); and
B. Tenant, an Affiliate of Transferor, desires to lease the
Property from Landlord, and Landlord desires to lease the Property to Tenant,
on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants
and agreements to be performed by Tenant and Landlord hereunder, and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord's rights and interest (to the extent acquired from Transferor) in
and to the following real property, improvements, personal property and
related rights (collectively the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without
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limitation, all of Landlord's right, title and interest, if any, in and to
all mineral and water rights and all easements, rights-of-way and other
appurtenances used or connected with the beneficial use or enjoyment of
the Land and the Improvements;
(d) the Tangible Personal Property; and
(e) the Intangible Personal Property.
ARTICLE 2
DEFINITIONS, RULES OF CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the indicated
meanings:
"AAA" has the meaning provided in Section 27.1.
"ACTUAL PECUNIARY LOSS" has the meaning provided in Section 23.6.
"ADDITIONAL CHARGES" has the meaning provided in Section 4.7.
"ADJUSTED NET OPERATING INCOME" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of
Landlord.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be
adjusted annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all licenses, permits and approvals required
by any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
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"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on October
1, 1996, and ending on September 30, 1997; provided, however, that the Base
Year shall refer to the calendar year immediately preceding the Conversion
Date if the Base Rent is increased as provided in Section 4.5. A
quarter-by-quarter calculation of Gross Golf Revenue in the Base Year is
attached hereto as EXHIBIT F.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York,
New York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" has the meaning provided in Section 12.4.
"CAPITAL REPLACEMENT FUND" means the cumulative amount of the
Capital Replacement Reserve accrued by Landlord, together with interest
thereon as provided in Section 12.4, less amounts withdrawn from the Capital
Replacement Fund as provided in Section 12.4.
"CAPITAL REPLACEMENT RESERVE" means the greater of (i) an amount
equal to 3.22% of each Fiscal Year's Gross Golf Revenue, to be accrued
quarterly by Landlord as part of the Capital Replacement Fund, as provided in
Section 12.4 hereof, based on the Officer's Certificate, or (ii) Fifty
Thousand Dollars ($50,000) per Fiscal Year.
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling interest in Tenant to a Person other
than to a Person that is an Affiliate of Tenant as of the date hereof;
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which
results in the shareholders, partners or members who
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control Tenant as of the date hereof no longer having Control of Tenant;
or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and Controlled
by an Affiliate of Tenant as of the date hereof), and Tenant is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to have occurred for purposes of this Lease if the shareholders or
partners who Control Tenant as of the date hereof remain in Control of Tenant
through an agreement or equity interest.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended or supplemented, and the rules and regulations promulgated thereunder.
"COMMENCEMENT DATE" means the date hereof.
"COMPANY" means Golf Trust of America, Inc. and any subsidiaries
thereof, including, without limitation, GTA LP and GTA GP, and, for purposes
of Sections 10.7, 22.1, 22.3 and 22.4, each of their officers, employees,
directors, agents and representatives.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat
of condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTINGENT PURCHASE PRICE" shall have the meaning set forth in
EXHIBIT K of the Agreement.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise.
"CONVERSION DATE" means the earlier of (i) the date Transferor
elects to receive additional Owner's Shares in the Partnership as a
Contingent Purchase Price for the contribution of the Property, (ii) the date
on which Transferor elects in writing to waive its right to receive
additional Owner's Shares, or (iii) April 30, 2003.
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"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99-499
and 99-563; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2007, as such date may be
extended by the Extended Terms.
"EXTENDED TERM" has the meaning provided in Section 3.2.
"FACILITY MORTGAGE" means a mortgage, deed of trust or other security
agreement securing any indebtedness or any other Landlord's Encumbrance placed
on the Property in accordance with the provisions of Article 25.
"FACILITY MORTGAGEE" means the holder or beneficiary of a Facility
Mortgage, if any; provided Landlord has given Tenant notice of the identity and
address of the Person.
"FISCAL QUARTER" means the three-month periods (or applicable portions
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from January 1 to
December 31 of each year; provided that for purposes of the Lease Term and the
Pledge Agreement, the first Fiscal Year shall be deemed to include the period
from the Commencement Date to December 31, 1997.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal
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property, including all components thereof, now or hereafter located in, on
or used in connection with and permanently affixed to or incorporated into
the Property, including all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems
and apparatus, sprinkler systems and fire and theft protection equipment, all
of which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding
all items included within the category of Tenant's Personal Property and any
Tenant Improvements.
"FULL REPLACEMENT COST" means the actual replacement cost from time to
time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GROSS GOLF REVENUE" means all revenues accrued (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees (to the extent described in EXHIBIT E
attached hereto), (ii) periodic membership dues, (iii) greens fees, (iv) fees to
reserve a tee time, (v) guest fees, (vi) golf cart rentals, (vii) parking lot
fees, (viii) locker rentals, (ix) fees for golf club storage, (x) fees for the
use of swim, tennis or other facilities, (xi) charges for range balls, range
fees or other fees for golf practice facilities, (xii) fees or other charges
paid for golf or tennis lessons (except where retained by or paid to a USTA or
PGA professional in accordance with historical practice at the Property), (xiii)
fees or other charges for fitness centers, (xiv) forfeited deposits with respect
to any membership application, (xv) transfer fees imposed on any member in
connection with the transfer of any membership interest, (xvi) fees or other
charges paid to Tenant by sponsors of golf tournaments at the Property (unless
the terms under which Tenant is paid by such sponsor do not comply with Section
23.4, in which event the gross revenues received from such sponsor for the
tournament shall be excluded from Gross Golf Revenue and further provided that
Tenant shall use commercially reasonable efforts to structure such payment to
comply with Section 23.4), (xvii) advertising or placement fees paid by vendors
in exchange for exclusive use or name rights at the Property, and (xviii) fees
received in connection with any golf package sponsored by any hotel group,
condominium group, golf association, travel agency,
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tourist or travel association or similar payments; PROVIDED, HOWEVER, that
Gross Golf Revenue shall not include:
(a) Other Revenue;
(b) The amount of any city, county, state or federal sales,
admissions, usage, or excise tax on the item included in Gross Golf
Revenue, which is both added to or incorporated in the selling price and
paid to the taxing authority by Tenant; and
(c) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Tenant used in
connection with Tenant's operation of the Property.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPARTIAL APPRAISER" means the casualty insurance company which is
then carrying the largest amount of casualty insurance carried on the Property.
"IMPOSITIONS" means collectively:
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term);
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(c) excises;
(d) fees (including license, permit, inspection, authorization and
similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Rent or
Additional Charges (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Landlord or Landlord's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; PROVIDED, HOWEVER, that Impositions shall not include:
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Landlord or any
other Person other than Tenant;
(bb) any transfer or net revenue tax of Landlord or any other
Person other than Tenant; or
(cc) any tax imposed with respect to any principal or interest on
any indebtedness on the Property.
"IMPOUND CHARGES" has the meaning provided in Section 17.9.
"IMPOUND PAYMENT" has the meaning provided in Section 17.9.
"IMPROVEMENTS" means the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, Fixtures and other items of real estate located on
the Land as more particularly described in EXHIBIT B attached hereto.
"INITIAL BASE RENT" means $652,800 per year.
"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2007.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
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"INTANGIBLE PERSONAL PROPERTY" means all intangible personal property
owned by Landlord and used solely in connection with the ownership, operation,
leasing or maintenance of the Real Property or the Tangible Personal Property,
and any and all trademarks and copyrights, guarantees, Authorizations, general
intangibles, business records, plans and specifications, surveys, all licenses,
permits and approvals solely with respect to the construction, ownership,
operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through and
including the Expiration Date (or the termination date, if earlier terminated
pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all federal, state, county, municipal and
other governmental statutes, laws (including the Americans with Disabilities Act
and any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (i) require repairs, modifications, or alterations in or to the
Property; (ii) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property; or (iii) require the cleanup or other treatment of any
Hazardous Material.
"NET OPERATING INCOME" shall have the meaning set forth in EXHIBIT K
of the Agreement.
"NON-COMPLYING PARTY" has the meaning provided in Section 27.2.
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"OFFICER'S CERTIFICATE" means a certificate of Tenant signed by an
officer authorized to so sign by the board of directors or by-laws, or if Tenant
is a partnership, by an officer authorized to so sign by the general partners.
"OPERATING BUDGET" has the meaning provided in Section 12.7.
"OTHER LEASED PROPERTIES" means the property or properties leased or
hereafter leased to Tenant or an Affiliate of Tenant by Landlord or an Affiliate
of Landlord, other than pursuant to this Lease, which as of the date hereof are
the properties listed on EXHIBIT C attached hereto.
"OTHER REVENUE" means all revenue received (whether by Tenant or any
subtenants, assignees, concessionaires or licensees) from or by reason of the
Property relating to (i) the operation of snack bars, restaurants, bars,
catering functions, and banquet operations, (ii) sale of merchandise and
inventory on the Property, and (iii) photography services.
"OVERDUE RATE" means, on any date, a rate equal to the Prime Rate plus
an additional five percent (5%) per annum, but in no event greater than the
maximum rate then permitted under applicable law.
"OWNER'S SHARES" means limited partnership interests in the
Partnership.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means, for any Fiscal Year during the Lease Term,
thirty-three and one-third percent (33 1/3%) of the positive difference, if any,
between the current year's Gross Golf Revenue and the Gross Golf Revenue for the
Base Year, pro rated for any partial periods.
"PERMITTED ASSIGNEE" means a Person or an Affiliate of a Person
meeting one or more of the following standards:
(a) an existing lessee under a lease with Landlord or any
Affiliate of Landlord who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from an
Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided Landlord has approved such assignee
in its reasonable discretion, based on, among other things, the proposed
assignee's reputation and experience in owning, operating and managing golf
courses similar in type to the
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Property and the proposed assignee's net worth and financial resources; and
(c) a list of pre-approved assignees prepared by Landlord from
time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AGREEMENT" means that certain pledge agreement dated as of the
date of this Lease, by and between Transferor and Landlord, in the form attached
hereto as EXHIBIT D.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant to
the Pledge Agreement.
"PRIMARY INTENDED USE" means the operation of a golf course and other
activities incidental to the operation of a golf course.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by NationsBank, N.A. or its successor entity, to be its
prime rate or, if the prime rate is discontinued, the base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing.
"PROPERTY" means the Real Property, the Tangible Personal Property and
the Intangible Personal Property.
"REAL PROPERTY" means the Land and the Improvements, and all easements
and appurtenances attached thereto.
"RENT" means, collectively, the Base Rent and Percentage Rent.
"STATE" means the State or Commonwealth in which the Property is
located.
"TANGIBLE PERSONAL PROPERTY" means all items of tangible personal
property and fixtures (if any) owned by Landlord and located on or used solely
in connection with the Real Property, including, but not limited to, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone systems,
restaurant equipment, computers or trade fixtures, golf course operation and
maintenance equipment, including mowers, tractors, aerators, sprinklers,
sprinkler and irrigation facilities and equipment, valves or rotors, driving
range equipment, athletic
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training equipment, office equipment or machines, antiques or other
decorations, furniture, computers or other control systems, and equipment or
machinery of every kind or nature, including all warranties and guaranties
associated therewith, with the exception of golf carts.
"TENANT" means E.W.G.C., LLC, a Georgia limited liability company, and
any successor thereto, or assignee thereof, as permitted by the terms of this
Lease.
"TENANT IMPROVEMENTS" has the meaning provided in Section 12.1.
"TENANT'S PERSONAL PROPERTY" has the meaning provided in Section 8.2.
"TENANT'S RIGHT OF FIRST OFFER TO LEASE" has the meaning provided in
Section 3.3.
"TENANT'S RIGHT OF FIRST OFFER TO PURCHASE" has the meaning provided
in Section 26.1.
"TERM" means, collectively, the Initial Term and any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
"TERMINATION PAYMENT" means an amount calculated on the Expiration
Date equal to the positive difference, if any, between one hundred thirteen and
one half percent (113.5%) of the Rent and the Net Operating Income for the prior
Fiscal Year, divided by ten and two tenths percent (10.2%).
"TRANSFEROR" has the meaning provided in Recital A.
"TRUSTEE" has the meaning provided in Section 23.6.
"UNAVOIDABLE DELAYS" means delays due to strikes, lockouts, power
failure, acts of God, governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or other causes beyond the control of the party
responsible for performing an obligation hereunder, PROVIDED THAT lack of funds
shall not be deemed a cause beyond the control of either party hereto unless
such lack of funds is caused by the failure of the other party hereto to perform
any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of condition
of the Property such that in the good faith judgment of Landlord, reasonably
exercised, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
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2.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease
nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the
preparation of this Lease, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2007.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to extend
the Initial Term of this Lease five (5) consecutive times for a period of five
(5) years each (each such extension, an "Extended Term"). Tenant may exercise
its option for an Extended Term solely by giving written notice at least one
hundred eighty (180) days prior to the termination of the then-current term.
Tenant shall be entitled to exercise these options only if at the time of the
giving of such notice, Tenant is then the lessee of the Property pursuant to
this Lease, and at the time of the commencement of the applicable Term or
Extended Term no Event of Default shall then exist. During the Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, as the same may be amended, supplemented or modified.
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3.3 RIGHT OF FIRST OFFER TO LEASE. Upon the expiration of the
Lease Term and provided that Tenant has exercised each Extended Term and no
Event of Default then exists beyond any applicable notice and cure period,
Tenant shall have a right of first offer ("Tenant's Right of First Offer to
Lease") to lease the Property upon the same terms and conditions as Landlord, at
its election, intends to offer to lease the Property to a third party. Tenant
shall be entitled to exercise Tenant's Right of First Offer to Lease only if at
the time of the giving of such notice and at the time of the commencement of the
applicable term no Event of Default shall then exist and only if Landlord elects
to lease the Property at the expiration of the Lease Term. Not more than nine
(9) months and not less than three (3) months prior to the expiration of the
Lease Term, Landlord shall, if applicable, give Tenant written notice of its
intent to lease the Property and shall indicate the terms and conditions upon
which Landlord intends to lease the Property. Tenant shall thereafter have a
period of thirty (30) days to elect by unequivocal written notice to Landlord to
lease the Property on the same terms and conditions as Landlord intends to offer
to a third party; provided prior to Tenant's acceptance Landlord shall retain
the right to elect not to lease the Property by giving Tenant written notice
thereof. If Tenant elects not to lease the Property, then Landlord shall be
free to lease the Property to a third party. However, if the Base Rent for such
proposed lease is reduced by five percent (5%) or more as compared to the Base
Rent included in the lease that Tenant rejected, then Landlord shall again offer
Tenant the right to acquire the Property upon the same terms and conditions,
provided that Tenant shall have only fifteen (15) days to accept such offer.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.9 or at such other place
or to such other Person as Landlord from time to time may designate in writing.
The first monthly installment shall be prorated as to any partial month. If any
payment owing hereunder shall otherwise be due on a day that is not a Business
Day, such payment shall be due on the next succeeding Business Day. No payment
in addition to the payment of Rent shall be required in order to require
Landlord to accrue the Capital Replacement Fund as provided in Section 12.4.
Tenant shall receive a credit against Rent (or be paid directly, at Landlord's
option) for any operating expense credits or operating revenues credited to
Landlord pursuant to the Agreement which are applicable to any period in the
Lease Term (E.G., credit for real property taxes, membership dues, sublease
rents, etc.) and conversely Tenant
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shall reimburse Landlord for any operating expenses paid for by Landlord
pursuant to the Agreement which are the responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1, 1999
and on each January 1 thereafter through and including January 1, 2003, the
Annual Base Rent will increase by the lesser of (i) three percent (3%) of the
Annual Base Rent payable for the immediately preceding year, or (ii) two hundred
percent (200%) of the change in CPI from the immediately preceding fiscal year
(the "Base Rent Escalator"). If Landlord provides Tenant with the Bunker Repair
Funds as provided in Section 11.5, Annual Base Rent shall increase by an amount
that is 10.5% of the Bunker Repair Funds. In addition, if the Annual Base Rent
is increased as provided in Section 4.5, then the Base Rent Escalator shall
continue to apply to each of the five (5) years following such increase, with
the increase effective on the anniversary of the increase in Base Rent as
provided in Section 4.5 in lieu of increases on January of each year.
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. Beginning in the first year of the Initial
Term and continuing for the Initial Term and any Extended Term, Tenant shall
calculate the Gross Golf Revenue for each Fiscal Quarter (or shorter period, if
applicable) within twenty (20) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to
Landlord by way of an Officer's Certificate. If the Gross Golf Revenue for that
Fiscal Quarter (or shorter period, if applicable) is greater than the Gross Golf
Revenue for the same Fiscal Quarter (or shorter period, if applicable) in the
Base Year (and, following the Fiscal Quarter ending March 31, on a year-to-date
basis), then Tenant shall pay to Landlord the Percentage Rent upon submittal of
the Officer's Certificate. The Percentage Rent payable in any period in any
Fiscal Year shall be adjusted to reflect the Percentage Rent paid on a year-to-
date cumulative basis for the Fiscal Year (pro rated for any partial periods)
and the limits set forth in the next two sentences on a pro rated basis. The
increase in Rent resulting from the payment of Percentage Rent (together with
any increase in Base Rent pursuant to Section 4.2) payable, if any, during each
of the first five (5) full calendar years of the Initial Term shall be limited
to five percent (5%) of the Rent payable for the prior calendar year. Tenant
shall receive a credit against the payment of Percentage Rent in an amount equal
to the increase in the Base Rent over the Initial Base Rent.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty (60)
days after the end of each Fiscal Year, or after the expiration or termination
of this Lease, Tenant shall deliver to Landlord an Officer's Certificate setting
forth (i) the Gross Golf Revenue for the Fiscal Year just ended, and (ii) a
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comparison of the amount of the Percentage Rent actually paid during such Fiscal
Year versus the amount of Percentage Rent actually owing on the basis of the
annual calculation of the Gross Golf Revenue. If the Percentage Rent for such
Fiscal Year exceeds the sum of the quarterly payments of Percentage Rent
previously paid by Tenant, Tenant shall pay such deficiency to Landlord along
with such Officer's Certificate. If the Percentage Rent for such Fiscal Year is
less than the amount of Percentage Rent previously paid by Tenant, Landlord
shall, at Landlord's option, either (i) remit to Tenant its check in an amount
equal to such difference, or (ii) grant Tenant a credit against the payment of
Rent next coming due. Landlord shall have the right to audit all of Tenant's
business operations at the Property so as to determine the calculation of
Percentage Rent as provided in Section 12.6.
4.5 INCREASE IN BASE RENT FOLLOWING CONVERSION DATE. For the
Fiscal Year in which the Conversion Date occurs, the Annual Base Rent shall be
increased, effective as of the date the additional Owner's Shares are issued to
the Transferor, to an amount equal to the Adjusted Net Operating Income.
4.6 RECORD-KEEPING. Tenant shall utilize an accounting system for
the Property in accordance with its usual and customary practices and in
accordance with GAAP, approved by Landlord, which will accurately record all
Gross Golf Revenue. Tenant shall retain all accounting records for each Fiscal
Year conforming to such accounting system until at least five (5) years after
the expiration of such Fiscal Year.
4.7 ADDITIONAL CHARGES. In addition to the Base Rent and
Percentage Rent, (a) Tenant shall also pay and discharge when due and payable
all other amounts, liabilities, obligations and Impositions which Tenant assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Tenant to pay any of those items referred to in clause (a) above, Tenant
shall also pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"). Except as otherwise provided in this Lease, all
Additional Charges shall become due and payable at the earlier of (i) thirty
(30) days after either Landlord or the applicable third party delivery of an
invoice to Tenant, or (ii) the date of delinquency with respect to Impositions.
4.8 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the
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terms of any mortgage or deed of trust covering the Property and other
expenses of a similar or dissimilar nature. Accordingly, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within ten (10) Business Days after the date such payment is due, Tenant will
pay Landlord on demand, as Additional Charges, a late charge equal to five
percent (5%) of such installment. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant and is not a penalty. In addition,
if any installment of Base Rent, Percentage Rent or Additional Charges (but
only as to those Additional Charges which are payable directly to Landlord)
shall not be paid within five (5) Business Days after the due date with
respect to Base Rent or Percentage Rent or delivery of an invoice to Tenant
with respect to the Additional Charge, the amount unpaid shall bear interest,
from such due date to the date of payment thereof, computed at the Overdue
Rate on the amount of such installment, and Tenant will pay such interest to
Landlord as Additional Charges. The acceptance of any late charge or
interest shall not constitute a waiver of, nor excuse or cure, any default
under this Lease, nor prevent Landlord from exercising any other rights and
remedies available to Landlord.
4.9 NET LEASE. This Lease shall be a triple net lease and Rent
shall be payable to Landlord without notice or demand and without set-off,
counterclaim, recoupment, abatement, suspension, determent, deduction or
defense, except as expressly provided herein, so that this Lease shall yield
to Landlord the full amount of the installments of Base Rent, Percentage Rent
and Additional Charges throughout the Term. Without limiting the foregoing,
Tenant shall pay to Landlord on a monthly basis along with Base Rent, as
additional rent, an amount equal to one-twelfth (1/12) of the Capital
Replacement Reserve. Such amount shall be subject to reconciliation at the
end of each Fiscal Quarter.
4.10 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Golf Revenue (e.g., green fees and dinner), then Tenant agrees
that revenues shall be allocated to Gross Golf Revenue in a reasonable manner
consistent with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNER'S SHARES. On or prior to the Commencement
Date, Tenant shall cause the Pledge Agreement to be executed for the benefit
of Landlord.
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS. Notwithstanding the
above provisions, if the Net Operating Income
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for the Property falls below the coverage ratio set forth in Section 2(a) of
EXHIBIT D-1 to the Pledge Agreement, at any time following the release of any
Pledged Owner's Shares (or security deposit held by Landlord in lieu
thereof), then Tenant shall thereafter retain, and not make cash
distributions (except as may be necessary to pay any applicable taxes) to its
shareholders, partners or members, as applicable, until such time as Tenant
has accumulated six (6) months of Base Rent at the then current level. Cash
distributions may be made at such time as Tenant shall have again satisfied
such coverage ratios for two (2) consecutive Fiscal Years. Tenant shall
provide Landlord with such documentation, including Officer's Certificates
and financial statements, within forty-five (45) days after the end of each
Fiscal Quarter as are necessary to establish Tenant's compliance with the
foregoing requirements.
5.3 CROSS-COLLATERAL. The Pledged Owner's Shares shall also
secure Tenant's or Tenant's Affiliates obligations under each of the leases
for the Other Leased Properties. Notwithstanding the foregoing, the Pledged
Owner's Shares shall not secure any obligations of O.A.G.C., LLC, a Georgia
limited liability company ("Olde Atlanta"), under that certain Lease (the
"Olde Atlanta Lease") dated as of February 11, 1997, by and between Landlord
and Olde Atlanta, nor shall any security for Olde Atlanta's performance under
the Olde Atlanta Lease secure the performance of Tenant under this Lease.
5.4 LANDLORD'S LIEN. To the fullest extent permitted by
applicable law, Landlord is granted a lien and security interest on all of
Tenant's personal property now or hereafter located on the Property, and such
lien and security interest shall remain attached to Tenant's personal
property until payment in full of all Rent and satisfaction of all of
Tenant's obligations hereunder; provided, however, Landlord shall subordinate
its lien and security interest only to that of any third party lender or
seller which finances Tenant's personal property, the terms and conditions of
such subordination to be satisfactory to Landlord in its reasonable
discretion. Tenant shall, upon the request of Landlord, execute such
financing statements or other documents or instruments reasonably requested
by Landlord to perfect the lien and security interests herein granted.
5.5 TERMINATION PAYMENT. On the day following the Expiration
Date (unless the Expiration Date is December 31, 2032), Tenant shall pay to
Landlord the Termination Payment, if any, provided the maximum Termination
Payment shall equal the amounts in the Security Fund (as defined in the
Pledge Agreement) then held by Landlord and shall be payable solely from the
proceeds thereof. For purposes of calculating the Termination Payment, the
shares of Common Stock of GTA shall have a value deemed to equal the closing
share price of common stock of GTA on the Expiration Date.
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ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be
made directly to the taxing authorities where feasible. All payments of
Impositions shall be subject to Tenant's right of contest pursuant to the
provisions of Section 6.3 or Article 14. Upon request, Tenant shall promptly
furnish to Landlord copies of official receipts, if available, or other
satisfactory proof evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay
such Impositions. Landlord and Tenant shall, upon reasonable request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Property as may be necessary to prepare any required
returns and reports. In the event any applicable governmental authorities
classify any property covered by this Lease as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it
must legally so file. Each party, to the extent it possesses the same, will
provide the other party, upon reasonable request, with cost and depreciation
records necessary for filing returns for any property so classified as
personal property.
6.3 PRORATIONS. Impositions imposed in respect of the
tax-fiscal period during which the Lease commences or terminates shall be
adjusted and prorated between Landlord and Tenant, whether or not such
Imposition is imposed before or after such commencement or termination, and
Tenant's obligation to pay its prorated share thereof shall survive such
termination. If any Imposition may, at the option of the taxpayer, lawfully
be paid in installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may elect to pay in installments, in
which event Tenant shall pay all installments (and any accrued interest on
the unpaid balance of the Imposition) that are due during the Term hereof
before any fine, penalty, premium, further interest or cost may be added
thereto.
6.4 REFUNDS. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article 17.
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6.5 UTILITY CHARGES. Tenant shall pay or cause to be paid prior
to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Property during the Term.
6.6 ASSESSMENT DISTRICTS. Landlord shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the Leased Property into a special
assessment district or other taxing jurisdiction unless Tenant shall have
consented thereto, which consent shall not be unreasonably withheld or unless
Landlord agrees to pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord
or any person whose claim arose under Landlord, (i) Tenant, to the extent
permitted by law, shall remain bound by this Lease in accordance with its
terms and shall neither take any action without the consent of Landlord to
modify, surrender or terminate the same, nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent by
reason of, and (ii) the respective obligations of Landlord and Tenant shall
not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Property or any portion
thereof from whatever cause or any taking of the Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any portion thereof, the interference with
such use by any Person, or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or
by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Tenant from any such obligations as
a matter of law.
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Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by
Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the
execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purposes hereunder. Regardless,
however of any inspection made by Tenant of the Property and whether or not
any patent or latent defect or condition was revealed or discovered thereby,
Tenant is leasing the Property "as is" in its present condition. Tenant
waives and releases any claim or cause of action against Landlord with
respect to the condition of the Property including any defects or adverse
conditions latent or patent, matured or unmatured, known or unknown by Tenant
or Landlord as of the date hereof. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER
ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL
NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING
ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT,
(iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x)
MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv)
OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi) COMPLIANCE
OF THE PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR LEGAL
REQUIREMENTS. TENANT ACKNOWLEDGES THAT THE PROPERTY IS OF ITS SELECTION AND
TO ITS SPECIFICATIONS AND THAT THE PROPERTY HAS BEEN INSPECTED BY TENANT AND
IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE
PROPERTY OF ANY NATURE, WHETHER LATENT OR PATENT, AS BETWEEN LANDLORD AND
TENANT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT
THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT
LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 7.2 HAVE BEEN NEGOTIATED
AND REVIEWED BY TENANT'S LEGAL COUNSEL, AND ARE INTENDED TO BE A COMPLETE
EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED,
WITH RESPECT TO THE
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PROPERTY, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW
NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.
Tenant represents to Landlord that Tenant has examined the title to
the Property prior to the execution and delivery of this Lease and has found
the same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) Tenant or an Affiliate of Tenant has previously
operated the Property and has knowledge of its condition which is superior to
that of Landlord, (B) fee simple title, except where the Property is held
under a ground lease, (both legal and equitable) is in Landlord and that
Tenant has only the leasehold right of possession and use of the Property as
provided herein, (C) to Tenant's knowledge the Improvements conform to all
material Legal Requirements and all material Insurance Requirements, (D) all
easements necessary or appropriate for the use or operation of the Property
have been obtained, (E) all contractors and subcontractors retained by Tenant
who have performed work on or supplied materials to the Property have been
fully paid, and all materials to the Property have been fully paid for, (F)
the Improvements constructed by Tenant or any Affiliate of Tenant have been
completed in all material respects in a workmanlike manner of first class
quality, and (G) all equipment necessary or appropriate for the use or
operation of the Property has been installed and is presently operative in
all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of
such Property during the Term of and upon the terms and conditions of this
Lease.
8.2 TENANT'S PERSONAL PROPERTY. Tenant shall maintain all of
the Property, whether initially included in the Lease or thereafter acquired
by Landlord or Tenant, in good condition and repair, normal wear and tear
excepted. Upon the loss, destruction or obsolescence of any Tangible Personal
Property, Tenant shall replace such property with replacements of the same
type and quality as initially in place, which such property will be owned by
Tenant except to the extent acquired with funds from the Capital Replacement
Fund ("Tenant's Personal Property"). Upon the expiration or sooner
termination of this Lease, the Tenant's Personal Property shall transfer to
Landlord without requirement of any bill of sale or assignment; provided
Landlord, at its election, may require Tenant to execute such documentation
as Landlord may require to evidence such transfer. Tenant shall not remove
any Tangible Personal Property from the Property upon termination of the
Lease. If any of such Tangible Personal Property is stored away from the
Property, Tenant will provide Landlord with proper access to the storage
facility.
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8.3 TENANT'S OBLIGATIONS. Tenant shall provide and maintain, or
cause to be provided and maintained, during the entire term of the Lease, all
Tangible Personal Property, as well as merchandise for sale to the public,
and food and beverage, as shall be necessary in order to operate the Property
in compliance with (a) all applicable Legal Requirements, (b) customary
practices in the golf industry, (c) past practices of the Transferor, and (d)
such other reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal
Property may, upon notice to Landlord and during reasonable hours, enter the
Property and take possession of any of Tenant's Personal Property without
liability for trespass or conversion upon a default by Tenant, provided that
such lessor provide Landlord with the opportunity to cure the defaults of
Tenant on terms and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term,
Tenant shall use or cause to be used the Property and the improvements
thereon for its Primary Intended Use. Tenant shall not use the Property or
any portion thereof for any other use without the prior written consent of
Landlord, in Landlord's absolute discretion. No use shall be made or
permitted to be made of the Property, and no acts shall be done, which will
cause the cancellation of any insurance policy covering the Property or any
part thereof, nor shall Tenant sell or otherwise provide to patrons, or
permit to be kept, used or sold in or about the Property any article which
may be prohibited by law or by the standard form of fire insurance policies,
or any other insurance policies required to be carried hereunder, or fire
underwriters regulations. Tenant shall, at its sole cost, comply with all of
the requirements pertaining to the Property or other improvements of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Property and
Tenant's Personal Property.
9.2 SPECIFIC PROHIBITED USES. Tenant shall not use or occupy or
permit the Property to be used or occupied, nor do or permit anything to be
done in or on the Property, in a manner which would (i) violate or fail to
comply with any law, rule or regulation or Legal Requirement, (ii) subject to
Article 12, cause structural injury to any of the Improvements or (iii)
constitute a public or private nuisance or waste. Tenant shall not allow any
Hazardous Material to be located in, on or under the Property, or any
adjacent property, or incorporated in the Property or any improvements
thereon except in compliance with applicable law (including any Environmental
Laws). Tenant shall not allow the Property to be used as a landfill or a
waste
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disposal site, or a manufacturing, distribution or disposal facility for any
Hazardous Materials. Tenant shall neither suffer nor permit the Property or
any portion thereof, including Tenant's Personal Property, to be used in such
a manner as (i) might reasonably tend to impair Landlord's title thereto or
to any portion thereof, or (ii) may reasonably make possible a claim or
claims of adverse usage or adverse possession by the public, as such, or of
implied dedication of the Property or any portion thereof, or (iii) is in
material violation of any applicable Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees, dues and other charges or
materially increase or decrease the number of memberships available at the
Property, except as follows:
(a) in accordance with Transferor's past practice, as reasonably
approved by Landlord, or
(b) membership plans and fees proposed by Tenant and approved by
Landlord, in Landlord's reasonable discretion.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from time
to time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the
approval of Landlord, which approval shall not be unreasonably withheld or
delayed): (i) grant easements and other rights in the nature of easements;
(ii) release existing easements or other rights in the nature of easements
which are for the benefit of the Property; (iii) dedicate or transfer
unimproved portions of the Property for road, highway or other public
purposes; (iv) execute petitions to have the Property annexed to any
municipal corporation or utility district; (v) execute amendments to any
covenants and restrictions affecting the Property; and (vi) execute and
deliver to any person any instrument appropriate to confirm or effect such
grants, releases, dedications and transfers (to the extent of its interest in
the Property), but only upon delivery to Landlord of an Officer's Certificate
(which Officer's Certificate, if contested by Landlord, shall not be binding
on Landlord) stating that such grant, release, dedication, transfer, petition
or amendment is not detrimental to the proper conduct of the business of
Tenant on the Property and does not reduce its value or usefulness for the
Primary Intended Use. Landlord shall not grant, release, dedicate or execute
any of the foregoing items in this Section 9.4 without obtaining Tenant's
approval, which approval shall not be unreasonably withheld or delayed.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the activities of such association; (b)
at its election, engage in reasonable cross-marketing endeavors with the
members of the Advisory Association; and (c) at its election, provide signage
on the
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Property which references that the Property is owned by Landlord, which
signage may include an appropriate logo selected by Landlord. In addition,
it is the intent of the parties that Tenant be a single-purpose entity with
no business operations except for those related solely to the operation of
the Property for its Primary Intended Use and other property of Landlord
which may be leased to Tenant. Tenant shall, therefore, not engage in or
undertake any activities other than those respecting the operation of the
Property for its Primary Intended Use, including leasing, managing, and
operating golf courses in accordance with this Lease.
9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market
value (determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement
Date. Tenant further represents that, at the end of the Term, including all
Extended Terms, it expects that the Land and each of the Improvements will
have a remaining useful life equal to at least twenty percent (20%) of its
expected useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
Except as set forth in the environmental report dated September,
1997, prepared by Law Engineering, Tenant hereby represents, warrants, and
covenants to Landlord as follows:
10.1 OPERATIONS. Except as set forth in the Agreement, the
Property is presently operated in compliance in all material respects with
all Environmental Laws.
10.2 REMEDIATION. Except as set forth in the Agreement, and to
the best knowledge of Tenant, there are no Environmental Laws requiring any
material remediation, cleanup, repairs or construction (other than normal
maintenance) with respect to the Property.
10.3 VIOLATIONS; ORDERS. Except as set forth in the Agreement,
and to the best knowledge of Tenant, (a) no notices of any violation or
alleged violation of any Environmental Laws relating to the Property or its
uses have been received by either Tenant, or, to the best knowledge of
Tenant, by any prior owner, operator or occupant of the Property, and (b)
there are no writs, injunctions, decrees, orders or judgments outstanding, or
any actions, suits, claims, proceedings or investigations pending or
threatened, relating to the ownership, use, maintenance or operation of the
Property.
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10.4 PERMITS. Except as set forth in the Agreement, all material
permits and licenses required under any Environmental Laws in respect of the
operations of the Property have been obtained or are in the process of being
obtained, and Tenant shall be in compliance, in all material respects, with
the terms and conditions of such permits and licenses.
10.5 REPORTS. All material reports of environmental surveys,
audits, investigations and assessments relating to the Property in the
possession or control of Tenant, Transferor or their Affiliates are set forth
or described in the Agreement.
10.6 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or
reporting under any Environmental Law in, on or under the Property or if
Tenant, Landlord, or the Property becomes subject to any order of any
federal, state or local agency to investigate, remove, remediate, repair,
close, detoxify, decontaminate or otherwise clean up the Property, Tenant
shall, at its sole expense, but subject to the last sentence of Section 10.7,
carry out and complete any required investigation, removal, remediation,
repair, closure, detoxification, decontamination or other cleanup of the
Property. If Tenant fails to implement and diligently pursue any such
repair, closure, detoxification, decontamination or other cleanup of the
Property in a timely manner, Landlord shall have the right, but not the
obligation, to carry out such action and to recover its costs and expenses
therefor from Tenant as Additional Charges.
10.7 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees
and expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any
Environmental Law) in respect of the Property howsoever arising, without
regard to fault on the part of Tenant, including (a) liability for response
costs and for costs of removal and remedial action incurred by the United
States Government, any state or local governmental unit to any other Person,
or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any
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Environmental Law, (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying
on of a dangerous activity, or (d) by reason of a breach of a representation
or warranty in Sections 10.1 through 10.5 of this Lease. Notwithstanding the
foregoing or any other provision of this Lease (including, without
limitation, Section 7.2, Section 10.9 and Article 23), Tenant shall not be
liable, or otherwise be required to indemnify Landlord or the Company or any
Affiliates of the Company for (i) any matters or events that arise after the
Commencement Date that are not caused by any act or omission on the part of
Tenant, or (ii) any matters or events that arise after the Commencement Date
that are directly caused by a breach by Landlord of the terms of this Lease.
10.8 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
10.9 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.7), if, at a time when the Term would otherwise
terminate or expire, a violation of any Environmental Law has been asserted
by Landlord and has not been resolved in a manner reasonably satisfactory to
Landlord, or has been acknowledged by Tenant to exist or has been found to
exist at the Property or has been asserted by any governmental authority and
Tenant's failure to have completed all action required to correct, abate or
remediate such a violation of any Environmental Law materially impairs the
leasability of the Property upon the expiration of the Term, then, at the
option of Landlord, the Term shall be automatically extended with respect to
the Property beyond the date of termination or expiration and this Lease
shall remain in full force and effect under the same terms and conditions
beyond such date with respect to the Property until the earlier to occur of
(i) the completion of all remedial action in accordance with applicable
Environmental Laws or (ii) 12 months beyond such expiration or termination
date; PROVIDED, that Tenant may, upon any such extension of the Term,
terminate the Term by paying to Landlord such amount as is necessary in the
reasonable judgment of Landlord to complete or perform such remedial action.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or
not the need for such repairs occurs as a result of Tenant's use, any prior
use, the elements or the age of the Property or any portion thereof) and in
accordance with any applicable Legal Requirements, and, except as otherwise
provided
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in Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
Commencement Date (concealed or otherwise). Tenant shall operate and
maintain the Property in accordance with the operation and maintenance
practices of the Property at the Commencement Date and otherwise in a manner
comparable to other comparable golf course facilities in the vicinity of the
Property. Landlord may consult with the Advisory Association from time to
time with respect to Tenant's compliance with its maintenance and operation
obligations under this Section 11.1, and Landlord and representatives of
Advisory Association shall have the right from time to time to enter the
Property for the purpose of inspecting the Property. If Landlord, in
consultation with the Advisory Association, determines that Tenant has failed
to comply with its maintenance and operation obligations under this Section
11.1, Landlord shall provide written notice to Tenant setting forth a list of
remedial work and/or steps to be performed by Tenant. Tenant shall promptly
and diligently perform such remedial work and/or steps as recommended by
Landlord, provided if Tenant objects to one or more of the remedial
obligations proposed by Landlord, then the matter shall be submitted to the
dispute resolution procedure set forth in Section 12.7. Tenant will not take
or omit to take any action the taking or omission of which could reasonably
be expected to impair the value or the usefulness of the Property or any part
thereof for its Primary Intended Use.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under
any circumstances be required to build or rebuild any improvements on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, in connection with this
Lease, or to maintain the Property in any way. Tenant hereby waives, to the
extent permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of
any labor or services or the furnishing of any materials or other property
for the construction, alteration, addition, repair or demolition of or to the
Property or any part thereof; or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property, in either case, in such
fashion as
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would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in the condition in which the Property was originally received from
Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Tenant to maintain the Property in
good order and repair during the entire Term of the Lease).
11.5 BUNKER REPAIRS. During the Initial Term, Tenant shall have
the right to cause repairs to be made to bunkers on the Property (the "Bunker
Repairs"), which Bunker Repairs shall be completed to the satisfaction of
Landlord. So long as the Net Operating Income for the immediately preceding
fiscal year was equal to or greater than 113.5% of Base Rent (as increased for
the payment of the Bunker Repair Funds) and the Percentage Rent, then Landlord
shall provide Tenant with funds (the "Bunker Repair Funds") necessary to
complete the Bunker Repairs, in an amount not to exceed One Hundred Thousand
Dollars ($100,000). Payment of the Bunker Repair Funds shall be made within
thirty (30) days of Landlord's receipt and approval of paid invoices for the
same.
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS
12.1 TENANT'S RIGHT TO CONSTRUCT. Subject to the prior written
approval of Landlord in its reasonable discretion, during the Lease Term Tenant
may make alterations, additions, changes and/or improvements to the Property
(individually, a "Tenant Improvement," and collectively, "Tenant Improvements").
Any such Tenant Improvement shall be made at Tenant's sole expense and shall
become the property of Landlord upon termination of this Lease. Unless made on
an emergency basis to prevent injury to Person or property, Tenant will submit
plans and specifications for any Tenant Improvements, in the form necessary for
any required building permits, to Landlord for Landlord's prior written
approval, such approval not to be unreasonably withheld or delayed.
Upon approval by Landlord:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals (E.G., ground lessor, mortgagee,
etc.) relating to the construction of any Tenant Improvement; and
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(b) once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such Tenant Improvement to completion
in accordance with applicable insurance requirements and the laws, rules
and regulations of all governmental bodies or agencies having jurisdiction
over the Property; and
(c) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any Tenant
Improvement to be enforced against the Property or any part thereof, and
Tenant agrees to hold Landlord and the Property free and harmless from all
liability from any such liens, claims or demands, together with all costs
and expenses in connection therewith; and
(d) all work shall be performed in a good and workmanlike manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost and
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that Tenant
requires to construct any Tenant Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant determines
are necessary or desirable for the development of the Property in
accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this Lease
within ten (10) Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to protect
Landlord's interest from mechanics' liens, materialmen's liens or liens of a
similar nature.
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12.4 CAPITAL REPLACEMENT FUND. Solely from the payment of
additional rent received pursuant to Section 4.9 of this Lease, Landlord shall
be obligated to accrue the Capital Replacement Reserve. The Capital Replacement
Reserve shall accrue quarterly based on the Officer's Certificate and shall be
placed in the Capital Replacement Fund. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Landlord and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Tenant to Landlord
stating the specific use to be made and subject to the reasonable approval of
Landlord, the Capital Replacement Fund shall be made available to Tenant for
Capital Expenditures; PROVIDED, HOWEVER, no portion of amounts credited to the
Capital Replacement Fund shall be used to purchase property to the extent that
doing so would cause Landlord to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code. Tenant shall have no rights
with respect to any amounts in the Capital Replacement Fund except as provided
herein. Subject to Landlord's approval of the Capital Expenditures, Landlord
shall make available to Tenant amounts from the Capital Replacement Fund under
the following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts for reimbursement, or
qualifying invoices for direct payment to the vendor;
(c) Such expenditures are included in the Capital Budget submitted
to and approved by Landlord in accordance with Section 12.7; and
(d) If from time to time Tenant shall expend monies beyond the
balance in the Capital Replacement Fund, then Tenant shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates
when the Tenant's reserve balance shall be replenished to a level that can
support such expenditure.
12.5 RIGHTS IN TENANT IMPROVEMENTS. All Tenant Improvements shall
be the property of Landlord. However, Tenant shall be entitled to all federal
and state income tax benefits associated with any Tenant Improvement during the
Lease Term exclusive of any Capital Expenditures paid for from amounts credited
to the Capital Replacement Fund, as to which Landlord shall be entitled all
income tax benefits.
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS GOLF REVENUE.
Landlord, at its own expense except as provided hereinbelow, shall have the
right from time to time directly or though its accountants to audit the
information set forth in the Officer's Certificate referred to in Section 4.4
and in
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connection with such audits to examine Tenant's book and records with respect
thereto (including supporting data, sales tax returns and Tenant's work
papers). If any such audit discloses a deficiency in the payment of
Percentage Rent, Tenant shall forthwith pay to Landlord the amount of the
deficiency as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the
date of payment thereof; PROVIDED, HOWEVER, that as to any audit that is
commenced more than twelve (12) months after the date Gross Golf Revenue for
any Fiscal Year is reported by Tenant to Landlord in the Officer's
Certificate, the deficiency, if any, with respect to such Gross Golf Revenue
shall bear interest as permitted herein only from the date such determination
of deficiency is made unless such deficiency is the result of gross
negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Golf Revenue actually received by Tenant for any
Fiscal Year exceeds the Gross Golf Revenue reported by Tenant in the
Officer's Certificate by more than two percent (2%), then Tenant shall pay
all reasonable costs of such audit and examination; provided Tenant shall
have the right to submit the audit determination to arbitration in accordance
with the procedures set forth in Article 28. Landlord shall also have the
right to review and audit from time to time Tenant's business operations
including all books, records and financial statements of Tenant. Tenant
shall promptly provide to Landlord copies of all such books, records,
financial statements or any other documentation of Tenant's business
operations reasonably requested by Landlord.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior to
the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this
Section 12.7. The Operating Budget and the Capital Budget (together, the
"Annual Budget") shall be prepared in a form approved by Landlord for use
throughout the Lease Term and show by quarter and for the year as a whole the
following:
(a) Tenant's reasonable estimate of Gross Golf Revenue (including
membership dues, daily use fees and other sources of Gross Golf Revenue) and
other revenue for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Landlord and Tenant, together with assumptions,
in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next four Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
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(d) A narrative description of any anticipated significant events,
including, if requested by Landlord, a narrative description of any category of
operating expenses that decrease or increase by five percent (5%) or more from
the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget.
If the parties are not able to reach agreement on the Annual Budget for any
Fiscal Year during Landlord's thirty (30) day review period, the parties shall
attempt in good faith during the subsequent thirty (30) day period to resolve
any disputes, which attempts shall include, if requested by either party, at
least one (1) meeting of executive-level officers of Landlord and Tenant and one
(1) meeting with the directors of the Advisory Association. In the event the
parties are still not able to reach agreement on the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 12.7, the parties shall adopt such portions of the Operating Budget and
the Capital Budget as they may have agreed upon, and any matters not agreed upon
shall be referred to a dispute resolution committee composed of three (3)
members of the Advisory Association unaffiliated with Tenant and two (2) members
of the board of directors of the Company. Such committee shall be responsible
for resolving any such disagreement and the parties agree that the determination
of such dispute resolution committee shall be binding on the parties. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the prior year's Operating Budget until a new Operating
Budget is adopted, and (ii) if the Capital Budget has not been agreed upon, no
Capital Expenditures shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically required by Landlord or are
otherwise required to comply with Legal Requirements or Insurance Requirements.
Tenant shall operate the Property in a manner reasonably consistent with the
Annual Budget.
12.8 FINANCIAL STATEMENTS.
(a) Tenant shall utilize, or cause to be utilized, an accounting
system for the Property in accordance with its usual and customary practice, and
in accordance with GAAP, that will accurately record all data necessary to
compute Percentage Rent, and Tenant shall retain for at least five (5) years
after the expiration of each Fiscal Year, reasonably adequate records conforming
to such accounting system showing all data necessary to compute Percentage Rent.
The books of account and all other records relating to or reflecting the
operation of the Property
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shall be kept either at the Property or at Tenant's offices in Libertyville,
Illinois. Such books and records shall be available to Landlord and its
representatives for examination, audit, inspection and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter (i) unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations and a balance sheet. If Landlord requests, Tenant shall provide
reviewed financial statements for such Fiscal Quarter; provided, however, such
review (except as provided for in clause (ii)) shall be at Landlord's expense.
Each quarterly report shall also include a narrative explaining any deviation in
any major revenue or expense category or operating expenses (by category) of
more than ten percent (10%) from the amounts set forth on the Annual Budget,
together with, if appropriate a revised Annual Budget, which budget shall be
subject to Landlord's review and approval as provided in Section 12.7. Each
quarterly report shall also forecast any projected Percentage Rent payable for
the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord within
sixty (60) days of the end of such Fiscal Year financial statements prepared in
accordance with GAAP and audited by an independent accounting firm approved by
Landlord, in its reasonable discretion. Notwithstanding the foregoing, Landlord
shall only require audited financial statements of Gross Golf Revenue if
Tenant's financial statements are not required to be separately stated by the
Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
13.1 LIENS. Subject to the provisions of Article 14 relating to
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy,
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claim or encumbrance emanating from Tenant's actions or negligence, not
including, however:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date,
as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are
in the process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due; and
(h) any liens which are the responsibility of Landlord pursuant to
the provisions of Article 25.
13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article 21
and excepting any matters granted or created by Landlord after the Commencement
Date, if any of the Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Property, or shall violate the agreements
or conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Landlord or at the behest of any person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord, the
Company and Affiliates of the Company from and against all losses, liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including
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reasonable attorneys' fees and expenses) based on or arising by reason of any
such encroachment, violation or impairment and in such case, in the event of
an adverse final determination, either (i) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each
such encroachment, violation or impairment, whether the same shall affect
Landlord or Tenant; or (ii) make such changes in the Improvements, and take
such other actions, as Tenant in the good faith exercise of its judgment
deems reasonably practicable, to remove such encroachment, and to end such
violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary
in order to be able to continue the operation of the Improvements for the
Primary Intended Use substantially in the manner and to the extent the
Improvements were operated prior to the assertion of such violation or
encroachment. Tenant's obligation under this Section 13.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Tenant shall be
entitled to a credit for any sums recovered by Landlord under any such policy
of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, on its own or on Landlord's behalf (or
in Landlord's name) but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Tenant shall reasonably
cooperate with Landlord with respect to such contest), and, FURTHER PROVIDED
THAT:
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Landlord and from the
Property, and neither the Property nor any Rent therefrom nor any part
thereof or interest therein would be in any danger of being sold,
forfeited, attached or lost pending the outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this Section
14.1(b), however,
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shall permit Tenant to delay compliance with any requirement of an
Environmental Law to the extent such non-compliance poses an immediate
threat of injury to any Person or to the public health or safety or of
material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if any,
as may be demanded by Landlord to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or the Rent by
reason of such non-payment or noncompliance, PROVIDED, HOWEVER, the
provisions of this Article 14 shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to
Landlord hereunder;
(d) no such contest shall interfere in any material respect with
the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage required
by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
14.2 INDEMNIFICATION OF LANDLORD. Landlord, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term, Tenant
shall at all times keep the Property, and all property located in or on the
Property, including all Tenant's Personal Property and any Tenant Improvements,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State,
and shall otherwise meet the requirements set forth in Section 15.5 of this
Lease. The policies must name Landlord
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as an additional insured or loss payee, as applicable. Losses shall be
payable to Landlord and/or Tenant as provided in this Article 15. In
addition, the policies shall name as a loss payee any Facility Mortgagee by
way of a standard form of mortgagee's loss payable endorsement. Any loss
adjustment shall require the written consent of Landlord, Tenant, and each
Facility Mortgagee, if any. Evidence of insurance shall be deposited with
Landlord and, if requested, with any Facility Mortgagee(s). The policies on
the Property, including the Improvements, Fixtures, Tangible and Intangible
Personal Property and any Tenant Improvements, shall insure against the
following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100% of
the then Full Replacement Cost thereof covering all structures built on the
Property and all Tangible Personal Property; and further provided the
Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts not less than five million dollars ($5,000,000) per occurrence and
in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in whole
or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Tenant shall not be required to participate
in the National Flood Insurance Program or otherwise obtain flood insurance
to the extent not available at commercially reasonable rates; provided
Tenant shall give Landlord written notice thereof prior to cancelling or
not obtaining any flood insurance. Tenant may opt to insure the structures
only, and not the Land, subject to the approval of Landlord, in Landlord's
reasonable discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State law
permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type
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of building size and use to the Property and located in the geographic area
where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that the
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
15.5 FORM SATISFACTORY, ETC. All of the policies of insurance
referred to in this Article 15 shall be written in a form reasonably
satisfactory to Landlord and by insurance companies rated not less than XV by
A.M. Best's Insurance Guide. Tenant shall pay all premiums for the policies of
insurance referred to in Sections 15.1 and 15.2 and shall deliver certificates
thereof to Landlord prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing
policy). In the event Tenant fails to satisfy its obligations under this
Article 15, Landlord shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefore, which premiums shall be repayable
to Landlord upon written demand as Additional Charges. Each insurer issuing
policies pursuant to this Article 15 shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Landlord,
that it will give to Landlord thirty (30) days' written notice before the policy
or policies in question shall be altered, allowed to expire or cancelled. Each
such policy shall also provide that any loss otherwise payable thereunder shall
be payable notwithstanding (i) any act or omission of Landlord or Tenant which
might, absent such provision, result in a forfeiture of all or a part of such
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those
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permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by any Facility Mortgagee pursuant to any
provision of a mortgage, note, assignment or other document evidencing or
securing a loan upon the happening of an event of default therein or (iv) any
change in title to or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as Tenant can reasonably demonstrate its ability to satisfy such deductible
or amount of such self-retained insurance.
15.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 15, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; PROVIDED,
HOWEVER, that the coverage afforded Landlord will not be reduced or diminished
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 15 are otherwise satisfied. The amount of this total insurance
allocated to each of the Leased Properties, which amount shall be not less than
the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $100,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Property, or any portion
thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from
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time to time for the reasonable costs of such reconstruction or repair;
PROVIDED, HOWEVER, that Landlord shall disburse proceeds subject to the
following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall
have been approved by Landlord, which approval shall not be unreasonably
withheld or delayed and (ii) appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies of
all necessary governmental and private approvals necessary to complete the
reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Article 14, no
mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have
been posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the
estimated total cost of completion and performance of the work to date in a
good and workmanlike manner in accordance with the contracts, plans and
specifications, (ii) waivers of liens, (iii) a satisfactory bring down of
title insurance and (iv) other evidence of cost and payment so that
Landlord and Facility Mortgagee can verify that the amounts disbursed from
time to time are represented by work that is completed, in place and free
and clear of mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds; and
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(g) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation, payment by
Tenant of reasonable costs of administration imposed by or on behalf of
Facility Mortgagee should the proceeds be held by Facility Mortgagee.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Property (or in the event neither Landlord nor Tenant is required to or
elects to repair and restore) shall be paid to Landlord and deposited in the
Capital Replacement Fund except for any portion specifically applicable to
Tenant's merchandise and inventory. All salvage resulting from any risk covered
by insurance shall belong to Landlord.
If the costs of restoration or reconstruction exceeds the amount of
proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant may
petition Landlord for withdrawal from the Capital Replacement Fund to cover some
or all of such excess, subject to the approval of Landlord in Landlord's sole
and absolute discretion.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY USE.
If during the term the Property is totally or partially destroyed from a
risk covered by the insurance described in Article 15 and the Property
thereby is rendered Unsuitable For Its Primary Intended Use as reasonably
determined by Landlord, Tenant shall, at its election, either (i)
diligently restore the Property to substantially the same condition as
existed immediately before the damage or destruction, or (ii) terminate the
Lease as provided in Section 21.2 and assign all of its rights to any
insurance proceeds required under this Lease to Landlord.
(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS PRIMARY
USE. If during the term, the Property is totally or partially destroyed
from a risk covered by the insurance described in Article 15, but the Real
Property is not thereby rendered Unsuitable For Its Primary Intended Use,
Tenant shall diligently restore the Property to substantially the same
condition as existed immediately before the damage or destruction;
PROVIDED, HOWEVER, Tenant shall not be required to restore certain Tangible
Personal Property and/or any Tenant Improvements if failure to do so does
not adversely affect the amount of Rent payable hereunder or the Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction. Such damage or destruction shall not terminate this
Lease; PROVIDED FURTHER, HOWEVER, if Tenant cannot within eighteen
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(18) months obtain all necessary governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need,
after diligent efforts to do so in order to be able to perform all required
repair and restoration work and to operate the Property for its Primary
Intended Use in substantially the same manner immediately prior to such
damage or destruction, Tenant may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the Term,
the Property is totally or materially destroyed from a risk not covered by the
insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full force
and effect and Tenant's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during the period required
for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other provision
to the contrary in this Article 15, if damage to or destruction of the Property
occurs during the last twenty-four (24) months of the Lease Term, and if such
damage or destruction cannot reasonably be expected by Landlord to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the then-applicable Term, then either Landlord or Tenant shall have the
right to terminate the Lease on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
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ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property is
totally and permanently taken by Condemnation, this Lease shall terminate on the
Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property and
this Lease remains in full force and effect pursuant to Section 16.2, Landlord
at its cost shall accomplish all necessary restoration up to but not exceeding
the amount of the Award payable to Landlord, as provided herein. If Tenant
receives an Award under Section 16.4, Tenant shall repair or restore any Tenant
Improvements up to but not exceeding the amount of the Award payable to Tenant
therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and be
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) the loss of Tenant's business during the remaining term, (ii) any Tenant
Improvements and (iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect with no abatement of rent payable by Tenant hereunder.
In the event of any such temporary taking, the entire amount of any such Award
made for such temporary taking allocable to the Lease Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant.
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ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following events
(individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of thirty (30) days after receipt by Tenant of notice
thereof from Landlord, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days of receipt of notice from Landlord of
the default; PROVIDED, HOWEVER, that such notice shall be in lieu of and
not in addition to any notice required under applicable law; PROVIDED
FURTHER, HOWEVER, that the cure period shall not extend beyond thirty
(30) days as otherwise provided by this Section 17.1(b) if the facts or
circumstances giving rise to the default are creating a further harm to
Landlord or the Property and Landlord makes a good faith determination that
Tenant is not undertaking remedial steps that Landlord would cause to be
taken if this Lease were then to terminate;
(c) if Tenant shall:
(i) admit in writing its inability to pay its debts as they
become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property, or
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(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against it,
be adjudicated as bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of Tenant, a receiver of
Tenant or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of Tenant
under the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, and such judgment, order
or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED, HOWEVER,
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Property;
(h) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect; or
(i) an "Event of Default" (as defined in such lease) by Tenant or
any Affiliate of Tenant in any other lease by and between such party and
Landlord or any Affiliate of Landlord, or an "Event of Default" under the
Pledge Agreement;
THEN, Tenant shall be declared to have breached this Lease. Landlord
may terminate this Lease by giving Tenant not less than ten (10) days' notice
(or no notice for clauses (c), (d), (e), (f) and (g)) of such termination and
upon the
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expiration of the time fixed in such notice, the Term shall terminate and all
rights of Tenant under this Lease shall cease. Landlord shall have all
rights at law and in equity available to Landlord as a result of Tenant's
breach of this Lease.
17.2 PAYMENT OF COSTS. Tenant shall, to the extent permitted by
law, pay as Additional Charges all costs and expenses incurred by or on behalf
of Landlord, including reasonable attorneys' fees and expenses, as a result of
any Event of Default hereunder.
17.3 CERTAIN REMEDIES. If an Event of Default shall have occurred
and be continuing, whether or not this Lease has been terminated pursuant to
Section 17.1, Tenant shall, to the extent permitted by law, if required by
Landlord to do so, immediately surrender to Landlord the Property pursuant to
the provisions of Section 17.1 and quit the same and Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other Persons and any and all Tenant's
Personal Property from the Property subject to any requirement of law.
17.4 DAMAGES. None of the following events shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting: (a) the termination of this Lease
pursuant to Section 17.1, (b) the repossession of the Property, (c) the failure
of Landlord, notwithstanding reasonable good faith efforts, to relet the
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting. In
the event of any such termination, Tenant shall forthwith pay to Landlord all
Rent due and payable with respect to the Property to, and including, the date of
such termination. Thereafter, Tenant shall forthwith pay to Landlord, at
Landlord's option, as and for liquidated and agreed current damages for Tenant's
default, and not as a penalty, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such unpaid Rent that Tenant
proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such unpaid Rent that Tenant proves could be
reasonably avoided, and
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(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (iii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that may
be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter or right, to the appointment of a receiver or receivers acceptable to
Landlord of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section 17.1,
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
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17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use
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of the Property then being made, and for the proper erection, installation,
operation and maintenance of the Property or any party thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the Property
after the expiration of the Term or earlier termination of the Term hereof, such
possession shall be deemed to be a tenant at sufferance during which time Tenant
shall pay as rental each month, 125% of the aggregate of (i) the aggregate Base
Rent and monthly portion of the Percentage Rent payable with respect to that
month in the last Fiscal Year; (ii) all Additional Charges accruing during the
month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.2,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.7 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses
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(including reasonable attorneys' fees and expenses), to the extent permitted
by law, imposed upon or incurred by or asserted against Landlord, the Company
or Affiliates of the Company by reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls, golf
clubs, golf shoes, lawn mowers or other equipment, pesticides, fertilizers
or other substances, golf carts, tractors or other motorized vehicles
present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair of
the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the sale
and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with respect
to the Property; or
(h) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall protect,
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, actual or consequential damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees) imposed upon
or incurred by or asserted against Tenant as a result of Landlord's active,
gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof
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to the indemnifying party. The indemnified party may at its option demand
indemnity under this Article 22 as soon as a claim has been threatened by a
third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise
incur, a loss as a result thereof and shall give notice of such determination
to the indemnifying party. The indemnified party shall permit the
indemnifying party, at its option and expense, to assume the defense of any
such claim by counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party, and to settle or otherwise dispose of
the same; PROVIDED, HOWEVER, that the indemnified party may at all times
participate in such defense at its expense, and PROVIDED FURTHER, HOWEVER,
that the indemnifying party shall not, in defense of any such claim, except
with the prior written consent of the indemnified party, consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in
question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying
party shall fail to undertake such defense within thirty (30) days after such
notice, or within such shorter time as may be reasonable under the
circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE INSURANCE
PROCEEDS. Tenant's or Landlord's liability for a breach of the provisions of
this Article 22 arising during the term hereof shall survive any termination of
this Lease. Notwithstanding anything herein to the contrary, each party agrees
to look first to the available proceeds from any insurance it carries in
connection with the Property prior to seeking indemnification or otherwise
seeking to recover any amounts to compensate a party for its damages and then to
seek indemnification only to the extent of any loss not covered by their
available insurance proceeds.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant or a Permitted Assignee) the Lease or
any interest therein, all or any part of the Property, whether voluntarily,
involuntarily or by operation of law. For purposes
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of this Article 23, a Change in Control of the Tenant shall constitute an
assignment of this Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Tenant shall not, without the prior
written consent of Landlord, which consent Landlord may withhold in its
sole discretion, further sublease or license portions of the Property to
third parties, including concessionaires or licensees. Without limiting
the foregoing, Tenant's proposed sublease or any of the following transfers
shall require Landlord's prior written consent, which consent Landlord may
withhold in its sole discretion:
(i) sublease or license to operate golf courses;
(ii) sublease or license to operate golf professionals'
shops;
(iii) sublease or license to operate golf driving ranges;
(iv) sublease or license to provide golf lessons by other
than a resident professional;
(v) sublease or license to operate restaurants;
(vi) sublease or license to operate bars;
(vii) sublease or license to operate spa or health clubs; and
(viii) sublease or license to operate any other portions (but
not the entirety) of the Property customarily associated with or
incidental to the operation of the golf course.
(b) TERMS OF SUBLEASE. Each sublease with respect to the Property
shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this Section 23.2 shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days prior to
any proposed assignment or sublease, deliver to Landlord written notice of
its intent to assign or sublease, which notice shall identify the intended
assignee or sublessee by name and address, shall specify the effective date
of the intended assignment or sublease, and
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shall be accompanied by an exact copy of the proposed assignment or
sublease. Tenant shall provide Landlord with such additional information
or documents reasonably requested by Landlord with respect to the proposed
transaction and the proposed assignee or subtenant, and an opportunity to
meet and interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Property, and all extensions, modifications and renewals
thereof and all rents, issues and profits therefrom. Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Property; provided, however,
that Landlord shall have the absolute right at any time after the
occurrence and continuance of an Event of Default upon notice to Tenant and
any subtenants to revoke said license and to collect such rents and sums of
money and to retain the same. Tenant shall not (i) consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than ninety (90) days in
advance of the accrual thereof nor permit anything to be done, the doing of
which, nor omit or refrain from doing anything, the omission of which, will
or could be a breach of or default in the terms of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2, subleases
shall be deemed to include any licenses, concession arrangements,
management contracts (except to an Affiliate of the Lessee) or other
arrangements relating to the possession or use of all or any part of the
Property.
23.3 TRANSFERS. No assignment or sublease shall in any way impair
the continuing primary liability of Tenant hereunder, as a principal and not as
a surety or guarantor, and no consent to any assignment or sublease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 23.1. Any assignment shall be solely of Tenant's entire interest in
this Lease. Any assignment or other transfer of all or any portion of Tenant's
interest in the Lease in contravention of the terms of this Lease shall be
voidable at Landlord's option. Anything in this Lease to the contrary
notwithstanding, Tenant shall not sublet all or any portion of the Property or
enter into any other agreement which has the effect of reducing the Percentage
Rent payable to Landlord hereunder.
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23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD. In
addition to Landlord's rights in Section 23.1, Landlord or its designee shall
have, for a period of sixty (60) days following receipt of the written notice of
Tenant's intent to assign its interest in the Lease to a third party
unaffiliated with Tenant (and in which management of the Tenant shall have no
continuing management or ownership interest), the right to elect to purchase the
leasehold interest on the terms and conditions at which Tenant proposes to sell
or assign its interest. If Landlord or its designee elects not to purchase such
interest of Tenant, then Tenant shall be free to sell its interest to a third
party, subject to Landlord's prior written consent as provided in Section 23.1.
However, if (i) the price at which Tenant intends to sell its interest is
reduced by five percent (5%) or more, or (ii) the assignment to the third party
is not completed within one hundred eighty (180) days of Landlord's receipt of
written notice of Tenant's intention to assign its interest in the Lease, then
Tenant shall again offer Landlord the right to acquire its interest; provided,
however, that in the case of a change in price, Landlord shall have only fifteen
(15) days to accept such revised offer.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
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(b) If the Trustee proposes to assume or to assign this Lease or
sublet the Property (or any portion thereof) to any Person which shall have made
a bona fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, the Trustee shall give Landlord, and lessors and
mortgagees of Landlord of which Tenant has notice, written notice setting forth
the name and address of such person and the terms and conditions of such offer,
no later than twenty (20) days after receipt of such offer, but in any event no
later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive and assignment of this Lease or subletting of the Property to Landlord
or Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
(c) The Trustee shall have the right to assume Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures any Event
of Default then existing or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under this Lease. Adequate assurance of future
performance by the proposed assignee shall include, as a minimum, that: (i) any
proposed assignee of this Lease shall provide to Landlord an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth reasonably satisfactory to Landlord or, in the alternative, the
proposed assignee shall provide a guarantor of such proposed assignee's
obligations under this Lease, which guarantor shall provide an audited financial
statement meeting the requirements of (i) above and shall execute and deliver to
Landlord a guaranty agreement in form and substance acceptable to Landlord; and
(ii) any proposed assignee shall grant to Landlord a security interest in favor
of Landlord in all furniture, fixtures, and other personal property to be used
by such proposed assignee in the Property. All payments required of Tenant
under this Lease, whether or not expressly denominated as such in this Lease,
shall constitute rent for the purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy code
relating to (a) the obligation of the Trustee to
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provide adequate assurance that the Trustee will "promptly" cure defaults and
compensate Landlord for actual pecuniary loss, the word "promptly" shall mean
that cure of defaults and compensation will occur no later than sixty (60)
days following the filing of any motion or application to assume this Lease;
and (b) the obligation of the Trustee to compensate or to provide adequate
assurance that the Trustee will promptly compensate Landlord for "actual
pecuniary loss", (the term "actual pecuniary loss" shall mean, in addition to
any other provisions contained herein relating to Landlord's damages upon
default obligations of Tenant to pay money under this Lease and all
attorneys' fees and related costs of Landlord incurred in connection with any
default of Tenant in connection with Tenant's bankruptcy proceedings).
(e) Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Landlord, forthwith
execute and deliver to Landlord an instrument, in form and substance acceptable
to Landlord, confirming such assumption.
23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the
entire Property by an unaffiliated third party without the prior written consent
of Landlord.
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against Tenant
before or by any court or administrative agency which, if adversely
decided, would
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materially and adversely affect the financial condition and operations
of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease and the other matters set forth
in such request, if any, are true and correct. Any such Officer's Certificate
furnished pursuant to this Section 24.1 may be relied upon by Landlord and any
prospective lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessor or by any mortgagee or beneficiary, affecting
any lease or the Property. In confirmation of such
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subordination, Tenant shall execute promptly any certificate that Landlord
may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall pay
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
25.3 FACILITY MORTGAGE PROTECTION. Tenant agrees that the holder
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord's default with respect to any such obligation, Tenant will
give any such holder whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default and allow such holder
thirty (30) days following receipt of such notice for the cure of said default
before invoking any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
26.1 RIGHT OF FIRST OFFER TO PURCHASE. If Landlord intends to sell
the Property during the Lease Term, and provided no Event of Default then
exists, Tenant shall have a right of first offer to purchase the Property
("Tenant's Right of First Offer to Purchase") on the terms and conditions at
which Landlord proposes to sell the Property to a third party. Landlord shall
give Tenant written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Landlord intends to sell
the Property to a third party. Tenant shall thereafter have sixty (60) days to
elect in writing to purchase the Property and execute a Purchase and Sale
Agreement with respect thereto and shall have an additional fifty (50) days to
close on the acquisition of the Property on the terms and conditions set forth
in the notice provided by Landlord to Tenant; provided that prior to the
execution of a binding purchase and sale agreement, Landlord shall retain the
right to elect not to sell the Property. If Tenant does not elect to purchase
the Property, then Landlord shall be free to sell the Property to a third party.
However, if the price at which Landlord intends to sell the Property to a third
party is less than 95% of the price set forth in the notice provided by Landlord
to Tenant, then Landlord shall again offer Tenant the right to acquire the
Property upon the same terms and conditions, provided that Tenant shall have
only thirty (30) days thereafter to complete the acquisition at such price,
terms and conditions.
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26.2 CONVEYANCE BY LANDLORD. If Landlord shall convey the Property
in accordance with the terms hereof other than as security for a debt, Landlord
shall, upon the written assumption by the transferee of the Property of all
liabilities and obligations of the Lease be released from all future liabilities
and obligations under this Lease arising or accruing from and after the date of
such conveyance or other transfer as to the Property. All such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE 27
ARBITRATION
27.1 ARBITRATION. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 27.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
27.2 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to Section 27.1 a single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees
and expenses of the arbitrator shall be shared equally by Landlord and Tenant
except as otherwise specified above in this Section 27.2. Unless otherwise
agreed in writing by the parties or required by the arbitrator or AAA, if
applicable, arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Landlord and Tenant
regarding the Property during the arbitration.
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ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord and
its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.2 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of thirty (30) days after notice thereof from Tenant,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or permit Tenant to offset any Rent due and owing hereunder or otherwise
excuse Tenant from any of its obligations hereunder.
28.3 COMPETITION BETWEEN LANDLORD AND TENANT. Landlord and Tenant
agree that neither party shall be restricted as to other relationships and
competition. Affiliates of Tenant shall be allowed to own, lease and/or manage
other golf courses that are not affiliated with Landlord, provided that such
other ownership, leasing or management arrangements are disclosed to Landlord in
writing. Landlord may acquire or own golf courses that may be geographically
proximate to one or more golf courses that Tenant or Affiliates of Tenant may
own, manage or lease.
28.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
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28.5 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual rights, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy. The exercise or beginning of the exercise by Landlord or
Tenant of any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord or Tenant of any or all of
such other rights, powers and remedies.
28.6 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of the Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
28.7 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Property.
28.8 QUIET ENJOYMENT. So long as Tenant shall pay all Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or any
Landlord's Encumbrances.
28.9 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 N. Adger's Wharf
Charleston, South Carolina 29401
Attn: W. Bradley Blair, II
David J. Dick
Scott D. Peters
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If to Tenant: E.W.G.C., LLC
c/o The Crescent Company
1580 S. Milwaukee Avenue, Suite 208
Libertyville, Illinois 60048
With a copy to: David Grossberg
Sachnoff & Weaver
30 S. Wacker Drive, 28th Floor
Chicago, Illinois 60606-7484
28.10 SURVIVAL OF CLAIMS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
28.11 INVALIDITY OF TERMS OR PROVISIONS. If any term or provision
of this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
28.12 PROHIBITION AGAINST USURY. If any late charges provided for
in any provision of this Lease are based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at the maximum permissible rate.
28.13 AMENDMENTS TO LEASE. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
28.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
28.15 TITLES. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
28.16 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State (but not including its conflict of laws
rules).
28.17 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
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be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
28.18 ATTORNEYS' FEES. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
28.19 NON-RECOURSE AS TO LANDLORD. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Property and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of their respective general partners, either
directly or through either Landlord or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof.
28.20 NO RELATIONSHIP. Landlord shall in no event be construed for
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Property or any of the Other Leased Properties or otherwise in the conduct of
their respective businesses.
28.21 RELETTING. If Tenant does not exercise its option to extend
or further extend the Term under Section 3.2 or if an Event of Default occurs,
then Landlord shall have the right during the remainder of the Term then in
effect to advertise the availability of the Property for sale or reletting and
to show the Property to prospective purchasers or tenants or their agents at
such reasonable times as Landlord may elect.
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LANDLORD: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland
corporation, General Partner
By: /s/ W. Bradley Blair, II
--------------------------------------
W. Bradley Blair, II
Its: CEO and President
TENANT: E.W.G.C., LLC,
a Georgia limited liability company
By: Eagle Watch Golf Club Limited Partnership,
an Illinois limited partnership, its sole member
By: The Crescent Company,
its General Partner
By: /s/ E. Neal Trogdon
---------------------------------
E. Neal Trogdon
Its: President
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CONTRIBUTION AND LEASEBACK AGREEMENT
dated as of October 17, 1997
by and between
PROPERTIES OF THE COUNTRY, INC.
a Kansas corporation
and
GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
The Club of the Country
Louisburg, Kansas
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction. . . . . . . . . . . . . . . . . 7
ARTICLE 2 PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE . . . . . 8
2.1 Purchase and Contribution. . . . . . . . . . . . . . . 8
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . 8
2.3 Payment of Base Purchase Price . . . . . . . . . . . . 10
ARTICLE 3 TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . 11
3.1 Organization and Power . . . . . . . . . . . . . . . . 11
3.2 Authorization and Execution. . . . . . . . . . . . . . 11
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . 11
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . 12
3.5 Compliance with Existing Laws. . . . . . . . . . . . . 12
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . 12
3.7 Personal Property. . . . . . . . . . . . . . . . . . . 12
3.8 Operating Agreements . . . . . . . . . . . . . . . . . 13
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . 13
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . 13
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . 14
3.14 Financial Information. . . . . . . . . . . . . . . . . 14
3.15 Organizational Documents . . . . . . . . . . . . . . . 14
3.16 Operation of Property. . . . . . . . . . . . . . . . . 14
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . 15
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Public Offering; Preparation of S-11 . . . . . . . . . 15
3.20 Hazardous Substances . . . . . . . . . . . . . . . . . 16
3.21 Utilities. . . . . . . . . . . . . . . . . . . . . . . 16
3.22 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . 16
3.23 Leased Property. . . . . . . . . . . . . . . . . . . . 16
3.24 Sufficiency of Certain Items . . . . . . . . . . . . . 16
3.25 Accredited Investor. . . . . . . . . . . . . . . . . . 16
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ARTICLE 4 TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . 17
4.1 Organization and Power . . . . . . . . . . . . . . . . 17
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . 17
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Authorization and Execution. . . . . . . . . . . . . . 18
4.6 Trade Name . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5 CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . 18
5.1 As to Transferee's Obligations . . . . . . . . . . . . 18
5.2 As to Transferor's Obligations . . . . . . . . . . . . 20
ARTICLE 6 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Transferor's Deliveries. . . . . . . . . . . . . . . . 21
6.3 Transferee's Deliveries. . . . . . . . . . . . . . . . 23
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . 23
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . 23
6.6 Income and Expense Allocations . . . . . . . . . . . . 24
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . 24
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . 25
ARTICLE 7 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . 25
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . 25
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . 25
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR; TERMINATION
RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Liability of Transferee. . . . . . . . . . . . . . . . 26
8.2 Indemnification by Transferor. . . . . . . . . . . . . 27
8.3 Termination by Transferee. . . . . . . . . . . . . . . 27
8.4 Termination by Transferor. . . . . . . . . . . . . . . 27
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . 27
ARTICLE 9 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 28
9.1 Completeness; Modification . . . . . . . . . . . . . . 28
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . 28
9.3 Successors and Assigns . . . . . . . . . . . . . . . . 28
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9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . 28
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 28
9.7 Severability . . . . . . . . . . . . . . . . . . . . . 28
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . 28
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . 29
9.10 Incorporation by Reference . . . . . . . . . . . . . . 29
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . 29
9.12 Further Assurances . . . . . . . . . . . . . . . . . . 29
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . 29
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . 29
</TABLE>
EXHIBITS
Exhibit A-Legal Description of the Land
Exhibit B-Description of Improvements
Exhibit C-Tangible Personal Property
Exhibit D-Intangible Personal Property
Exhibit E-Golf Course Lease
Exhibit F-Bill of Sale - Personal Property
Exhibit G-Deed
Exhibit H-FIRPTA Affidavit of Transferor
Exhibit I-Contracts and Operating Agreements
Exhibit J-Partnership Agreement
Exhibit K-Calculation of Purchase Price
Exhibit L-Due Diligence List
Exhibit M-Schedule of Mortgages
Exhibit N-Accredited Investor Questionnaire
Exhibit O-Transferor's Certificate
Exhibit P-Warranty Disclosure Schedule
Exhibit Q-Transferee's Certificate
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CONTRIBUTION AND LEASEBACK AGREEMENT
SUMMARY SHEET
Transferee: GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Transferor: PROPERTIES OF THE COUNTRY, INC., a Kansas corporation
Date of
Agreement: October 17, 1997
Golf Course: The Club of the Country
(address): 6302 West 295th Street
Louisburg, Kansas 66053
Trade Name: The Club of the Country
Notice Address
of Transferor: Properties of the Country, Inc.
P.O. Box 7030
Shawnee Mission, Kansas 66207
with a copy to: Daniel T. Murphy, Esq.
Shughart, Thomson & Kilroy, P.C.
Twelve Wyandotte Plaza
120 West 12th Street
Kansas City, Missouri 64105
Notice Address
of Transferee: Scott D. Peters
Golf Trust of America, Inc.
14 N. Adger's Wharf
Charleston, South Carolina 29401
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with a copy to: Peter T. Healy, Esq.
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
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CONTRIBUTION AND LEASEBACK AGREEMENT
THIS CONTRIBUTION AND LEASEBACK AGREEMENT (this "Agreement") is
entered into by and between Transferee and Transferor.
RECITALS:
A. Transferor is the owner of that certain Golf Course and related
improvements located on the real property more particularly described in EXHIBIT
A attached hereto (the "Land").
B. Subject to the terms of this Agreement, Transferor hereby agrees
to contribute, assign and convey to Transferee, and Transferee hereby agrees to
acquire from Transferor, all of Transferor's right, title and interest in and to
the following:
1. The Land, together with the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, fixtures and other items of real
estate located on the Land (the "Improvements"), as more particularly
described in EXHIBIT B attached hereto.
2. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Transferor's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements, including, without limitation, concession agreements for spas
and the like (the Land, the Improvements and all such easements and
appurtenances are sometimes collectively hereinafter referred to as the
"Real Property").
3. All items of tangible personal property and fixtures (if any)
owned or leased by Transferor and located on or used in connection with the
Real Property, including, but not limited to, machinery, equipment,
furniture, furnishings, movable walls or partitions, phone systems and
other control systems, restaurant equipment, computers or trade fixtures,
golf course operation and maintenance equipment, including mowers,
tractors, aerators, sprinklers, sprinkler and irrigation facilities and
equipment, valves or rotors, driving range equipment, athletic training
equipment, office equipment or machines, other decorations, and equipment
or machinery of every kind or nature located on or used in connection with
the operation of the Real Property whether on or off-site, including all
warranties and guaranties associated therewith (the "Tangible Personal
Property"), excluding all golf carts, whether owned or leased, which shall
be retained by Transferor. A schedule of the Tangible Personal Property is
attached to this Agreement as EXHIBIT C, indicating whether such Tangible
Personal Property is owned or leased. The schedule of Tangible Personal
Property shall also indicate
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those items of personal property, such as art and antiques, which is
excluded from the personal property being conveyed hereby.
4. All intangible personal property owned or possessed by Transferor
and used in connection with the ownership, operation, leasing or
maintenance of the Real Property or the Tangible Personal Property, all
goodwill attributed to the Property, and any and all trademarks and
copyrights, guarantees, Authorizations (as hereinafter defined), general
intangibles, business records, plans and specifications, surveys and title
insurance policies pertaining to the Property, all licenses, permits and
approvals with respect to the construction, ownership, operation or
maintenance of the Property, any unpaid award for taking by condemnation or
any damage to the Real Property by reason of a change of grade or location
of or access to any street or highway, excluding (a) any of the aforesaid
rights that Transferee elects not to acquire and (b) the Current Assets, as
hereinafter defined (collectively, the "Intangible Personal Property"). A
schedule of the Intangible Personal Property is attached to this Agreement
as EXHIBIT D. The Intangible Personal Property shall not include the right
to use the Trade Name, which shall be retained by Transferor and
transferred to the lessee of the Golf Course (and further provided in no
event shall Transferee have the right to use such trade name in connection
with any other property owned by Transferee or any affiliate of
Transferee). (The Real Property, Tangible Personal Property and Intangible
Personal Property are sometimes collectively referred to as the
"Property".)
C. Upon the acquisition by the Transferee of the Property, the
Transferee will lease the Property to an Affiliate (hereinafter defined) of
Transferor pursuant to a lease (the "Golf Course Lease"), substantially in the
form attached hereto as EXHIBIT E.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
"ACT OF BANKRUPTCY" shall mean if a party hereto or any general
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its Property, (b) admit in writing its
inability to pay its debts as they become due, (c) make
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a general assignment for the benefit of its creditors, (d) file a voluntary
petition or commence a voluntary case or proceeding under the Federal Bankruptcy
Code (as now or hereafter in effect) or any new bankruptcy statute, (e) be
adjudicated bankrupt or insolvent, (f) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts, (g) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect) or any new bankruptcy statute, or (h) take any corporate or
partnership action for the purpose of effecting any of the foregoing; or if a
proceeding or case shall be commenced, without the application or consent of a
party hereto or any general partner thereof, in any court of competent
jurisdiction seeking (1) the liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of debts, of such party or
general partner, (2) the appointment of a receiver, custodian, trustee or
liquidator or such party or general partner or all or any substantial part of
its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed; or an order (including
an order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for a
period of sixty (60) consecutive days.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.
"AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
"BASE PURCHASE PRICE" shall mean Three Million Fifty Thousand Dollars
($3,050,000).
"BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale conveying
title to the Tangible Personal Property and Intangible Personal Property from
Transferor to Transferee, substantially in the form of EXHIBIT F attached
hereto.
"CLOSING" shall mean the time the Deed and each of the deliveries to
be made by Transferor (as provided in Section 6.2) and Transferee (as provided
in Section 6.3) are made and each of the Closing conditions of Transferee and
Transferor in Sections 5.1 and 5.2, respectively, have been satisfied or waived.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
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"CONTINGENT PURCHASE PRICE" shall mean the amount as calculated by the
procedure set forth in EXHIBIT K attached hereto.
"CURRENT ASSETS" shall mean cash, accounts receivable, Inventory and
Restaurant Supplies (each as hereinafter defined) held by Transferor prior to
the Closing Date.
"DEED" shall mean a grant deed or special warranty deed, substantially
in the form of EXHIBIT G attached hereto (or lease assignment, if the Property
is owned by Transferor pursuant to a ground lease), in form and substance
satisfactory to Transferee, conveying the title of Transferor to the Real
Property, with such grant or warranty covenants of title from Transferor to
Transferee as are customary in the state in which the Property is located,
subject only to Permitted Title Exceptions. If there is any difference between
the description of the Land, as shown on EXHIBIT A attached hereto and the
description of the Land as shown on the Survey, the description of the Land to
be contained in the Deed and the description of the Land set forth in the
Owner's Title Policy, as defined herein, shall conform to the description shown
on the Survey.
"DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
"DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00 a.m.,
California time, on the date hereof, and continuing through 5:00 p.m.,
California time, on the date that is thirty (30) days from the date hereof.
"EMPLOYMENT AGREEMENTS" shall mean all employment agreements, written
or oral, between Transferor or its managing agent and the persons employed with
respect to the Property in effect as of the date hereof.
"ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or
judicial action, suit, demand, letter, claim, lien, notice of non-compliance or
violation, investigation or proceeding relating in any way to any Environmental
Laws or any permit issued under any Environmental Law including, without
limitation, (i) by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Laws, and (ii) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Substances or arising from alleged injury or threat of
injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as amended,
29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et
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seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Substances.
"ESCROW AGENT" shall mean the Title Company.
"FIRPTA CERTIFICATE" shall mean the affidavit of Transferor under
Section 1445 of the Internal Revenue Code certifying that Transferor is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT H attached hereto.
"GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Transferor for purchase in connection with golfing
privileges at the Property.
"GOLF COURSE LEASE" shall have the meaning set forth in Recital C.
"GOVERNMENTAL BODY" shall mean any federal state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"HAZARDOUS SUBSTANCES" shall mean any substance, material, waste, gas
or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(4).
"INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Transferor's
business.
"LAND" shall have the meaning set forth in Recital A.
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<PAGE>
"MORTGAGE INDEBTEDNESS" shall have the meaning set forth in Section
2.2(d).
"OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the date hereof, as more particularly set forth on EXHIBIT I attached hereto.
"OWNER'S SHARES" shall mean limited partnership interests in the
Partnership.
"OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land Title
Association extended coverage owner's policy of title insurance issued to
Transferee by the Title Company, pursuant to which the Title Company insures
Transferee's ownership of fee simple title (or ground lease interest, as
applicable) to the Real Property (including the marketability thereof) subject
only to Permitted Title Exceptions and shall include those title endorsements
required by Transferee. The Owner's Title Policy shall insure Transferee in the
amount designated by Transferee and shall be acceptable in form and substance to
Transferee.
"PARTNERSHIP AGREEMENT" shall mean that certain amended and restated
limited partnership agreement relating to Transferee, which shall be
substantially in the form attached hereto as EXHIBIT J.
"PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title to
the Real Property that are satisfactory to Transferee as determined under this
Agreement, and as evidenced by a pro forma title report.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PRELIMINARY TITLE REPORT" shall have the meaning set forth in Section
2.2(d).
"PROPERTY" shall have the meaning set forth in Recital B(4).
"PURCHASE PRICE" shall mean the sum of the Base Purchase Price and the
Contingent Purchase Price.
"REAL PROPERTY" shall have the meaning set forth in Recital B(2).
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"RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES" shall have the meaning set forth in Section 7.4.
"STATE" shall mean the state or commonwealth in which the Property is
located.
"SUMMARY SHEET" shall mean the summary page attached to this Agreement
and incorporated herein by reference.
"SURVEY" shall mean the survey prepared pursuant to Section 2.2(c).
"TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B (3).
"TITLE COMPANY" shall mean a title insurance company selected by
Transferee and authorized to conduct a title insurance business in the State.
"TITLE OBJECTIONS" shall have the meaning set forth in Section 2.2(d).
"TRANSFEROR'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Transferor.
"UTILITIES" shall mean public sanitary and storm sewers, natural gas,
telephone, public water facilities, electrical facilities and all other utility
facilities and services necessary for the operation and occupancy of the
Property.
"WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
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(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Agreement or any exhibits hereto.
ARTICLE 2
PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND CONTRIBUTION. Transferor agrees to contribute and
Transferee agrees to acquire the Property for the Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) Transferee shall have the right, during the Due Diligence
Period, and thereafter if Transferee notifies Transferor that Transferee
has elected to proceed to Closing in the manner described below, to enter
upon the Real Property and to perform, at Transferor's expense, such
surveying, engineering, and environmental studies and investigations as
Transferee may deem appropriate. If such tests, studies and investigations
warrant, in Transferee's sole, absolute and unreviewable discretion, the
purchase of the Property for the purposes contemplated by Transferee, then
Transferee may elect to proceed to Closing and shall so notify Transferor
and the Escrow Agent, in writing, prior to the expiration of the Due
Diligence Period. If for any reason Transferee does not so notify
Transferor and Escrow Agent of its determination to proceed to Closing
prior to the expiration of the Due Diligence Period, or if Transferee
notifies Transferor and Escrow Agent, in writing, prior to the expiration
of the Due Diligence Period that it has determined not to proceed to
Closing, this Agreement automatically shall terminate and Transferee and
Escrow Agent shall be released from any further liability or obligation
under this Agreement and, if requested by Transferor, Transferee will
deliver such reports and materials to Transferor.
(b) During the Due Diligence Period, Transferor shall make
available to Transferee, its agents, auditors, engineers, attorneys and
other designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies,
zoning and site plan materials, correspondence, environmental audits and
reviews, books, records, tax returns, bank statements, financial
statements, fee schedules and any and all other material or information
relating to the Property which are in, or come into, Transferor's
possession or control, or which Transferor may attain. Such information is
more particularly described in EXHIBIT L attached hereto, as the same may
be amended or supplemented by Transferor from time to time.
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(c) Within thirty (30) days from the date hereof, if requested by
Transferee, Transferor shall deliver to Transferee an ALTA/ACSM survey or a
boundary survey, as reasonably required by Transferee, of the Land and the
Improvements, prepared by a surveyor licensed to practice as such in the
State, bearing a date not earlier than sixty (60) days from the date of its
delivery and certified to both Transferee, Transferor and the Title Company
(and any lender or other party designated by Transferee), showing the legal
description of the Land, all dimensions thereof, and showing the location
of Improvements on the Land and the setbacks thereof from the property
line, as well as the setbacks required by applicable zoning laws or
regulations (the "Survey"). The Survey shall locate all easements which
serve and affect the Land. The Survey shall reflect that no buildings or
improvements located on any other property encroach upon the Land and that
the Improvements located upon the Land do not encroach upon any other
property. The surveyor preparing the Survey shall certify that (i) the
Survey is an accurate Survey of the Land and the Improvements, (ii) that
the Survey was made under the surveyor's supervision, (iii) that the Survey
meets (a) the requirements of the Title Company for the issuance of the
Owner's Title Policy free of any general survey exception, and (b) the
minimum technical standards for land boundary surveys with improvements,
set forth by applicable statutes or applicable professional organizations,
and (iv) all buildings and other structures and their relation to the
property lines are shown and that there are no encroachments, overlaps,
boundary line disputes, easements, or claims of easements visible on the
ground, other than those shown on the Survey. If Transferee has any
objection to Survey matters, the same shall be treated for all purposes as
Title Objections within the provisions of this Agreement.
(d) Transferor agrees to provide to Transferee, within five (5)
business days following the date of this Agreement, a copy of any existing
title insurance policies which Transferor may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Transferee, at its expense, shall cause an examination of title to the
Property to be made and a preliminary title report to be issued (the
"Preliminary Title Report"), and, prior to the expiration of the Due
Diligence Period, shall notify Transferor of any defects in title shown by
such examination that Transferee is unwilling to accept by delivering a pro
forma copy of the Preliminary Title Report that reflects such unacceptable
defects in title, which shall be designated as the Title Objections.
Within ten (10) days after such notification, Transferor shall notify
Transferee whether Transferor is willing to cure such defects. If
Transferor is willing to cure such defects, Transferor shall act promptly
and diligently to cure such defects at its expense. If any of such defects
consist of mortgages, deeds of trust, construction or mechanics' liens, tax
liens or other liens or charges in a fixed sum or capable of computation as
a fixed sum, then, to that extent, and notwithstanding the foregoing,
Transferor shall be obligated to pay and discharge such defects at Closing,
except for the mortgages scheduled and set forth in EXHIBIT M attached
hereto (the "Mortgage Indebtedness") which Transferee shall take subject to
as provided in Section
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2.3(a). For such purposes, Transferor may use all or a portion of the cash
to close. If Transferor is unable to cure such defects by Closing, after
having attempted to do so diligently and in good faith, Transferee shall
elect (1) to waive such defects and proceed to Closing without any
abatement in the Purchase Price, or (2) to terminate this Agreement.
Transferor shall not, after the date of this Agreement, subject the
Property to any liens, encumbrances, leases, covenants, conditions,
restrictions, easements or other title matters or seek any zoning changes
or take any other action which may affect or modify the status of title
without Transferee's prior written consent. All title matters revealed by
Transferee's title examination and not objected to by Transferee as
provided above shall be deemed Permitted Title Exceptions. If Transferee
shall fail to examine title and notify Transferor of any such Title
Objections by the end of the Due Diligence Period, all such title
exceptions (other than those rendering title unmarketable and those that
are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions. Notwithstanding the foregoing, Transferee shall not be
required to take title to the Property subject to any matters which may
arise subsequent to the effective date of its examination of title to the
Property made during the Due Diligence Period.
(e) Transferor shall deliver to Transferee within fourteen (14)
days after the date of the execution of this Agreement by Transferor and
Transferee a disclosure schedule that accurately and completely identifies
and describes (a) all Employment Agreements (including name of employee,
social security number, wage or salary, accrued vacation benefits, other
fringe benefits, etc.), and (b) an updated Golf Club membership list,
setting forth the names of the members of the Golf Club, the length of
their membership, the payment obligations of the members and a summary of
the terms of the memberships (the "Disclosure Schedule").
(f) Transferor shall deliver to Transferee within thirty (30) days
after the date of execution of this Agreement by Transferor and Transferee
current searches of all Uniform Commercial Code financing statements filed
with the Secretary of State of the State respecting Transferor, together
with searches for pending litigation, tax liens and bankruptcy filings in
all appropriate jurisdictions.
2.3 PAYMENT OF BASE PURCHASE PRICE. The Base Purchase Price shall
be paid to Transferor in the following manner:
(a) Transferee shall (i) take subject to the Mortgage Indebtedness
in an aggregate amount not in excess of the Base Purchase Price and (ii)
receive a credit against the Base Purchase Price in an amount equal to a
sum necessary to pay off in full the Mortgage Indebtedness, including any
prepayment premium, and to obtain a release of such deeds of trust or
mortgages evidencing the Mortgage Indebtedness as of the Closing Date, as
evidenced by a payoff letter from the beneficiary of each such deed of
trust or mortgage in form and substance satisfactory to Transferee and the
Title Company.
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(b) Transferee shall pay the sum of Five Hundred Thousand Dollars
($500,000) in Owner's Shares. The number of Owner's Shares required for
such payment shall be the quotient obtained by dividing Five Hundred
Thousand Dollars ($500,000) by Twenty Six Dollars ($26) (the average of the
closing price of the common stock of Golf Trust of America, Inc. for the
five (5) day period prior to Closing).
(c) Transferee shall hold back the sum of Seventy-Five Thousand
Dollars ($75,000), which shall be credited against the Base Purchase Price,
and which shall be retained by Transferee pursuant to Section 5.6 of the
Golf Course Lease.
(d) Transferee shall pay the balance of the Base Purchase Price to
Transferor in cash, which shall include any amounts necessary to pay for
certain tax liabilities of Transferor and the cost incurred by Transferor
in connection with the preparation of certain audited financial statements,
due diligence costs and closing costs and to permit the liquidation of
certain third party-interests in Transferor, as set forth in a schedule to
be prepared by Transferor and delivered to Transferee prior to the
expiration of the Due Diligence Period, which schedule shall be subject to
Transferee's review and approval, which approval shall not be unreasonably
withheld.
2.4 RECONVEYANCE OF OUTPARCELS. Upon written request of
Transferor, Transferee agrees, subject to the following sentence and all
necessary governmental approvals, to convey by special warranty deed to
Transferee that certain parcel of land more particularly described on EXHIBIT R
attached hereto (the "North Outparcel") and that certain parcel of land
described on EXHIBIT S attached hereto (the "Driving Range Parcel"), each for
consideration of One Dollar ($1.00). Transferee shall have no obligation to
convey the Driving Range Parcel to Transferor until such time as Transferor has
completed the construction of a substitute driving range satisfactory to
Transferee on a parcel to be acquired by Transferor (the "New Driving Range
Parcel"). Transferor agrees to convey the New Driving Range Parcel to
Transferee by special warranty deed, which conveyance shall occur simultaneously
with the conveyance of the Driving Range Parcel to Transferor. With
Transferee's consent, Transferor may use funds in the Capital Replacement Fund
(as defined in the Golf Course Lease), to the extent such funds are available,
for the acquisition of, and construction of a driving range on, the New Driving
Range Parcel. Transferee agrees to reasonably cooperate, at the sole expense of
Transferor, in any subdividing, platting or zoning process requested by
Transferor in connection with the reconveyance of the North Outparcel and
Driving Range Parcel to Transferor. All expenses associated with the
reconveyance of the North Outparcel and Driving Range Parcel to Transferor shall
be the sole responsibility of Transferor. Prior to the construction of any
improvements on the North Outparcel by Transferor, Transferor shall submit plans
and specifications for such improvements to Transferee for its approval, which
approval shall not be unreasonably withheld.
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2.5 GRANT OF EASEMENTS. Transferee agrees that prior to the
Closing, Transferor may grant easements (the "Easements") encumbering the
Property pursuant to easement agreements in the forms attached hereto as EXHIBIT
T and EXHIBIT U, and that the Easements shall be Permitted Title Exceptions.
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferee to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, Transferor hereby makes the
following representations, warranties and covenants with respect to the
Property, subject to the Warranty Disclosure Schedule attached hereto as EXHIBIT
P, upon each of which Transferor acknowledges and agrees that Transferee is
entitled to rely and has relied:
3.1 ORGANIZATION AND POWER. Transferor is duly formed or
organized, validly existing and in good standing under the laws of the state of
its formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document or instrument required
to be executed and delivered by or on behalf of Transferor hereunder.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Transferor to be delivered to Transferee
at Closing as provided in Section 5.1 will be, duly authorized by all necessary
action on the part of Transferor, has been duly executed and delivered by
Transferor, constitutes the valid and binding agreement of Transferor and is
enforceable against Transferor in accordance with its terms. There is no other
person or entity who has an ownership interest in the Property or whose consent
is required in connection with Transferor's performance of its obligations
hereunder. All action required pursuant to this Agreement necessary to
effectuate the transactions contemplated herein has been, or will at Closing be,
taken promptly and in good faith by Transferor and its representatives and
agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the
performance by Transferor of its obligations under, this Agreement do not and
will not contravene, or constitute a default under, any provision of applicable
law or regulation, Transferor's Organizational Documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon Transferor,
or result in the creation of any lien or other encumbrance on any asset of
Transferor. There are no outstanding agreements (written or oral) pursuant to
which Transferor (or any predecessor to or representative of Transferor) has
agreed to contribute or has granted an option or right of first refusal to
purchase the Property or any part thereof. Other than the rights of tenants, as
tenants only, under any leases of any portion the Property (copies of which have
been provided to Transferee by Transferor), there are no purchase contracts,
options or other agreements of any kind, written or oral, recorded or
unrecorded, whereby any person or entity other than Transferor will have
acquired or will have any basis to assert any right,
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title or interest in, or right to possession, use, enjoyment or proceeds of, all
or any portion of the Property. There are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase or
to otherwise acquire any interest or profit participation of any kind in the
Property or any part thereof.
3.4 NO SPECIAL TAXES. Transferor has no knowledge of, nor has it
received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Transferor's knowledge, there is not
any proposed increase in the assessed valuation of the Real Property for tax
purposes (except as may relate to the transfer contemplated by this Agreement).
3.5 COMPLIANCE WITH EXISTING LAWS. Transferor possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Transferor has not misrepresented or failed to disclose
any relevant fact in obtaining all Authorizations, and Transferor has no
knowledge of any change in the circumstances under which any of those
Authorizations were obtained that result in their termination, suspension,
modification or limitation. Transferor has not taken any action (or failed to
take any action), the omission of which would result in the revocation of any of
the Authorizations. Transferor has no knowledge, nor has it received notice
within the past three years, of any existing or threatened violation of any
provision of any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Property or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof.
3.6 REAL PROPERTY. To the best of Transferor's knowledge, (i) the
Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, (iii) all contractors and subcontractors retained by Transferor
who have performed work on or supplied materials to the Property have been fully
paid, and all materials used at or on the Property have been fully paid for,
(iv) the Improvements have been completed in all material respects in a
workmanlike manner of first-class quality, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and is
presently operative in good working order. Transferor has not received any
written notice which is still in effect that there is, and, to the best of
Transferor's knowledge, there does not exist, any violation of a condition or
agreement contained in any easement, restrictive covenant or any similar
instrument or agreement effecting the Real Property, or any portion thereof.
3.7 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Transferor to Transferee is free
and
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clear of all liens and encumbrances and will be so on the Closing Date and
Transferor has good, merchantable title thereto and the right to convey same in
accordance with the terms of this Agreement.
3.8 OPERATING AGREEMENTS. Each of the Operating Agreements may be
terminated upon not more than thirty (30) days prior written notice and without
the payment of any penalty, fee, premium or other amount. Transferor has
performed all of its obligations under each of the Operating Agreements and no
fact or circumstance has occurred which, by itself or with the passage of time
or the giving of notice or both, would constitute a default under any of the
Operating Agreements. Transferor shall not enter into any new Operating
Agreements, supply contract, vending or service contract or other agreements
with respect to the Property, nor shall Transferor enter into any agreements
modifying the Operating Agreements, unless (a) any such agreement or
modification will not bind Transferee or the Property after the Closing Date, or
(b) Transferor has obtained Transferee's prior written consent to such agreement
or modification. Transferor acknowledges that Transferee will not assume any of
the Operating Agreements and none of the Operating Agreements will be binding on
Transferee or the Property after Closing.
3.9 WARRANTIES AND GUARANTIES. Transferor shall not before or
after Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
Transferee.
3.10 INSURANCE. All of Transferor's insurance policies are valid
and in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by Transferor on or before the due date therefor. Transferor shall pay
all premiums on, and shall not cancel or voluntarily allow to expire, any of
Transferor's insurance policies unless such policy is replaced, without any
lapse of coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. Transferor has not received
any notice from any insurance company of any defect or inadequacies in the
Property to any part thereof which would adversely affect the insurability of
the Property, or which would increase the cost of insurance beyond that which
would ordinarily and customarily be charged for similar properties in the
vicinity of the Real Property. The Property is fully insured in accordance with
prudent and customary practice.
3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Transferor has received no
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Transferor has no knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real Property. To the
best of Transferor's knowledge, no fact or condition exists which would result
in the termination or material impairment of access to the Real Property from
adjoining public or private streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other utilities or services.
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3.12 LITIGATION. Except as disclosed in writing to Transferor,
there is no action, suit or proceeding pending or known to be threatened against
or affecting Transferor or any of its properties in any court, before any
arbitrator or before or by any Governmental Body which (a) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which Transferor is a party or by which it is
bound and that is or is to be used in connection with, or is contemplated by,
this Agreement, (b) could materially and adversely affect the business,
financial position or results of operations of Transferor, (c) could materially
and adversely affect the ability of Transferor to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Property, any part thereof or any interest therein, (e) the
subject matter of which concerns any past or present employee of Transferor or
its managing agent, or (f) could otherwise adversely materially affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes
pending or, to the best of Transferor's knowledge, threatened as to the
operation or maintenance of the Property or any part thereof. Transferor is not
a party to any union or other collective bargaining agreement with employees
employed in connection with the ownership, operation or maintenance of the
Property. Transferor is not a party to any employment contracts or agreements,
other than the Employment Agreements, and neither Transferor nor its managing
agent will, between the date hereof and the Closing Date, enter into any new
employment contracts or agreements, amend any existing Employment Agreement,
except with the prior written consent of Transferee. Transferor acknowledges
that Transferee will not assume any of the Employment Agreements and Transferor
has complied with and shall be responsible for compliance with the WARN Act and
any other applicable employment-related laws or ordinances. Transferor has
complied with the requirements of the federal Immigration and Reform Control Act
respecting the employment of undocumented workers.
3.14 FINANCIAL INFORMATION. To the best of Transferor's knowledge,
all of Transferor's financial information, including, without limitation, all
books and records and financial statements, is correct and complete in all
material respects and presents accurately the results of the operations of the
Property for the periods indicated.
3.15 ORGANIZATIONAL DOCUMENTS. Transferor's Organizational
Documents are in full force and effect and have not been modified or
supplemented, and no fact or circumstance has occurred that, by itself or with
the giving of notice or the passage of time or both, would constitute a default
thereunder.
3.16 OPERATION OF PROPERTY. Transferor covenants, that between the
date hereof and the Closing Date, it will (a) operate the Property in the usual,
regular and ordinary manner consistent with Transferor's prior practice, (b)
maintain its books of account and records in the usual, regular and ordinary
manner, in accordance with sound accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years and (c) use
all reasonable efforts to preserve intact its present
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business organization, keep available the services of its present officers,
partners and employees and preserve its relationships with suppliers and others
having business dealings with it. Except as otherwise permitted hereby, from
the date hereof until Closing, Transferor shall not take any action or fail to
take action the result of which would have a material adverse effect on the
Property or Transferee's ability to continue the operation thereof after the
Closing Date in substantially the same manner as presently conducted, or which
would cause any of the representations and warranties contained in this Article
III to be untrue as of Closing.
From and after the execution and delivery of this Agreement,
Transferor shall not, other than in the ordinary course of business, (a) make
any agreements which shall be binding upon Transferee with respect to the
Property, or (b) reduce or cause to be reduced any green fees, membership fees,
tournament fees, driving range fees or any other charges over which Transferor
has operational control. Between the date hereof and the Closing Date, if and
to the extent requested by Transferee, Transferor shall deliver to Transferee
such periodic information with respect to the above information as Transferor
customarily keeps internally for its own use. Transferor agrees that it will
operate the Property in accordance with the provisions of this Section 3.16
between the date hereof and the Closing Date.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferor.
3.18 LAND USE. The current use and occupancy of the Property for
golfing and all other related purposes (including, without limitation, the sale
of merchandise and food and beverages) are permitted as a matter of right as a
principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special permit,
permission or consent and Transferor is not aware of any proposal to change or
restrict such use. Transferor has all necessary certificates of occupancy or
completion to operate the Property as presently operated and there are no
unfulfilled conditions respecting the development of the Property.
3.19 PUBLIC OFFERING; PREPARATION OF S-11. Transferor shall
cooperate in the preparation by an Affiliate of Transferee of a Form S-11 or, if
applicable, a Form S-3 under the Securities Act of 1933, as amended, to be
filed with the SEC in connection with any public offering (the "Registered
Offering"). The Registered Offering shall be for purposes of selling shares of
common stock in an Affiliate of Transferee. Transferor shall provide Transferee
access to all financial and other information relating to the Property which
would be sufficient to enable them to prepare financial statements in conformity
with Regulation S-X of the SEC and to enable the Transferee to prepare a
registration statement, report or disclosure statement for filing with the SEC.
At Transferee's request, Transferor shall provide to Transferee's
representatives a signed representation letter sufficient to enable an
independent public accountant to render an opinion on the financial statements
related to the Property.
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3.20 HAZARDOUS SUBSTANCES. Except as may be disclosed in the Phase
I environmental assessment report for the Property, to the best of Transferor's
knowledge, (i) no Hazardous Substances are or have been located on (except in
immaterial amounts used in the ordinary course for the operation or maintenance
of the Property by Transferor in accordance with all applicable laws), in or
under the Property or have been released into the environment, or discharged,
placed or disposed of at, on or under the Property; (ii) no underground storage
tanks are, or have been, located at the Property; (ii) the Property has never
been used to store, treat or dispose of Hazardous Substances; and (iv) the
Property and its prior uses comply with, and at all times have complied with all
applicable Environmental Laws or any other governmental law, regulation or
requirement relating to environmental and occupational health and safety matters
and Hazardous Substances. To the best of Transferor's knowledge, there
currently exist no facts or circumstances that could reasonably be expected to
give rise to a material non-compliance with Environmental Laws, material
environmental liability or material Environmental Claim.
3.21 UTILITIES. All Utilities required for the operation of the
Property either enter the Property through adjoining streets, or they pass
through adjoining land and do so in accordance with valid public easements or
private easements, and all of said Utilities are installed and are in good
working order and repair and operating as necessary for the operation of the
Property and all installation and connection charges therefor have been paid in
full. The sewage, sanitation, plumbing, water retention and detention, refuse
disposal and utility facilities in and on and/or servicing the Real Property are
adequate to service the Real Property as it is currently being used and the Real
Property's utilization of such facilities is in compliance with all applicable
governmental and environmental protection authorities' laws, rules, regulations
and requirements.
3.22 CURB CUTS. All curb cut street opening permits or licenses
required for vehicular access to and from the Property from any adjoining public
street have been obtained and paid for and are in full force and effect.
3.23 LEASED PROPERTY. The Personal Property identified on EXHIBIT C
is all of the leased property at the Property, and such exhibit reflects the
date of each such lease, the name of the lessor, the name of the lessee, the
term of each such lease, the lease payment terms and a description of the
property demised by each such lease. All leases of such property are in good
standing and free from default.
3.24 SUFFICIENCY OF CERTAIN ITEMS. The Property, together with the
Current Assets, contain an amount of equipment and supplies, which is sufficient
to efficiently operate and maintain the Property in the manner in which it is
normally operated and maintained.
3.25 ACCREDITED INVESTOR. Transferor and all equity owners of
Transferor are as of the date hereof, and as of the Closing Date shall be,
"Accredited Investors".
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Concurrent herewith Transferor shall execute and deliver to Transferee the
Accredited Investor Questionnaire attached hereto as EXHIBIT N.
3.26 NO CERTIFICATE OF OCCUPANCY. No certificate of occupancy, or
similar certificate from a Governmental Body, is required to allow for the use
of the Real Property as a golf course and permit the continued operation of the
Improvements as presently operated.
Each of the representations, warranties and covenants contained in this
Article III are intended for the benefit of Transferee and any underwriter in
the Registered Offering. Each of said representations, warranties and covenants
shall survive the Closing for a period of one (1) year, at which time they shall
expire unless prior to such time Transferee has made a formal, written claim
alleging a breach of one or more of the representations, warranties or
covenants. No investigation, audit, inspection, review or the like conducted by
or on behalf of Transferee shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that Transferee
has the right to rely thereon and that each such representation, warranty and
covenant constitutes a material inducement to Transferee to execute this
Agreement and to close the transaction contemplated hereby and to pay the
Purchase Price to Transferor.
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferor to enter into this Agreement and to contribute
the Property, Transferee hereby makes the following representations, warranties
and covenants, upon each of which Transferee acknowledges and agrees that
Transferor is entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. Transferee is duly formed or
organized, validly existing and in good standing under the laws of the state of
its formation and has all governmental licenses, Authorizations, consents and
approvals required to carry on its business as now conducted and to enter into
and perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of Transferee hereunder.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement
and the performance by Transferee of its obligations hereunder do not and will
not contravene, or constitute a default under, any provisions of applicable law
or regulation, Partnership Agreement or any agreement, judgment, injunction,
order, decree or other instrument binding upon Transferee or result in the
creation of any lien or other encumbrance on any asset of Transferee.
4.3 LITIGATION. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting Transferee in any court or before
any arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely
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affect the business, financial position or results of operations of Transferee,
or (b) could materially and adversely affect the ability of Transferee to
perform its obligations hereunder, or under any document to be delivered
pursuant hereto.
4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferee.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Transferee to be delivered to Transferor
at Closing as provided in Section 5.2 will be, duly authorized by all necessary
action on the part of Transferee, has been duly executed and delivered by
Transferee, constitutes the valid and binding agreement of Transferee and is
enforceable against Transferee in accordance with its terms. All action
required pursuant to this Agreement necessary to effectuate the transactions
contemplated herein has been, or will at Closing be, taken promptly and in good
faith by Transferee and its representatives and agents.
4.6 TRADE NAME. Transferee shall not use the trade name referenced
in Recital B(4) in connection with any other property owned by Transferee or any
Affiliate of Transferee.
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO TRANSFEREE'S OBLIGATIONS. Transferee's obligations
hereunder are subject to the satisfaction of the following conditions precedent
and the compliance by Transferor with the following covenants:
(a) TRANSFEROR'S DELIVERIES. Transferor shall have delivered to or
for the benefit of Transferee, as the case may be, on or before the Closing
Date, all of the documents and other information required of Transferor
pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Transferor's
representations and warranties made in this Agreement shall be true and
correct as of the date hereof and as of the Closing Date as if then made,
there shall have occurred no material adverse change in the condition or
financial results of the operation of the Property since the date hereof.
Transferor shall have performed all of its covenants and other obligations
under this Agreement and Transferor shall have executed and delivered to
Transferee on the Closing Date a certificate dated as of the Closing Date
to the foregoing effect in the form of EXHIBIT O attached hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
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(d) TITLE TO PROPERTY. Transferee shall have determined that
Transferor is the sole owner of good and marketable fee simple title (or
ground lease interest, as applicable) to the Real Property and to the
Tangible Personal Property, free and clear of all liens, encumbrances,
restrictions, conditions and agreements except for Permitted Title
Exceptions. Transferor shall not have taken any action or permitted or
suffered any action to be taken by others from the date hereof and through
and including the Closing Date that would adversely affect the status of
title to the Real Property or to the Tangible Personal Property.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving
range, putting greens, mechanical systems, plumbing, electrical wiring,
appliances, fixtures, heating, air conditioning and ventilating equipment,
elevators, boilers, equipment, roofs, structural members and furnaces)
shall be in the same condition at Closing as they are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, Transferor
shall not have diminished the quality or quantity of maintenance and upkeep
services heretofore provided to the Real Property and the Tangible Personal
Property. Transferor shall not have removed or caused or permitted to be
removed any part or portion of the Real Property or the Tangible Personal
Property unless the same is replaced, prior to Closing, with similar items
of at least equal quality and acceptable to Transferee.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal
of garbage and other waste from the Property. Between the date hereof and
the Closing Date, Transferor shall have received no notice of any material
increase or proposed material increase in the rates charged for the
Utilities from the rates in effect as of the date hereof.
(g) LIQUOR LICENSE. Transferor shall have obtained all liquor
licenses, alcoholic beverage licenses and other permits and Authorizations
necessary to operate the restaurant, bars, snack shops and lounges
presently located at the Property. To that end, Transferor and Transferee
shall have cooperated with each other, and each shall have executed such
transfer forms, license applications and other documents as may be
necessary to effect the obtaining of the liquor licenses, alcoholic
beverage licenses and other Authorizations required hereby. Subject to
required governmental consents (which Transferor shall diligently seek to
obtain), prior to or upon the expiration of the Lease, Transferor shall
convey, or cause to be conveyed, to Transferee or Transferee's nominee, all
such licenses, permits and Authorizations.
(h) PARTNERSHIP AGREEMENT. Transferor shall have delivered to
Transferee a countersigned copy of the Partnership Agreement in a form
prepared by Transferee, which shall be in substantially the form attached
hereto as EXHIBIT J.
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(i) GOLF COURSE LEASE. An Affiliate of Transferor shall have
delivered to Transferee a countersigned copy of the Golf Course Lease in a
form prepared by Transferee, which shall be in substantially the form
attached hereto as EXHIBIT E.
(j) APPROVAL BY BOARD OF DIRECTORS. Approval of the Board of
Directors of Golf Trust of America, Inc. of the transaction contemplated by
this Agreement by an affirmative vote within twenty-five (25) days of the
Effective Date.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferee and may be waived in whole or in part by
Transferee, but only by an instrument in writing signed by Transferee.
5.2 AS TO TRANSFEROR'S OBLIGATIONS. Transferor's obligations
hereunder are subject to the satisfaction of the following conditions precedent
and the compliance by Transferee with the following covenants:
(a) TRANSFEREE'S DELIVERIES. Transferee shall have delivered to or
for the benefit of Transferor, on or before the Closing Date, all of the
documents and payments required of Transferee pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Transferee's
representations and warranties made in this Agreement shall be true and
correct as of the date hereof and as of the Closing Date as if then made
and Transferee shall have performed all of its covenants and other
obligations under this Agreement and Transferee shall have executed and
delivered to Transferor on the Closing Date a certificate dated as of the
Closing Date to the foregoing effect in the form of EXHIBIT Q attached
hereto.
(c) COUNTERSIGNED COPIES OF PARTNERSHIP AGREEMENT AND GOLF COURSE
LEASE. Transferee shall have delivered to Transferor countersigned copies
of the Partnership Agreement and Golf Course Lease.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferor and may be waived in whole or in part, by
Transferor, but only by an instrument in writing signed by Transferor.
ARTICLE 6
CLOSING
6.1 CLOSING. Closing shall be held at 9:00 a.m., New York time, at
the offices of the Transferee (or counsel to Transferee) on a date that is ten
(10) days after the expiration of the Due Diligence Period; provided, however,
that such ten (10) day period may be extended for an additional twenty (20) days
by Transferee, at its sole discretion, by providing written notice to Transferor
prior to the expiration of such ten
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(10) day period. If the Closing Date falls on a Saturday, Sunday or other legal
holiday, the Closing shall take place on the first following business day
thereafter. Possession of the Property shall be delivered to Transferee at
Closing, subject only to Permitted Title Exceptions.
6.2 TRANSFEROR'S DELIVERIES. At Closing, Transferor shall deliver
to Transferee all of the following instruments, each of which shall have been
duly executed and, where applicable, acknowledged and/or sworn on behalf of
Transferor and shall be dated as of the Closing Date:
(a) The certificate required by Section 5.1 (b).
(b) The Deed.
(c) The Bill of Sale - Personal Property.
(d) The Partnership Agreement.
(e) The Golf Course Lease.
(f) Evidence of title acceptable to Transferee for any vehicle
owned by Transferor and used in connection with the Property.
(g) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy including
those endorsements requested by Transferee, and to eliminate the standard
exceptions as exceptions thereto (except for the standard survey
exception), so that the Owner's Title Policy will be subject only to the
Permitted Title Exceptions, including, without limitation, an appropriate
mechanics' and construction lien, possession and gap affidavit.
(h) The FIRPTA Certificate.
(i) To the extent available, true, correct and complete copies of
all warranties, if any, of manufacturers, suppliers and installers
possessed by Transferor and relating to the Property, or any part thereof.
(j) Certified copies of Transferor's Organizational Documents.
(k) Appropriate resolutions of the board of directors or partners,
as the case may be, of Transferor, certified by the secretary or an
assistant secretary of Transferor or a general partner, as the case may be,
together with all other necessary approvals and consents of Transferor,
authorizing (i) the execution on behalf of Transferor of this Agreement and
the documents to be executed and delivered by Transferor prior to, at or
otherwise in connection with Closing, and (ii) the performance by
Transferor of its obligations hereunder and under such
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documents, or appropriate resolutions of the partners of Transferor, as the
case may be.
(l) Such proof as Transferee may reasonably require with respect to
Transferor's compliance (or indemnity with respect to compliance) with the
bulk sales laws or similar statutes of the state in which the Property is
located, if any such laws or statutes exist.
(m) Copy of each and every existing insurance policy covering the
Property and certificates evidencing such coverage.
(n) To the extent available, a set or copies of the plans and
specifications for the Improvements.
(o) A written instrument executed by Transferor, conveying and
transferring to Transferee all of Transferor's right, title and interest in
any telephone numbers, fax numbers or internet or electronic mail addresses
(if applicable) relating solely to the Property, and, if Transferor
maintains a post office box solely with respect to the Property, conveying
to Transferee all of its interest in and to such post office box and the
number associated therewith, so as to assure a continuity in operation and
communication.
(p) All current real estate and personal property tax bills in
Transferor's possession or under its control.
(q) All surveys and plot plans of the Real Property in possession
of or in the control of Transferor.
(r) A complete list of all scheduled tournaments, functions and the
like, in reasonable detail.
(s) A list of Transferor's outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each
account and the amount due Transferor.
(u) A pay off statement prepared by any holder of Mortgage
Indebtedness setting forth the amount, including accrued interest and
prepayment penalties, to pay off the Mortgage Indebtedness.
(v) Written notice executed by Transferor notifying all interested
parties, including all tenants under any leases of the Property, that the
Property has been conveyed to Transferee and directing that all payments,
inquiries and the like be forwarded to Transferee at the address to be
provided by Transferee.
(t) Any other document or instrument reasonably requested by
Transferee with respect to the Property.
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6.3 TRANSFEREE'S DELIVERIES. At Closing, Transferee shall pay or
deliver to Transferor the following:
(a) The cash portion of the Purchase Price by federal funds wire to
an account designated by Transferor.
(b) The non-cash portion of the Purchase Price payable in Owner's
Shares issued to such holders and in such denominations to such holders as
specified by Transferor.
(c) Any other document or instrument reasonably requested by
Transferor relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Transferee and Transferor shall
mutually execute and deliver each to the other:
(a) A closing statement for Transferor and a closing statement for
Transferee (collectively, the "Closing Statements") reflecting the Purchase
Price and the adjustments and prorations required hereunder and the
allocation of income and expenses required hereby.
(b) Such other documents, instruments and undertakings as may be
required by the liquor authorities of the State or of any county or
municipality or Governmental Body having jurisdiction with respect to the
transfer or issue of any liquor licenses or alcoholic beverage licenses or
permits for the Property, to the extent not theretofore executed and
delivered.
(c) The Golf Course Lease.
(d) The Partnership Agreement.
(e) Such other and further documents, papers and instruments as may
be reasonably required by the parties hereto or their respective counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this
Agreement, each party hereto shall pay its own legal fees and expenses, and
Transferor shall pay for the cost of any audit required by Transferee with
respect to the Property. All filing fees for the Deed and the real estate
transfer, recording or other similar taxes due with respect to the transfer of
title and all charges for title insurance premiums shall be paid by Transferor.
Transferor shall pay for preparation of the documents to be delivered by
Transferor hereunder, and for the releases of any deeds of trust, mortgages and
other financing encumbering the Property and for any costs associated with any
corrective instruments, and for the cost of any due diligence reports and
surveys prepared by or for Transferee with respect to the Property. Transferor
shall receive a cash payment at closing to pay for such closing costs as
provided in Section 2.3(c).
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6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Transferor and Transferee (or,
at Transferee's election, between Transferor and the lessee under the Golf
Course Lease to the extent such income or expenses will be payable by or
attributable to such lessee). Transferor shall be entitled to all income and
shall be responsible for all expenses for the period of time up to but not
including the Closing Date, and Transferee shall be entitled to all income and
shall be responsible for all expenses for the period of time from, after and
including the Closing Date. Such adjustments shall be shown on the Closing
Statements (with such supporting documentation as the parties hereto may require
being attached as exhibits to the Closing Statements) and shall increase or
decrease (as the case may be) the Purchase Price payable by Transferee. Without
limiting the generality of the foregoing, the following items of income and
expense shall be prorated at Closing:
(a) Current and prepaid rents or fees, including, without
limitation, prepaid Golf Club membership fees, function receipts and other
reservation receipts.
(b) Real estate and personal property taxes.
(c) Utility charges (including but not limited to charges for
water, sewer and electricity).
(d) Value of fuel stored on the Property at the price paid for such
fuel by Transferor, including any taxes.
(e) Municipal improvement liens where the work has physically
commenced (certified liens) shall be paid by Transferor at Closing.
Municipal improvement liens which have been authorized, but where the work
has not commenced (pending liens) shall be assumed by Transferee.
(f) License and permit fees, where transferable.
(g) All other income and expenses of the Property (excluding income
and expenses directly related to the sale of Restaurant Supplies and
Inventory).
(h) Such other items as are usually and customarily prorated
between Transferees and Transferors of golf course properties in the area
in which the Property is located shall be prorated as of the Closing Date.
6.7 SALES TAXES. Transferor shall be required to pay all sales
taxes and like impositions arising from the ownership and operation of the
Property currently through the Closing Date.
6.8 POST-CLOSING ADJUSTMENTS.
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(a) Transferee shall not be obligated to collect any accounts
receivable or revenues accrued prior to the Closing Date for Transferor,
but if Transferee collects same, such amounts will be promptly remitted to
Transferor in the form received. Transferee shall receive a credit at
Closing for the amount of any security deposits held by Transferor under
any lease of any portion of the Property that is being assigned to
Transferee in accordance herewith.
(b) If accurate allocations and prorations cannot be made at
Closing because current bills are not obtainable (as, for example, in the
case of utility bills and/or real estate or personal property taxes), the
parties shall allocate such income or expenses at Closing on the best
available information, subject to adjustment outside of escrow upon receipt
of the final bill or other evidence of the applicable income or expense.
Any income received or expense incurred by Transferor or Transferee with
respect to the Property after the Closing Date shall be promptly allocated
in the manner described herein and the parties shall promptly pay or
reimburse any amount due. Transferor shall pay at Closing all accrued
special assessments and taxes applicable to the Property.
ARTICLE 7
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Transferor shall give written
notice thereof to Transferee promptly after Transferor learns or receives notice
thereof. If all or any part of the Real Property is, or is to be, so condemned
or sold, Transferee shall have the right to terminate this Agreement pursuant to
Section 8.3. If Transferee elects not to terminate this Agreement, all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to Transferee
at Closing. Transferor will not settle or compromise any such proceeding
without Transferee's prior written consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the Property
prior to the Closing Date shall remain upon Transferor. If any such loss or
damage occurs prior to Closing, Transferee shall have the right to terminate
this Agreement pursuant to Section 8.3. If Transferee elects not to terminate
this Agreement, all insurance proceeds and rights to proceeds arising out of
such loss or damage shall be paid or assigned, as applicable, to Transferee at
Closing.
7.3 REAL ESTATE BROKER. Except for a broker or finder who may have
been engaged by Transferor and for whom Transferor accepts sole financial
responsibility, and except for any broker or finder who may have been engaged by
Transferee and for whom Transferee accepts sole financial responsibility, there
is no real estate broker involved in this transaction. Transferee warrants and
represents to Transferor that Transferee has not dealt with any other real
estate broker in connection with this transaction, nor has Transferee been
introduced to the Property or to
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Transferor by any other real estate broker, and Transferee shall indemnify
Transferor and save and hold Transferor harmless from and against any claims,
suits, demands or liabilities of any kind or nature whatsoever arising on
account of the claim of any person, firm or corporation to a real estate
brokerage commission or a finder's fee as a result of having dealt with
Transferee, or as a result of having introduced Transferee to Transferor or to
the Property. In like manner, Transferor warrants and represents to Transferee
that Transferor has not dealt with any real estate broker in connection with
this transaction, nor has Transferor been introduced to Transferee by any real
estate broker, and Transferor shall indemnify Transferee and save and hold
Transferee harmless from and against any claims, suits, demands or liabilities
of any kind or nature whatsoever arising on account of the claim of any person,
firm or corporation to a real estate brokerage commission or a finder's fee as a
result of having dealt with Transferor in connection with this transaction.
Transferee acknowledges that David J. Dick, an officer of the Transferee, is a
licensed California real estate broker but is not acting as a broker in relation
to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and
after the execution of this Agreement, Transferee and Transferor shall keep the
terms, conditions and provisions of this Agreement confidential and neither
shall make any public announcements hereof unless the other first approves of
same in writing, nor shall either disclose the terms, conditions and provisions
hereof, except to their respective attorneys, accountants, engineers, surveyors,
financiers and bankers. Notwithstanding the foregoing, it is acknowledged that
the Company is a public company and will make a public announcement concerning
this transaction and that the Company anticipates that it will seek to sell
shares of its common stock and other securities (collectively, the "Securities")
to the general public pursuant to a public offering and that in connection
therewith, Transferee will have the absolute right to market the Securities and
prepare and file all necessary or required registration statements and other
papers, documents and instruments necessary or required in Transferee's judgment
and that of its attorneys and underwriters to file a registration statement with
respect to the Securities with the SEC and/or similar state authorities and to
cause same to become effective and to disclose therein and thus to its
underwriters, to the SEC and/or to similar state authorities and to the public
all of the terms, conditions and provisions of this Agreement. The obligations
of this Section 7.4 shall survive any termination of this Agreement.
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS
8.1 LIABILITY OF TRANSFEREE. Except for any obligation expressly
assumed or agreed to be assumed by Transferee hereunder, Transferee does not
assume any obligation of Transferor or any liability for claims arising out of
any occurrence prior to Closing.
8.2 INDEMNIFICATION BY TRANSFEROR. Transferor hereby indemnifies
and holds Transferee harmless from and against any and all claims, costs,
penalties, damages,
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losses, liabilities and expenses (including reasonable attorneys' fees) that may
at any time be incurred by Transferee, whether before or after Closing, as a
result of any breach by Transferor of any of its representations, warranties,
covenants or obligations set forth herein or in any other document delivered by
Transferor pursuant hereto, for a period of one (1) year following the Closing.
The provisions of this section shall survive termination of this Agreement by
Transferee or Transferor.
8.3 TERMINATION BY TRANSFEREE. If any condition set forth herein
for the benefit of Transferee cannot or will not be satisfied prior to Closing,
or upon the occurrence of any other event that would entitle Transferee to
terminate this Agreement and its obligations hereunder, and Transferor fails to
cure any such matter within ten (10) business days after notice thereof from
Transferee, Transferee, at its option, may elect either (a) to terminate this
Agreement and all other rights and obligations of Transferor and Transferee
hereunder shall terminate immediately, or (b) to waive its right to terminate
(but without waiving any breach or default on the part of Transferor) and,
instead, to proceed to Closing. If Transferee terminates this Agreement as a
consequence of a misrepresentation or breach of a warranty or covenant by
Transferor, or a failure by Transferor to perform its obligations hereunder,
then Transferee shall retain all remedies accruing as a result thereof,
including, without limitation, specific performance.
8.4 TERMINATION BY TRANSFEROR. If any condition set forth herein
for the benefit of Transferor (other than a default by Transferee) cannot or
will not be satisfied prior to Closing, and Transferee fails to cure any such
matter within ten (10) business days after notice thereof from Transferor,
Transferor may, at its option, elect either (a) to terminate this Agreement, in
which event the rights and obligations of Transferor and Transferee hereunder
shall terminate immediately, or (b) to waive its right to terminate, and
instead, to proceed to Closing. If, prior to Closing, Transferee defaults in
performing any of its obligations under this Agreement (including its obligation
to purchase the Property), and Transferee fails to cure any such default within
ten (10) business days after notice thereof from Transferor, then Transferor's
sole remedy for such default shall be to terminate this Agreement and Transferor
waives any claims for damages, actual, consequential or otherwise, that it may
possess against Transferee.
8.5 COSTS AND ATTORNEYS' FEES. In the event of any litigation or
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, arbitration or other form of dispute
resolution, then the prevailing party in such litigation shall be entitled to
recover its costs of prosecuting and/or defending same, including, without
limitation, reasonable attorneys' fees at trial and all appellate levels.
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ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 ASSIGNMENTS. Transferee may assign its rights hereunder to an
Affiliate of Transferee without the consent of Transferor. Transferee may not
otherwise assign its interest herein without the prior written consent of
Transferor. Transferor may not assign any of its rights pursuant to this
Agreement without the prior written consent of Transferee, which may be withheld
in Transferee's sole and absolute discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
9.4 DAYS. If any action is required to be performed, or if any
notice, consent or other communication is given, on a day that is a Saturday or
Sunday or a legal holiday in the jurisdiction in which the action is required to
be performed or in which is located the intended recipient of such notice,
consent or other communication, such performance shall be deemed to be required,
and such notice, consent or other communication shall be deemed to be given, on
the first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to
herein shall be governed by and construed and interpreted in accordance with the
laws of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
9.7 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
9.8 COSTS. Regardless of whether Closing occurs hereunder, and
except as otherwise expressly provided herein, each party hereto shall be
responsible for its own
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costs in connection with this Agreement and the transactions contemplated
hereby, including without limitation, fees of attorneys, engineers and
accountants.
9.9 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
transmitted by facsimile transmission, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States mail,
certified, postage prepaid, return receipt requested, at the addresses and with
such copies as on the Summary Sheet or to such other address as the intended
recipient may have specified in a notice to the other party. Any party hereto
may change its address or designate different or other persons or entities to
receive copies by notifying the other party and Escrow Agent in a manner
described in this Section. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached
hereto are by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all of
the representations, warranties, covenants and agreements of Transferor and
Transferee made in, or pursuant to, this Agreement shall survive Closing and
shall not merge into the Deed or any other document or instrument executed and
delivered in connection herewith.
9.12 FURTHER ASSURANCES. Transferor and Transferee each covenant
and agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Transferor and Transferee
specifically established hereby.
9.14 CONFIDENTIALITY. Any confidential information delivered by
Transferor to Transferee hereunder shall be used solely for the purpose of
acquiring the Property and Transferee will keep such information confidential;
provided Transferee shall have the right to provide such information to its
consultants and advisors and to disclose such information as Transferee
determines is necessary or appropriate in connection with filing any public
offering of the Securities. If Transferee does not acquire the Property, it
shall deliver to Transferor copies of all proprietary information delivered to
Transferee by Transferor. Transferor agrees to keep confidential the terms and
conditions of this Agreement; provided, Transferor shall have the right to
provide such information to its consultants and advisors.
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IN WITNESS WHEREOF, Transferor and Transferee have hereunder affixed
their signatures to this Contribution and Leaseback Agreement, all as of the
17th day of October, 1997.
"TRANSFEREE"
GOLF TRUST OF AMERICA, L.P., A DELAWARE LIMITED
PARTNERSHIP
By: GTA GP, Inc. a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
---------------------------------------------
W. Bradley Blair, II
President
"TRANSFEROR"
PROPERTIES OF THE COUNTRY, INC.,
a Kansas corporation
By: /s/ Jerry Simmons
---------------------------------------------
Jerry Simmons
President
31
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PURCHASE AGREEMENT
Summary Sheet
Buyer: Granite Golf Group, Inc., a Nevada corporation
Seller: Black Bear Golf Club Ltd., a Florida limited partnership
Effective Date: November 5, 1997
Golf Course: Black Bear Golf Club
Trade Name: Black Bear Golf Club
Notice Address
of Seller: Mr. Richard A. Stein, President
Sarvan, Inc., general partner
24505 Calusa Blvd.
Eustis, FL 32726
Phone (800) 423-2718
with a Mr. Robert Q. Williams
copy to Williams, Smith & Summers, P.A.
380 W. Alfred St.
Tavares, FL 32778-3298
Phone (352) 343-6655 Fax (352) 343-4267
Notice Address
of Buyer: Granite Golf Group, Inc.
15170 N. Hayden Rd. Suite 106
Scottsdale, AZ 85254
Phone (602) 905-0978 Fax (602) 905-0979
Attn. Steve Richards
with a
copy to: Mr. Mark Nesvig
Fennemore Craig
3003 N. Central Ave. Suite 2600
Phoenix, AZ 85012-2913
Phone (602) 916-5472 Fax (602) 916-5672
<PAGE>
EXHIBITS
Exhibit "A" - Legal Description of the Land
Exhibit "B" - Description of Improvements
Exhibit "C" - Tangible Personal Property
Exhibit "D" - Intangible Personal Property
Exhibit "E" - Bill of Sale - Personal Property
Exhibit "F" - Deed
Exhibit "G" - FIRPTA Affidavit of Seller
Exhibit "H" - Contracts of Operating Agreements
Exhibit "I" - Due Diligence List
Exhibit "J" - Seller's Certificate
Exhibit "K" - Warranty Disclosure Schedule
Exhibit "L" - Membership Agreements
Exhibit "M" - Security Agreement
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into by and
between Buyer and Seller.
RECITALS:
Seller is the owner of that certain Black Bear Golf Club and related
improvements located on the real property more particularly described in
Exhibit A attached hereto (the "Land").
Subject to the terms of this Agreement, Seller hereby agrees to sell to
Buyer, and Buyer hereby agrees to buy from Seller, all of Seller's right,
title and interest in and to the following:
The Land, together with the golf course, driving range, putting greens,
clubhouse facilities, snack bar, restaurant, pro shop, buildings, structures,
parking lots, improvements, fixtures and other items of real estate located
on the Land, including, but not limited to those items more particularly
described in Exhibit B attached hereto and all warranties and guarantees
associated therewith (the "Improvements").
All rights, privileges, easements and appurtenances to the Land and the
Improvements, if any, including, without limitation, all of Seller's right,
title and interest, if any, in and to all mineral and water rights and all
easements, rights-of-way and other appurtenances used or connected with the
beneficial use or enjoyment of the Land and the Improvements, including,
without limitation, concession agreements, management contracts, employee
contracts, maintenance and repair contracts and service or other contracts
related to the Land, the Improvements and all such easements and
appurtenances are sometimes collectively hereinafter referred to as the "Real
Property").
All items of tangible personal property and fixtures (if any) owned or leased
by Seller and located on or used in connection with the Real Property,
including, but not limited to, machinery, equipment, furniture, furnishings,
merchandise held for sale in the ordinary course of Seller's business
("Inventory"), movable walls or partitions, phone systems and other control
systems, restaurant equipment, computers or trade fixtures, golf course
operation and maintenance equipment, including mowers, tractors, aerators,
sprinklers, sprinkler and irrigation facilities and equipment, valves or
rotors, driving range equipment, golf carts, athletic training equipment,
office equipment or
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machines, other decorations, and equipment or machinery of every kind or
nature located on or used in connection with the operation of the Real
Property whether on or off-site, including all warranties and guaranties
associated therewith (the "Tangible Personal Property"), including, but not
limited to items on Exhibit C. A schedule of the Tangible Personal Property
is attached to this Agreement as Exhibit C, indicating whether such Tangible
Personal Property is owned or leased. If any item is to be excluded from this
transaction, it shall be so stated and attached as part of Exhibit C.
All intangible personal property owned or possessed by Seller and used in
connection with the ownership, operation, leasing or maintenance of the Real
Property or the Tangible Personal Property, all goodwill attributed to the
Property, and any and all trademarks and copyrights, tradenames, promotional
and marketing materials including, but not limited to, guarantees,
Authorizations (as hereinafter defined), general intangibles, business
records, plans and specifications, surveys and title insurance policies
pertaining to the Property, all licenses, permits and approvals with respect
to the construction, ownership, operation or maintenance of the Property, any
unpaid award for taking by condemnation or any damage to the Real Property by
reason of a change of grade or location of or access to any street or
highway, excluding (a) any of the aforesaid rights that Buyer elects not to
acquire and (b) the Current Assets, as hereinafter defined (collectively, the
"Intangible Personal Property"). Including but not limited to a schedule of
the Intangible Personal Property is attached to this Agreement as Exhibit D.
(The Real Property, Tangible Personal Property and Intangible Personal
Property are sometimes collectively referred to as the "Property").
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE I
EXHIBITS; DEFINITIONS; RULES OF CONSTRUCTION
1.0 Exhibits. This Agreement makes reference to Exhibits A through M,
inclusive, some of which are not yet prepared and attached hereto. Beginning
upon the execution of this Agreement and continuing through the Closing of
this transaction, the parties agree to prepare, execute and attach all
referenced Exhibits to this Agreement.
3
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1.1 Definitions. Capitalized terms not otherwise defined herein shall have
the meanings set forth on the Summary Sheet. The following terms shall have
the indicated meanings:
"Act of Bankruptcy" shall mean if a party to this agreement or any general
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its Property, (b) admit in writing
its inability to pay its debts as they become due, (c) make a general
assignment for the benefit of its creditors, (d) file a voluntary petition or
commence a voluntary case or proceeding under the Federal Bankruptcy Code (as
now or hereafter in effect) or any other jurisdiction's bankruptcy statute,
(e) be adjudicated bankrupt or insolvent, (f) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, (g) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case or proceeding under the
Federal Bankruptcy Code (as now or hereafter in effect) or any other
jurisdiction's bankruptcy statute, or (h) take any corporate or partnership
action for the purpose of effecting any of the foregoing; or if a proceeding
or case shall be commenced, without the application or consent of a party
hereto or any general partner thereof, in any court of competent jurisdiction
seeking (1) the liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of debts, of such party or general partner,
(2) the appointment of a receiver, custodian, trustee or liquidator or such
party or general partner or all or any substantial part of its assets, or (3)
other similar relief under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, and such
proceeding or case shall continue undismissed; or an order (including an
order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect,
for a period of sixty (60) consecutive days.
"Authorizations" shall mean all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
4
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"Bill of Sale - Personal Property" shall mean a bill of sale conveying title
to the Tangible Personal Property and Intangible Personal Property from
Seller to Buyer, substantially in the form of Exhibit E attached hereto.
"Buyer" shall mean Granite Golf Group, Inc., a Nevada corporation. At the
sole discretion of Buyer, it may assign all interest in this transaction to
an affiliated company. Further, without Seller's consent, Buyer may assign
its interest to an entity affiliated with the source of financing for this
purchase.
"Closing" shall mean the time the Deed and each of the deliveries to be made
by Seller (as provided in Section 6.2) and Buyer (as provided in Section 6.3)
are made and each of the Closing conditions of Buyer and Seller in Sections
5.1 and 5.2, respectively, have been satisfied or waived.
"Closing Date" shall mean the date on which the Closing occurs.
"Closing Statements" shall have the meaning set forth in Section 6.4(a).
"Deed" shall mean a grant deed or special warranty deed, substantially in the
form set forth for statutory warranty deeds in Section 689.02, Florida
Statutes (1995), conveying the title of Seller to the Real Property, with
such grant or warranty covenants of title from Seller to Buyer as are
customary in the state in which the Property is located, subject only to
Permitted Title Exceptions. If there is any difference between the
description of the Land, as shown on Exhibit A attached hereto and the
description of the Land as shown on the Survey, the description of the Land
to be contained in the Deed and the description of the Land set forth in the
Owner's Title Policy (as defined herein) shall conform to the description
shown on the Survey.
"Disclosure Schedule" shall have the meaning set forth in Section 2.2(e) as
defined by the Letter of Intent between the parties, as amended.
"Due Diligence and Underwriting Period" shall mean the period commencing at 9
a.m., Pacific time, on the Effective Date, and continuing through 5 p.m.,
Pacific time, on November 19, 1997.
"Effective Date" shall mean the date at which all parties have executed this
agreement.
"Environmental Claim" shall mean any administrative,
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regulatory or judicial action, suit, demand, letter, claim, lien, notice of
non-compliance or violation, investigation or proceeding relating in any way
to any Environmental Laws or any permit issued under any Environmental Law
including, without limitation, (i) by governmental or regulatory authorities
for enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Laws, and (ii) by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Substances or
arising from alleged injury or threat of injury to health, safety or the
environment.
"Environmental Laws" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section
1801, et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub.
L. 99499 and 99-563; the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42
U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as amended, 42
U.S.C. Section 201, et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and local
environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Substances.
"Escrow Agent" shall mean Williams, Smith & Summers, P. A.
"FIRPTA Certificate" shall mean the affidavit of Seller under Section 1445 of
the Internal Revenue Code certifying that Seller is not a foreign
corporation, foreign partnership, foreign trust, foreign estate or foreign
person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of Exhibit G attached
hereto.
"Golf Club" shall mean any organization, club or group whereby Seller offers
memberships for purchase in connection with golfing privileges at the
Property.
"Governmental Body" shall mean any federal state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
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"Hazardous Substances" shall mean any substance, material, waste, gas or
particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or
substance which is (i) defined as a "hazardous waste", "hazardous material",
or "restricted hazardous waste" or words of similar import under any
provision of any Environmental Law; (ii) petroleum or petroleum products;
(iii) asbestos; (iv) polychlorinated biphenyl; (v) radioactive material; (vi)
radon gas; (vii) designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C.
Section 1317); (viii) defined as a "hazardous waste" pursuant to Section 1004
of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. (42 U.S.C. Section 6903); or (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C.
Section 9601).
"Improvements" shall have the meaning set forth in Recital B(l).
"Intangible Personal Property" shall have the meaning set forth in Recital B
(4).
"Inventory" shall mean the merchandise located in any pro shop or similar
facility and held for sale in the ordinary course of Seller's business.
"Land" shall have the meaning set forth in Recital A.
"Mortgage Indebtedness" shall mean any indebtedness of Seller which is
secured by a mortgage, deed of trust or other lien on the Property.
"Operating Agreements" shall mean any management agreements, maintenance or
repair contracts, service contracts, supply contracts and other agreements,
if any, in effect with respect to the construction, ownership, operation,
occupancy or maintenance of the Property in force and effect as of the
Effective Date, as more particularly set forth on Exhibit H attached hereto.
"Owner's Title Policy" shall mean a 1970 Form B American Land Title
Association extended coverage owner's policy of title insurance issued to
Buyer by the Title Company, pursuant to which the Title Company insures
Buyer's ownership of fee simple title (or ground lease interest, as
applicable) to the Real Property (including the marketability thereof)
subject only to Permitted Title Exceptions and shall include those title
endorsements
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required by Buyer. The Owner's Title Policy shall insure Buyer in the amount
designated by Buyer and shall be acceptable in form and substance to Buyer.
"Permitted Title Exceptions" shall mean those exceptions to title to the Real
Property that are satisfactory to Buyer as determined under this Agreement.
"Preliminary Title Report" shall mean a Title Commitment issued by Williams,
Smith & Summers, P.A., as agents for the Title Company.
"Property" shall have the meaning set forth in Recital B(4).
"Purchase Price" shall mean Four Million Three Hundred Thousand ($4,300,000)
dollars, payable at Closing as follows:
$4,100,000 in cash
$200,000 in Granite Golf Group, Inc. Common stock (the "Shares"). By written
directive to be exercised not less than five (5) days before closing, Seller
may direct that the Shares be issued to not more than four (4) separate
individuals or entities, each of whom shall be accredited investors. If so
elected, each such individual shall execute the security agreement contained
herein as Exhibit M.
(a) The Shares shall contain a restrictive legend, requiring the stockholder
to observe up to a one year holding period before it may be sold. The number
of Shares transferred at the Closing will be based upon the previous average
5-day closing price. The Seller agrees to allow up to 10 business days
following closing for the issuance of the certificate(s).
At the option of the Seller or the separate shareholders as contemplated by
the preceding paragraph, the Shares, or any portion thereof, may be exchanged
for a total of $200,000 in cash, to be paid by Buyer. In the event less than
100% of the Shares are so exchanged, the amount to be paid by the Buyer shall
be prorated. This one-time option shall be exercised by Seller, or the
separate shareholders, by giving written notice of the intention to exchange,
delivered no sooner than twelve months from the date of issuance of the stock.
Notice must be given within a 30 day period following said anniversary of
stock issuance. Buyer shall have 15 business days to make payment.
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"Real Property" shall have the meaning set forth in Recital B(2).
"Restaurant Supplies" shall mean the consumable goods, supplies (including
beverages) and all silverware, glassware, napkins, tablecloths, papers goods
and related goods owned by Seller necessary to efficiently operate the
restaurant, bar, lounge or snack shop located upon or within the Improvements.
"State" shall mean the state or commonwealth in which the Property is located.
"Summary Sheet" shall mean the summary page attached to this Agreement and
incorporated herein by reference.
"Survey" shall mean the survey prepared pursuant to Section 2.2(c).
"Tangible Personal Property" shall have the meaning set forth in Recital B
(3).
"Title Company" shall mean Lawyers' Title Insurance Corporation.
"Title Objections" shall have the meaning set forth in Section 2.2(d).
"Seller's Organizational Documents" shall mean the current organizational
documents of Seller.
"Utilities" shall mean public sanitary and storm sewers, natural gas,
telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of
the Property.
"WARN Act" shall mean the Worker Adjustment Retraining and Notification Act,
as amended.
1.2 Rules of Construction. The following rules shall apply to the
construction and interpretation of this Agreement:
Gender. Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
Section References. All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
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Headings. The table of contents and headings contained herein are solely for
convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
Construction. Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this
Agreement or any exhibits hereto.
ARTICLE II
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE
2.1 Purchase and Sale. Seller agrees to sell and Buyer agrees to acquire the
Property for the Purchase Price.
2.2 Due Diligence and Underwriting Period Site Inspection. Buyer shall have
the right, during this period, to enter upon the property and to perform the
studies and investigations set forth in Exhibit I, and such other studies or
investigations as Buyer may deem appropriate. The cost of the studies or
investigations set forth in Exhibit I shall be allocated as is the custom in
sales of this nature, or as otherwise agreed by the parties. If such studies
or investigations disclose a defect or other deficiency in the property, or
the subject matter of a study or investigation, which materially diminishes
the value of the property, then the Buyer shall have the right to terminate
this Agreement, and to a return of any deposit of the purchase price. If such
studies and investigations do not disclose such defects or deficiencies, the
Buyer shall proceed to Closing as provided herein, and failure to do so shall
be governed by paragraph 8.4 of this Agreement.
Inspection of Documents. During the Due Diligence Period, Seller shall make
available to Buyer, its agents, auditors, engineers, attorneys and other
designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies,
zoning and site plan materials, correspondence, environmental audits and
reviews, books, records, tax returns, bank statements, financial statements,
fee schedules and any and all other material or information relating to the
Property which are in, or come into, Seller's possession or control, or which
Seller may attain. Such information is more particularly described but not
limited to Exhibit I attached hereto, as the same may be
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amended or supplemented by Seller from time to time. The items listed on
Exhibit I shall be delivered by Seller to Buyer not later than ten (10) days
after the Effective Date.
Survey. Within ten (10) days from the Effective Date, if requested by Buyer,
Seller shall deliver to Buyer an ALTA/ACSM survey or a boundary survey, as
reasonably required by Buyer, of the Land and the Improvements, prepared by a
surveyor licensed to practice as such in the State, bearing a date not
earlier than sixty (60) days from the date of its delivery and certified to
both Buyer, Seller and the Title Company (and any lender or other party
designated by Buyer), showing the legal description of the Land, all
dimensions thereof, and showing the location of Improvements on the Land, the
location of all recorded documents referred to on the Preliminary Title
Report (to the extent plottable, and if not plottable the Survey shall
contain a notation to that effect), and the setbacks thereof from the
property line, as well as the setbacks required by applicable zoning laws or
regulations (the "Survey"). The Survey shall locate all easements that serve
and affect the Land. The Survey shall reflect that no buildings or
improvements located on any other property encroach upon the Land and that
the Improvements located upon the Land do not encroach upon any other
property. The surveyor preparing the Survey shall certify that (i) the Survey
is an accurate Survey of the Land and the Improvements, (ii) that the Survey
was made under the surveyor's supervision, (iii) that the Survey meets (a)
the requirements of the Title Company for the issuance of the Owner's Title
Policy free of any general survey exception, and (b) the minimum technical
standards for land boundary surveys with improvements, set forth by
applicable statutes or applicable professional organizations, and (iv) all
buildings and other structures and their relation to the property lines are
shown and that there are no encroachments, overlaps, boundary line disputes,
easements, or claims of easements visible on the ground, other than those
shown on the Survey. If Buyer has any objection to Survey matters, the same
shall be treated for all purposes as Title Objections within the provisions
of this Agreement.
Preliminary Title Report. Seller agrees to provide to Buyer, within five (5)
business days following the Effective Date, a copy of any existing title
insurance policies which Seller may have in its possession or control
covering the Real Property, together with legible copies of all exception
documents referred to therein. Within ten (10) business days following the
Effective Date, Seller shall provide to Buyer a Title Commitment. Prior to
the expiration of the Due Diligence Period, Buyer shall notify Seller of any
defects
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in title shown by such examination of the Title Commitment that Buyer in its
sole and absolute discretion, is unwilling to accept by delivering a written
statement that reflects such unacceptable defects in title, which shall be
designated as the Title Objections. Within ten (10) days after such
notification, Seller shall notify Buyer whether Seller is willing to cure
such defects. If Seller is willing to cure such defects, Seller shall act
promptly and diligently to cure such defects at its expense. If any of such
defects consist of mortgages, deeds of trust, construction or mechanics,
liens, tax liens or other liens or charges in a fixed sum or capable of
computation as a fixed sum, then, to that extent, and notwithstanding the
foregoing, Seller shall be obligated to pay and discharge such defects at
Closing. For such purposes, Seller may use all or a portion of the cash
payable by Buyer at Closing to cure such defects. If Seller is unable to cure
such defects by Closing, after having attempted to do so diligently and in
good faith, Buyer shall elect (1) to waive such defects and proceed to
Closing without any abatement in the Purchase Price, or (2) to terminate this
Agreement; provided, however that Buyer may pursue any and all remedies in
the event that Seller fails to cure any defect which is required to cure
under the terms of this Agreement. Seller shall not, after the date of this
Agreement, subject the Property to any liens, encumbrances, leases,
covenants, conditions, restrictions, easements or other title matters or seek
any zoning changes or take any other action which may affect or modify the
status of title without Buyer's prior written consent. All title matters
revealed by Buyer's title examination and not objected to by Buyer as
provided above shall be deemed Permitted Title Exceptions. If Buyer shall
fail to examine title and notify Seller of any such Title Objections by the
end of the Due Diligence Period, all such title exceptions (other than those
rendering title unmarketable and those that are to be paid at Closing as
provided above) shall be deemed Permitted Title Exceptions. Notwithstanding
the foregoing, Buyer shall not be required to take title to the Property
subject to any matters which may arise subsequent to the effective date of
its examination of title to the Property made during the Due Diligence Period.
Disclosure Schedule. Seller shall deliver to Buyer within fourteen (14) days
after the Effective Date a disclosure schedule that accurately and completely
identifies and describes (a) all Employment Agreements (including name of
employee, social security number, wage or salary, accrued vacation benefits,
other fringe benefits, etc.), and (b) an updated Golf Club membership list,
setting forth the names of the members of the Golf Club, the length of their
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membership, the payment obligations of the members and a summary of the terms
of the memberships (the "Disclosure Schedule").
UCC Search. Seller shall deliver to Buyer within fifteen (15) days after the
Effective Date current searches of all Uniform Commercial Code financing
statements filed with the Secretary of State of the State respecting Seller,
together with searches for pending litigation, tax liens and bankruptcy
filings in all appropriate jurisdictions.
Financial Statements. Seller shall deliver to Buyer financial statements for
the Golf Course within ten (10) days after the Effective Date.
Tax Clearance Certificates. Delivery of Tax Clearance Certificates if
available under applicable law from each jurisdiction assessing taxes against
property or business thereon.
2.3 Payment of Refundable Deposit. Within 5 business days of the Effective
Date, Buyer will place, or caused to be placed, a deposit of fifty thousand
($50,000) dollars. The deposit shall be refundable, except for a maximum of
$5,000 which shall be paid for Seller's out of pocket expenses related to the
property survey and Environmental report. Unless Buyer gives prior written
notice of its intent not to proceed to Closing, the deposit shall become
nonrefundable on November 19, 1997, contingent only upon Seller's inability
to Close.
ARTICLE III
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Buyer to enter into this Agreement and to purchase the Property,
and to pay the Purchase Price therefor, Seller hereby makes the following
representations, warranties and covenants with respect to the Property,
subject to the Warranty Disclosure Schedule attached hereto as Exhibit J, upon
each of which Seller acknowledges and agrees that Buyer is entitled to rely
and has relied:
3.1 Organization and Power. Seller is duly formed or organized, validly
existing and in good standing under the laws of the state of its formation
and is qualified to transact business in the State and has all requisite
powers and all governmental licenses, authorizations, consents and approvals
to carry on its business as now conducted and to enter into and perform its
obligations under this Agreement and under any document or instrument
required to be executed
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and delivered by or on behalf of Seller under this Agreement.
3.2 Authorization and Execution. This Agreement has been, and each of the
agreements and certificates of Seller to be delivered to Buyer at Closing as
provided in Section 5.1 will be, duly authorized by all necessary action on
the part of Seller, has been duly executed and delivered by Seller,
constitutes the valid and binding agreement of Seller and is enforceable
against Seller in accordance with its terms. There is no other person or
entity who has an ownership interest in the Property or whose consent is
required in connection with Seller's performance of its obligations under
this Agreement. All action required pursuant to this Agreement necessary to
effectuate the transactions contemplated herein has been, or will at Closing
be, taken promptly and in good faith by Seller and its representatives and
agents.
3.3 Non-contravention. The execution and delivery of, and the performance by
Seller of its obligations under, this Agreement do not and will not
contravene, or constitute a default under, any provision of applicable law or
regulation, Seller's Organizational Documents or any agreement, judgment,
injunction, order, decree or other instrument binding upon Seller, or result
in the creation of any lien or other encumbrance on any asset of Seller.
There are no outstanding agreements (written or oral) pursuant to which
Seller (or any predecessor to or representative of Seller) has agreed to
contribute or has granted an option or right of first refusal to purchase the
Property or any part thereof. There are no purchase contracts, options or
other agreements of any kind, written or oral, recorded or unrecorded,
whereby any person or entity other than Seller will have acquired or will
have any basis to assert any right, title or interest in, or right to
possession, use, enjoyment or proceeds of, all or any portion of the
Property. There are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or to otherwise
acquire any interest or profit participation of any kind in the Property or
any part thereof.
3.4 No Special Taxes. Seller has no knowledge of, nor has it received any
notice of, any special taxes or assessments relating to the Property or any
part thereof, including taxes relating to the business of the Property, or
any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Seller's knowledge, there is not any
proposed increase in
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the assessed valuation of the Real Property for tax purposes (except as may
relate to the transfer contemplated by this Agreement).
3.5 Compliance with Existing Laws. Seller possesses all Authorizations, each
of which is valid and in full force and effect, and no provision, condition
or limitation of any of the Authorizations has been breached or violated.
Seller has not misrepresented or failed to disclose any relevant fact in
obtaining all Authorizations, and Seller has no knowledge of any change in
the circumstances under which any of those Authorizations were obtained that
result in their termination, suspension, modification or limitation. Seller
has not taken any action (or failed to take any action), the omission of
which would result in the revocation of any of the Authorizations. Seller has
no knowledge, nor has it received notice within the past three years, of any
existing or threatened violation of any provision of any applicable building,
zoning, subdivision, environmental or other governmental ordinance,
resolution, statute, rule, order or regulation, including but not limited to
those of environmental agencies or insurance boards of underwriters, with
respect to the ownership, operation, use, maintenance or condition of the
Property or any part thereof, or requiring any repairs or alterations other
than those that have been made prior to the Effective Date.
3.6 Real Property. To the best of Seller's knowledge, (i) the Improvements
conform in all respects to all legal requirements, (ii) all easements
necessary or appropriate for the use or operation of the Property have been
obtained, (iii) all contractors and subcontractors retained by Seller who
have performed work on or supplied materials to the Property have been fully
paid, and all materials used at or on the Property have been fully paid for,
(iv) the Improvements have been completed in all material respects in a
workmanlike manner of first-class quality, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and
is presently operative in good working order. Seller has not received any
written notice which is still in effect that there is, and, to the best of
Seller's knowledge, there does not exist, any violation of a condition or
agreement contained in any easement, restrictive covenant or any similar
instrument or agreement effecting the Real Property, or any portion thereof.
3.7 Personal Property. All of the Tangible Personal Property and Intangible
Personal Property being conveyed by Seller to Buyer is free and clear of all
liens and encumbrances and will be so on the Closing Date and Seller has
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good, merchantable title thereto and the right to convey same in accordance
with the terms of this Agreement.
3.8 Operating Agreements. With the exception of those disclosed during the
Due Diligence period, each of the Operating Agreements may be terminated upon
not more than thirty (30) days prior written notice and without the payment
of any penalty, fee, premium or other amount. Seller has performed all of its
obligations under each of the Operating Agreements and no fact or
circumstance has occurred which, by itself or with the passage of time or the
giving of notice or both, would constitute a default under any of the
Operating Agreements. Seller shall not enter into any new Operating
Agreements, supply contract, vending or service contract or other agreements
with respect to the Property, nor shall Seller enter into any agreements
modifying the Operating Agreements, unless (a) any such agreement or
modification will not bind Buyer or the Property after the Closing Date, or
(b) Seller has obtained Buyer's prior written consent to such agreement or
modification. Seller acknowledges that Buyer will not assume any of the
Operating Agreements and none of the Operating Agreements will be binding on
Buyer or the Property after Closing unless Buyer agrees to assume in writing
and such contract was listed within Exhibit H.
3.9 Warranties and Guaranties. Seller shall not before or after Closing,
release or modify any warranties or guarantees, if any, of manufacturers,
suppliers and installers relating to the Improvements or the Personal
Property or any part thereof, except with the prior written consent of Buyer.
3.10 Insurance. All of Seller's insurance policies are valid and in full
force and effect, all premiums for such policies were paid when due and all
future premiums for such policies (and any replacements thereof) shall be
paid by Seller on or before the due date therefor. Seller shall pay all
premiums on, and shall not cancel or voluntarily allow to expire, any of
Seller's insurance policies unless such policy is replaced, without any lapse
of coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. At Closing, the parties
shall allocate the cost of all insurance policies. Seller has not received
any notice from any insurance company of any defect or inadequacies in the
Property to any part thereof which would adversely affect the insurability of
the Property, or which would increase the cost of insurance beyond that which
would ordinarily and customarily be charged for similar properties in the
vicinity of the Real
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Property. The Property is fully insured in accordance with prudent and
customary practice.
3.11 Condemnation Proceedings; Roadways. Seller has received no notice of any
condemnation or eminent domain proceeding pending or threatened against the
Property or any part thereof. Seller has no knowledge of any change or
proposed change in the route, grade or width of, or otherwise affecting, any
street or road adjacent to or serving the Real Property. To the best of
Seller's knowledge, no fact or condition exists which would result in the
termination or material impairment of access to the Real Property from
adjoining public or private streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other utilities or services.
3.12 Litigation. Except as disclosed in writing to Seller, there is no
action, suit or proceeding pending or known to be threatened against or
affecting Seller or any of its properties, including but not limited to the
property, in any court, before any arbitrator or before or by any
Governmental Body which (i) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other agreement or
instrument to which Seller is a party or by which it is bound and that is or
is to be used in connection with, or is contemplated by, this Agreement, (ii)
could materially and adversely affect the business, financial position or
results of operations of Seller, (iii) could materially and adversely affect
the ability of Seller to perform its obligations under this Agreement, or
under any document to be delivered pursuant hereto, (iv) could create a lien
on the Property, any part thereof or any interest therein, (v) the subject
matter of which concerns any past or present employee of Seller or its
managing agent, or (vi) could otherwise adversely materially affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
3.13 Labor Disputes and Agreements. There are no labor disputes pending or,
to the best of Seller's knowledge, threatened as to the operation or
maintenance of the Property or any part thereof. Seller is not a party to any
union or other collective bargaining agreement with employees employed in
connection with the ownership, operation or maintenance of the Property.
Seller is not a party to any employment contracts or agreements, other than
those that have been disclosed in writing, and neither Seller nor its
managing agent will, between the Effective Date and the Closing Date, enter
into any new employment
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contracts or agreements, except with the prior written consent of Buyer.
Seller has complied with and shall be responsible for compliance with the
WARN Act and any other applicable employment-related laws or ordinances.
Seller has complied with the requirements of the federal Immigration and
Reform Control Act respecting the employment of undocumented workers.
3.14 Financial Information. To the best of Seller's knowledge, all of Seller's
financial information, including, without limitation, all books and records
and financial statements, is correct and complete in all material respects and
presents accurately the results of the operations of the Property for the
periods indicated.
3.15 Organizational Documents. Seller's Organizational Documents are in full
force and effect and have not been modified or supplemented, and no fact or
circumstance has occurred that, by itself or with the giving of notice or the
passage of time or both, would constitute a default thereunder.
3.16 Operation of Property. Seller covenants, that between the Effective Date
and the Closing Date, it will (i) operate the Property in the usual, regular
and ordinary manner consistent with Seller's prior practice, (ii) maintain
its books of account and records in the usual, regular and ordinary manner,
in accordance with sound accounting principles applied on a basis consistent
with the basis used in keeping its books in prior years and (iii) use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers, partners and employees and
preserve its relationships with suppliers and others having business dealings
with it. Except as otherwise permitted hereby, from the Effective Date until
Closing, Seller shall not take any action or fail to take action the result
of which would have a material adverse effect on the Property or Buyer's
ability to continue the operation thereof after the Closing Date in
substantially the same manner as presently conducted, or which would cause
any of the representations and warranties contained in this Article III to be
untrue as of Closing.
From and after the execution and delivery of this Agreement, Seller shall
not, other than in the ordinary course of business, (a) make any agreements
which shall be binding upon Buyer with respect to the Property, or (b) reduce
or cause to be reduced any green fees, membership fees, tournament fees,
driving range fees or any other charges over which Seller has operational
control, or (c) shall
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maintain levels of inventory and supplies at the same levels as existing on
the date of this Agreement. Between the Effective Date and the Closing Date,
if and to the extent requested by Buyer, Seller shall deliver to Buyer such
periodic information with respect to the above information as Seller
customarily keeps internally for its own use. Seller agrees that it will
operate the Property in accordance with the provisions of this Section 3.16
between the Effective Date and the Closing Date.
3.17 Bankruptcy. No Act of Bankruptcy has occurred with respect to Seller.
3.18 Land Use. The current use and occupancy of the Property for golfing and
all other related purposes (including, without limitation, the sale of
merchandise and food and beverages) are permitted as a matter of right as a
principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special
permit, permission or consent and Seller is not aware of any proposal to
change or restrict such use. Seller has all necessary certificates of
occupancy or completion to operate the Property as presently operated and
there are no unfulfilled conditions respecting the development of the
Property.
3.19 Hazardous Substances. Except as may be disclosed in the Phase I
environmental assessment report for the Property delivered to Buyer pursuant
to Section 2.2(b), to the best of Seller's knowledge, (i) no Hazardous
Substances are or have been located on (except in immaterial amounts used in
the ordinary course for the operation or maintenance of the Property by
Seller in accordance with all applicable environmental laws), in or under the
Property or have been released into the environment, or discharged, placed or
disposed of at, on or under the Property; (ii) no underground storage tanks
are, or have been, located at the Property; (iii) the Property has never been
used to store, treat or dispose of Hazardous Substances; and (iv) the
Property and its prior uses comply with, and at all times have complied with
all applicable Environmental Laws or any other governmental law, regulation
or requirement relating to environmental and occupational health and safety
matters and Hazardous Substances. To the best of Seller's knowledge, there
currently exist no facts or circumstances that could reasonably be expected
to give rise to a material non-compliance with Environmental Laws, material
environmental liability or material Environmental Claim.
3.20 Utilities. All Utilities required for the operation of the Property
either enter the Property through adjoining
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public streets, or they pass through adjoining land and do so in accordance
with valid public easements or private easements, and all of said Utilities
are installed and are in good working order and repair and operating as
necessary for the operation of the Property and all installation and
connection charges therefor have been paid in full. The sewage, sanitation,
plumbing, water retention and detention, refuse disposal and utility
facilities in and on and/or servicing the Real Property are adequate to
service the Real Property as it is currently being used and the Real
Property's utilization of such facilities is in compliance with all
applicable governmental and environmental protection authorities' laws,
rules, regulations and requirements.
3.21 Curb Cuts. All curb cut street opening permits or licenses required for
vehicular access to and from the Property from any adjoining public street
have been obtained and paid for and are in full force and effect.
3.22 Leased Property. The Leased Personal Property identified on Exhibit C is
all of the leased property at the Property, and such exhibit reflects the
date of each such lease, the name of the lessor, the name of the lessee, the
term of each such lease, the lease payment terms and a description of the
property demised by each such lease. All leases of such property are in good
standing and free from default.
3.23 Sufficiency of Certain Items. The Property, together with the Current
Assets, contain an amount of equipment and supplies, which is sufficient to
efficiently operate and maintain the Property in the manner in which it is
normally operated and maintained.
3.24 Accuracy of Membership Offering Materials. All materials, statements or
any other representations given, delivered or made by the Seller to any
member relating to the offering of Club memberships are true and accurate in
all material respects.
3.25 Survival of Representations. Each of the representations, warranties and
covenants contained in this Article III are intended for the benefit of
Buyer. Each of said representations, warranties and covenants shall survive
the Closing for a period of three (3) year, at which time they shall expire
unless prior to such time Buyer has made a formal, written claim alleging a
breach of one or more of the representations, warranties or covenants. No
investigation, audit, inspection, review or the like conducted by or on
behalf of Buyer shall be deemed to
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terminate the effect of any such representations, warranties and covenants,
it being understood that Buyer has the right to rely thereon and that each
such representation, warranty and covenant constitutes a material inducement
to Buyer to execute this Agreement and to close the transaction contemplated
hereby and to pay the Purchase Price to Seller.
ARTICLE IV
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Seller to enter into this Agreement and to sell the Property, Buyer
hereby makes the following representations, warranties and covenants, upon
each of which Buyer acknowledges and agrees that Seller is entitled to rely
and has relied:
4.1 Organization and Power. Buyer is duly formed or organized, validly
existing and in good standing under the laws of the state of its formation
and has all governmental licenses, Authorizations, consents and approvals
required to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of Buyer under this Agreement.
4.2 Non-contravention. The execution and delivery of this Agreement and the
performance by Buyer of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law
or regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Buyer or result in the creation of any lien or other
encumbrance on any asset of Buyer.
4.3 Litigation. There is no action, suit or proceeding, pending or known to
be threatened, against or affecting Buyer in any court or before any
arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely affect the business, financial position or results
of operations of Buyer, or (b) could materially and adversely affect the
ability of Buyer to perform its obligations under this Agreement, or under
any document to be delivered pursuant hereto.
4.4 Bankruptcy. No Act of Bankruptcy has occurred with respect to Buyer.
4.5 Authorization and Execution. This Agreement has been, and each of the
agreements and certificates of Buyer to be delivered to Seller at Closing as
provided in Section 5.2 will be, duly authorized by all necessary action on
the part
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of Buyer, has been duly executed and delivered by Buyer, constitutes the
valid and binding agreement of Buyer and is enforceable against Buyer in
accordance with its terms. All action required pursuant to this Agreement
necessary to effectuate the transactions contemplated herein has been, or
will at Closing be, taken promptly and in good faith by Buyer and its
representatives and agents.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
5.1 As to Buyer's Obligations. Buyer's obligations under this Agreement are
subject to the satisfaction of the following conditions precedent and the
compliance by Seller with the following covenants:
Seller's Deliveries. Seller shall have delivered to or for the benefit of
Buyer, as the case may be, on or before the Closing Date, all of the
documents and other information required of Seller pursuant to this Agreement.
Representations, Warranties and Covenants. All of Seller's representations
and warranties made in this Agreement shall be true and correct as of the
Effective Date and as of the Closing Date as if then made, there shall have
occurred no material adverse change in the condition or financial results of
the operation of the Property since the Effective Date. Seller shall have
performed all of its covenants and other obligations under this Agreement and
Seller shall have executed and delivered to Buyer at the Closing Date a
certificate dated as of the Closing Date to the foregoing effect in the form
of Exhibit K attached hereto.
Title Insurance. The Title Company shall have delivered or unconditionally
and irrevocable committed to deliver within ten (10) days after Closing, the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
Title to Property. Buyer shall have determined that Seller is the sole owner
of good and marketable fee simple title (or ground lease interest, as
applicable) to the Real Property and to the Tangible Personal Property, free
and clear of all liens, encumbrances, restrictions, conditions and agreements
except for Permitted Title Exceptions. Seller shall not have taken any action
or permitted or suffered any action to be taken by others from the Effective
Date and through and including the Closing Date that would adversely affect
the status of title to the Real Property or to the Tangible Personal Property.
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Condition of Property. The Real Property and the Tangible Personal Property
(including but not limited to the golf course, driving range, putting greens,
mechanical systems, plumbing, electrical wiring, appliances, fixtures, heating,
air conditioning and ventilation equipment, elevators, boilers, equipment,
roofs, structural members and furnaces) shall be in the same condition at
Closing as they are as of the Effective Date, reasonable wear and tear expected.
Prior to Closing, Seller shall not have diminished the quality or quantity or
maintenance and upkeep services heretofore provided to the Real Property and the
Tangible Personal Property. Seller shall not have removed or caused or permitted
to be removed any part or portion of the Real Property or the Tangible Personal
Property unless the same is replaced, prior to Closing, with similar items of at
least equal quality and acceptable to Buyer.
Utilities. All of the Utilities shall be installed in and operating at the
Property, and service shall be available for the removal of garbage and other
waste from the Property. Between the Effective Date and the Closing Date, Seller
shall have received no notice of any material increase or proposed material
increase in the rates charged for the Utilities from the rates in effect as of
the Effective Date.
Liquor License. On or before the Closing Date, Buyer, or Buyer's nominee, shall
have obtained all liquor licenses, alcoholic beverage licenses and other permits
and Authorizations necessary to operate the restaurant, bars, snack shops and
lounges presently located at the Property except as otherwise provided in
Section 7.5. To that end, Seller and Buyer, or Buyer's nominee shall have
cooperated with each other, and each shall have executed such transfer forms,
license applications and other documents as may be necessary to effect the
obtaining of the liquor licenses, alcoholic beverage licenses and other
Authorizations required hereby.
Financing. On or before November 19, 1997, Buyer shall have obtained financing
for Buyer's purchase of the Property, or other financial arrangement, on terms
and conditions acceptable to Buyer in its sole and absolute discretion.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Buyer and may be waived in whole or in part by
Buyer, but only by an instrument in writing signed by Buyer.
5.2 As to Seller's Obligations. Seller's obligations under this are subject to
the satisfaction of the following
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conditions precedent and the compliance by Buyer with the following covenants:
Buyer's Deliveries. Buyer shall have delivered to or for the benefit of Seller,
on or before the Closing Date, all of the documents and payments required of
Buyer pursuant to this Agreement.
Representations, Warranties and Covenants. All of Buyer's representations and
warranties made in this Agreement shall be true and correct as of the Effective
Date and as of the Closing Date as if then made and Buyer shall have performed
all of its covenants and other obligations under this Agreement.
Easements. Buyer hereby grants to Seller the easements on and rights of access
to the Property as described in Exhibit J, attached to this Agreement.
Membership Agreements. Buyer agrees to and by this Agreement assumes each of the
obligations set forth in certain membership agreements, attached hereto as
Exhibit L.
Consulting Agreement. Richard and Kristina Stein, husband and wife, shall
provide consulting services, on an "as requested" basis, for a period of three
years following the Closing. By mutual agreement of the parties, the cost for
such services shall be a maximum of $5,000 per year, or including both husband
and wife in health insurance coverage that is currently maintained at the
facility.
Financial Releases and Deposits. Buyer shall place a deposit or make such other
appropriate financial arrangements with Sumter Electric Cooperative so as to
release Seller's deposit with that utility. Buyer shall also procure the
release of Richard and Kristina Stein, as personal guarantors, on all vendor
accounts payable being assumed by Buyer at Closing.
Assumption of Payables. As additional consideration for Seller's transfer of
all Inventory and Tangible Personal Property, Buyer agrees to assume all related
Inventory and Tangible Personal Property accounts payable as of the date of
Closing and indemnify Seller therefor, provided that the value of said Inventory
and Tangible Personal Property exceeds the accounts payable as of the Closing
date.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Seller and may be waived in whole or in part, by
Seller, but only by an instrument in writing signed by Seller.
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ARTICLE VI
CLOSING
6.1 Closing. Closing shall be held on Tuesday November 25th, 1997 at a mutually
agreed upon location. The parties agree that a Closing may be held by telephonic
conference or other sufficient method. Furthermore, the Buyer, in its
reasonable discretion, may extend the Closing until Tuesday, December 2nd, 1997
by written notice to Seller. Possession of the Property shall be delivered to
Buyer at Closing, subject only to Permitted Title Exceptions.
6.2 Seller's Deliveries. At Closing, Seller shall deliver to Buyer all of the
following instruments, each of which shall have been duly executed and, where
applicable, acknowledged and/or sworn on behalf of Seller and shall be dated as
of the Closing Date:
Seller's Certificate. The certificate required by Section 5.1 (b).
The Deed.
The Bill of Sale - Personal Property.
Evidence of Title. Evidence of title acceptable to Buyer for any vehicle owned
by Seller and used in connection with the Property.
Title Requirements. Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy including those
endorsements requested by Buyer, and to eliminate the standard exceptions as
exceptions thereto, so that the Owner's Title Policy will be subject only to the
Permitted Title Exceptions, including, without limitation, an appropriate
mechanics' and construction lien, possession and gap affidavit.
The FIRPTA Certificate.
Warranties. To the extent available, true, correct and complete copies of all
warranties, if any, of manufacturers, suppliers and installers possessed by
Seller and relating to the Property, or any part thereof.
Organizational Documents. Certified copies of Seller's Organizational Documents.
Resolutions. Appropriate resolutions of the board of directors or partners, as
the case may be, of Seller, certified by the secretary or an assistant secretary
of
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Seller or a general partner, as the case may be, together with all other
necessary approvals and consents of Seller, authorizing (i) the execution on
behalf of Seller of this Agreement and the documents to be executed and
delivered by Seller prior to, at or otherwise in connection with Closing, and
(ii) the performance by Seller of its obligations under this Agreement and under
such documents, or appropriate resolutions of the partners of Seller, as the
case may be.
Certificate of Occupancy. A valid, final and unconditional certificate of
occupancy for the Real Property and Improvements, issued by the appropriate
Governmental Body allowing for the use of the Real Property as a golf course and
permitting the continued operation of the improvements as presently operated.
Evidence of Bulk Sales Compliance. Such proof as Buyer may reasonably require
with respect to Seller's compliance (or indemnity with respect to compliance)
with the bulk sales laws or similar statutes.
Insurance Policies. Copy of each and every existing insurance policy covering
the Property and certificates evidencing such coverage.
Improvement Plans. To the extent available, a set or copies of the plans and
specifications for the Improvements.
Communication; Addresses. A written instrument executed by Seller, conveying and
transferring to Buyer all of Seller's right, title and interest in any telephone
numbers, fax numbers or internet or electronic mail addresses (if applicable)
relating solely to the Property, and, if Seller maintains a post office box
solely with respect to the Property, conveying to Buyer all of its interest in
and to such post office box and the number associated therewith, so as to assure
a continuity in operation and communication.
Tax Bills. All current real estate and personal property tax bills in Seller's
possession or under its control.
Surveys. All surveys and plot plans of the Real Property in possession of or in
the control of Seller.
Tournament Schedule. A complete list of all scheduled tournaments, functions and
the like, in reasonable detail.
Accounts Receivable and Accounts Payable. A list of Seller's outstanding
accounts receivable as of midnight on the date prior to the Closing, specifying
the name of each account and the amount due Seller.
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Payoff Statement. A payoff statement prepared by any holder of Mortgage
Indebtedness setting forth the amount, including accrued interest and prepayment
penalties, to pay off the Mortgage Indebtedness.
Tenant Notices. Written notice executed by Seller notifying all interested
parties, including all tenants under any leases of the Property, that the
Property has been conveyed to Buyer and directing that all payments, inquiries
and the like be forwarded to Buyer at the address to be provided by Buyer.
Miscellaneous. Any other document or instrument reasonably requested by Buyer
with respect to the Property, or in connection with the Registered Offering.
Assignment of leases on Exhibit C and contracts on Exhibit H which Buyer elects
to assume by delivery of written notice to Seller prior to Closing.
6.3 Buyer's Deliveries. At Closing, Buyer shall pay or deliver to Seller the
following:
Purchase Price. The Purchase Price by federal funds wire to an account for the
benefit of the Seller.
Miscellaneous. Any other document or instrument reasonably requested by Seller
relating to the transaction contemplated hereby.
6.4 Mutual Deliveries. At Closing, Buyer and Seller shall mutually execute and
deliver each to the other:
Closing Statements. A closing statement for Seller and a closing statement for
Buyer (collectively, the "Closing Statements") reflecting the Purchase Price and
the adjustments and prorations required under this Agreement and the allocation
of income and expenses required hereby.
Liquor License Transfer Documents. Such other documents, instruments and
undertakings as may be required by the liquor authorities of the State or of any
county or municipality or Governmental Body having jurisdiction with respect to
the transfer or issue of any liquor licenses or alcoholic beverage licenses or
permits for the Property, to the extent not theretofore executed and delivered.
Miscellaneous. Such other and further documents, papers and instruments as may
be reasonably required by the parties hereto or their respective counsel.
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6.5 Closing Costs. Except as is otherwise provided in this Agreement, each party
hereto shall pay its own legal fees and expenses. Seller shall be responsible
for all property transfer and documentary taxes, assessments (due as of the date
of closing), and one-half of escrow charges and title insurance. Buyer shall pay
for the cost of recording the deed, all costs of its due diligence
investigations and one-half of escrow charges and title insurance. Seller shall
pay for preparation of the documents to be delivered by Seller under this
Agreement, and for the releases of any mortgage indebtedness, and for any costs
associated with any corrective instruments.
6.6 Income and Expense Allocations. All income and expenses with respect to the
Property, and applicable to the period of time before and after Closing,
determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Seller and Buyer. Seller shall
be entitled to all income and shall be responsible for all expenses for the
period of time up to but not including the Closing Date, and Buyer shall be
entitled to all income and shall be responsible for all expenses for the period
of time from, after and including the Closing Date. Such adjustments shall be
shown on the Closing Statements (with such supporting documentation as the
parties hereto may require being attached as exhibits to the Closing Statements)
and shall increase or decrease (as the case may be) the Purchase Price payable
by Buyer. Without limiting the generality of the foregoing, the following items
of income and expense shall be prorated at Closing:
Rents and Fees. Current and prepaid rents or fees, including, without
limitation, prepaid Golf Club membership fees, function receipts and other
reservation receipts.
Taxes. Real estate and personal property taxes payable in 1997 shall be
allocated in proportion to the number of days that each party owned the property
during 1997.
Utilities. Utility charges (including but not limited to charges for water,
sewer and electricity).
Fuel. Value of fuel stored on the Property at the price paid for such fuel by
Seller, including any taxes.
Municipal Improvement Liens. Municipal improvement liens where the work has
physically commenced (certified liens) shall be paid by Seller at Closing.
Municipal improvement liens which have been authorized, but where the work has
not commenced (pending liens) shall be assumed by Buyer.
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License and Permit Fees. License and permit fees, where transferable.
Income and Expenses. All other income and expenses of the Property, including,
but not being limited to such things as restaurant and snack bar income and
expenses and the like.
Miscellaneous Prorations. Such other items as are usually and customarily
prorated between Buyers and Sellers of golf course properties in the area in
which the Property is located shall be prorated as of the Closing Date.
6.7 Sales Taxes. Seller shall be required to pay all sales taxes and like
impositions arising from the ownership and operation of the Property currently
through the Closing Date.
6.8 Post-Closing Adjustments.
Accounts Receivable. Buyer shall not be obligated to collect any accounts
receivable or revenues accrued prior to the Closing Date for Seller, but if
Buyer collects same, such amounts will be promptly remitted to Seller in the
form received. Buyer shall receive a credit at Closing for the amount of any
security deposits held by Seller under any lease of any portion of the Property
that is being assigned to Buyer in accordance herewith.
Availability of Bills. If accurate allocations and prorations cannot be made at
Closing because current bills are not obtainable (as, for example, in the case
of utility bills and/or real estate or personal property taxes), the parties
shall allocate such income or expenses at Closing on the best available
information, subject to adjustment outside of escrow upon receipt of the final
bill or other evidence of the applicable income or expense. Any income received
or expense incurred by Seller or Buyer with respect to the Property after the
Closing Date shall be promptly allocated in the manner described herein and the
parties shall promptly pay or reimburse any amount due. Seller shall pay at
Closing all accrued special assessments and taxes applicable to the Property.
ARTICLE VII
GENERAL PROVISIONS
7.1 Condemnation. In the event of any actual or threatened taking, pursuant to
the power of eminent domain, of all or
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any portion of the Real Property, or any proposed sale in lieu thereof, Seller
shall give written notice thereof to Buyer promptly after Seller learns or
receives notice thereof. If all or any part of the Real Property is, or is to
be, so condemned or sold, Buyer shall have the right to terminate this Agreement
pursuant to Section 8.3. If Buyer elects not to terminate this Agreement, all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to Buyer at
Closing. Seller will not settle or compromise any such proceeding without
Buyer's prior written consent.
7.2 Risk of Loss. The risk of any loss or damage to the Property prior to the
Closing Date shall remain upon Seller, and thereafter such risk of loss shall be
borne by Buyer. If any such loss or damage which materially alters the value of
the Property occurs prior to Closing, Buyer shall have the right to terminate
this Agreement pursuant to Section 8.3. In the case of loss or damage that does
not materially alter the value of the Property, or if Buyer elects not to
terminate this Agreement in the case of material alteration to that value, all
insurance proceeds and rights to proceeds arising out of such loss or damage
shall be paid or assigned, as applicable, to Buyer at Closing.
7.3 Real Estate Broker. Except for a broker or finder who may have been engaged
by Seller and for whom Seller accepts sole financial responsibility, and except
for any broker or finder who may have been engaged by Buyer and for whom Buyer
accepts sole financial responsibility, there is no real estate broker involved
in this transaction.
7.4 Confidentiality. Except as hereinafter provided, from and after the
execution of this Agreement, Buyer and Seller shall keep the terms, conditions
and provisions of this Agreement confidential and neither shall make any public
announcements hereof unless the other first approves of same in writing, nor
shall either disclose the terms, conditions and provisions hereof, except to
their respective attorneys, accountants, engineers, surveyors, financiers and
bankers. Seller acknowledges and agrees that Buyer must comply with all
disclosure and applicable securities regulations.
7.5 Liquor Licenses. Seller shall transfer or cause to be transferred to Buyer
or, at Buyer's discretion, Buyer's nominee all liquor licenses and alcoholic
beverage licenses, if any, necessary to operate the restaurant, bars, snack bars
and lounges presently located within the Property, if any. To that end, Seller
and Buyer, or Buyer's nominee, shall cooperate each with the other, and each
shall execute
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such transfer forms, license applications and other documents as may be
necessary to effect such transfer. If permitted under the laws of the
jurisdiction in which the Property is located, the parties shall execute and
file all necessary transfer forms, applications and papers with the appropriate
liquor and alcoholic beverage authorities prior to Closing, to the end that the
transfer shall take effect, if possible, on the Closing Date, simultaneously
with Closing. If not so permitted, then the parties agree each with the other
that they will promptly execute all transfer forms, applications and other
documents required by the liquor authorities in order to effect such transfer at
the earliest date in time possible consistent with the laws of the State in
order that all liquor licenses may be transferred from Seller to Buyer, or
Buyer's nominee, at the earliest possible time. If under the laws of the State
such licenses cannot be transferred until after the Closing of the transaction
contemplated hereby, then Seller covenants and agrees that Seller will cooperate
with Buyer, or Buyer's nominee, in keeping open the bars and liquor facilities
of the Property between the Closing Date and the time when such liquor license
transfers actually become effective, by exercising management and supervision of
such facilities until such time under Seller's licenses, provided, however, that
Buyer shall indemnify and hold Seller harmless from any liability, damages or
claims encountered in connection with such operations during said period of
time, except for Seller's gross negligence or willful misconduct.
ARTICLE VIII
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS
8.1 Liability of Buyer. Except for any obligation expressly assumed or agreed to
be assumed by Buyer under this Agreement, Buyer does not assume any obligation
of Seller or any liability for claims arising out of any occurrence prior to
Closing with respect to Seller or the Property including but not limited to any
business operated thereon.
8.2 Indemnification by Seller. Seller hereby indemnities and holds Buyer
harmless from and against any and all claims, costs, penalties, damages, losses,
liabilities and expenses (including reasonable attorneys, fees) that may at any
time be incurred by Buyer, whether before or after Closing, as a result of any
breach by Seller of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Seller
pursuant hereto, for a period of three (3) years following the Closing. The
provisions of this section shall survive
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termination of this Agreement by Buyer or Seller.
8.3 Termination by Buyer. If any condition set forth herein for the benefit of
Buyer cannot or will not be satisfied prior to Closing, or upon the occurrence
of any other event that would materially effect this transaction and entitle
Buyer to terminate this Agreement and its obligations under this Agreement, and
Seller fails to cure any such matter within ten (10) business days after notice
thereof from Buyer, Buyer, at its option, may elect either (a) to terminate this
Agreement and all other rights and obligations of Seller and Buyer under this
Agreement shall terminate immediately and all funds paid or deposited by Buyer
(including but not limited to earnest money) shall be immediately refunded to
Buyer; or (b) to waive its right to terminate (but without waiving any breach or
default on the part of Seller) and, instead, to proceed to Closing. If Buyer
terminates this Agreement as a consequence of a misrepresentation or breach of a
warranty or covenant by Seller, or a failure by Seller to perform its
obligations under this Agreement, Seller shall return all monies paid as
deposits to the Buyer. Buyer shall retain all remedies accruing as a result
thereof, including, without limitation, specific performance.
8.4 Termination by Seller. If any condition set forth herein for the benefit of
Seller (other than a default by Buyer) cannot or will not be satisfied prior to
Closing, and Buyer fails to cure any such matter within ten (10) business days
after notice thereof from Seller, Seller may, at its option, elect either (a) to
terminate this Agreement, in which event the rights and obligations of Seller
and Buyer hereunder shall terminate immediately, or (b) to waive its right to
terminate, and instead, to proceed to Closing. If, prior to Closing, Buyer
defaults in performing any of its obligations under this Agreement (including
its obligation to purchase the Property), and Buyer fails to cure any such
default within ten (10) business days after notice thereof from Seller, then
Seller's sole remedy for such default shall be to terminate this Agreement and
Seller waives any claims for damages, actual, consequential or otherwise, that
it may possess against Buyer.
8.5 Costs and Attorneys' Fees. In the event of any litigation or dispute between
the parties arising out of or in any way connected with this Agreement,
resulting in any litigation, arbitration or other form of dispute resolution,
then the prevailing party in such litigation shall be entitled to recover its
costs of prosecuting and/or defending same, including, without limitation,
reasonable
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attorneys' fees at trial and all appellate levels.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Completeness; Modification. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto. This Agreement may be modified only by
a written instrument duly executed by the parties hereto.
9.2 Assignments. Buyer may assign its rights under this Agreement to an
affiliate of Buyer. Further, without Seller's consent, Buyer may assign its
interest to an entity affiliated with the source of financing for this purchase.
Buyer may not otherwise assign its interest herein without the prior written
consent of Seller. Seller may not assign any of its rights pursuant to this
Agreement without the prior written consent of Buyer, which may be withheld in
Buyer's sole and absolute discretion.
9.3 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
9.4 Days. If any action is required to be performed, or if any notice, consent
or other communication is given, on a day that is a Saturday or Sunday or a
legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 Governing Law. This Agreement and all documents referred to herein shall be
governed by and construed and interpreted in accordance with the laws of the
State.
9.6 Counterparts. To facilitate execution, this Agreement may be executed in as
many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.
33
<PAGE>
9.7 Severability. If any term, covenant or condition of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless of whether Closing occurs under this Agreement, and except
as otherwise expressly provided in this Agreement, each party to this Agreement
shall be responsible for its own costs in connection with this Agreement and the
transactions contemplated hereby, including without limitation, fees of
attorneys, engineers and accountants.
9.9 Notices. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as on the Summary Sheet or to such other address as the intended recipient may
have specified in a notice to the other party. Any party hereto may change its
address or designate different or other persons or entities to receive copies by
notifying the other party and Escrow Agent in a manner described in this
Section. Any notice, request, demand or other communication delivered or sent in
the manner aforesaid shall be deemed given or made (as the case may be) when
actually delivered to the intended recipient.
9.10 Incorporation by Reference. All of the exhibits attached hereto are by this
reference incorporated herein and made a part hereof.
9.11 Survival. Except as expressly provided in Section 3, all of the
representations, warranties, covenants and agreements of Seller and Buyer made
in, or pursuant to, this Agreement shall survive Closing and shall not merge
into the Deed or any other document or instrument executed and delivered in
connection herewith.
9.12 Further Assurances. Seller and Buyer each covenant and agree to sign,
execute and deliver, or cause to be signed, executed and delivered, and to do or
make, or cause to be done or made, upon the written request of the other party,
any and all agreements, instruments, papers, deeds, acts or things,
supplemental, confirmatory or otherwise, as may be reasonably required by either
party hereto for the purpose of or in connection with consummating the
transactions
34
<PAGE>
described herein.
9.13 No Partnership. This Agreement does not and shall not be construed to
create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Seller and Buyer specifically
established hereby.
9.14 Confidentiality. Any confidential information delivered by Seller to Buyer
under this Agreement shall be used solely for the purpose of acquiring the
Property and Buyer will keep such information confidential; provided Buyer shall
have the right to provide such information to its consultants and advisors and
to disclose such information as Buyer determines is necessary or appropriate in
connection with filing with the Securities and Exchange Commission. If Buyer
does not acquire the Property, it shall deliver to Seller copies of all
proprietary information delivered to Buyer by Seller. Seller agrees to keep
confidential the terms and conditions of this Agreement and the Registered
Offering provided Seller shall have the right to provide such information to its
consultants and advisors.
IN WITNESS WHEREOF, Seller and Buyer have hereunder affixed their signatures to
this Purchase and Sale Agreement, all as of the 5th day of November, 1997.
Buyer
GRANITE GOLF GROUP, INC.,
a Nevada Corporation
By:/s/ T. Marney Edwards
--------------------------
Seller
BLACK BEAR GOLF CLUB, LTD.,
a Florida Limited Partnership
By: Sarvan, Inc.,
a Delaware Corporation,
its General Partner
By:/s/ Richard A. Stein
--------------------------
Richard A. Stein, president,
Sarvan, Inc.
35
<PAGE>
ASSIGNMENT AND ASSUMPTION OF
PURCHASE AND SALE AGREEMENT
(BLACK BEAR GOLF CLUB)
THIS ASSIGNMENT AND ASSUMPTION OF PURCHASE AND SALE AGREEMENT (this
"Assignment Agreement") is made and entered into as of the 19th day of November,
1997 (the "Effective Date"), by and between GRANITE GOLF GROUP, INC., a Nevada
corporation ("Assignor"), and GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Assignee").
THE PARTIES ENTER THIS ASSIGNMENT AGREEMENT on the basis of the
following facts, understandings and intentions:
A. Assignor and Black Bear Golf Club, Ltd., a Florida limited
partnership ("Seller"), have entered into that certain Purchase and Sale
Agreement dated as of November 5, 1997 (the "Purchase Agreement"), whereby
Assignor agreed, subject to certain terms and conditions set forth therein, to
acquire from Seller that certain real property, and improvements located
thereon, as more particularly described in the Purchase Agreement (the
"Property"). Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Purchase Agreement.
B. Assignor desires to assign to Assignee, and Assignor desires to
assume from Assignor, Assignor's right and obligation to acquire the Property,
together with Assignor's right, title and interest in, to and under the Purchase
Agreement on the terms and conditions set forth herein.
C. At Closing, and in partial consideration of the terms and
conditions of this Assignment Agreement, including, without limitation, the
obligation of Assignor to deliver the Lease (defined below) to Assignee at
Closing, Assignee will convey ________ units of limited partnership interests in
Assignee [$650,000 divided by the average closing price of common stock of Golf
Trust of America, Inc. for the five days prior to Closing] (the "Owner's
Shares"), in a private placement offering (the "Offering").
D. The rights and preferences of holders of the Owner's Shares are
summarized in the final Prospectus of Golf Trust of America, Inc. (the
"Company") dated November 4, 1997, and the documents incorporated therein, and
all documents filed by the Company with the United States Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934 (the "Act") (collectively, the "Offering Documents").
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable
<PAGE>
considerations, the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee hereby agree as follows:
1. ASSIGNMENT AND ASSUMPTION. As of the Effective Date, Assignor
hereby assigns and transfers to Assignee, all of Assignor's right, title and
interest in, to and under the Purchase Agreement, and, subject to Section 2 of
this Assignment Agreement, Assignee hereby accepts Assignor's assignment and
assumes all of Assignor's duties, obligations and responsibilities arising under
the Purchase Agreement arising from and after the Effective Date. Nothing
contained in this Assignment Agreement shall release Assignor from any of its
obligations under the Purchase Agreement.
2. OBLIGATIONS NOT ASSUMED BY ASSIGNEE. Notwithstanding anything to
the contrary contained in this Assignment Agreement, Assignee shall not assume
the following obligations of Assignor under the Purchase Agreement, which
obligations are specifically retained by Assignor:
a. the obligation to deliver the Shares, or cash in lieu of the
Shares pursuant to an exercise of Seller's option under the last paragraph of
page 8 of the Purchase Agreement, to Seller as part of the Purchase Price;
b. the obligation to execute and deliver the Securities
Agreement attached to the Purchase Agreement as Exhibit M; and
c. the obligation to pay for any closing costs pursuant to
Section 6.5 of the Purchase Agreement, except for the obligation to pay for
one-half (1/2) of the cost of title insurance which obligation shall be
assumed by Assignee.
3. DELIVERIES AT CLOSING. At Closing, Assignor and Assignee shall
make the following payments and deliveries:
a. ASSIGNOR PAYMENTS. Assignor shall pay or deliver to Seller
(i) the Shares, or cash in lieu of the Shares pursuant to an exercise of
Seller's option under the last paragraph of page 8 of the Purchase Agreement,
and (ii) all closing costs required to be paid by Assignor pursuant to Section
6.5 of the Purchase Agreement. In addition, Assignor shall pay to Assignee any
transfer and documentary taxes and any title insurance premiums due at Closing
that Seller is not obligated to pay under the Purchase Agreement.
b. ASSIGNEE PAYMENTS. Assignee shall pay or deliver (i) to
Seller through escrow $4,050,000 in same day funds, and wired to an account
designated by escrow holder, and (ii) to Assignor the Owner's Shares. In
addition, Assignee shall pay any title insurance premiums due at Closing that
neither
2
<PAGE>
Seller nor Buyer is obligated to pay under the Purchase Agreement.
c. MUTUAL DELIVERY. Assignee and Assignor shall deliver, each
to the other, an executed counterpart of that certain amended and restated
limited partnership agreement relating to Assignee.
4. POST-CLOSING PAYMENTS.
a. ASSIGNEE PAYMENTS. Upon the terms and conditions of EXHIBIT
A attached hereto (the "Contingent Purchase Price Formula"), Assignee shall
cause the Company to deliver additional shares of common stock of the Company
equal to the Contingent Purchase Price (as defined in the Contingent Purchase
Price Formula) to Assignor.
5. REPRESENTATIONS AND WARRANTIES REGARDING THE PURCHASE AGREEMENT.
Assignor hereby represents and warrants to Assignee that: (i) there has been no
prior assignment of the Purchase Agreement; (ii) there has occurred no default
under the Purchase Agreement on the part of Assignor or, to Assignor's actual
knowledge, on the part of Seller; and (iii) Assignee may rely on all of the
representations and warranties made by Assignor to Seller pursuant to Article IV
of the Purchase Agreement.
6. REPRESENTATIONS AND WARRANTIES REGARDING ACQUISITION OF THE
OWNER'S SHARES. In connection with the acquisition of the Owner's Shares by
Assignor, Assignor makes the following representations and warranties for the
benefit of Assignee and the Company:
a. Assignor represents that it is an "accredited investor" as
such term is defined in Rule 501 ("Rule 501") of Regulation D promulgated under
the Act and that it is able to bear the economic risk of an investment in the
Owner's Shares.
b. Assignor acknowledges that it has prior investment
experience, including investment in non-listed and non-registered securities,
and the ability and expertise to evaluate the merits and risks of such an
investment on its behalf.
c. Assignor hereby represents that it has (i) received the
Offering Documents and (ii) carefully reviewed the Offering Documents.
d. Assignor hereby represents that it has been furnished by
Assignee during the course of this transaction with all information regarding
the Company which it has requested or desired to know; that it has been afforded
the opportunity to ask questions of, and receive answers from, duly authorized
officers
3
<PAGE>
or other representatives of the Company concerning the terms and conditions of
the Offering, and has received any additional information which it has
requested.
e. Assignor hereby acknowledges that the offering of Owner's
Shares has not been reviewed by, and the fairness of such Owner's Shares has not
been determined by, the Commission or any state regulatory authority, since the
Offering is intended to be a nonpublic offering pursuant to Section 4(2) of the
Act. Assignor represents that the Owner's Shares being acquired by it are being
acquired for its own account, for investment and not for distribution of the
Owner's Shares to others.
f. Assignor understands that the Owner's Shares have not been
registered under the Act or any state securities or "blue sky" laws and are
being sold in reliance on exemptions from the registration requirements of the
Act and such laws.
g. The undersigned, if acting in a representative or fiduciary
capacity, has full power and authority to execute and deliver this Assignment
Agreement, to make the representations and warranties specified herein, and to
consummate the transactions contemplated herein on behalf of the subscribing
partnership, trust, corporation or other entity for which the undersigned is
acting and such partnership, trust, corporation, or other entity has full right
and power to subscribe for Shares and perform its obligations pursuant to this
Assignment Agreement.
h. The Company may rely, and shall be protected in acting upon,
any papers or other documents which may be submitted to it by the Assignor in
connection with the Owner's Shares and which are believed by it to be genuine
and to have been signed or presented by the proper party or parties, and the
Company shall not have any liability or responsibility with respect to the form,
execution or validity thereof.
i. Assignor hereby represents that the address set forth on
Page 1 of the Purchase Agreement is Assignor's principal business address.
j. The foregoing representations, warranties and agreements,
together with all other representations and warranties made or given by the
undersigned to Assignee or the Company in any other written statement or
document delivered in connection with the transactions contemplated hereby,
shall be true and correct in all respects on and as of the date of this
Assignment Agreement as if made on and as of such date and shall survive such
date and if there should be any material change in such information prior to the
Closing, the undersigned will immediately furnish such revised or corrected
information to Assignee. Assignor understands that Assignee and the Company
4
<PAGE>
will rely upon the accuracy and truth of the foregoing representations,
warranties and agreements, and Assignor hereby consents to such reliance.
7. LEASE AND PLEDGE AGREEMENT.
a. As a condition to Assignee's performance of its obligations
under this Assignment Agreement, at Closing Assignor shall deliver to Assignee
executed counterparts of a lease in the form attached hereto as EXHIBIT B (the
"Lease"), and pledge agreements in the forms attached to the Lease as EXHIBITS D
and E (the "Pledge Agreements").
b. As a condition to Assignor's performance of its obligations
under this Assignment Agreement, at Closing, Assignee shall deliver to Assignor
executed counterparts of the Lease and Pledge Agreements.
8. INDEMNITY. Assignor shall indemnify and hold Assignee harmless
from and against all claims, demands, losses, damages, expenses and costs
including, but not limited to, reasonable attorneys' fees and expenses actually
incurred, arising out of or in connection with Assignor's failure to observe,
perform and discharge each and every one of the covenants, obligations and
liabilities of "Buyer" under the Purchase Agreement to be observed, performed or
discharged on, or relating to, or accruing with respect to the period prior to
the date of this Assignment Agreement. Assignee shall indemnify and hold
Assignor harmless from and against all claims, demands, losses, damages,
expenses and costs including, but not limited to, reasonable attorneys' fees and
expenses actually incurred, arising out of or in connection with Assignee's
failure, from and after the date of this Assignment Agreement, to observe,
perform and discharge each and every one of the covenants, obligations and
liabilities assumed by Assignee with respect to the Purchase Agreement and
relating to the period from and after the date of this Assignment Agreement.
9. NOTICES. All notices, consents, approvals, waivers, and
elections which any party shall be required or shall desire to make or give
under this Assignment Agreement shall be in writing and shall be sufficiently
made or given only when sent by (a) certified mail, return receipt requested,
(b) prepaid overnight delivery service with proof of delivery, or (c) electronic
transmission with hard copy to follow as confirmation of receipt, addressed:
5
<PAGE>
to Assignor: Granite Golf Group, Inc.
15170 N. Hayden Road, Suite 106
Scottsdale, Arizona 85260
Attention: Steve Richards
Telephone: (602) 905-0978
Facsimile: (602) 905-0979
with a copy to: Mr. Mark Nesvig
Fennemore Craig
3003 N. Central Avenue, Suite 2600
Phoenix, Arizona 85012-2913
Telephone: (602) 916-5000
Facsimile: (602) 916-5999
to Assignee: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attn: Scott D. Peters
Telephone: (803) 723-4653
Facsimile: (803) 723-0479
with a copy to: O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attn: Peter T. Healy, Esq.
Telephone: (415) 984-8700
Facsimile: (415) 984-8701
10. GOVERNING LAW. This Assignment Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Florida.
11. BINDING EFFECT. This Assignment Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal representatives, successors and assigns.
12. COUNTERPARTS. This Assignment Agreement may be executed in any
number of counterparts, which counterparts, when considered together, shall
constitute a single, binding, valid and enforceable agreement.
6
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment Agreement as of the day and year first above written.
ASSIGNEE:
GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc.,
a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair, II
-------------------------------
W. Bradley Blair, II
President and CEO
ASSIGNOR:
GRANITE GOLF GROUP, INC.,
a Nevada corporation
By: /s/ Steven T. Richards
---------------------------------
Steven T. Richards
Vice President
7
<PAGE>
--------------------------------
PURCHASE AND SALE AGREEMENT
--------------------------------
Seller: BONAVENTURE COUNTRY CLUB ASSOCIATES,
a Florida general partnership
Buyer: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
Property: Bonaventure Golf Courses
Weston, Florida
Purchase
Price: $23,725,000
Effective
Date: November 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Act of Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . 2
(b) Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Authorizations . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Bill of Sale - Personal Property . . . . . . . . . . . . . . . 3
(e) Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 3
(g) Closing Statements . . . . . . . . . . . . . . . . . . . . . . 3
(h) Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(j) Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(k) Schedule of Agreements . . . . . . . . . . . . . . . . . . . . 4
(l) Due Diligence Period . . . . . . . . . . . . . . . . . . . . . 4
(m) Employment Agreements. . . . . . . . . . . . . . . . . . . . . 4
(n) Environmental Claim. . . . . . . . . . . . . . . . . . . . . . 4
(o) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 4
(p) Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . 5
(q) FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . . . 5
(r) Golf Club. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(s) Golf Course Lease. . . . . . . . . . . . . . . . . . . . . . . 5
(t) Governmental Body. . . . . . . . . . . . . . . . . . . . . . . 5
(u) Hazardous Substances . . . . . . . . . . . . . . . . . . . . . 5
(v) Improvements . . . . . . . . . . . . . . . . . . . . . . . . . 5
(w) Intangible Personal Property . . . . . . . . . . . . . . . . . 5
(x) Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(y) Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(z) Management Agreement . . . . . . . . . . . . . . . . . . . . . 6
(aa) Mortgage Indebtedness. . . . . . . . . . . . . . . . . . . . . 6
(ab) Operating Agreements . . . . . . . . . . . . . . . . . . . . . 6
(ac) Owner's Title Policy . . . . . . . . . . . . . . . . . . . . . 6
(ad) Permitted Title Exceptions . . . . . . . . . . . . . . . . . . 6
(ae) Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(af) Preliminary Title Report . . . . . . . . . . . . . . . . . . . 6
(ag) Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ah) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 6
(ai) Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 7
(aj) Released Parcel. . . . . . . . . . . . . . . . . . . . . . . . 7
(ak) Restaurant Supplies. . . . . . . . . . . . . . . . . . . . . . 7
(al) SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(am) Seller's Organizational Documents. . . . . . . . . . . . . . . 7
(an) State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ao) Summary Sheet. . . . . . . . . . . . . . . . . . . . . . . . . 7
(ap) Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(aq) Tangible Personal Property . . . . . . . . . . . . . . . . . . 7
(ar) Title Company. . . . . . . . . . . . . . . . . . . . . . . . . 7
(as) Title Objections . . . . . . . . . . . . . . . . . . . . . . . 7
i
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(at) Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(au) WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Gender.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Section References.. . . . . . . . . . . . . . . . . . . . . . 8
(c) Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Construction.. . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE. . . . . . . . . . . . . . . . 8
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Due Diligence Period. . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Site Inspection. . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Inspection of Documents. . . . . . . . . . . . . . . . . . . . 11
(c) Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Preliminary Title Report . . . . . . . . . . . . . . . . . . . 12
(e) Environmental Remediation. . . . . . . . . . . . . . . . . . . 12
(f) Schedule of Agreements . . . . . . . . . . . . . . . . . . . . 13
(g) UCC Search . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Financial Statements . . . . . . . . . . . . . . . . . . . . . 13
2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . 14
3.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Authorization and Execution . . . . . . . . . . . . . . . . . . . . 14
3.3 Mortgage Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 No Special Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Compliance with Existing Laws . . . . . . . . . . . . . . . . . . . 15
3.7 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Operating Agreements. . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Warranties and Guaranties . . . . . . . . . . . . . . . . . . . . . 17
3.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Condemnation Proceedings; Roadways. . . . . . . . . . . . . . . . . 17
3.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Labor Disputes and Agreements . . . . . . . . . . . . . . . . . . . 18
3.15 Financial Information . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Organizational Documents. . . . . . . . . . . . . . . . . . . . . . 18
3.17 Operation of Property . . . . . . . . . . . . . . . . . . . . . . . 18
3.18 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Land Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 Hazardous Substances. . . . . . . . . . . . . . . . . . . . . . . . 19
3.21 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.22 Curb Cuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.23 Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.24 Survival of Representations . . . . . . . . . . . . . . . . . . . . 20
ii
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ARTICLE 4
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . 21
4.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Authorization and Execution . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . 23
5.1 As to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . 23
(a) Seller Deliveries. . . . . . . . . . . . . . . . . . . . . . . 23
(b) Representations, Warranties and Covenants. . . . . . . . . . . 23
(c) Title Insurance. . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Title to Property. . . . . . . . . . . . . . . . . . . . . . . 23
(e) Condition of Property. . . . . . . . . . . . . . . . . . . . . 23
(f) Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Liquor License . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1.1 As to Seller's Obligations . . . . . . . . . . . . . . . . . . 24
(a) Buyer's Deliveries . . . . . . . . . . . . . . . . . . . . . . 24
(b) Representations, Warranties and Covenants. . . . . . . . . . . 24
ARTICLE 6
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Seller's Deliveries . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Seller's Certificate . . . . . . . . . . . . . . . . . . . . . 25
(b) The Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) The Bill of Sale - Personal Property . . . . . . . . . . . . . 25
(d) Evidence of Title. . . . . . . . . . . . . . . . . . . . . . . 25
(e) Title Requirements . . . . . . . . . . . . . . . . . . . . . . 25
(f) The FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . 25
(g) Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Organizational Documents . . . . . . . . . . . . . . . . . . . 25
(i) Partner's Documents. . . . . . . . . . . . . . . . . . . . . . 25
(j) Assignment of Contracts. . . . . . . . . . . . . . . . . . . . 25
(k) Assignment of Facilities Agreement . . . . . . . . . . . . . . 25
(l) Certificate of Occupancy . . . . . . . . . . . . . . . . . . . 26
(m) Improvement Plans. . . . . . . . . . . . . . . . . . . . . . . 26
(n) Communication; Addresses . . . . . . . . . . . . . . . . . . . 26
(o) Tax Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(p) Surveys. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(q) Tournament Schedule. . . . . . . . . . . . . . . . . . . . . . 26
(r) Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 26
(s) Payoff Statement . . . . . . . . . . . . . . . . . . . . . . . 26
(t) Tenant Notices . . . . . . . . . . . . . . . . . . . . . . . . 26
(u) Letter from Contractor . . . . . . . . . . . . . . . . . . . . 26
(v) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Buyer's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Assignment of Contracts. . . . . . . . . . . . . . . . . . . . 27
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(c) Assignment of Facilities Agreement . . . . . . . . . . . . . . 27
(d) Assumption Agreement . . . . . . . . . . . . . . . . . . . . . 27
(e) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Mutual Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Closing Statements . . . . . . . . . . . . . . . . . . . . . . 27
(b) Liquor License Transfer Documents. . . . . . . . . . . . . . . 27
(c) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Income and Expense Allocations. . . . . . . . . . . . . . . . . . . 28
(a) Rents and Fees . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Municipal Improvement Liens. . . . . . . . . . . . . . . . . . 28
(f) License and Permit Fees. . . . . . . . . . . . . . . . . . . . 28
(g) Income and Expenses. . . . . . . . . . . . . . . . . . . . . . 28
(h) Miscellaneous Prorations . . . . . . . . . . . . . . . . . . . 29
6.7 Sales Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8 Accounts Receivable/Cash. . . . . . . . . . . . . . . . . . . . . . 29
6.9 Post-Closing Adjustments. . . . . . . . . . . . . . . . . . . . . . 29
(a) Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 29
(b) Availability of Bills. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Real Estate Broker. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.5 Liquor Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Liability of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . 32
8.3 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . 32
8.4 Termination by Buyer. . . . . . . . . . . . . . . . . . . . . . . . 32
8.5 Termination by Seller . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Costs and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 9
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Completeness; Modification. . . . . . . . . . . . . . . . . . . . . 34
9.2 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.8 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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9.10 Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . 35
9.11 No Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 35
9.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.14 Radon Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Description of Improvements
Exhibit C - Tangible Personal Property
Exhibit D - Intangible Personal Property
Exhibit E - Bill of Sale - Personal Property
Exhibit F - Deed
Exhibit G - FIRPTA Affidavit of Seller
Exhibit H - Contracts and Operating Agreements
Exhibit I - Due Diligence List
Exhibit J - Warranty Disclosure Schedule
Exhibit K - Seller's Certificate
Exhibit L - Permitted Title Exceptions
Exhibit M - Assignment of Contracts
Exhibit N - Assignment of Facilities Agreement
Exhibit O - Legal Description of Released Parcel
Exhibit P - Litigation, Claim or Proceedings
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PURCHASE AGREEMENT
SUMMARY SHEET
Buyer: GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
Seller: BONAVENTURE COUNTRY CLUB ASSOCIATES,
a Florida general partnership
Effective
Date: November 26, 1997
Golf Courses: Bonaventure Golf Courses (East and West Courses)
Trade Name: Bonaventure Country Club
Purchase
Price: Twenty-Three Million Seven Hundred Twenty-Five Thousand
Dollars ($23,725,000)
Notice Address
of Seller: Bonaventure Country Club Associates
c/o Ireland Companies
12000 Biscayne Boulevard
Miami, Florida 33181
Attention: Thomas K. Ireland
with a
copy to: Rubin Baum Levin Constant Friedman & Bilzin
2500 First Union Financial Center
Miami, Florida 33131-2336
Attention: Martin A. Schwartz, Esq.
Notice Address
of Buyer: Golf Trust of America, Inc.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
with a
copy to: O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
Attention: Peter T. Healy, Esq.
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into by
and between Buyer and Seller.
RECITALS:
A. Seller is the owner of the golf courses and related improvements
located on the real property more particularly described in EXHIBIT A attached
hereto (the "Land").
B. Subject to the terms of this Agreement, Seller hereby agrees to
sell to Buyer, and Buyer hereby agrees to buy from Seller, all of Seller's
right, title and interest in and to the following:
1. The Land, together with two 18-hole golf courses, driving range,
putting greens, clubhouse facilities, snack bar, restaurant, pro shop,
buildings, structures, parking lots, improvements, fixtures and other items of
real estate located on the Land as more particularly described in EXHIBIT B
attached hereto (the "Improvements").
2. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of Seller's
right, title and interest, if any, in and to all mineral and water rights and
all easements, rights-of-way and other appurtenances used or connected with the
beneficial use or enjoyment of the Land and the Improvements, including, without
limitation, concession agreements for spas and the like, if any (the Land, the
Improvements and all such easements and appurtenances are sometimes collectively
hereinafter referred to as the "Real Property").
3. All items of tangible personal property and fixtures (if any)
owned or leased by Seller and located on or used in connection with the Real
Property, including, but not limited to, machinery, equipment, furniture,
furnishings, movable walls or partitions, phone systems and other control
systems, restaurant equipment, computers or trade fixtures, golf course
operation and maintenance equipment, including mowers, tractors, aerators,
sprinklers, sprinkler and irrigation facilities and equipment, valves or rotors,
driving range equipment, athletic training equipment, office equipment or
machines, other decorations, and equipment or machinery of every kind or nature
located on or used in connection with the operation of the Real Property whether
on or off-site, including all warranties and guaranties associated therewith
(the "Tangible Personal Property"). A schedule of the Tangible Personal
Property is attached to this Agreement as EXHIBIT C, indicating whether such
Tangible Personal Property is owned or leased.
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<PAGE>
4. All intangible personal property owned or possessed by Seller and
used in connection with the ownership, operation, leasing or maintenance of the
Real Property or the Tangible Personal Property, all goodwill attributed to the
Property, and any and all trademarks and copyrights, tradenames (including the
name "Bonaventure Country Club"), guarantees, Authorizations (as hereinafter
defined), general intangibles, business records, plans and specifications,
surveys all licenses, permits and approvals with respect to the construction,
ownership, operation or maintenance of the Property, to the extent transferable,
any unpaid award for taking by condemnation or any damage to the Real Property
by reason of a change of grade or location of or access to any street or
highway, excluding (a) any of the aforesaid rights that Buyer elects not to
acquire and, (b) subject to Section 2.1(c), the Current Assets, as hereinafter
defined (collectively, the "Intangible Personal Property"). A schedule of the
Intangible Personal Property is attached to this Agreement as EXHIBIT D. (The
Real Property, Tangible Personal Property and Intangible Personal Property are
sometimes collectively referred to as the "Property".)
C. Upon the acquisition by the Buyer of the Property, the Buyer will
lease the Property to a third-party lessee pursuant to a separate lease (the
"Golf Course Lease").
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
(a) "ACT OF BANKRUPTCY" shall mean if a party to this agreement or
any general partner thereof shall (a) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its Property, (b) admit in writing
its inability to pay its debts as they become due, (c) make a general assignment
for the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect) or any new bankruptcy statute, (e) be adjudicated bankrupt
or insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition
or adjustment of debts, (g) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case or proceeding
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<PAGE>
under the Federal Bankruptcy Code (as now or hereafter in effect) or any new
bankruptcy statute, or (h) take any corporate or partnership action for the
purpose of effecting any of the foregoing; or if a proceeding or case shall be
commenced, without the application or consent of a party hereto or any general
partner thereof, in any court of competent jurisdiction seeking (1) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of debts, of such party or general partner, (2) the appointment of
a receiver, custodian, trustee or liquidator or such party or general partner or
all or any substantial part of its assets, or (3) other similar relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.
(b) "AFFILIATE" shall mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person.
(c) "AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
(d) "BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale
conveying title to the Tangible Personal Property and Intangible Personal
Property from Seller to Buyer, substantially in the form of EXHIBIT E attached
hereto.
(e) "CLOSING" shall mean the time that the Deed and each of the
deliveries to be made by Seller (as provided in Section 6.2) and Buyer (as
provided in Section 6.3) are made and each of the Closing conditions of Buyer
and Seller in Sections 5.1 and 5.1.1, respectively, have been satisfied or
waived.
(f) "CLOSING DATE" shall mean the date on which the Closing occurs.
(g) "CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
(h) "CURRENT ASSETS" shall mean cash, accounts receivable and
Inventory (as hereinafter defined) held by Seller prior to the Closing Date.
(i) "DEED" shall mean a special warranty deed, substantially in the
form of EXHIBIT F attached hereto (or lease
3
<PAGE>
assignment, if the Property is owned by Seller pursuant to a ground lease),
conveying the title of Seller to the Real Property subject only to Permitted
Title Exceptions. If there is any difference between the description of the
Land, as shown on EXHIBIT A attached hereto and the description of the Land as
shown on the Survey, the description of the Land to be contained in the Deed and
the description of the Land set forth in the Owner's Title Policy (as defined
herein) shall conform to the description shown on the Survey.
(j) "DEPOSIT" shall mean the sum of Seven Hundred Fifty Thousand
Dollars ($750,000) together with accrued interest thereon, which shall be
deposited with Escrow Agent, and held in escrow by the Escrow Agent pursuant to
the provisions of this Agreement.
(k) "SCHEDULE OF AGREEMENTS" shall have the meaning set forth in
Section 2.2(f).
(l) "DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00
a.m., Eastern Standard time, on the Effective Date, and continuing through 5:00
p.m., Eastern Standard time, on November 26, 1997.
(m) "EMPLOYMENT AGREEMENTS" shall mean all employment agreements,
written or oral, between Seller or its managing agent and the persons employed
with respect to the Property in effect as of the Effective Date.
(n) "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory
or judicial action, suit, demand, letter, claim, lien, notice of non-compliance
or violation, investigation or proceeding relating in any way to any
Environmental Laws or any permit issued under any Environmental Law including,
without limitation, (i) by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Laws, and (ii) by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to health, safety or the environment.
(o) "ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as amended,
29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution
4
<PAGE>
Control Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state
and local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability or
standards concerning or in connection with Hazardous Substances.
(p) "ESCROW AGENT" shall mean the Title Company.
(q) "FIRPTA CERTIFICATE" shall mean the affidavit of Seller under
Section 1445 of the Internal Revenue Code certifying that Seller is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT G attached hereto.
(r) "GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Seller for purchase in connection with golfing
privileges at the Property.
(s) "GOLF COURSE LEASE" shall have the meaning set forth in Recital
C.
(t) "GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(u) "HAZARDOUS SUBSTANCES" shall mean any substance, material, waste,
gas or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
(v) "IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
(w) "INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth
in Recital B(4).
(x) "INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Seller's business.
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<PAGE>
(y) "LAND" shall have the meaning set forth in Recital A.
(z) "MANAGEMENT AGREEMENT" shall mean that certain Golf Course
Facilities Management Agreement dated September 15, 1988, as amended, by and
between Seller and Johnny LaPonzina, Inc. for management of the Property.
(aa) "MORTGAGE INDEBTEDNESS" shall mean the indebtedness of Seller
which is secured by a mortgage or deed of trust on the Property made to Textron
Financial Corporation in the original principal amount of Seventeen Million Five
Hundred Thousand Dollars ($17,500,000).
(bb) "OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the Effective Date, as more particularly set forth on EXHIBIT H attached hereto.
(cc) "OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land
Title Association extended coverage owner's policy of title insurance (with
mechanics' lien coverage) issued to Buyer by the Title Company, pursuant to
which the Title Company insures Buyer's ownership of fee simple title (or ground
lease interest, as applicable) to the Real Property (including the marketability
thereof) subject only to Permitted Title Exceptions and shall include those
title endorsements required by Buyer and available under Florida law. The
Owner's Title Policy shall insure Buyer in the amount of the Purchase Price.
(dd) "PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title
to the Real Property described in EXHIBIT L and those that are evidenced by a
pro forma title report and not objected to by Buyer within the period described
in Section 2.2(d).
(ee) "PERSON" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships,
joint stock companies, joint ventures, associations, companies, trusts,
banks, trusts companies, land trusts, business trusts, Indian tribes or other
organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
(ff) "PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
(gg) "PROPERTY" shall have the meaning set forth in Recital B(4).
(hh) "PURCHASE PRICE" shall mean Twenty-Three Million Seven Hundred
Twenty-Five Thousand Dollars ($23,725,000).
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(ii) "REAL PROPERTY" shall have the meaning set forth in Recital B(2).
(jj) "RELEASED PARCEL" shall mean that certain parcel of land more
particularly described in EXHIBIT O attached hereto, which Seller proposes to
release from Property prior to or at Closing.
(kk) "RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
(ll) "SEC" shall mean the United States Securities and Exchange
Commission.
(mm) "SELLER'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Seller.
(nn) "STATE" shall mean the state or commonwealth in which the
Property is located.
(oo) "SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
(pp) "SURVEY" shall mean the survey prepared pursuant to Section
2.2(c).
(qq) "TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
(rr) "TITLE COMPANY" shall mean a title insurance company selected by
Buyer and authorized to conduct a title insurance business in the State.
(ss) "TITLE OBJECTIONS" shall have the meaning set forth in Section
2.2(d).
(tt) "UTILITIES" shall mean public sanitary and storm sewers, natural
gas (if any exists), telephone, public water facilities, electrical facilities
and all other utility facilities and services necessary for the operation and
occupancy of the Property.
(uu) "WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) GENDER. Singular words shall connote the plural number as well
as the singular and vice versa, and the masculine shall include the feminine and
the neuter.
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(b) SECTION REFERENCES. All references herein to particular
articles, sections, subsections, clauses or exhibits are references to articles,
sections, subsections, clauses or exhibits of this Agreement.
(c) HEADINGS. The table of contents and headings contained herein
are solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) CONSTRUCTION. Each party hereto and its counsel have reviewed
and revised (or requested revisions of) this Agreement and have participated in
the preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement or
any exhibits hereto.
ARTICLE 2
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND SALE. Seller agrees to sell and Buyer agrees to purchase
the Property for the Purchase Price.
(a) On or before November 25, 1997, Buyer shall deliver the Deposit
to Escrow Agent. The Deposit shall be placed in an interest-bearing account in
the name of Escrow Agent. The Deposit and interest thereon shall be tendered to
Seller or Buyer, as the case may be, in accordance with terms and conditions of
this Agreement. Escrow Agent shall hold the Deposit in accordance with the
terms of this Agreement. Escrow Agent has agreed to act as escrow agent for the
convenience of the Buyer and Seller without fee or other charges for such
service. Escrow Agent shall not be liable for: (i) any acts taken in good faith
but only for its intentional misconduct or gross negligence; (ii) any loss or
impairment of funds in the course of collection or on deposit in a financial
institution arising out of failure, insolvency or suspension of such financial
institution; (iii) expiration of any time limit or other consequence of delay
unless a properly executed written instruction, accepted by Escrow Agent, has
instructed Escrow Agent to comply with such time limit; (iv) default, error,
action or omission of any Party; (v) compliance with any legal process,
subpoena, writ, order, judgment or decree, whether issued with or without
jurisdiction and whether subsequently vacated, modified, set aside or reversed;
(vi) any legal effect, insufficiency or undesirability of any instrument
deposited with or delivered by Escrow Agent or exchanged by the parties to this
Agreement whether or not Escrow Agent prepared such instrument; or (vii) any
default, error, action or omission of any party to this Agreement. Escrow Agent
may rely upon the written notices, communications, orders or instructions given
by any Party or reasonably believed by it to be genuine. The Parties will
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indemnify and hold Escrow Agent harmless against any matters directly or
indirectly related to the Deposit, including, without limitation, attorneys'
fees. Notwithstanding anything to the contrary in this Agreement, if prior to
Closing either Party makes a demand upon Escrow Agent for the Deposit, Escrow
Agent shall give notice to the other Party of such demand. Should Escrow Agent
not receive an objection from the non-demanding Party to the proposed payment
within 10 days after such notice, Escrow Agent is authorized to make payment to
the demanding Party; if an objection is received within such 10-day period or if
for any other reason Escrow Agent is in good faith uncertain about its
responsibilities, it shall continue to hold the Deposit until otherwise directed
by written instructions from Seller and Buyer or by final judgment of a court of
competent jurisdiction. In the event of any dispute, Escrow Agent may at any
time deposit the Deposit with the Clerk of the Court of the County in which the
Property is located and be relieved and discharged of all obligations under this
Agreement. Seller acknowledges that Rubin Baum Levin Constant Friedman & Bilzin
is acting as Escrow Agent and is counsel to Seller. In the event of any dispute
between Seller and Buyer, Rubin Baum Levin Constant Friedman & Bilzin shall be
permitted to continue to represent Buyer in such dispute, including, without
limitation, any litigation over payment of the Deposit.
(b) Buyer shall have the option, at its sole discretion, to accept
title to the Property subject to the Mortgage Indebtedness, provided Buyer can
obtain the consent of the holder of the Mortgage Indebtedness to the assumption
by Buyer. In the event the consent is obtained and Buyer elects to assume the
Mortgage Indebtedness, the outstanding principal balance of the Mortgage
Indebtedness shall be credited against the Purchase Price, and Buyer shall pay a
loan assumption fee of up to one percent (1%) of the outstanding Mortgage
Indebtedness. If the consent of the Mortgage Indebtedness holder cannot be
obtained, then Buyer shall pay off the Mortgage Indebtedness at Closing and pay
the prepayment penalty owed to the holder of the Mortgage Indebtedness, up to a
maximum of four percent (4%) of the amount of the Mortgage Indebtedness. Buyer
shall be responsible for all costs associated with Buyer's assumption of the
Mortgage Indebtedness, including, without limitation, the lender's legal fees,
the application fee, and any taxes associated with the assumption of the
Mortgage Indebtedness.
(c) Upon payment of the Purchase Price to Seller, Seller shall
transfer to Buyer or Buyer's designee Fifty Thousand Dollars ($50,000) worth of
Inventory, as reasonably determined by Buyer and Seller based on Seller's cost
and the wholesale replacement cost thereof. Buyer or its designee shall also
purchase the remainder of the Inventory (the "Remaining Inventory") for the
price which Buyer or Buyer's designee could have purchased the Remaining
Inventory had Buyer or Buyer's designee purchased the Remaining Inventory
directly from its suppliers.
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2.2 DUE DILIGENCE PERIOD.
(a) SITE INSPECTION. Buyer shall have the right, during the Due
Diligence Period, and thereafter if Buyer notifies Seller that Buyer has elected
to proceed to Closing in the manner described below, to enter upon the Property
and to perform, at Seller's expense, such surveying, engineering, and
environmental studies and investigations as Buyer may deem appropriate. No
invasive inspection shall be performed without Seller's prior written consent
(which consent shall not be unreasonably withheld or delayed, but it shall be
deemed reasonable for Seller to refuse to consent to any inspections which would
be materially disruptive to Seller's business). Buyer shall give not less than
twenty-four (24) hours prior written notice to Seller prior to any entry upon
the Property for the purpose of conducting such inspections, and such entry
shall be scheduled and coordinated with Seller. At Seller's election,a
representative of Seller shall be present during any entry by Buyer or Buyer's
representative upon the Property for conducting said inspections. Buyer shall
not cause or permit any mechanic's liens, materialmen's liens, or other liens to
be filed against the Property as a result of the inspections. Buyer shall
repair and restore any damage to the Property caused by entry upon the Property
by Buyer or Buyer's representative. Buyer shall indemnify, defend, and hold
harmless Seller and Seller's officers, directors, shareholders, partners,
tenants, agents, and employees (collectively, the "Indemnified Parties"), from
and against any and all actions, losses, costs, damages, claims, liabilities,
and expenses (including court costs and reasonable attorneys' fees) brought,
sought, or incurred by or against any of the Indemnified Parties resulting from,
arising out of, or relating to, entry upon the Property or Improvements by Buyer
or any of the other Buyer's representatives. The foregoing indemnification and
repair and restoration obligations shall expressly survive the termination of
this Agreement but survival of such obligations for any physical damage to the
Property shall be limited to a period of six (6) months, at which time they
shall expire unless prior to such time a lawsuit is commenced against Buyer
alleging a breach of such obligations and then only to the extent of the
purported breach. If such tests, studies and investigations warrant, in Buyer's
sole, absolute and unreviewable discretion, the purchase of the Property for the
purposes contemplated by Buyer, then Buyer may elect to proceed to Closing and
shall so notify Seller and the Escrow Agent, in writing, prior to the expiration
of the Due Diligence Period. If for any reason Buyer does not so notify Seller
and Escrow Agent of its determination to proceed to Closing prior to the
expiration of the Due Diligence Period, or if Buyer notifies Seller and Escrow
Agent, in writing, prior to the expiration of the Due Diligence Period that it
has determined not to proceed to Closing, this Agreement automatically shall
terminate and Buyer and Escrow Agent shall be released from any further
liability or
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obligation under this Agreement and, Buyer will deliver such reports and
materials to Seller.
(b) INSPECTION OF DOCUMENTS. During the Due Diligence Period, Seller
shall make available to Buyer, its agents, auditors, engineers, attorneys and
other designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies, zoning
and site plan materials, correspondence, environmental audits and reviews,
books, records, tax returns, bank statements, financial statements, fee
schedules and any and all other material or information relating to the Property
which are in, or come into, Seller's possession or control, or which Seller may
attain. Such information is more particularly described in EXHIBIT I attached
hereto, as the same may be amended or supplemented by Seller from time to time.
Buyer acknowledges receipt of the materials described in EXHIBIT I.
(c) SURVEY. Seller has delivered to Buyer all survey(s) of the
Property, or any portion thereof, in Seller's possession. In addition, Seller
shall cause the most recent survey of the Property to be certified to Buyer and
Buyer's designees, and shall deliver the same to Buyer prior to Closing. Buyer
may procure an ALTA/ACSM survey or a boundary survey of the Land and the
Improvements, prepared by a surveyor licensed to practice as such in the State,
bearing a date not earlier than sixty (60) days from the date of its delivery
and certified to both Buyer, Seller and the Title Company (and any lender or
other party designated by Buyer), showing the legal description of the Land, all
dimensions thereof, and showing the location of Improvements on the Land and the
setbacks thereof from the property line, as well as the setbacks required by
applicable zoning laws or regulations (the "Survey"). The Survey shall locate
all easements which serve and affect the Land. The Survey shall reflect that no
buildings or improvements located on any other property encroach upon the Land
and that the Improvements located upon the Land do not encroach upon any other
property. The surveyor preparing the Survey shall certify that (i) the Survey
is an accurate Survey of the Land and the Improvements, (ii) that the Survey was
made under the surveyor's supervision, (iii) that the Survey meets (a) the
requirements of the Title Company for the issuance of the Owner's Title Policy
free of any general survey exception, and (b) the minimum technical standards
for land boundary surveys with improvements, set forth by applicable statutes or
applicable professional organizations, and (iv) all buildings and other
structures and their relation to the property lines are shown and that there are
no encroachments, overlaps, boundary line disputes, easements, or claims of
easements visible on the ground, other than those shown on the Survey. If Buyer
has any objection to survey matters, the same shall be treated for all purposes
as Title Objections within the provisions of this Agreement.
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(d) PRELIMINARY TITLE REPORT. Seller has provided to Buyer a copy of
an existing title insurance policy covering the Real Property. Buyer, at its
expense, shall cause an examination of title to the Property to be made and a
preliminary title report to be issued (the "Preliminary Title Report"), and
shall, within five (5) business days of receipt of the Preliminary Title Report
by Buyer's attorneys, notify Seller of any defects in title shown by such
examination that Buyer is unwilling to accept by delivering a pro forma copy of
the Preliminary Title Report that reflects such unacceptable defects in title,
which shall be designated as the Title Objections. The matters described in
EXHIBIT L shall not be included in any title objections. Within ten (10) days
after such notification, Seller shall notify Buyer whether Seller is willing to
cure such defects. If Seller is willing to cure such defects, Seller shall act
promptly and diligently to cure such defects at its expense. If any of such
defects consist of mortgages, deeds of trust, construction or mechanics' liens,
tax liens or other liens or charges in a fixed sum or capable of computation as
a fixed sum, then, to that extent, and notwithstanding the foregoing, Seller
shall be obligated to pay and discharge such defects at Closing except as
otherwise provided for the Mortgage Indebtedness. For such purposes, Seller may
use all or a portion of the cash to close. If Seller is unable to cure such
defects by Closing, after having attempted to do so in good faith, or if Seller
has elected not to cure any title defects by notice to Buyer ("Seller's Non-Cure
Notice") Buyer shall elect (1) to waive such defects and proceed to Closing
without any abatement in the Purchase Price, or (2) to terminate this Agreement
(which termination to be effective must be given within five (5) business days
following Buyer's receipt of Seller's Non-Cure Notice) in which case Escrow
Agent shall promptly return the Deposit to Buyer. Seller shall not, after the
date of this Agreement, subject the Property to any liens, encumbrances, leases,
covenants, conditions, restrictions, easements or other title matters or seek
any zoning changes or take any other action which may affect or modify the
status of title without Buyer's prior written consent. All title matters
revealed by Buyer's title examination and not objected to by Buyer as provided
above shall be deemed Permitted Title Exceptions. If Buyer shall fail to
examine title and notify Seller of any such Title Objections by the end of the
Due Diligence Period, all such title exceptions (other than those that are to be
paid at Closing as provided above) shall be deemed Permitted Title Exceptions.
Notwithstanding the foregoing, Buyer shall not be required to take title to the
Property subject to any matters which may arise subsequent to the effective date
of its examination of title to the Property made during the Due Diligence
Period.
(e) ENVIRONMENTAL REMEDIATION. Seller has entered into a contract
(the "Contract") with SECOR International, Inc. (the "Contractor") to complete
all environmental and asbestos remediation at the Property detailed in the
proposal dated June 30, 1997, prepared by SECOR for Mr. Scott Ireland, and in
Section
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9.2 of the Limited Asbestos Survey Report for the Property dated February 21,
1997, prepared by SECOR (collectively, the "Remediation Work"). Seller shall
use its best efforts to ensure that the Remediation Work is completed by the
Contractor prior to Closing. The Remediation Work shall be performed at
Seller's sole cost and expense. If the Remediation Work is not completed prior
to Closing, Seller shall pay Contractor for all work completed as of the date of
Closing and Buyer shall receive a credit (the "Credit") against the Purchase
Price in the amount of all remaining sums unpaid under the Contract. In no
event shall Buyer be responsible for any costs due, or claimed to be due, to the
Contractor or any other person or entity in connection with the Remediation Work
over and above the amount of the Credit, and Seller hereby indemnifies and holds
Seller harmless from and against any and all claims, costs, penalties, damages,
losses, liabilities and expenses (including reasonable attorney's fees) arising
out of the cost of the Remediation Work.
(f) SCHEDULE OF AGREEMENTS. A disclosure schedule that accurately
and completely identifies and describes (a) all Employment Agreements (including
name of employee, social security number, wage or salary, accrued vacation
benefits, other fringe benefits, etc.), and (b) an updated Golf Club membership
list, setting forth the names of the members of the Golf Club, the length of
their membership, the payment obligations of the members and a summary of the
terms of the memberships and other matters is included in the list attached
hereto as EXHIBIT H (the "Schedule of Agreements").
(g) UCC SEARCH. Buyer shall, at its election, obtain at Buyer's
expense current searches of all Uniform Commercial Code financing statements
filed with the Secretary of State of the State respecting Seller, together with
searches for pending litigation, tax liens and bankruptcy filings in all
appropriate jurisdictions.
(h) FINANCIAL STATEMENTS. Seller has delivered to Buyer financial
statements for each of the following periods: Twelve (12) months ended December
31, 1996; January 1, 1997 through September 30, 1997 and shall deliver to Seller
five (5) days prior to the Closing Date for the period October 1, 1997 through
the date five (5) days prior to the Closing Date. Such statements shall be
certified to Buyer by Seller to be true, complete and accurate and to accurately
reflect the operations at the Property for the applicable period. On or before
December 5, 1997, Buyer may, at its sole cost and expense, cause such financial
statements, along with Seller's operating procedures, books and records, to be
reviewed by its independent certified public accountants (the "Auditor's
Report"). If the Auditor's Report determines that the net operating income from
the Property for the twelve (12) months ending December 31, 1996 is at least
$100,000 less than the net operating income represented in the financial
statements delivered by Seller, Buyer may elect to either (i) terminate this
Agreement by written notice to Seller,
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and receive a prompt refund of the Deposit, or (ii) proceed with the transaction
contemplated by this Agreement without a reduction in the Purchase Price.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to Seller
at closing.
ARTICLE 3
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Buyer to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, Seller hereby makes the
following representations, warranties and covenants with respect to the
Property, subject to the Warranty Schedule of Agreements attached hereto as
EXHIBIT J, upon each of which Seller acknowledges and agrees that Buyer is
entitled to rely and has relied:
3.1 ORGANIZATION AND POWER. Seller is duly formed or organized, validly
existing and in good standing under the laws of the state of Florida and is
qualified to transact business in the state of Florida and has all requisite
powers and all governmental licenses, authorizations, consents and approvals to
carry on its business as now conducted and to enter into and perform its
obligations under this Agreement and under any document or instrument required
to be executed and delivered by or on behalf of Seller under this Agreement.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of the
agreements and certificates of Seller to be delivered to Buyer at Closing as
provided in Section 5.1 will be, duly authorized by all necessary action on the
part of Seller, has been duly executed and delivered by Seller, constitutes the
valid and binding agreement of Seller and is enforceable against Seller in
accordance with its terms. There is no other person or entity who has an
ownership interest in the Property or whose consent is required in connection
with Seller's performance of its obligations under this Agreement other than the
holder of the Mortgage Indebtedness. All action required pursuant to this
Agreement necessary to effectuate the transactions contemplated herein has been,
or will at Closing be, taken promptly and in good faith by Seller and its
representatives and agents.
3.3 MORTGAGE INDEBTEDNESS. As of the Effective Date and as of the Closing
there shall exist no defaults under the Mortgage Indebtedness or any documents
executed by Seller or any Affiliate of Seller in connection therewith, with or
without the giving of notice or the passage of time. Seller is responsible for
all payments and all obligations, including but not limited
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to, any taxes, fees or additional payments, related to the release of the
Released Parcel, which is currently subject to the lien of the Mortgage
Indebtedness.
3.4 NONCONTRAVENTION. The execution and delivery of, and the performance
by Seller of its obligations under, this Agreement do not and will not
contravene, or constitute a default under, any provision of applicable law or
regulation, Seller's Organizational Documents or any agreement (excluding the
agreements evidencing the Mortgage Indebtedness), judgment, injunction, order,
decree or other instrument binding upon Seller, or result in the creation of any
lien or other encumbrance on any asset of Seller. Except as indicated on
EXHIBIT L there are no outstanding agreements (written or oral) pursuant to
which Seller (or any predecessor to or representative of Seller) has agreed to
contribute or has granted an option or right of first refusal to purchase the
Property or any part thereof. Except as indicated on EXHIBIT L, there are no
purchase contracts, options or other agreements of any kind, written or oral,
recorded or unrecorded, whereby any person or entity other than Seller will have
acquired or will have any basis to assert any right, title or interest in, or
right to possession, use, enjoyment or proceeds of, all or any portion of the
Property. There are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or to otherwise acquire
any interest or profit participation of any kind in the Property or any part
thereof, except as described in item no. 4 listed on EXHIBIT L.
3.5 NO SPECIAL TAXES. Seller has no knowledge of, nor has it received any
notice of, any special taxes or assessments relating to the Property or any part
thereof, including taxes relating to the business of the Property, or any
planned public improvements that may result in a special tax or assessment
against the Property, that are not otherwise disclosed in the Preliminary Title
Report. To Seller's knowledge, there is not any proposed increase in the
assessed valuation of the Real Property for tax purposes (except as may relate
to the transfer contemplated by this Agreement) over the assessed valuation for
1997.
3.6 COMPLIANCE WITH EXISTING LAWS. Seller possesses all Authorizations,
each of which is valid and in full force and effect, and, to Seller's knowledge,
no provision, condition or limitation of any of the Authorizations has been
breached or violated. Seller has not misrepresented or failed to disclose any
relevant fact in obtaining all Authorizations, and Seller has no knowledge of
any change in the circumstances under which any of those Authorizations were
obtained that result in their termination, suspension, modification or
limitation. To Seller's knowledge, Seller has not taken any action (or failed
to take any action), the omission of which would result in the revocation of any
of the Authorizations. Except as disclosed in item nos. 1 and 2 of EXHIBIT J
attached hereto, Seller has no knowledge, nor
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has it received written notice within the past three years, of any existing or
threatened violation of any provision of any applicable building, zoning,
subdivision, environmental or other governmental ordinance, resolution, statute,
rule, order or regulation, including but not limited to those of environmental
agencies or insurance boards of underwriters, with respect to the ownership,
operation, use, maintenance or condition of the Property or any part thereof, or
requiring any repairs or alterations other than those that have been made prior
to the Effective Date.
3.7 REAL PROPERTY. To Seller's knowledge, (i) the Improvements conform in
all material respects to all legal requirements, (ii) all easements necessary or
appropriate for the use or operation of the Property have been obtained, (iii)
all contractors and subcontractors retained by Seller who have performed work on
or supplied materials to the Property have been fully paid, and all materials
used at or on the Property have been fully paid for prior to the Closing Date or
will be fully paid for in the ordinary course of business by Seller after the
Closing Date, and Buyer shall have no responsibility for paying such contractors
and subcontractors or paying for such materials, (iv) the Improvements have been
completed in all material respects, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and is
presently operative in good working order. Seller has not received any written
notice which is still in effect that there is, and, to Seller's knowledge, there
does not exist, any violation of a condition or agreement contained in any
easement, restrictive covenant or any similar instrument or agreement effecting
the Real Property, or any portion thereof.
3.8 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Seller to Buyer is free and clear
of all liens and encumbrances other than the Mortgage Indebtedness and will be
so on the Closing Date and Seller has good, merchantable title thereto and the
right to convey same in accordance with the terms of this Agreement except to
the extent of approvals necessary to transfer any leased property.
3.9 OPERATING AGREEMENTS. The Management Agreement will be terminated by
Seller effective as of the Closing Date. Seller has performed all of its
obligations under each of the Operating Agreements and no fact or circumstance
has occurred which, by itself or with the passage of time or the giving of
notice or both, would constitute a default under any of the Operating
Agreements. Seller shall not enter into any new Operating Agreements, supply
contract, vending or service contract or other agreements with respect to the
Property, nor shall Seller enter into any agreements modifying the Operating
Agreements, unless (a) any such agreement or modification will not bind Buyer or
the Property after the Closing Date, or (b)
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Seller has obtained Buyer's prior written consent to such agreement or
modification.
3.10 WARRANTIES AND GUARANTIES. Seller shall not before or after Closing,
release or modify any warranties or guarantees, if any, of manufacturers,
suppliers and installers relating to the Improvements and the Personal Property
or any part thereof, except with the prior written consent of Buyer.
3.11 INSURANCE. All of Seller's insurance policies are valid and in full
force and effect, all premiums for such policies were paid when due and all
future premiums for such policies (and any replacements thereof) shall be paid
by Seller on or before the due date therefor. Seller shall pay all premiums on,
and shall not cancel or voluntarily allow to expire, any of Seller's insurance
policies unless such policy is replaced, without any lapse of coverage, by
another policy or policies providing coverage at least as extensive as the
policy or policies being replaced. Seller has not received any notice from any
insurance company of any defect or inadequacies in the Property to any part
thereof which would adversely affect the insurability of the Property, or which
would increase the cost of insurance beyond that which would ordinarily and
customarily be charged for similar properties in the vicinity of the Real
Property. Seller covenants that at least seven (7) days prior to Closing,
Seller shall deliver to Buyer evidence reasonably satisfactory to Buyer that all
of Seller's insurance policies are valid and in full force and effect and that
all premiums for such policies have been paid.
3.12 CONDEMNATION PROCEEDINGS; ROADWAYS. Seller has received no written
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Seller has no knowledge of any change
or proposed change in the route, grade or width of, or otherwise affecting, any
street or road adjacent to or serving the Real Property. To the best of
Seller's knowledge, no fact or condition exists which would result in the
termination or material impairment of access to the Real Property from adjoining
public or private streets or ways or which could result in discontinuation of
presently available or otherwise necessary sewer, water, electric, gas,
telephone or other utilities or services.
3.13 LITIGATION. Except as disclosed in EXHIBIT P, there is no action,
suit or proceeding pending or threatened in writing against or affecting Seller
or any of its properties in any court, before any arbitrator or before or by any
Governmental Body which (a) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other agreement or
instrument to which Seller is a party or by which it is bound and that is or is
to be used in connection with, or is contemplated by, this Agreement, (b) could
materially and adversely affect the business, financial position or results of
operations of Seller, (c) could materially and adversely affect
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the ability of Seller to perform its obligations under this Agreement, or under
any document to be delivered pursuant hereto, (d) could create a lien on the
Property, any part thereof or any interest therein, (e) the subject matter of
which concerns any past or present employee of Seller or its managing agent, or
(f) could otherwise adversely materially affect the Property, any part thereof
or any interest therein or the use, operation, condition or occupancy thereof.
3.14 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes pending
or, to Seller's knowledge, threatened as to the operation or maintenance of the
Property or any part thereof. Seller is not a party to any union or other
collective bargaining agreement with employees employed in connection with the
ownership, operation or maintenance of the Property. Seller is not a party to
any employment contracts or agreements, other than the Employment Agreements,
and neither Seller nor its managing agent will, between the Effective Date and
the Closing Date, enter into any new employment contracts or agreements, amend
any existing Employment Agreement, except with the prior written consent of
Buyer. Seller acknowledges that Buyer will not assume any of the Employment
Agreements and Seller has complied with and shall be responsible for compliance
with the WARN Act and any other applicable employment-related laws or
ordinances. Seller has complied with the requirements of the federal
Immigration and Reform Control Act respecting the employment of undocumented
workers.
3.15 FINANCIAL INFORMATION. To Seller's knowledge, all of Seller's
financial information, including, without limitation, all books and records and
financial statements, is correct and complete in all material respects and
presents accurately the results of the operations of the Property for the
periods indicated.
3.16 ORGANIZATIONAL DOCUMENTS. Seller's Organizational Documents are in
full force and effect and have not been modified or supplemented, and no fact or
circumstance has occurred that, by itself or with the giving of notice or the
passage of time or both, would constitute a default thereunder.
3.17 OPERATION OF PROPERTY. Seller covenants, that between the Effective
Date and the Closing Date, it will (a) operate the Property in the usual,
regular and ordinary manner consistent with Seller's prior practice, (b)
maintain its books of account and records in the usual, regular and ordinary
manner, in accordance with sound accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years and (c) use
all reasonable efforts to preserve intact its present business organization,
keep available the services of its present officers, partners and employees and
preserve its relationships with suppliers and others having business dealings
with it. Except as otherwise permitted hereby, from the Effective Date until
Closing, Seller shall not take any action or
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fail to take action the result of which would have a material adverse effect on
the Property or Buyer's ability to continue the operation thereof after the
Closing Date in substantially the same manner as presently conducted, or which
would cause any of the representations and warranties contained in this Article
III to be untrue as of Closing in any material respect.
From and after the execution and delivery of this Agreement, Seller
shall not, other than in the ordinary course of business, (a) make any
agreements which shall be binding upon Buyer with respect to the Property, or
(b) reduce or cause to be reduced any green fees, membership fees, tournament
fees, driving range fees or any other charges over which Seller has operational
control. Between the Effective Date and the Closing Date, if and to the extent
requested by Buyer, Seller shall deliver to Buyer such periodic information with
respect to the above information as Seller customarily keeps internally for its
own use. Seller agrees that it will operate the Property in accordance with the
provisions of this Section 3.17 between the Effective Date and the Closing Date.
3.18 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to Seller.
3.19 LAND USE. The current use and occupancy of the Property for golfing
and all other related purposes (including, without limitation, the sale of
merchandise and food and beverages) are permitted as a matter of right as a
principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special permit,
(other than an alcoholic beverage permit and a food service permit) permission
or consent and Seller is not aware of any proposal to change or restrict such
use. Seller has all necessary certificates of occupancy or completion to
operate the Property as presently operated and there are no unfulfilled
conditions respecting the development of the Property.
3.20 HAZARDOUS SUBSTANCES. Except as may be disclosed in the documents
described in the Warranty Disclosure Schedule, to Seller's knowledge, (i) no
Hazardous Substances are or have been located on (except in immaterial amounts
used in the ordinary course for the operation or maintenance of the Property by
Seller in accordance with all applicable laws), in or under the Property or have
been released into the environment, or discharged, placed or disposed of at, on
or under the Property; (ii) no underground storage tanks are, or have been,
located at the Property; (ii) the Property has never been used to store, treat
or dispose of Hazardous Substances; and (iv) the Property and its prior uses
comply with, and at all times have complied with all applicable Environmental
Laws or any other governmental law, regulation or requirement relating to
environmental and occupational health and safety matters and Hazardous
Substances. To Seller's knowledge, there currently exist no facts or
circumstances that could reasonably be expected to give rise to a
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material non-compliance with Environmental Laws, material environmental
liability or material Environmental Claim except as may be disclosed by the
documents described in the Warranty Disclosure Schedule.
3.21 UTILITIES. All Utilities required for the operation of the Property
either enter the Property through adjoining streets, or they pass through
adjoining land and do so in accordance with valid public easements or private
easements, and all of said Utilities are installed and are in working order and
repair and operating as necessary for the operation of the Property and all
installation and connection charges therefor have been paid in full. The
sewage, sanitation, plumbing, water retention and detention, refuse disposal and
utility facilities in and on and/or servicing the Real Property are adequate to
service the Real Property as it is currently being used and, to Seller's
knowledge, the Real Property's utilization of such facilities is in compliance
with all applicable governmental and environmental protection authorities' laws,
rules, regulations and requirements.
3.22 CURB CUTS. All curb cut street opening permits or licenses required
for vehicular access to and from the Property from any adjoining public street
have been obtained and paid for and are in full force and effect.
3.23 LEASED PROPERTY. The Personal Property identified as item nos. 7, 8,
9, 10, 11, 17 and 25 on EXHIBIT H is all of the leased property at the Property,
and such exhibit reflects the date of each such lease, the name of the lessor,
the name of the lessee, the term of each such lease, the lease payment terms and
a description of the property demised by each such lease. All leases of such
property are in good standing and free from default.
3.24 SURVIVAL OF REPRESENTATIONS. Each of the representations, warranties
and covenants contained in this Article III are intended for the benefit of
Buyer. Except for the matters contained in sections 3.3, 3.11, 3.21 and 3.22
which shall not survive Closing, each of said representations, warranties and
covenants shall survive the Closing for a period of one (1) year, at which time
they shall expire unless prior to such time a lawsuit is commenced against
Seller alleging such breach and then only to the extent of the purported breach.
In the event the Buyer determines based on any third party report, due diligence
document or other written documentation delivered by Seller to Buyer
specifically disclosing such breach that there is a breach of any
representation, warranty or covenant of Seller prior to Closing, or if Buyer's
internal documentation created prior to the Closing indicates the presence of
such a breach, Buyer's sole remedy shall be to terminate this Agreement and
receive a return of the Deposit. No breach of any representation, warranty or
covenant of Seller shall be actionable following Closing if such breach is
specifically
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disclosed in the due diligence documents delivered to Buyer or is otherwise
disclosed to Buyer in writing as indicated above prior to Closing but Buyer
nevertheless elected to close. As used in this Agreement, the phrase "to
Seller's knowledge" or words of similar import shall mean the actual, and not
imputed or constructive, knowledge of Johnny LaPonzina or Thomas K. Ireland, and
Seller represents that Johnny LaPonzina and Thomas K. Ireland are the persons
with the primary oversight responsibility for the Property.
ARTICLE 4
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Seller to enter into this Agreement and to sell the Property,
Buyer hereby makes the following representations, warranties and covenants, upon
each of which Buyer acknowledges and agrees that Seller is entitled to rely and
has relied:
4.1 ORGANIZATION AND POWER. Buyer is duly formed or organized, validly
existing and in good standing under the laws of the state of its formation and
has all governmental licenses, Authorizations, consents and approvals required
to carry on its business as now conducted and to enter into and perform its
obligations under this Agreement and any document or instrument required to be
executed and delivered on behalf of Buyer under this Agreement.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement and
the performance by Buyer of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Buyer or result in the creation of any lien or other
encumbrance on any asset of Buyer.
4.3 LITIGATION. There is no action, suit or proceeding, pending or known
to be threatened, against or affecting Buyer in any court or before any
arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely affect the business, financial position or results of
operations of Buyer, or (b) could materially and adversely affect the ability of
Buyer to perform its obligations under this Agreement, or under any document to
be delivered pursuant hereto.
4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to Buyer.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of the
agreements and certificates of Buyer to be delivered to Seller at Closing as
provided in Section 5.1.1 will be, duly authorized by all necessary action on
the part of Buyer, has been duly executed and delivered by Buyer, constitutes
the
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valid and binding agreement of Buyer and is enforceable against Buyer in
accordance with its terms. All action required pursuant to this Agreement
necessary to effectuate the transactions contemplated herein has been, or will
at Closing be, taken promptly and in good faith by Buyer and its representatives
and agents.
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO BUYER'S OBLIGATIONS. Buyer's obligations under this Agreement
are subject to the satisfaction of the following conditions precedent and the
compliance by Seller with the following covenants:
(a) SELLER DELIVERIES. Seller shall have delivered to or for the
benefit of Buyer, as the case may be, on or before the Closing Date, all of the
documents required to be delivered pursuant to Section 6.2 of this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Seller's
representations and warranties made in this Agreement shall be true and correct
in all material respects as of the Effective Date and as of the Closing Date as
if then made, there shall have occurred no material adverse change in the
condition or financial results of the operation of the Property since the
Effective Date. Seller shall have performed all of its covenants and other
obligations under this Agreement and Seller shall have executed and delivered to
Buyer on the Closing Date a certificate dated as of the Closing Date to the
foregoing effect in the form of EXHIBIT K attached hereto.
(c) TITLE INSURANCE. Subject to the payment of the appropriate
premium, Buyer shall be able to obtain the Owner's Title Policy, subject only to
the Permitted Title Exceptions.
(d) TITLE TO PROPERTY. Seller shall be the sole owner of good and
marketable fee simple title (or ground lease interest, as applicable) to the
Real Property and to the Tangible Personal Property, free and clear of all
liens, encumbrances, restrictions, conditions and agreements except for
Permitted Title Exceptions. Seller shall not have taken any action or permitted
or suffered any action to be taken by others from the Effective Date and through
and including the Closing Date that would adversely affect the status of title
to the Real Property or to the Tangible Personal Property.
(e) CONDITION OF PROPERTY. Subject to the provisions of Section 7.2,
the Real Property and the Tangible Personal Property (including but not limited
to the golf course, driving range, putting greens, mechanical systems, plumbing,
electrical wiring, appliances, fixtures, heating, air conditioning and
ventilating equipment, elevators, boilers,
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equipment, roofs, structural members and furnaces) shall be in the same
condition at Closing as they are as of the Effective Date, reasonable wear and
tear excepted. Prior to Closing, Seller shall not have diminished the quality or
quantity of maintenance and upkeep services heretofore provided to the Real
Property and the Tangible Personal Property. Seller shall not have removed or
caused or permitted to be removed any part or portion of the Real Property or
the Tangible Personal Property unless the same is replaced, prior to Closing,
with similar items of at least equal quality and acceptable to Buyer.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property.
(g) LIQUOR LICENSE. Seller and Seller's principals and Buyer, or
Buyer's nominee, shall have cooperated with each other, and each shall have
executed such transfer forms, license applications and other documents as may be
necessary to effect the obtaining of the liquor licenses, alcoholic beverage
licenses and other Authorizations required hereby.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Buyer and may be waived in whole or in part by
Buyer, but only by an instrument in writing signed by Buyer.
5.1.1 AS TO SELLER'S OBLIGATIONS. Seller's obligations under this are
subject to the satisfaction of the following conditions precedent and the
compliance by Buyer with the following covenants:
(a) BUYER'S DELIVERIES. Buyer shall have delivered to or for the
benefit of Seller, on or before the Closing Date, all of the documents and
payments required of Buyer pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Buyer's
representations and warranties made in this Agreement shall be true and correct
as of the Effective Date and as of the Closing Date as if then made and Buyer
shall have performed all of its covenants and other obligations under this
Agreement.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Seller and may be waived in whole or in part, by
Seller, but only by an instrument in writing signed by Seller.
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ARTICLE 6
CLOSING
6.1 CLOSING. Closing shall be held at 9:00 a.m., New York time, at the
offices of Escrow Agent on January 2, 1998, as such date may be extended by
mutual agreement of Buyer and Seller. If the Closing Date falls on a Saturday,
Sunday or other legal holiday, the Closing shall take place on the first
following business day thereafter. Possession of the Property shall be delivered
to Buyer at Closing, subject only to Permitted Title Exceptions.
6.2 SELLER'S DELIVERIES. At Closing, Seller shall deliver to Buyer all of
the following instruments, each of which shall have been duly executed and,
where applicable, acknowledged and/or sworn on behalf of Seller and shall be
dated as of the Closing Date:
(a) SELLER'S CERTIFICATE. The certificate required by Section
5.1(b).
(b) THE DEED.
(c) THE BILL OF SALE - PERSONAL PROPERTY.
(d) EVIDENCE OF TITLE. Evidence of title acceptable to Buyer for any
vehicle owned by Seller and used in connection with the Property.
(e) TITLE REQUIREMENTS. Such affidavits or other documents as may be
customarily required by the Title Company to issue the Owner's Title Policy
including those endorsements reasonably requested by Buyer, and to eliminate the
standard exceptions as exceptions thereto, so that the Owner's Title Policy will
be subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and gap
affidavit.
(f) THE FIRPTA CERTIFICATE.
(g) WARRANTIES. To the extent available, true, correct and complete
copies of all warranties, if any, of manufacturers, suppliers and installers
possessed by Seller and relating to the Property, or any part thereof.
(h) ORGANIZATIONAL DOCUMENTS. Copies of Seller's Organizational
Documents certified by Seller.
(i) PARTNER'S DOCUMENTS. Approvals and consents of the partners of
Seller and their partners, authorizing (i) the execution on behalf of Seller of
this Agreement and the documents to be executed and delivered by Seller prior
to, at or otherwise in connection with Closing, and (ii) the performance by
Seller of its obligations under this Agreement and under such documents, or
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appropriate resolutions of the partners of Seller, as the case may be together
with good standing certificates of Seller's general partners.
(j) ASSIGNMENT OF CONTRACTS. As assignment of the leases, contracts
and agreements described in EXHIBIT H (except for item no. 1) in the form
attached hereto as EXHIBIT M (the "Assignment of Contracts").
(k) ASSIGNMENT OF FACILITIES AGREEMENT. An assignment of the golf
facilities agreement described as item no. 1 in EXHIBIT H in the form attached
hereto as EXHIBIT N.
(l) CERTIFICATE OF OCCUPANCY. To the extent in existence, a valid,
final and unconditional certificate of occupancy for the Real Property and
Improvements, issued by the appropriate Governmental Body allowing for the use
of the Real Property as a golf course and permitting the continued operation of
the improvements as presently operated.
(m) IMPROVEMENT PLANS. To the extent available, a set or copies of
the plans and specifications for the Improvements.
(n) COMMUNICATION; ADDRESSES. A written instrument executed by
Seller, conveying and transferring to Buyer all of Seller's right, title and
interest in any telephone numbers, fax numbers or internet or electronic mail
addresses (if applicable) relating solely to the Property, and, if Seller
maintains a post office box solely with respect to the Property, conveying to
Buyer all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.
(o) TAX BILLS. All current real estate and personal property tax
bills in Seller's possession or under its control.
(p) SURVEYS. All surveys and plot plans of the Real Property in
possession of or in the control of Seller.
(q) TOURNAMENT SCHEDULE. A complete list of all scheduled
tournaments, functions and the like, in reasonable detail.
(r) ACCOUNTS RECEIVABLE. A list of Seller's outstanding accounts
receivable as of midnight on the date prior to the Closing, specifying the name
of each account and the amount due Seller.
(s) PAYOFF STATEMENT. A payoff or beneficiary statement prepared by
the holder of Mortgage Indebtedness setting forth the amount, including accrued
interest, outstanding principal balance, escrow accounts held by the holder of
the Mortgage Indebtedness and any other amounts outstanding and prepayment
penalties, with respect to the Mortgage Indebtedness.
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(t) TENANT NOTICES. Written notice executed by Seller notifying all
interested parties, including all tenants under any leases of the Property, that
the Property has been conveyed to Buyer and directing that all payments,
inquiries and the like be forwarded to Buyer at the address to be provided by
Buyer.
(u) LETTER FROM CONTRACTOR. A letter from the Contractor certifying
that all Remediation Work performed prior to Closing has been paid for by
Seller, specifying the scope of Remediation Work still to be performed under the
Contract and reciting the amount remaining to be paid under the Contract for
completion of the Remediation Work.
(v) MISCELLANEOUS. Any other document or instrument reasonably
requested by Buyer with respect to the Property.
6.3 BUYER'S DELIVERIES. At Closing, Buyer shall pay or deliver to Seller
the following:
(a) PURCHASE PRICE. The Purchase Price by federal funds wire to an
account designated by Seller, net of the Mortgage Indebtedness if the same is to
be assumed.
(b) ASSIGNMENT OF CONTRACTS. A countersigned copy of the Assignment
of Contracts.
(c) ASSIGNMENT OF FACILITIES AGREEMENT. A countersigned copy of the
Assignment of Facilities Agreement.
(d) ASSUMPTION AGREEMENT. An assumption of the Mortgage Indebtedness
together with all other documents reasonably requested from Buyer by the holder
of the Mortgage Indebtedness, unless the Mortgage Indebtedness is to be
satisfied on the Closing Date.
(e) MISCELLANEOUS. Any other document or instrument reasonably
requested by Seller relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Buyer and Seller shall mutually
execute and deliver each to the other:
(a) CLOSING STATEMENTS. A closing statement for Seller and a closing
statement for Buyer (collectively, the "Closing Statements") reflecting the
Purchase Price and the adjustments and prorations required under this Agreement
and the allocation of income and expenses required hereby.
(b) LIQUOR LICENSE TRANSFER DOCUMENTS. Such other documents,
instruments and undertakings as may be required by the liquor authorities of the
State or of any county or municipality or Governmental Body having jurisdiction
with respect to the transfer or issue of any liquor licenses or alcoholic
beverage licenses or permits for the Property, to the extent not
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theretofore executed and delivered. Seller shall cause Seller's principals to
join in the transfer application, if required by the state of Florida.
(c) MISCELLANEOUS. Such other and further documents, papers and
instruments as may be reasonably required by the parties hereto, their
respective counsel or the Title Company.
6.5 CLOSING COSTS. Each party hereto shall pay its own legal fees and
expenses. All filing fees for the Deed and the real estate transfer taxes
(documentary stamps), or other similar taxes due with respect to the transfer of
title shall be paid by Seller and all charges for title insurance premiums shall
be paid by Buyer. . Seller shall pay for any costs associated with any
corrective instruments, and for the cost of any due diligence reports and
surveys (except for the Survey) prepared by or for Buyer with respect to the
Property (copies of which have previously been delivered to Buyer as provided in
Section 2.2(e) of this Agreement).
6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with respect
to the Property, and applicable to the period of time before and after Closing,
determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Seller and Buyer (or, at
Buyer's election, between Seller and the lessee under the Golf Course Lease to
the extent such income or expenses will be payable by or attributable to such
lessee). Seller shall be entitled to all income and shall be responsible for
all expenses for the period of time up to but not including January 1, 1998, and
Buyer shall be entitled to all income and shall be responsible for all expenses
for the period of time from, after and including January 1, 1998. Such
adjustments shall be shown on the Closing Statements (with such supporting
documentation as the parties hereto may require being attached as exhibits to
the Closing Statements) and shall increase or decrease (as the case may be) the
Purchase Price payable by Buyer. Without limiting the generality of the
foregoing, the following items of income and expense shall be prorated at
Closing:
(a) RENTS AND FEES. Current and prepaid rents or fees, including,
without limitation, prepaid Golf Club membership fees, function receipts and
other reservation receipts.
(b) TAXES. Real estate and personal property taxes.
(c) UTILITIES. Utility charges (including but not limited to charges
for water, sewer and electricity).
(d) FUEL. Value of fuel stored on the Property at the price paid for
such fuel by Seller, including any taxes.
(e) MUNICIPAL IMPROVEMENT LIENS. Municipal improvement liens where
the work has physically commenced
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(certified liens) shall be paid by Seller at Closing. Municipal improvement
liens which have been authorized, but where the work has not commenced (pending
liens) shall be assumed by Buyer.
(f) LICENSE AND PERMIT FEES. License and permit fees and utility
deposits, where transferable.
(g) INCOME AND EXPENSES. All other income and expenses of the
Property, including, but not being limited to such things as restaurant and
snack bar income and expenses and the like.
(h) MISCELLANEOUS PRORATIONS. Such other items as are usually and
customarily prorated between buyers and sellers of golf course properties in the
area in which the Property is located shall be prorated as of January 1, 1998,
in accordance with Section 6.6. If Buyer elects to assume the Mortgage
Indebtedness, Buyer shall pay to Seller at Closing an amount equal to the amount
of any real estate tax or insurance impound account maintained by the holder of
the Mortgage Indebtedness as security for the performance of Seller's
obligations under the documents securing the Mortgage Indebtedness, provided
such amount is confirmed in writing by the holder of the Mortgage Indebtedness.
Seller shall disclose to Buyer the amount of any such escrows at least twenty
(20) days prior to Closing.
6.7 SALES TAXES. Seller shall be required to pay all sales taxes and like
impositions arising from the ownership and operation of the Property currently
through the Closing Date.
6.8 ACCOUNTS RECEIVABLE/CASH. Seller shall be entitled to retain (and the
same shall not be deemed included in the sale to Buyer) all accounts receivable
and cash attributable to events and operations at the Property for the period
prior to January 1, 1998. Buyer shall be entitled to a credit at Closing for
all deposits and prepaid items (I.E., membership dues, deposits, etc.) for
periods after December 31, 1997.
6.9 POST-CLOSING ADJUSTMENTS.
(a) ACCOUNTS RECEIVABLE. Buyer shall not be obligated to collect any
accounts receivable or revenues accrued prior to the Closing Date for Seller,
but if Buyer collects same, such amounts will be promptly remitted to Seller in
the form received. Buyer shall receive a credit at Closing for the amount of
any security deposits held by Seller under any lease of any portion of the
Property that is being assigned to Buyer in accordance herewith. Seller shall
retain the right to collect all accounts receivable to which it is entitled
following Closing.
(b) AVAILABILITY OF BILLS. If accurate allocations and prorations
cannot be made at Closing because current bills are not obtainable (as, for
example, in the case of utility bills and/or real estate or personal property
taxes), the parties shall
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allocate such income or expenses at Closing on the best available information,
subject to adjustment outside of escrow upon receipt of the final bill or other
evidence of the applicable income or expense. Any income received or expense
incurred by Seller or Buyer with respect to the Property after the Closing Date
shall be promptly allocated in the manner described herein and the parties shall
promptly pay or reimburse any amount due. Seller shall pay at Closing all
accrued special assessments and taxes applicable to the Property.
ARTICLE 7
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual taking or threatened taking
(by written notice to Seller), pursuant to the power of eminent domain, of all
or any portion of the Real Property, or any proposed sale in lieu thereof,
Seller shall give written notice thereof to Buyer promptly after Seller learns
or receives notice thereof. If all or any part of the Real Property is, or is
to be, so condemned or sold, Buyer shall have the right to terminate this
Agreement pursuant to Section 8.3. If Buyer elects not to terminate this
Agreement, all proceeds, awards and other payments arising out of such
condemnation or sale (actual or threatened) shall be paid or assigned, as
applicable, to Buyer at Closing. Seller will not settle or compromise any such
proceeding without Buyer's prior written consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the Property prior to
the Closing Date shall remain upon Seller. In the event that damage or
destruction of the Property, or any part thereof, by fire or other casualty
occurs prior to Closing which is in excess of Three Hundred Thousand Dollars
($300,000) Buyer shall, within ten (10) days after receipt from Seller of
written notice of the occurrence of such damage or destruction elect, in
writing, at its option, one of the following:
(a) To terminate this Agreement, in which event each party shall be
released from all obligations hereunder, and the Deposit shall immediately be
returned to Buyer;
(b) To accept from Seller the assignment of any insurance proceeds
payable by reason of such damage or destruction and proceed with Closing.
In the event that damage or destruction occurs prior to Closing which is less
than Three Hundred Thousand Dollars ($300,000), then Seller shall (i) assign to
Buyer any insurance proceeds payable by reason of such damage or destruction,
and (ii) give Buyer a credit against the Purchase Price in the amount of any
deductible in connection with such insurance, and Buyer and Seller shall proceed
with Closing.
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7.3 REAL ESTATE BROKER. Except for Barrington Financial Advisors, Inc.
("Broker"), Seller and Buyer each warrant and represent that it has not dealt
with any other real estate broker in connection with this transaction. Each
party shall indemnify the other and save and hold each other harmless from and
against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation to
a real estate brokerage commission or a finder's fee as a result of having dealt
with the indemnifying party or as a result of having introduced such party to
the Property or the other party, but Buyer will not indemnify Seller against any
fees owed, or claimed to be owed, to Broker. Seller accepts sole financial
responsibility for Broker and shall pay all fees due Broker pursuant to a
separate agreement with Broker. Buyer acknowledges that David J. Dick, an
officer of the Buyer, is a licensed California real estate broker but is not
acting as a broker in relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and after the
execution of this Agreement, Buyer and Seller shall keep the terms, conditions
and provisions of this Agreement confidential and neither shall make any public
announcements hereof unless the other first approves of same in writing, nor
shall either disclose the terms, conditions and provisions hereof, except to
their respective attorneys, accountants, engineers, surveyors, financiers and
bankers. Notwithstanding the foregoing, it is acknowledged that (a) the Company
is a public company and will make a public announcement concerning this
transaction and that the Company anticipates that it will seek to sell shares of
its common stock and other securities (collectively, the "Securities") to the
general public pursuant to a public offering and that in connection therewith,
Buyer will have the absolute right to market the Securities and prepare and file
all necessary or required registration statements, and other papers, documents
and instruments necessary or required in Buyer's judgment and that of its
attorneys and underwriters to file a registration statement with respect to the
Securities with the SEC and/or similar state authorities and to cause same to
become effective and to disclose therein and thus to its underwriters, to the
SEC and/or to similar state authorities and to the public all of the terms,
conditions and provisions of this Agreement, and (b) after Closing, both Seller
and Buyer may disclose, without the consent of the other, the transfer of the
Property, the name of Buyer and Seller and the Purchase Price. The obligations
of this Section 7.4 shall survive any termination of this Agreement.
7.5 LIQUOR LICENSES. Seller shall transfer or cause to be transferred to
Buyer or, at Buyer's discretion, Buyer's nominee (which may include the lessee
under the Golf Course Lease), all liquor licenses and alcoholic beverage
licenses, if any, necessary to operate the restaurant, bars, snack bars and
lounges presently located within the Property, if any. To that end, Seller and
Buyer, or Buyer's nominee, shall cooperate each
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with the other, and each shall execute such transfer forms, license applications
and other documents as may be necessary to effect such transfer at Buyer's
expense. If permitted under the laws of the jurisdiction in which the Property
is located, the parties shall execute and file all necessary transfer forms,
applications and papers with the appropriate liquor and alcoholic beverage
authorities prior to Closing, to the end that the transfer shall take effect, if
possible, on the Closing Date, simultaneously with Closing. If not so
permitted, then the parties agree each with the other that they will promptly
execute all transfer forms, applications and other documents required by the
liquor authorities in order to effect such transfer at the earliest date in time
possible consistent with the laws of the State in order that all liquor licenses
may be transferred from Seller to Buyer, or Buyer's nominee, at the earliest
possible time. If under the laws of the State such licenses cannot be
transferred until after the Closing of the transaction contemplated hereby, then
Seller covenants and agrees that Seller will cooperate with Buyer, or Buyer's
nominee, in keeping open the bars and liquor facilities of the Property between
the Closing Date and the time when such liquor license transfers actually become
effective, by exercising management and supervision of such facilities until
such time under Seller's licenses, provided, however, that Buyer shall indemnify
and hold Seller harmless from any liability, damages or claims encountered in
connection with such operations during said period of time, except for Seller's
gross negligence or willful misconduct.
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS
8.1 LIABILITY OF BUYER. Except for any obligation expressly assumed or
agreed to be assumed by Buyer under this Agreement, Buyer does not assume any
obligation of Seller or any liability for claims arising out of any occurrence
prior to Closing.
8.2 INDEMNIFICATION BY SELLER. Seller hereby indemnifies and holds Buyer
harmless from and against any and all claims, costs, penalties, damages, losses,
liabilities and expenses (including reasonable attorneys' fees) that may at any
time be incurred by Buyer, whether before or after Closing, as a result of any
breach by Seller of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Seller
pursuant hereto which are intended to survive Closing, for a period of one (1)
year following the Closing. The provisions of this section shall survive
termination of this Agreement by Buyer or Seller.
8.3 INDEMNIFICATION BY BUYER. Buyer hereby indemnifies and holds Seller
harmless from and against any and all claims, costs, penalties, damages, losses,
liabilities and expenses (including reasonable attorneys' fees) that may at any
31
<PAGE>
time be incurred by Seller, whether before or after Closing, as a result of any
breach by Seller of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Buyer
pursuant hereto which are intended to survive Closing, for a period of one (1)
year following the Closing. The provisions of this section shall survive
termination of this Agreement by Buyer or Seller.
8.4 TERMINATION BY BUYER. If any condition set forth herein for the
benefit of Buyer cannot or will not be satisfied prior to Closing, or upon the
occurrence of any other event that would entitle Buyer to terminate this
Agreement and its obligations under this Agreement, and Seller fails to cure any
such matter within ten (10) business days after notice thereof from Buyer,
Buyer, at its option, may elect either (a) to terminate this Agreement and all
other rights and obligations of Seller and Buyer under this Agreement shall
terminate immediately and Escrow Agent shall promptly return the Deposit to
Buyer, or (b) to waive its right to terminate (waiving any breach or default on
the part of Seller) and, instead, to proceed to Closing. If Buyer terminates
this Agreement as a consequence of a misrepresentation or breach of a warranty
or covenant by Seller, or a failure by Seller to perform its obligations under
this Agreement, then Buyer shall retain all remedies accruing as a result
thereof, including, without limitation, specific performance; provided, however,
in an action for damages, Buyer shall be limited to recovering its actual
out-of-pocket damages, including all due diligence costs and third party costs,
including attorneys' fees, up to a maximum amount of $750,000, provided such
limitation will not limit any damages based on a claim for intentional breach by
reason of refusal to transfer title to the Property. In no event shall Seller
be liable for any damages for any breach of any representations and warranties
disclosed in any written instrument delivered to Buyer prior to the Effective
Date.
8.5 TERMINATION BY SELLER. IN THE EVENT THAT THIS TRANSACTION DOES NOT
CLOSE AS A CONSEQUENCE OF DEFAULT BY BUYER, SELLER MAY TERMINATE THIS AGREEMENT
BY WRITTEN NOTICE TO BUYER, AND BUYER SHALL PAY TO SELLER, AS LIQUIDATED
DAMAGES, THE DEPOSIT AND EACH PARTY'S OBLIGATIONS AND LIABILITIES UNDER THIS
AGREEMENT SHALL TERMINATE, EXCEPT TO THE EXTENT OF BUYER'S INDEMNITY OBLIGATIONS
UNDER SECTION 2.2(a) OF THIS AGREEMENT. THE PARTIES AGREE THAT (A) SELLER'S
ACTUAL DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE IF BUYER DEFAULTS,
(B) THE DEPOSIT IS THE BEST ESTIMATE OF THE AMOUNT OF DAMAGES SELLER WOULD
SUFFER, AND (C) THE PAYMENT OF THE DEPOSIT TO SELLER AS LIQUIDATED DAMAGES IS
NOT A PENALTY. THE DEPOSIT SHALL BE THE AMOUNT THAT SELLER IS ENTITLED TO
RECEIVE AS LIQUIDATED DAMAGES; AND SELLER SHALL HAVE NO RIGHT, AND HEREBY WAIVES
THE RIGHT, TO AN ACTION FOR SPECIFIC PERFORMANCE OF THIS AGREEMENT OR ANY OTHER
REMEDY AVAILABLE AT LAW OR IN EQUITY. THE PARTIES WITNESS THEIR AGREEMENT TO
THIS LIQUIDATED DAMAGES PROVISION AND SELLER'S WAIVER OF SPECIFIC PERFORMANCE BY
INITIALING THIS SECTION BELOW.
Seller: /s/R. Scott Ireland Buyer:
------------------------- --------------------------
President
32
<PAGE>
8.6 COSTS AND ATTORNEYS' FEES. In the event of any litigation or dispute
between the parties arising out of or in any way connected with this Agreement,
resulting in any litigation, arbitration or other form of dispute resolution,
then the prevailing party in such litigation shall be entitled to recover its
costs of prosecuting and/or defending same, including, without limitation,
reasonable attorneys' fees at trial and all appellate levels.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 ASSIGNMENTS. Buyer may assign its rights under this Agreement to an
Affiliate of Buyer without the consent of Seller. Buyer may not otherwise
assign its interest herein without the prior written consent of Seller. Seller
may not assign any of its rights pursuant to this Agreement without the prior
written consent of Buyer, which may be withheld in Buyer's sole and absolute
discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
9.4 DAYS. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.
33
<PAGE>
9.7 SEVERABILITY. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9.8 COSTS. Regardless of whether Closing occurs under this Agreement, and
except as otherwise expressly provided in this Agreement, each party to this
Agreement shall be responsible for its own costs in connection with this
Agreement and the transactions contemplated hereby, including without
limitation, fees of attorneys, engineers and accountants.
9.9 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be delivered by hand,
transmitted by facsimile transmission, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States mail,
certified, postage prepaid, return receipt requested, at the addresses and with
such copies as on the Summary Sheet or to such other address as the intended
recipient may have specified in a notice to the other party. Any party hereto
may change its address or designate different or other persons or entities to
receive copies by notifying the other party and Escrow Agent in a manner
described in this Section. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached hereto are
by this reference incorporated herein and made a part hereof.
9.11 NO PARTNERSHIP. This Agreement does not and shall not be construed to
create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Seller and Buyer specifically
established hereby.
9.12 FURTHER ASSURANCES. Seller and Buyer each covenant and agree to sign,
execute and deliver, or cause to be signed, executed and delivered, and to do or
make, or cause to be done or made, upon the written request of the other party,
any and all agreements, instruments, papers, deeds, acts or things,
supplemental, confirmatory or otherwise, as may be reasonably required by either
party hereto for the purpose of or in connection with consummating the
transactions described herein, to the extent the same are customarily used in
Broward County, Florida for the transfer of property similar to the Property.
9.13 CONFIDENTIALITY. Any confidential information delivered by Seller to
Buyer under this Agreement shall be used
34
<PAGE>
solely for the purpose of acquiring the Property and Buyer will keep such
information confidential; provided Buyer shall have the right to provide such
information to its consultants and advisors and to disclose such information as
Buyer determines is necessary or appropriate in connection with any public
offering of the Securities. If Buyer does not acquire the Property, it shall
deliver to Seller all copies of all due diligence information delivered to Buyer
by Seller. Seller agrees to keep confidential the terms and conditions of this
Agreement provided, Seller shall have the right to provide such information to
its consultants and advisors and, after the Closing, may disclose the name of
Buyer and the Purchase Price.
9.14 RADON DISCLOSURE. In accordance with Section 404.056(7) of Florida
Statutes, Buyer is advised that radon is a naturally occurring radioactive gas
that, when it has accumulated in a building in sufficient quantities, may
present health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from the county public health unit. The foregoing disclosure is
provided to comply with state law and is for informational purposes only.
Seller represents that it has not conducted radon testing with respect to the
Property, is not aware of any specific radon problems at the Property and
specifically disclaims any and all representations and warranties as to the
absence of radon gas or radon producing conditions in connection with any
building and the Property.
35
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have hereunder affixed their
signatures to this Purchase and Sale Agreement, all as of the 26th day of
November 1997.
"BUYER"
GOLF TRUST OF AMERICA, L.P., A DELAWARE LIMITED
PARTNERSHIP
By: GTA GP, Inc., a Maryland
corporation
Its: General Partner
By: /s/W. Bradley Blair, II
--------------------------------
Its: President
--------------------------------
"SELLER"
BONAVENTURE COUNTRY CLUB ASSOCIATES,
A FLORIDA GENERAL PARTNERSHIP
BY: IRELAND HOTEL & SPA, LTD., PARTNER
BY: IRELAND HOTEL & SPA, INC.,
GENERAL PARTNER
By: /s/R. Scott Ireland
---------------------------------
R. Scott Ireland, President
S-1
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
dated as of December 5, 1997
by and between
Mystic Creek Golf Club, L.P.,
as Transferor,
and
GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Mystic Creek Golf Course
Milford (Camp Dearborn), Michigan
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
<S> <C>
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . 8
2.1 Purchase and Contribution. . . . . . . . . . . . . . . . . . . . 8
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Payment of Base Purchase Price . . . . . . . . . . . . . . . . . 11
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . 12
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 13
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . 13
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . 14
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . 15
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . 15
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . 16
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . 16
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . 16
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . 16
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.19 Public Offering; Preparation of S-11 . . . . . . . . . . . . . . 18
3.20 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . 18
3.21 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.23 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.24 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . 19
i
<PAGE>
3.25 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . 19
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 20
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . 20
4.6 Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 No Material Misrepresentations . . . . . . . . . . . . . . . . . 21
4.9 Partnership Units Issued . . . . . . . . . . . . . . . . . . . . 21
4.10 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . 21
5.1 As to Transferee's Obligations . . . . . . . . . . . . . . . . . 21
5.2 As to Transferor's Obligations . . . . . . . . . . . . . . . . . 23
5.3 Mutual Conditions Precedent. . . . . . . . . . . . . . . . . . . 24
ARTICLE 6
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Transferor's Deliveries. . . . . . . . . . . . . . . . . . . . . 25
6.3 Transferee's Deliveries. . . . . . . . . . . . . . . . . . . . . 27
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . 28
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 30
ii
<PAGE>
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Liability of Transferee. . . . . . . . . . . . . . . . . . . . . 31
8.2 Mutual Indemnification . . . . . . . . . . . . . . . . . . . . . 31
8.3 Termination by Transferee. . . . . . . . . . . . . . . . . . . . 31
8.4 Termination by Transferor. . . . . . . . . . . . . . . . . . . . 31
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . 32
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 32
9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . 33
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 33
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 10
ESCROW DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
EXHIBITS
Exhibit A-Legal Description of the Land
Exhibit B-Description of Improvements
Exhibit C-Tangible Personal Property
Exhibit D-Intangible Personal Property
Exhibit E-Golf Course Lease
Exhibit F-Bill of Sale - Personal Property
Exhibit G-Deed
Exhibit H-FIRPTA Affidavit of Transferor
Exhibit I-Contracts and Operating Agreements
Exhibit J-Partnership Agreement
Exhibit K-Calculation of Purchase Price
iii
<PAGE>
Exhibit L-Due Diligence List
Exhibit M-Schedule of Mortgages
Exhibit N-Accredited Investor Questionnaire
Exhibit O-Transferor's Certificate
Exhibit P-Warranty Disclosure Schedule
Exhibit Q-Partnership Units Issued
iv
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
SUMMARY SHEET
Transferee: GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Transferor: Mystic Creek Golf Club, L.P.,
a Michigan Limited Partnership
Date of
Agreement: December 5, 1997
Golf Course: Mystic Creek Golf Course
(address): One Champions Circle
Milford, Michigan 48380
Trade Name: Mystic Creek Golf Club
Notice Address
of Transferor: Eric A. Gold
Mystic Creek Golf Club, L.P.
32605 West 12 Mile Road, Suite 350
Farmington Hills, Michigan 48334
with a copy to: Mystic Creek Golf Club, L.P.
One Champions Circle
Milford, Michigan 48380
Attention: James Dewling
with a copy to: Steven B. Haffner
Steven B. Haffner & Associates
Suite 310
30300 Northwestern Highway
Farmington Hills, Michigan 48334
Notice Address
of Transferee: Scott D. Peters
James Hoppenrath
Golf Trust of America, Inc.
14 N. Adger's Wharf
Charleston, South Carolina 29401
with a copy to: Stephen A. Cowan
Richard J. Rabbitt
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
THIS CONTRIBUTION AND LEASEBACK AGREEMENT (this "Agreement") is
entered into by and between Transferee and Transferor as of this 5th day of
December, 1997.
RECITALS:
A. Transferor is the owner of the leasehold interest under the
Ground Lease, relating to that certain Golf Course and related improvements
located on the real property more particularly described in EXHIBIT A attached
hereto (the "Land").
B. Subject to the terms of this Agreement, Transferor hereby agrees
to contribute, assign and convey to Transferee, and Transferee hereby agrees to
acquire from Transferor, all of Transferor's right, title and leasehold interest
in and to the following:
1. The Land, together with the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, fixtures and other items of real
estate located on the Land (the "Improvements"), as more particularly
described in EXHIBIT B attached hereto.
2. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Transferor's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements, including, without limitation, concession agreements for spas
and the like (the Land, the Improvements and all such easements and
appurtenances are sometimes collectively hereinafter referred to as the
"Real Property").
3. All items of tangible personal property and fixtures (if any)
owned or leased by Transferor and located on or used in connection with
the Real Property, including, but not limited to, machinery, equipment,
furniture, furnishings, movable walls or partitions, phone systems and
other control systems, restaurant equipment, computers or trade fixtures,
golf course operation and maintenance equipment, including mowers,
tractors, aerators, sprinklers, sprinkler and irrigation facilities and
equipment, valves or rotors, driving range equipment, athletic training
equipment, office equipment or machines, other decorations, and equipment
or machinery of every kind or nature located on or used in connection with
the operation of the Real Property whether on or off-site, including all
warranties and guaranties associated therewith (the "Tangible Personal
Property"), excluding all golf carts, whether owned or leased, which shall
be retained by Transferor. Without limitation of the foregoing, a schedule
of the Tangible
1
<PAGE>
Personal Property is attached to this Agreement as EXHIBIT C, indicating
whether such Tangible Personal Property is owned or leased. The schedule
of Tangible Personal Property shall also indicate those items of personal
property, such as art and antiques, which is excluded from the personal
property being conveyed hereby.
4. All intangible personal property owned or possessed by Transferor
and used in connection with the ownership, operation, leasing or
maintenance of the Real Property or the Tangible Personal Property, all
goodwill attributed to the Property, and any and all trademarks and
copyrights, guarantees, Authorizations (as hereinafter defined), general
intangibles, business records, plans and specifications, surveys and title
insurance policies pertaining to the Property, all licenses, permits and
approvals with respect to the construction, ownership, operation or
maintenance of the Property, any unpaid award for taking by condemnation or
any damage to the Real Property by reason of a change of grade or location
of or access to any street or highway, excluding (a) any of the aforesaid
rights that Transferee elects not to acquire and (b) the Current Assets, as
hereinafter defined (collectively, the "Intangible Personal Property").
Without limitation of the foregoing, a schedule of the Intangible Personal
Property is attached to this Agreement as EXHIBIT D. The Intangible
Personal Property shall not include the right to use the Trade Name, which
shall be retained by Transferor and transferred to the lessee of the Golf
Course (and further provided in no event shall Transferee have the right to
use such trade name in connection with any other property owned by
Transferee or any Affiliate (hereinafter defined) of Transferee). (The
Real Property, Tangible Personal Property and Intangible Personal Property
are sometimes collectively referred to as the "Property".)
C. Upon the acquisition by the Transferee of the Property, the
Transferee will lease the Property to Transferor pursuant to a lease (the "Golf
Course Lease"), substantially in the form attached hereto as EXHIBIT E.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
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"ACT OF BANKRUPTCY" shall mean if a party hereto or any general
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its Property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect) or any new bankruptcy statute, (e) be adjudicated bankrupt
or insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect)
or any new bankruptcy statute, or (h) take any corporate or partnership action
for the purpose of effecting any of the foregoing; or if a proceeding or case
shall be commenced, without the application or consent of a party hereto or any
general partner thereof, in any court of competent jurisdiction seeking (1) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of debts, of such party or general partner, (2) the appointment of
a receiver, custodian, trustee or liquidator or such party or general partner or
all or any substantial part of its assets, or (3) other similar relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.
"AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"ASSIGNMENT OF LEASE" shall mean an assignment of lease,
substantially in the form of EXHIBIT G attached hereto, in form and substance
satisfactory to Transferee, conveying the leasehold interest of Transferor to
the Real Property, with such grant or warranty covenants of title from
Transferor to Transferee as are customary in the state in which the Property is
located, subject only to Permitted Title Exceptions. If there is any difference
between the description of the Land, as shown on EXHIBIT A attached hereto and
the description of the Land as shown on the Survey, the description of the Land
to be contained in the Assignment of Lease and the description of the Land set
forth in the Owner's Leasehold Title Policy, as defined herein, shall conform to
the description shown on the Survey.
"AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
"BASE PURCHASE PRICE" shall mean Ten Million Dollars
($10,000,000.00).
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"BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale
conveying title to the Tangible Personal Property and Intangible Personal
Property from Transferor to Transferee, substantially in the form of EXHIBIT F
attached hereto.
"CASH WITHHOLD AMOUNTS" means the First Cash Withhold Amount and
the Second Cash Withhold Amount.
"CLOSING" shall mean the time the Assignment of Lease and each of
the deliveries to be made by Transferor (as provided in Section 6.2) and
Transferee (as provided in Section 6.3) are made and each of the Closing
conditions of Transferee and Transferor in Sections 5.1 and 5.2, respectively,
have been satisfied or waived.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
"CONTINGENT PURCHASE PRICE" shall mean the amount as calculated by
the procedure set forth in Exhibit K attached hereto.
"CURRENT ASSETS" shall mean cash, accounts receivable, Inventory
and Restaurant Supplies (each as hereinafter defined) held by Transferor prior
to the Closing Date.
"DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
"DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00
a.m., California time, on the date hereof, and continuing through 5:00 p.m.,
California time, on the date that is the later of: (a) the receipt of the
consent of the City of Dearborn to the Assignment of Lease, this Agreement, and
the Lease, in form and content satisfactory to Transferee in its reasonable
discretion (b) twenty (20) days after the receipt of the last of (i) all
environmental reports, (ii) the Survey, and (iii) the Preliminary Title Report,
or (c) three (3) days after receipt by Transferee of all limited partner
approvals referred by Section 5.3(b), in form satisfactory to Transferee.
"EMPLOYMENT AGREEMENTS" shall mean all employment agreements,
written or oral, between Transferor or its managing agent and the persons
employed with respect to the Property in effect as of the date hereof.
"ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or
judicial action, suit, demand, letter, claim, lien, notice of non-compliance or
violation, investigation or proceeding relating in any way to any Environmental
Laws or any permit issued under any Environmental Law including, without
limitation, (i) by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Laws, and (ii) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
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injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Section 1801, et seq.; the Superfund Amendments and reauthorization Act
of 1986, Pub. L. 99-499 and 99-563; the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq.; the Clean Air Act, as
amended, 42 U.S.C. Section 7401, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 201, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, et seq.; and all federal, state and
local environmental health and safety statutes, ordinance, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability
or standards concerning or in connection with Hazardous Substances.
"ESCROW AGENT" shall mean the Title Company.
"FIRPTA CERTIFICATE" shall mean the affidavit of Transferor under
Section 1445 of the Internal Revenue Code certifying that Transferor is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT H attached hereto.
"FIRST CASH WITHHOLD AMOUNT" means the sum of Five Hundred Thousand
Dollars ($500,000.00).
"GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Transferor for purchase in connection with golfing
privileges at the Property.
"GOLF COURSE LEASE" shall have the meaning set forth in Recital C.
"GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"GROUND LEASE" means that certain Golf Course Concession and Lease
Agreement dated July 1, 1994, between the City of Dearborn, a Michigan
Corporation, and Transferor.
"HAZARDOUS SUBSTANCES" shall mean any substance, material, waste,
gas or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or
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petroleum products; (iii) asbestos; (iv) polychlorinated biphenyl; (v)
radioactive material; (vi) radon gas; (vii) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section
1251, et seq. (42 U.S.C. Section 1317); (viii) defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq. (42 U.S.C. Section 9601).
"IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(4).
"INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Transferor's
business.
"LAND" shall have the meaning set forth in Recital A.
"MORTGAGE INDEBTEDNESS" shall have the meaning set forth in Section
2.2(d).
"OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the date hereof, as more particularly set forth on EXHIBIT I attached hereto.
"OWNER'S SHARES" shall mean limited partnership interests in the
Partnership.
"OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land Title
Association extended coverage owner's policy of title insurance issued to
Transferee by the Title Company, with a policy amount of no less than eight
million five hundred thousand dollars ($8,500,000) pursuant to which the Title
Company insures Transferee's ownership of a ground lessee's interest to the Real
Property (including the marketability thereof) subject only to Permitted Title
Exceptions and shall include those title endorsements required by Transferee.
The Owner's Title Policy shall insure Transferee in the amount designated by
Transferee and shall be acceptable in form and substance to Transferee.
"PARTNERSHIP AGREEMENT" shall mean that certain amended and
restated limited partnership agreement relating to Transferee, which shall be
substantially in the form attached hereto as EXHIBIT J.
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"PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title
to the Real Property that are satisfactory to Transferee as determined under
this Agreement, and as evidenced by a pro forma title report.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
"PROPERTY" shall have the meaning set forth in Recital B(4).
"PURCHASE PRICE" shall mean the sum of the Base Purchase Price and
the Contingent Purchase Price.
"REAL PROPERTY" shall have the meaning set forth in Recital B(2).
"REGISTERED OFFERING" shall have the same meaning set forth in
Section 3.19.
"RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
"SECOND CASH WITHHOLD AMOUNT" means $500,000.00 plus the absolute
value of the difference between the Net Operating Income for 1997 and
$1,000,000.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECURITIES" shall have the meaning set forth in Section 7.4.
"STATE" shall mean the state or commonwealth in which the Property
is located.
"SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
"SURVEY" shall mean the survey prepared pursuant to Section 2.2(c).
"TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
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"TITLE COMPANY" shall mean a title insurance company selected by
Transferee and authorized to conduct a title insurance business in the State.
"TITLE OBJECTIONS" shall have the meaning set forth in Section
2.2(d).
"TRANSFEROR'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Transferor.
"UTILITIES" shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of the
Property.
"WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Agreement or any exhibits hereto.
ARTICLE 2
PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND CONTRIBUTION. Transferor agrees to contribute and
Transferee agrees to acquire the Property for the Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) Transferee shall have the right, during the Due Diligence
Period, and thereafter if Transferee notifies Transferor that Transferee
has elected to
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proceed to Closing in the manner described below, to enter upon the Real
Property and to perform, at Transferor's expense, such surveying,
engineering, and environmental studies and investigations as Transferee
may deem appropriate. If such tests, studies and investigations warrant,
in Transferee's sole, absolute and unreviewable discretion, the purchase
of the Property for the purposes contemplated by Transferee, then
Transferee may elect to proceed to Closing and shall so notify Transferor
and the Escrow Agent, in writing, prior to the expiration of the Due
Diligence Period. If for any reason Transferee does not so notify
Transferor and Escrow Agent of its determination to proceed to Closing
prior to the expiration of the Due Diligence Period, or if Transferee
notifies Transferor and Escrow Agent, in writing, prior to the expiration
of the Due Diligence Period that it has determined not to proceed to
Closing, this Agreement automatically shall terminate and Transferee and
Escrow Agent shall be released from any further liability or obligation
under this Agreement and, if requested by Transferor, Transferee will
deliver such reports and materials to Transferor.
(b) During the Due Diligence Period, Transferor shall make
available to Transferee, its agents, auditors, engineers, attorneys and
other designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies,
zoning and site plan materials, correspondence, environmental audits and
reviews, books, records, tax returns, bank statements, financial
statements, fee schedules and any and all other material or information
relating to the Property which are in, or come into, Transferor's
possession or control, or which Transferor may attain. Such information is
more particularly described in EXHIBIT L attached hereto, as the same may
be amended or supplemented by Transferor from time to time.
(c) Within ten (10) days from the date hereof, if requested by
Transferee, Transferor shall deliver to Transferee an ALTA/ACSM survey or a
boundary survey, as reasonably required by Transferee, of the Land and the
Improvements, prepared by a surveyor licensed to practice as such in the
State, bearing a date not earlier than sixty (60) days from the date of its
delivery and certified to both Transferee, Transferor and the Title Company
(and any lender or other party designated by Transferee), showing the legal
description of the Land, all dimensions thereof, and showing the location
of Improvements on the Land and the setbacks thereof from the property
line, as well as the setbacks required by applicable zoning laws or
regulations (the "Survey"). The Survey shall locate all easements which
serve and affect the Land. The Survey shall reflect that no buildings or
improvements located on any other property encroach upon the Land and that
the Improvements located upon the Land do not encroach upon any other
property. The surveyor preparing the Survey shall certify that (i) the
Survey is an accurate Survey of the Land and the Improvements, (ii) that
the Survey was made under the surveyor's supervision, (iii) that the Survey
meets (a) the requirements of the Title Company for the issuance of the
Owner's Title Policy free of any general survey exception, and (b) the
minimum technical standards for land boundary surveys with improvements,
set forth by applicable
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statutes or applicable professional organizations, and (iv) all buildings
and other structures and their relation to the property lines are shown
and that there are no encroachments, overlaps, boundary line disputes,
easements, or claims of easements visible on the ground, other than those
shown on the Survey. If Transferee has any objection to Survey matters,
the same shall be treated for all purposes as Title Objections within
the provisions of this Agreement.
(d) Transferor agrees to provide to Transferee, within five (5)
business days following the date of this Agreement, a copy of any existing
title insurance policies which Transferor may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Transferor, at its expense, shall cause an examination of title to the
Property to be made and a preliminary title report to be issued (the
"Preliminary Title Report"), and, prior to the expiration of the Due
Diligence Period, shall notify Transferor of any defects in title shown by
such examination that Transferee is unwilling to accept by delivering a pro
forma copy of the Preliminary Title Report that reflects such unacceptable
defects in title, which shall be designated as the Title Objections.
Within ten (10) days after such notification, Transferor shall notify
Transferee whether Transferor is willing to cure such defects. If
Transferor is willing to cure such defects, Transferor shall act promptly
and diligently to cure such defects at its expense. If any of such defects
consist of mortgages, deeds of trust, construction or mechanics' liens, tax
liens or other liens or charges in a fixed sum or capable of computation as
a fixed sum, then, to that extent, and notwithstanding the foregoing,
Transferor shall be obligated to pay and discharge such defects at Closing,
except for the mortgages scheduled and set forth in EXHIBIT M attached
hereto (the "Mortgage Indebtedness") which Transferee shall take subject to
as provided in Section 2.3(a). For such purposes, Transferor may use all
or a portion of the cash to close. If Transferor is unable to cure such
defects by Closing, after having attempted to do so diligently and in good
faith, Transferee shall elect (1) to waive such defects and proceed to
Closing without any abatement in the Purchase Price, or (2) to terminate
this Agreement. Transferor shall not, after the date of this Agreement,
subject the Property to any liens, encumbrances, leases, covenants,
conditions, restrictions, easements or other title matters or seek any
zoning changes or take any other action which may affect or modify the
status of title without Transferee's prior written consent. All title
matters revealed by Transferee's title examination and not objected to by
Transferee as provided above shall be deemed Permitted Title Exceptions.
If Transferee shall fail to examine title and notify Transferor of any such
Title Objections by the end of the Due Diligence Period, all such title
exceptions (other than those rendering title unmarketable and those that
are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions. Notwithstanding the foregoing, Transferee shall not be
required to take title to the Property subject to any matters which may
arise subsequent to the effective date of its examination of title to the
Property made during the Due Diligence Period.
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(e) Transferor shall deliver to Transferee within fourteen (14)
days after the date of the execution of this Agreement by Transferor and
Transferee a disclosure schedule that accurately and completely identifies
and describes (a) all Employment Agreements (including name of employee,
social security number, wage or salary, accrued vacation benefits, other
fringe benefits, etc.), and (b) an updated Golf Club membership list,
setting forth the names of the members of the Golf Club, the length of
their membership, the payment obligations of the members and a summary of
the terms of the memberships (the "Disclosure Schedule").
(f) Transferor shall deliver to Transferee within thirty (30)
days after the date of execution of this Agreement by Transferor and
Transferee current searches of all Uniform Commercial Code financing
statements filed with the Secretary of State of the State respecting
Transferor, together with searches for pending litigation, tax liens and
bankruptcy filings in all appropriate jurisdictions.
(g) Transferee agrees to maintain the confidentiality of all the
foregoing Due Diligence materials which have been provided by Transferor,
except to the extent to which such information is public information and/or
may be available to Transferee through other sources. Transferee agrees,
prior to the Closing, to only use such materials in connection with its
evaluation of the Property for purposes of the transfer, provided, however,
that, after the Closing, Transferee may use such information for any
purposes whatsoever. If the transaction does not close due to the default
of Transferee or if Transferee should determine not to proceed with the
transaction, Transferee shall return to Transferor all Due Diligence
materials which have been provided by Transferor.
(h) Without limitation of the foregoing, the satisfactory
resolution, as determined by Transferee in its sole and absolute
discretion, of all of the exceptions set forth on the Warranty
Disclosure Schedule attached hereto as Exhibit P, and the matters
referenced therein, shall be an express condition precedent to
Transferee's approval of the Property, any of which may only be waived
by Transferee pursuant to an express written waiver. The Due
Diligence Period shall be extended if additional time is required in
connection with Transferee's determination as to the satisfactory
resolution of such exceptions. If any of such exceptions are not
resolved in a satisfactory manner, Transferee shall have the right to
terminate this Agreement and receive the full amount of the Deposit.
Notwithstanding the foregoing, Transferee shall have the right to
waive any of such exceptions as conditions to the expiration of the
Due Diligence Period, but such exceptions shall remain as conditions
to Closing unless expressly waived as such by Transferee.
2.3 PAYMENT OF BASE PURCHASE PRICE. The Base Purchase Price shall
be paid to Transferor in the following manner:
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(a) Transferee shall (i) apply the Base Purchase Price against
the Mortgage Indebtedness in an amount equal to a sum necessary to pay off
in full the Mortgage Indebtedness, including any prepayment premium, and to
obtain a release of such deeds of trust or mortgages evidencing the
Mortgage Indebtedness as of the Closing Date, as evidenced by a payoff
letter from the beneficiary of each such deed of trust or mortgage in form
and substance satisfactory to Transferee and the Title Company.
(b) Transferee shall then pay, from the Base Purchase Price,
amounts necessary to pay for certain tax liabilities of Transferor and the
cost incurred by Transferor in connection with the preparation of certain
audits of financial statements, due diligence costs and closing costs, and
to permit the liquidation of certain third party interests in Transferor,
as set forth in the schedule to be prepared by Transferor and delivered to
Transferee prior to the expiration of the due diligence period, which
schedule shall be subject to Transferee's review and approval, which
approval shall not be unreasonably withheld.
(c) Transferee shall then withhold the Cash Withheld Amounts
from the Base Purchase Price.
(d) Transferee shall then pay One Million Five Hundred Thousand
Dollars ($1,500,000) of the remaining portion of the Base Purchase Price by
issuing Owner's Shares to Transferor equal to the amount of One Million
Five Hundred Thousand Dollars ($1,500,000) provided, however, that such
Owner's shares shall be held by Transferee, pursuant to that certain Pledge
Agreement, dated as of the Closing Date, by and between Transferor, as
Pledgor, and Transferee, as Pledgee, as security for the Transferor's
performance, as Tenant under that certain Lease, dated as of the Closing
Date, by and between Transferee, as Landlord, and Transferor, as Tenant.
The number of Owner's Shares required for such payment shall be the
quotient obtained by dividing such One Million Five Hundred Thousand
Dollars ($1,500,000) by an amount equal to the daily average of the
publicly traded share price for the common stock of the Company (as defined
in Section 4.7) for the five (5) days immediately preceding the Closing
Date.
(e) Transferee shall then pay the remainder of the Base Purchase
Price in cash to Transferor. Such amount shall be paid by wire transfer
from Transferee to Transferor.
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferee to enter into this Agreement and to purchase
the Property, and to pay the Purchase Price therefor, Transferor hereby makes
the following representations, warranties and covenants with respect to the
Property, subject to the
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Warranty Disclosure Schedule attached hereto as EXHIBIT P, upon each of which
Transferor acknowledges and agrees that Transferee is entitled to rely and
has relied:
3.1 ORGANIZATION AND POWER. Transferor is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document or instrument required
to be executed and delivered by or on behalf of Transferor hereunder.
3.2 AUTHORIZATION AND EXECUTION. Prior to the end of the Due Diligence
Period, this Agreement, and each of the agreements and certificates of
Transferor to be delivered to Transferee at Closing as provided in Section 5.1,
shall have been duly authorized by all necessary action on the part of
Transferor, has been duly executed and delivered by Transferor, constitutes the
valid and binding agreement of Transferor and is enforceable against Transferor
in accordance with its terms. There is no other person or entity who has an
ownership interest in the Property or whose consent is required in connection
with Transferor's performance of its obligations hereunder. All action required
pursuant to this Agreement necessary to effectuate the transactions contemplated
herein has been, or will at Closing be, taken promptly and in good faith by
Transferor and its representatives and agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the
performance by Transferor of its obligations under, this Agreement do not and
will not contravene, or constitute a default under, any provision of applicable
law or regulation, Transferor's Organizational Documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon Transferor,
or result in the creation of any lien or other encumbrance on any asset of
Transferor. There are no outstanding agreements (written or oral) pursuant to
which Transferor (or any predecessor to or representative of Transferor) has
agreed to contribute or has granted an option or right of first refusal to
purchase the Property or any part thereof. Other than the rights of tenants, as
tenants only, under any leases of any portion of the Property (copies of which
have been provided to Transferee by Transferor and, in connection therewith,
Transferee acknowledges receipt of that certain lease dated October 15, 1994 by
and between Mystic Creek Golf Club and Total Golf, Inc. respecting a sublease of
a portion of the property located at 1303 Commerce Road, Milford, Michigan for a
term of ten years, two months), there are no purchase contracts, options or
other agreements of any kind, written or oral, recorded or unrecorded, whereby
any person or entity other than Transferor will have acquired or will have any
basis to assert any right, title or interest in, or right to possession, use,
enjoyment or proceeds of, all or any portion of the Property. There are no
rights, subscriptions, warrants, options, conversion rights or agreements of any
kind outstanding to purchase or to otherwise acquire any interest or profit
participation of any kind in the Property or any part thereof.
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3.4 NO SPECIAL TAXES. Transferor has no knowledge of, nor has it
received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Transferor's knowledge, there is not
any proposed increase in the assessed valuation of the Real Property for tax
purposes (except as may relate to the transfer contemplated by this Agreement).
3.5 COMPLIANCE WITH EXISTING LAWS. Transferor possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Transferor has not misrepresented or failed to disclose
any relevant fact in obtaining all Authorizations, and Transferor has no
knowledge of any change in the circumstances under which any of those
Authorizations were obtained that result in their termination, suspension,
modification or limitation. Transferor has not taken any action (or failed to
take any action), the omission of which would result in the revocation of any of
the Authorizations. Transferor has no knowledge, nor has it received notice
within the past three years, of any existing or threatened violation of any
provision of any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Property or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof.
3.6 REAL PROPERTY. To the best of Transferor's knowledge, (i) the
Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, (iii) all contractors and subcontractors retained by Transferor
who have performed work on or supplied materials to the Property have been fully
paid, or have fully waived all lien rights in connection therewith pursuant to
valid, binding, and enforceable lien waivers, copies of which have been provided
to Transferee, which copies are hereinafter referred to as the "Specific Lien
Waivers", and all materials used at or on the Property have been fully paid for,
(iv) the Improvements have been completed in all material respects in a
workmanlike manner of first-class quality, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and is
presently operative in good working order. Transferor has not received any
written notice which is still in effect that there is, and, to the best of
Transferor's knowledge, there does not exist, any violation of a condition or
agreement contained in any easement, restrictive covenant or any similar
instrument or agreement effecting the Real Property, or any portion thereof.
3.7 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Transferor to Transferee is free
and clear of all liens and encumbrances and will be so on the Closing Date and
Transferor
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has good, merchantable title thereto and the right to convey same in
accordance with the terms of this Agreement.
3.8 OPERATING AGREEMENTS. Transferor shall provide copies of each of
the Operating Agreements to Transferee within ten (10) days of the date hereof
and shall also provide Transferee with copies of any summaries or abstracts of
such Operating Agreements. Transferor has performed all of its obligations
under each of the Operating Agreements and no fact or circumstance has occurred
which, by itself or with the passage of time or the giving of notice or both,
would constitute a default under any of the Operating Agreements. Transferor
shall not enter into any new Operating Agreements, supply contract, vending or
service contract or other agreements with respect to the Property, nor shall
Transferor enter into any agreements modifying the Operating Agreements, unless
(a) any such agreement or modification will not bind Transferee or the Property
after the Closing Date, or (b) Transferor has obtained Transferee's prior
written consent to such agreement or modification. Transferor acknowledges that
Transferee will not assume any of the Operating Agreements and none of the
Operating Agreements will be binding on Transferee or the Property after
Closing.
3.9 WARRANTIES AND GUARANTIES. Transferor shall not before or after
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
Transferee.
3.10 INSURANCE. All of Transferor's insurance policies are valid and in
full force and effect, all premiums for such policies were paid when due and all
future premiums for such policies (and any replacements thereof) shall be paid
by Transferor on or before the due date therefor. Transferor shall pay all
premiums on, and shall not cancel or voluntarily allow to expire, any of
Transferor's insurance policies unless such policy is replaced, without any
lapse of coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. Transferor has not received
any notice from any insurance company of any defect or inadequacies in the
Property to any part thereof which would adversely affect the insurability of
the Property, or which would increase the cost of insurance beyond that which
would ordinarily and customarily be charged for similar properties in the
vicinity of the Real Property. The Property is fully insured in accordance with
prudent and customary practice.
3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Transferor has received no
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Transferor has no knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real Property. To the
best of Transferor's knowledge, no fact or condition exists which would result
in the termination or material impairment of access to the Real Property from
adjoining public or private streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other utilities or services.
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3.12 LITIGATION. Except as disclosed in writing to Transferor, there is
no action, suit or proceeding pending or known to be threatened against or
affecting Transferor or any of its properties in any court, before any
arbitrator or before or by any Governmental Body which (a) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which Transferor is a party or by which it is
bound and that is or is to be used in connection with, or is contemplated by,
this Agreement, (b) could materially and adversely affect the business,
financial position or results of operations of Transferor, (c) could materially
and adversely affect the ability of Transferor to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Property, any part thereof or any interest therein, (e) the
subject matter of which concerns any past or present employee of Transferor or
its managing agent, or (f) could otherwise adversely materially affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes pending
or, to the best of Transferor's knowledge, threatened as to the operation or
maintenance of the Property or any part thereof. Transferor is not a party to
any union or other collective bargaining agreement with employees employed in
connection with the ownership, operation or maintenance of the Property.
Transferor is not a party to any employment contracts or agreements, other than
the Employment Agreements, and neither Transferor nor its managing agent will,
between the date hereof and the Closing Date, enter into any new employment
contracts or agreements, amend any existing Employment Agreement, except with
the prior written consent of Transferee. Transferor acknowledges that
Transferee will not assume any of the Employment Agreements. Transferor agrees
to indemnify and hold harmless Transferee from any and all claims and damages
which Transferee may suffer from the failure of Transferor to comply with the
WARN Act and any other applicable employment related laws or ordinances.
Transferor has complied with the requirements of the federal Immigration and
Reform Control Act respecting the employment of undocumented workers.
3.14 FINANCIAL INFORMATION. To the best of Transferor's knowledge, all
of Transferor's financial information, including, without limitation, all books
and records and financial statements, is correct and complete in all material
respects and presents accurately the results of the operations of the Property
for the periods indicated.
3.15 ORGANIZATIONAL DOCUMENTS. Transferor's Organizational Documents
are in full force and effect and have not been modified or supplemented, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default thereunder.
3.16 OPERATION OF PROPERTY. Transferor covenants, that between the date
hereof and the Closing Date, it will (a) operate the Property in the usual,
regular and ordinary manner consistent with Transferor's prior practice, (b)
maintain its books of account and records in the usual, regular and ordinary
manner, in accordance with sound accounting principles applied on a basis
consistent with the basis used in keeping its
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books in prior years and (c) use all reasonable efforts to preserve intact
its present business organization, keep available the services of its present
officers, partners and employees and preserve its relationships with
suppliers and others having business dealings with it. Except as otherwise
permitted hereby, from the date hereof until Closing, Transferor shall not
take any action or fail to take action the result of which would have a
material adverse effect on the Property or Transferee's ability to continue
the operation thereof after the Closing Date in substantially the same manner
as presently conducted, or which would cause any of the representations and
warranties contained in this Article III to be untrue as of Closing.
From and after the execution and delivery of this Agreement,
Transferor shall not, other than in the ordinary course of business, (a) make
any agreements which shall be binding upon Transferee with respect to the
Property, or (b) reduce or cause to be reduced any green fees, membership fees,
tournament fees, driving range fees or any other charges over which Transferor
has operational control. Between the date hereof and the Closing Date, if and
to the extent requested by Transferee, Transferor shall deliver to Transferee
such periodic information with respect to the above information as Transferor
customarily keeps internally for its own use. Transferor agrees that it will
operate the Property in accordance with the provisions of this Section 3.16
between the date hereof and the Closing Date. Without limitation of the
foregoing, Transferor acknowledges and agrees that it shall obtain Transferee's
approval and consent to any proposed amendment and restatement of the Ground
Lease, which approval and consent may be withheld in Transferee's sole and
absolute discretion, and that Transferor shall not amend or modify the Ground
Lease without such consent. Transferor acknowledges that Transferee's interest
in the terms and conditions of the Ground Lease goes to the essence of this
Agreement and that Transferor's agreement to this provision was a material
inducement to Transferee's agreement to enter into this Agreement.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferor.
3.18 LAND USE. The current use and occupancy of the Property for
golfing and all other related purposes (including, without limitation, the sale
of merchandise and food and beverages) are permitted as a matter of right as a
principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special permit,
permission or consent and Transferor is not aware of any proposal to change or
restrict such use. Transferor has all necessary certificates of occupancy or
completion to operate the Property as presently operated and there are no
unfulfilled conditions respecting the development of the Property, except that
Transferee acknowledges that Transferor is presently in the process of obtaining
a certificate of occupancy for the clubhouse, and that such certificate shall be
obtained at least ten (10) days prior to the end of the due diligence period.
If Transferor has not received such certificate at least ten (10) days prior to
the end of the due diligence period, Transferor shall notify Transferee of such
failure and Transferee shall have the option to terminate this agreement.
Transferee shall have the option to waive the requirement that Transferor shall
obtain such certificate prior to the end of
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the due diligence period, but such waiver shall not relieve Transferor of the
obligation to provide such certificate to Transferee prior to, and as a
condition of, to Closing.
3.19 PUBLIC OFFERING; PREPARATION OF S-11. At Transferee's cost,
Transferor shall cooperate in the preparation by an Affiliate of Transferee of a
Form S-11 or, if applicable, a Form S-3 under the Securities Act of 1933, as
amended, to be filed with the SEC in connection with any public offering (the
"Registered Offering"). The Registered Offering shall be for purposes of
selling shares of common stock in an Affiliate of Transferee. Transferor shall
provide Transferee access to all financial and other information relating to the
Property which would be sufficient to enable them to prepare financial
statements in conformity with Regulation S-X of the SEC and to enable the
Transferee to prepare a registration statement, report or disclosure statement
for filing with the SEC. At Transferee's request, Transferor shall provide to
Transferee's representatives a signed representation letter sufficient to enable
an independent public accountant to render an opinion on the financial
statements related to the Property.
3.20 HAZARDOUS SUBSTANCES. Except as may be disclosed in the Phase I
environmental assessment report for the Property, to the best of Transferor's
knowledge, without inquiry, except for such inquiries as have actually been
made, or would be deemed reasonable by a property owner in the normal course of
the operation of such property (i) no Hazardous Substances are or have been
located on (except in immaterial amounts used in the ordinary course for the
operation or maintenance of the Property by Transferor in accordance with all
applicable laws), in or under the Property or have been released into the
environment, or discharged, placed or disposed of at, on or under the Property;
(ii) no underground storage tanks are, or have been, located at the Property;
(iii) the Property has never been used to store, treat or dispose of Hazardous
Substances; and (iv) the Property and its prior uses comply with, and at all
times have complied with all applicable Environmental Laws or any other
governmental law, regulation or requirement relating to environmental and
occupational health and safety matters and Hazardous Substances. To the best of
Transferor's knowledge, without inquiry, except for such inquiries as have
actually been made, or would be deemed reasonable by a property owner in the
normal course of the operation of such property there currently exist no facts
or circumstances that could reasonably be expected to give rise to a material
non-compliance with Environmental Laws, material environmental liability or
material Environmental Claim.
3.21 UTILITIES. To the best of Transferor's knowledge, without inquiry,
except for such inquiries as have actually been made, or would be deemed
reasonable by a property owner in the normal course of the operation of such
property all Utilities required for the operation of the Property either enter
the Property through adjoining streets, or they pass through adjoining land and
do so in accordance with valid public easements or private easements, and all of
said Utilities are installed and are in good working order and repair and
operating as necessary for the operation of the Property and all installation
and connection charges therefor have been paid in full. To the best of
Transferor's knowledge, without inquiry, except for such inquiries as have
actually
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been made, or would be deemed reasonable by a property owner in the normal
course of the operation of such property the sewage, sanitation, plumbing,
water retention and detention, refuse disposal and utility facilities in and
on and/or servicing the Real Property are adequate to service the Real
Property as it is currently being used and the Real Property's utilization of
such facilities is in compliance with all applicable governmental and
environmental protection authorities' laws, rules, regulations and
requirements.
3.22 CURB CUTS. All curb cut street opening permits or licenses
required for vehicular access to and from the Property from any adjoining public
street have been obtained and paid for and are in full force and effect.
3.23 LEASED PROPERTY. The Personal Property identified on EXHIBIT C is
all of the leased property at the Property, and such exhibit reflects the date
of each such lease, the name of the lessor, the name of the lessee, the term of
each such lease, the lease payment terms and a description of the property
demised by each such lease. All leases of such property are in good standing
and free from default.
3.24 SUFFICIENCY OF CERTAIN ITEMS. The Property, together with the
Current Assets, contain an amount of equipment and supplies, which is sufficient
to efficiently operate and maintain the Property in the manner in which it is
normally operated and maintained.
3.25 ACCREDITED INVESTOR. Transferor is, as of the date hereof, and as
of the Closing Date shall be, an "Accredited Investor". Concurrent herewith
Transferor shall execute and deliver to Transferee the Accredited Investor
Questionnaire attached hereto as EXHIBIT N.
Each of the representations, warranties and covenants contained in this
Article III are intended for the benefit of Transferee and any underwriter in
the Registered Offering. Each of said representations, warranties and covenants
shall survive the Closing for a period of one (1) year, at which time they shall
expire unless prior to such time Transferee has made a formal, written claim
alleging a breach of one or more of the representations, warranties or
covenants. No investigation, audit, inspection, review or the like conducted by
or on behalf of Transferee shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that Transferee
has the right to rely thereon and that each such representation, warranty and
covenant constitutes a material inducement to Transferee to execute this
Agreement and to close the transaction contemplated hereby and to pay the
Purchase Price to Transferor.
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferor to enter into this Agreement and to contribute the
Property, Transferee hereby makes the following representations, warranties and
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covenants, upon each of which Transferee acknowledges and agrees that Transferor
is entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. Transferee is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and has all requisite powers, all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and to enter into and perform its obligations under this Agreement and
any document or instrument required to be executed and delivered on behalf of
Transferee hereunder.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement and
the performance by Transferee of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, Partnership Agreement or any agreement, judgment, injunction, order,
decree or other instrument binding upon Transferee or result in the creation of
any lien or other encumbrance on any asset of Transferee.
4.3 LITIGATION. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting Transferee in any court or before
any arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely affect the business, financial position or results of
operations of Transferee, or (b) could materially and adversely affect the
ability of Transferee to perform its obligations hereunder, or under any
document to be delivered pursuant hereto.
4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferee.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of
the agreements and certificates of Transferee to be delivered to Transferor at
Closing as provided in Section 5.2 will be, duly authorized by all necessary
action on the part of Transferee, has been duly executed and delivered by
Transferee, constitutes the valid and binding agreement of Transferee and is
enforceable against Transferee in accordance with its terms. All action
required pursuant to this Agreement necessary to effectuate the transactions
contemplated herein has been, or will at Closing be, taken promptly and in good
faith by Transferee and its representatives and agents.
4.6 TRADE NAME. Transferee shall not use the trade name referenced in
Recital B(4) in connection with any other property owned by Transferee or any
Affiliate of Transferee.
4.7 PROSPECTUS. Transferee represents and warrants that, as to the
final Prospectus of Golf Trust of America, Inc., a Maryland corporation (the
"Company"), dated November 4, 1997 (the "Prospectus"), of which Transferor
hereby acknowledges receipt, and the documents incorporated therein, and all
documents filed by the Company with the United States Securities and Exchange
Commission (the "Commission") pursuant to the Act (collectively, the "Offering
Documents"): (i) to the
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best of Transferee's knowledge, the financial information pertaining to the
Transferee and the Company that is contained in the Prospectus is true and
correct, (ii) from and after the date of the Prospectus, there have been no
material adverse changes in the operations of the Transferee or the Company,
and (iii) Transferee and the Company have the power and authority to offer
the conversion rights, and to issue the Owner's Shares, to Transferor in
accordance with the terms set forth herein or in the Lease.
4.8 NO MATERIAL MISREPRESENTATIONS. No representation or warranty made
by Transferee in this Agreement and no statement or description contained in any
Offering Documents provided or delivered by the Transferee to the Transferor
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements and descriptions contained herein
or therein not misleading.
4.9 PARTNERSHIP UNITS ISSUED. Exhibit Q attached hereto is a true,
correct, and complete schedule, as of December 1, 1997, of the partnership units
issued by the Transferee and the other matters set forth therein. All of the
issued and outstanding partnership units referenced therein and all of the
partnership units to be issued to Transferor pursuant to this Agreement or the
Lease have been or will be duly authorized and validly issued, are or will be
fully paid and nonassessable and are owned of record by the Partners and in the
amounts set forth on said Exhibit Q, and have been offered, issued, sold and
delivered by the Transferee in compliance with applicable federal and state
laws, including securities laws. Transferee shall update Exhibit Q as of the
Closing Date.
4.10 RISK FACTORS. Transferor acknowledges and agrees that all of the
Offering Documents have either been provided to Transferor or made available to
Transferor, and that Transferor is aware that such Offering Documents contain
discussion of certain risk factors ("Risk Factors") affecting Transferee, the
Company, and their properties. Transferor acknowledges that it has reviewed
such Risk Factors and retained independent counsel in connection with its
determination to enter into this Agreement and receive the Owner's Shares in
accordance with the terms of this Agreement.
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO TRANSFEREE'S OBLIGATIONS. Transferee's obligations hereunder
are subject to the satisfaction of the following conditions precedent and the
compliance by Transferor with the following covenants:
(a) TRANSFEROR'S DELIVERIES. Transferor shall have delivered to
or for the benefit of Transferee, as the case may be, on or before the
Closing Date, all of the documents and other information required of
Transferor pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
Transferor's representations and warranties made in this Agreement shall be
true and correct
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as of the date hereof and as of the Closing Date as if then made, there
shall have occurred no material adverse change in the condition or financial
results of the operation of the Property since the date hereof. Transferor
shall have performed all of its covenants and other obligations under this
Agreement and Transferor shall have executed and delivered to Transferee on
the Closing Date a certificate dated as of the Closing Date to the foregoing
effect in the form of EXHIBIT O attached hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
(d) TITLE TO PROPERTY. Transferee shall have determined that
Transferor is the sole owner of a good and marketable ground lessee
interest to the Real Property and of good and marketable title, or
leasehold interest, as the case may be, to the Tangible Personal Property,
free and clear of all liens, encumbrances, restrictions, conditions and
agreements except for Permitted Title Exceptions. Transferor shall not have
taken any action or permitted or suffered any action to be taken by others
from the date hereof and through and including the Closing Date that would
adversely affect the status of title to the Real Property or to the
Tangible Personal Property. All liens of Michigan National Bank existing
against any of the Property as of the Closing Date shall be paid out of the
amount of the Purchase Price and released at Closing, and no such liens
shall constitute Permitted Title Exceptions.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving
range, putting greens, mechanical systems, plumbing, electrical wiring,
appliances, fixtures, heating, air conditioning and ventilating equipment,
elevators, boilers, equipment, roofs, structural members and furnaces)
shall be in the same condition at Closing as they are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, Transferor
shall not have diminished the quality or quantity of maintenance and upkeep
services heretofore provided to the Real Property and the Tangible Personal
Property. Transferor shall not have removed or caused or permitted to be
removed any part or portion of the Real Property or the Tangible Personal
Property unless the same is replaced, prior to Closing, with similar items
of at least equal quality and acceptable to Transferee.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal
of garbage and other waste from the Property. Between the date hereof and
the Closing Date, Transferor shall have received no notice of any material
increase or proposed material increase in the rates charged for the
Utilities from the rates in effect as of the date hereof.
(g) LIQUOR LICENSE. Transferor represents and warrants to
Transferee that Transferor presently owns all liquor licenses, alcoholic
beverage licenses and other permits and authorizations necessary to operate
the restaurant, bars, snack
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shops and lounges presently located at the Property. In connection
therewith, and in order to create a security interest in such licenses in
favor of Transferee, Transferor and Transferee, or Transferee's nominee,
shall cooperate with each other, and each shall execute such transfer
forms, license applications and other documents as may be necessary to
create, attach, perfect, and preserve Transferee's security interest in
and to the liquor licenses, alcoholic beverage licenses and other
Authorizations required hereby. Such efforts shall include the deposit
of all such executed transfer forms into an escrow account, with an escrow
agreement by and between Transferor and Transferee providing that
Transferee shall have the right to possess and file all such documents
upon the default of Transferor under this Agreement or the Lease.
(h) PARTNERSHIP AGREEMENT. Transferor shall have delivered to
Transferee a countersigned copy of the Partnership Agreement in a form
prepared by Transferee, which shall be in substantially the form attached
hereto as EXHIBIT J.
(i) GOLF COURSE LEASE. An Affiliate of Transferor shall have
delivered to Transferee a countersigned copy of the Golf Course Lease in a
form prepared by Transferee, which shall be in substantially the form
attached hereto as EXHIBIT E.
(j) APPROVAL BY BOARD OF DIRECTORS. Approval of the Board of
Directors of Golf Trust of America, Inc. of the transaction contemplated by
this Agreement by an affirmative vote within ten (10) days of the Effective
Date.
(k) SUBORDINATION AGREEMENT. Transferor shall have
provided documentation satisfactory to Transferee, in its sole and
absolute discretion, that any new lien granted to or asserted by
Michigan National Bank ("Bank") against any security held by
Transferee shall be expressly subordinate and junior to any lien held
by Transferee against such security. Such documentation shall
include, without limitation, a subordination agreement executed by the
Bank. Nothing in this subsection (k) shall be deemed to constitute a
consent by Transferee to any such lien, which consent may be withheld
in Transferee's sole and absolute discretion.
5.2 AS TO TRANSFEROR'S OBLIGATIONS. Transferor's obligations
hereunder are subject to the satisfaction of the following conditions
precedent and the compliance by Transferee with the following covenants:
(a) TRANSFEREE'S DELIVERIES. Transferee shall have delivered to
or for the benefit of Transferor, on or before the Closing Date, all of the
documents, Owner's Shares and payments required of Transferee pursuant to
this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
Transferee's representations and warranties made in this Agreement shall be
true and correct
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as of the date hereof and as of the Closing Date as if then made and
Transferee shall have performed all of its covenants and other obligations
under this Agreement.
(c) COUNTERSIGNED COPIES OF PARTNERSHIP AGREEMENT AND GOLF
COURSE LEASE. Transferee shall have delivered to Transferor countersigned
copies of the Partnership Agreement and Golf Course Lease.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferor and may be waived in whole or in part,
by Transferor, but only by an instrument in writing signed by Transferor.
5.3 MUTUAL CONDITIONS PRECEDENT. The obligations of both Transferor
and Transferee hereunder are subject to the satisfaction of the following
conditions precedent:
(a) The written approval of this transaction and all the
documents contemplated hereby by the City of Dearborn, as the ground lessor
under the Ground Lease, together with any and all city council resolutions
required to authorize such approval.
(b) The approval, prior to the end of the Due Diligence Period,
of this transaction by the limited partners of Transferor, as required by
the limited partnership agreement of Transferor. If such approval is not
received by such date, either party hereto shall have the right to
terminate this Agreement, provided, however, that if neither party elects
to terminate, the Due Diligence Period shall be extended until such
approval is received.
ARTICLE 6
CLOSING
6.1 CLOSING. Closing shall be held at 9:00 a.m., New York time, at
the offices of Transferee (or counsel to Transferee) on a date that is ten
(10) days after the expiration of the Due Diligence Period; provided,
however, that such ten (10) day period may be extended for an additional
twenty (20) days by Transferee, at its sole discretion by providing written
notice to Transferor prior to the expiration of such ten (10) day period. If
the Closing Date falls on a Saturday, Sunday or other legal holiday, the
Closing shall take place on the first following business day thereafter.
Possession of the Property shall be delivered to Transferee at Closing,
subject only to Permitted Title Exceptions.
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6.2 TRANSFEROR'S DELIVERIES. At Closing, Transferor shall deliver to
Transferee all of the following instruments, each of which shall have been
duly executed and, where applicable, acknowledged and/or sworn on behalf of
Transferor and shall be dated as of the Closing Date:
(a) The certificate required by Section 5.1(b).
(b) The Assignment of Lease.
(c) The Bill of Sale - Personal Property.
(d) The Partnership Agreement.
(e) The Golf Course Lease.
(f) Reserved.
(g) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy including
those endorsements requested by Transferee, and to eliminate the standard
exceptions as exceptions thereto, so that the Owner's Title Policy will be
subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and
gap affidavit.
(h) The FIRPTA Certificate.
(i) To the extent available, true, correct and complete copies
of all warranties, if any, of manufacturers, suppliers and installers
possessed by Transferor and relating to the Property, or any part thereof.
(j) Certified copies of Transferor's Organizational Documents.
(k) Appropriate resolutions of the board of directors or
partners, as the case may be, of Transferor, certified by the secretary or
an assistant secretary of Transferor or a general partner, as the case may
be, together with all other necessary approvals and consents of Transferor,
authorizing (i) the execution on behalf of Transferor of this Agreement and
the documents to be executed and delivered by Transferor prior to, at or
otherwise in connection with Closing, and (ii) the performance by
Transferor of its obligations hereunder and under such documents, or
appropriate resolutions of the partners of Transferor, as the case may be.
(l) A valid, final and unconditional certificate of occupancy
for the Improvements located on the Real Property, issued by the
appropriate Governmental Body allowing for the use of the Real Property as
a golf course
25
<PAGE>
and permitting the continued operation of the improvements as presently
operated.
(m) Such proof as Transferee may reasonably require with respect
to Transferor's compliance (or indemnity with respect to compliance) with
the bulk sales laws or similar statutes.
(n) Copy of each and every existing insurance policy covering
the Property and certificates evidencing such coverage.
(o) To the extent available, a set or copies of the plans and
specifications for the Improvements.
(p) A written instrument executed by Transferor, conveying and
transferring to Transferee all of Transferor's right, title and interest in
any telephone numbers, fax numbers or internet or electronic mail addresses
(if applicable) relating solely to the Property, and, if Transferor
maintains a post office box solely with respect to the Property, conveying
to Transferee all of its interest in and to such post office box and the
number associated therewith, so as to assure a continuity in operation and
communication.
(q) All current real estate and personal property tax bills in
Transferor's possession or under its control.
(r) All surveys and plot plans of the Real Property in
possession of or in the control of Transferor.
(s) A complete list of all scheduled tournaments, functions and
the like, in reasonable detail.
(t) A list of Transferor's outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each
account and the amount due Transferor.
(u) A pay off statement prepared by any holder of Mortgage
Indebtedness setting forth the amount, including accrued interest and
prepayment penalties, to pay off the Mortgage Indebtedness.
(v) Written notice executed by Transferor notifying all
interested parties, including all tenants under any leases of the Property,
that the Property has been conveyed to Transferee and directing that all
payments, inquiries and the like be forwarded to Transferee at the address
to be provided by Transferee.
(w) Any other document or instrument reasonably requested
by Transferee with respect to the Property, but excluding an opinion
of counsel to Transferor.
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6.3 TRANSFEREE'S DELIVERIES. At Closing, Transferee shall pay or
deliver to Transferor the following:
(a) The cash portion of the Purchase Price by federal funds wire
to an account designated by Transferor.
(b) The non-cash portion of the Purchase Price payable in
Owner's Shares issued to Transferor.
(c) Any other document or instrument reasonably requested by
Transferor relating to the transaction contemplated hereby, but excluding
an opinion of counsel to Transferee.
6.4 MUTUAL DELIVERIES. At Closing, Transferee and Transferor shall
mutually execute and deliver each to the other:
(a) A closing statement for Transferor and a closing statement
for Transferee (collectively, the "Closing Statements") reflecting the
Purchase Price and the adjustments and prorations required hereunder and
the allocation of income and expenses required hereby.
(b) In accordance with subsection 5.1(g) hereinabove, such other
documents, instruments and undertakings as may be required by the liquor
authorities of the State or of any county or municipality or Governmental
Body having jurisdiction with respect to the transfer or issue of any
liquor licenses or alcoholic beverage licenses or permits for the Property,
to the extent not theretofore executed and delivered in order to create,
attach, preserve, and perfect a valid, binding and enforceable security
interest in and to such licenses in favor of Transferee.
(c) The Golf Course Lease.
(d) The Partnership Agreement.
(e) Such other and further documents, papers and instruments as
may be reasonably required by the parties hereto or their respective
counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this
Agreement, each party hereto shall pay its own legal fees and expenses, and
Transferor shall pay for the cost of a Phase I environmental audit required
by Transferee with respect to the Property but for no other audits. All
filing fees, if any, for the Assignment of Lease and the real estate
transfer, recording or other similar taxes due with respect to the transfer
of title and all charges for title insurance premiums shall be paid by
Transferor. Transferor shall pay for preparation of the documents to be
delivered by Transferor hereunder, and for the releases of any deeds of
trust, mortgages and other financing encumbering the Property and for any
costs associated with any corrective instruments,
27
<PAGE>
and for the cost of any due diligence reports and surveys prepared by or for
Transferee with respect to the Property. Transferor shall receive a cash
payment at closing to pay for such closing costs as provided in Section
2.3(b).
6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with
respect to the Property, and applicable to the period of time before and
after Closing, determined in accordance with generally accepted accounting
principles consistently applied, shall be allocated between Transferor and
Transferee (or, at Transferee's election, between Transferor and the lessee
under the Golf Course Lease to the extent such income or expenses will be
payable by or attributable to such lessee). Transferor shall be entitled to
all income and shall be responsible for all expenses for the period of time
up to but not including the Closing Date, and Transferee shall be entitled to
all income and shall be responsible for all expenses for the period of time
from, after and including the Closing Date. Such adjustments shall be shown
on the Closing Statements (with such supporting documentation as the parties
hereto may require being attached as exhibits to the Closing Statements) and
shall increase or decrease (as the case may be) the Purchase Price payable by
Transferee. Without limiting the generality of the foregoing, the following
items of income and expense shall be prorated at Closing:
(a) Current and prepaid rents or fees, including, without
limitation, prepaid Golf Club membership fees, function receipts and other
reservation receipts.
(b) Real estate and personal property taxes.
(c) Utility charges (including but not limited to charges for
water, sewer and electricity).
(d) Value of fuel stored on the Property at the price paid for
such fuel by Transferor, including any taxes.
(e) Municipal improvement liens where the work has physically
commenced (certified liens) shall be paid by Transferor at Closing.
Municipal improvement liens which have been authorized, but where the work
has not commenced (pending liens) shall be assumed by Transferee.
(f) License and permit fees, where transferable.
(g) All other income and expenses of the Property, including,
but not being limited to such things as restaurant and snack bar income and
expenses and the like.
(h) Such other items as are usually and customarily prorated
between Transferees and Transferors of golf course properties in the area
in which the Property is located shall be prorated as of the Closing Date.
28
<PAGE>
6.7 SALES TAXES. Transferor shall be required to pay all sales taxes
and like impositions arising from the ownership and operation of the Property
currently through the Closing Date.
6.8 POST-CLOSING ADJUSTMENTS.
(a) Transferee shall not be obligated to collect any accounts
receivable or revenues accrued prior to the Closing Date for Transferor,
but if Transferee collects same, such amounts will be promptly remitted to
Transferor in the form received. Transferee shall receive a credit at
Closing for the amount of any security deposits held by Transferor under
any lease of any portion of the Property that is being assigned to
Transferee in accordance herewith.
(b) If accurate allocations and prorations cannot be made at
Closing because current bills are not obtainable (as, for example, in the
case of utility bills and/or real estate or personal property taxes), the
parties shall allocate such income or expenses at Closing on the best
available information, subject to adjustment outside of escrow upon receipt
of the final bill or other evidence of the applicable income or expense.
Any income received or expense incurred by Transferor or Transferee with
respect to the Property after the Closing Date shall be promptly allocated
in the manner described herein and the parties shall promptly pay or
reimburse any amount due. Transferor shall pay at Closing all accrued
special assessments and taxes applicable to the Property.
ARTICLE 7
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
prior to the Closing Date, pursuant to the power of eminent domain, of all or
any portion of the Real Property, or any proposed sale in lieu thereof,
Transferor shall give written notice thereof to Transferee promptly after
Transferor learns or receives notice thereof. If all or any part of the Real
Property is, or is to be, so condemned or sold, Transferee shall have the
right to terminate this Agreement pursuant to Section 8.3. If Transferee
elects not to terminate this Agreement, all proceeds, awards and other
payments arising out of such condemnation or sale (actual or threatened)
shall be paid or assigned, as applicable, to Transferee at Closing.
Transferor will not settle or compromise any such proceeding without
Transferee's prior written consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the Property
prior to the Closing Date shall remain upon Transferor. If any such loss or
damage occurs prior to Closing, Transferee shall have the right to terminate
this Agreement pursuant to Section 8.3. If Transferee elects not to
terminate this Agreement, all insurance proceeds and rights to proceeds
arising out of such loss or damage shall be paid or assigned, as applicable,
to Transferee at Closing.
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<PAGE>
7.3 REAL ESTATE BROKER. Except for a broker or finder who may have
been engaged by Transferor and for whom Transferor accepts sole financial
responsibility, and except for any broker or finder who may have been engaged
by Transferee and for whom Transferee accepts sole financial responsibility,
there is no real estate broker involved in this transaction. Transferee
warrants and represents to Transferor that Transferee has not dealt with any
other real estate broker in connection with this transaction, nor has
Transferee been introduced to the Property or to Transferor by any other real
estate broker, and Transferee shall indemnify Transferor and save and hold
Transferor harmless from and against any claims, suits, demands or
liabilities of any kind or nature whatsoever arising on account of the claim
of any person, firm or corporation to a real estate brokerage commission or a
finder's fee as a result of having dealt with Transferee, or as a result of
having introduced Transferee to Transferor or to the Property. In like
manner, Transferor warrants and represents to Transferee that Transferor has
not dealt with any real estate broker in connection with this transaction,
nor has Transferor been introduced to Transferee by any real estate broker,
and Transferor shall indemnify Transferee and save and hold Transferee
harmless from and against any claims, suits, demands or liabilities of any
kind or nature whatsoever arising on account of the claim of any person, firm
or corporation to a real estate brokerage commission or a finder's fee as a
result of having dealt with Transferor in connection with this transaction.
Transferee acknowledges that David J. Dick, an officer of the Transferee, is
a licensed California real estate broker but is not acting as a broker in
relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided and except for
disclosures required to be made to the City of Dearborn, as ground lessor,
and to the limited partners of Transferor, in connection with the obtaining
of required consents from such parties, from and after the execution of this
Agreement, Transferee and Transferor shall keep the terms, conditions and
provisions of this Agreement confidential and neither shall make any public
announcements hereof unless the other first approves of same in writing, nor
shall either disclose the terms, conditions and provisions hereof, except to
their respective attorneys, accountants, engineers, surveyors, financiers and
bankers. Notwithstanding the foregoing, it is acknowledged that the Company
is a public company and will make a public announcement concerning this
transaction and that the Company anticipates that it will seek to sell shares
of its common stock and other securities (collectively, the "Securities") to
the general public pursuant to a public offering and that in connection
therewith, Transferee will have the absolute right to market the Securities
and prepare and file all necessary or required registration statements and
other papers, documents and instruments necessary or required in Transferee's
judgment and that of its attorneys and underwriters to file a registration
statement with respect to the Securities with the SEC and/or similar state
authorities and to cause same to become effective and to disclose therein and
thus to its underwriters, to the SEC and/or to similar state authorities and
to the public all of the terms, conditions and provisions of this Agreement.
The obligations of this Section 7.4 shall survive any termination of this
Agreement.
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<PAGE>
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS
8.1 LIABILITY OF TRANSFEREE. Except for any obligation expressly
assumed or agreed to be assumed by Transferee hereunder, Transferee does not
assume any obligation of Transferor or any liability for claims arising out
of any occurrence prior to Closing. Without limitation of the foregoing,
Transferor and Transferee agree that Transferee shall not assume the
equipment leases of Transferor or pay off any amounts owing thereunder.
8.2 MUTUAL INDEMNIFICATION. Each party hereto hereby indemnifies and
holds the other harmless from and against any and all claims, costs,
penalties, damages, losses, liabilities and expenses (including reasonable
attorneys' fees) that may at any time be incurred by such damaged party,
whether before or after Closing, as a result of any breach by the breaching
party of any of its representations, warranties, covenants or obligations set
forth herein or in any other document delivered by such other party pursuant
hereto, for a period of one (1) year following the Closing. The provisions
of this section shall survive termination of this Agreement by Transferee or
Transferor.
8.3 TERMINATION BY TRANSFEREE. If any condition set forth herein for
the benefit of Transferee cannot or will not be satisfied prior to Closing,
or upon the occurrence of any other event that would entitle Transferee to
terminate this Agreement and its obligations hereunder, and Transferor fails
to cure any such matter within ten (10) business days after notice thereof
from Transferee, Transferee, at its option, may elect either (a) to terminate
this Agreement and all other rights and obligations of Transferor and
Transferee hereunder shall terminate immediately, or (b) to waive its right
to terminate (but without waiving any breach or default on the part of
Transferor) and, instead, to proceed to Closing. If Transferee terminates
this Agreement as a consequence of a misrepresentation or breach of a
warranty or covenant by Transferor, or a failure by Transferor to perform its
obligations hereunder, then Transferee shall retain all remedies accruing as
a result thereof, including, without limitation, specific performance.
8.4 TERMINATION BY TRANSFEROR. If any condition set forth herein for
the benefit of Transferor (other than a default by Transferee) cannot or will
not be satisfied prior to Closing, and Transferee fails to cure any such
matter within ten (10) business days after notice thereof from Transferor,
Transferor may, at its option, elect either (a) to terminate this Agreement,
in which event the rights and obligations of Transferor and Transferee
hereunder shall terminate immediately, or (b) to waive its right to
terminate, and instead, to proceed to Closing. If, prior to Closing,
Transferee defaults in performing any of its obligations under this Agreement
(including its obligation to purchase the Property), Transferee shall have
ten (10) business days to cure any such default after notice thereof from
Transferor. In the event that Transferee fails to cure such default,
Transferor shall have a remedy for actual and direct damages, but excluding
31
<PAGE>
any remedies of specific performance and punitive damages which Transferor
hereby irrevocably waives.
8.5 COSTS AND ATTORNEYS' FEES. In the event of any litigation or
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, arbitration or other form of dispute
resolution, then the prevailing party in such litigation shall be entitled to
recover its costs of prosecuting and/or defending same, including, without
limitation, reasonable attorneys' fees at trial and all appellate levels.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement, its exhibits, and
schedules constitute the entire agreement between the parties hereto with
respect to the transactions contemplated hereby and supersedes all prior
discussions, understandings, agreements and negotiations between the parties
hereto. This Agreement may be modified only by a written instrument duly
executed by the parties hereto.
9.2 ASSIGNMENTS. Transferee may assign its rights hereunder to an
Affiliate of Transferee without the consent of Transferor. Transferee may
not otherwise assign its interest herein without the prior written consent of
Transferor. Transferor may not assign any of its rights pursuant to this
Agreement without the prior written consent of Transferee, which may be
withheld in Transferee's sole and absolute discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
9.4 DAYS. If any action is required to be performed, or if any
notice, consent or other communication is given, on a day that is a Saturday
or Sunday or a legal holiday in the jurisdiction in which the action is
required to be performed or in which is located the intended recipient of
such notice, consent or other communication, such performance shall be deemed
to be required, and such notice, consent or other communication shall be
deemed to be given, on the first business day following such Saturday, Sunday
or legal holiday. Unless otherwise specified herein, all references herein
to a "day" or "days" shall refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to
herein shall be governed by and construed and interpreted in accordance with
the laws of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be
necessary that the signature on behalf of both parties hereto appear on each
counterpart hereof. All counterparts hereof shall collectively constitute a
single agreement.
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9.7 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or
the application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
9.8 COSTS. Regardless of whether Closing occurs hereunder, and
except as otherwise expressly provided herein, each party hereto shall be
responsible for its own costs in connection with this Agreement and the
transactions contemplated hereby, including without limitation, fees of
attorneys, engineers and accountants.
9.9 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such
copies as on the Summary Sheet or to such other address as the intended
recipient may have specified in a notice to the other party. Any party
hereto may change its address or designate different or other persons or
entities to receive copies by notifying the other party and Escrow Agent in a
manner described in this Section. Any notice, request, demand or other
communication delivered or sent in the manner aforesaid shall be deemed given
or made (as the case may be) when actually delivered to the intended
recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all of the
representations, warranties, covenants and agreements of Transferor and
Transferee made in, or pursuant to, this Agreement shall survive Closing and
shall not merge into the Assignment of Lease or any other document or
instrument executed and delivered in connection herewith.
9.12 FURTHER ASSURANCES. Transferor and Transferee each covenant and
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers,
deeds, acts or things, supplemental, confirmatory or otherwise, as may be
reasonably required by either party hereto for the purpose of or in
connection with consummating the transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Transferor and
Transferee specifically established hereby.
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9.14 CONFIDENTIALITY. Any confidential information delivered by
Transferor to Transferee hereunder shall be used solely for the purpose of
acquiring the Property and Transferee will keep such information
confidential; provided Transferee shall have the right to provide such
information to its consultants and advisors and to disclose such information
as Transferee determines is necessary or appropriate in connection with any
public offering of the Securities. If Transferee does not acquire the
Property, it shall deliver to Transferor copies of all proprietary
information delivered to Transferee by Transferor. Transferor agrees to keep
confidential the terms and conditions of this Agreement; provided, Transferor
shall have the right to provide such information to its consultants and
advisors.
ARTICLE 10
ESCROW DEPOSIT
10.1 DEPOSIT. By letter dated November 20, 1997, Transferee deposited
with First American Title Insurance Company the sum of $25,000.00 (the
"Deposit"), to be released at the sole instruction of Transferee. Upon
Transferee's receipt of three (3) fully executed originals of this Agreement,
Transferee shall transfer such Deposit to a joint escrow, to be released at
the mutual instruction of Transferor and Transferee, subject to the terms of
this Agreement. If Transferee terminates this Agreement prior to the end of
the Due Diligence Period, the Deposit shall be returned to Transferee. If
Transferee does not terminate this Agreement prior to the end of the Due
Diligence Period, but does not close, then, upon notice from Transferee that
it has elected not to close or upon a default by Transferee under this
Agreement, the Deposit shall be paid over to Transferor and Transferor shall
have all remedies specified in Section 8.4.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, Transferor and Transferee have hereunder
affixed their signatures to this Contribution and Leaseback Agreement on the
date first written above.
"TRANSFEREE"
GOLF TRUST OF AMERICA, L.P., A DELAWARE LIMITED
PARTNERSHIP
By: GTA GP, Inc. a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair
----------------------------------
Its: President
---------------------------------
"TRANSFEROR"
MYSTIC CREEK GOLF CLUB, L.P., A
MICHIGAN LIMITED PARTNERSHIP
By: Foremost Golf Ventures Limited Liability
Company
Its: General Partner
By: Total Golf, Inc., a Michigan corporation
Its: Member
By: /s/ James R. Dewlig
---------------------------------
Its: President
-------------------------------
By: The Slavik Co., a Michigan corporation
Its: Member
By: /s/ Stephan P. Slavik, Sr.
---------------------------------
Its: President
-------------------------------
35
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
dated as of December 18, 1997
by and between
STONEHENGE GOLF DEVELOPMENT, LLC, a South Carolina limited liability company,
as Transferor,
and
GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
as Transferee
WILDEWOOD COUNTRY CLUB
THE COUNTRY CLUB AT WOODCREEK FARMS
COLUMBIA, SOUTH CAROLINA
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
<S><C>
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2
PURCHASE AND CONTRIBUTION; PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . 8
2.1 Purchase and Contribution. . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Payment of Base Purchase Price . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . 11
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . 11
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . . . . 12
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . . . . 14
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . . . . 14
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . 15
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . 15
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . . . . 15
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Public Offering; Preparation of S-11 . . . . . . . . . . . . . . . . . 16
3.20 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.21 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.22 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.23 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.24 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . . . . 17
3.25 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . 17
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . 18
4.6 Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 As to Transferee's Obligations . . . . . . . . . . . . . . . . . . . . 18
5.2 As to Transferor's Obligations . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Transferor's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Transferee's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . . . . 24
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR; TERMINATION RIGHTS . . . . 27
8.1 Liability of Transferee. . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Indemnification by Transferor. . . . . . . . . . . . . . . . . . . . . 27
8.3 Termination by Transferee. . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Termination by Transferor. . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . 28
P-ii
<PAGE>
ARTICLE 9
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . 30
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
EXHIBITS
Exhibit A-Legal Description of the Land
Exhibit B-Description of Improvements
Exhibit C-Tangible Personal Property
Exhibit D-Intangible Personal Property
Exhibit E-Golf Course Lease
Exhibit F-Bill of Sale - Personal Property
Exhibit G-Deed
Exhibit H-FIRPTA Affidavit of Transferor
Exhibit I-Contracts and Operating Agreements
Exhibit J-Partnership Agreement
Exhibit K-Calculation of Purchase Price
Exhibit L-Due Diligence List
Exhibit M-Schedule of Mortgages
Exhibit N-Accredited Investor Questionnaire
Exhibit O-Transferor's Certificate
Exhibit P-Warranty Disclosure Schedule
P-iii
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
SUMMARY SHEET
Transferee: GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Transferor: STONEHENGE GOLF DEVELOPMENT, LLC,
a South Carolina limited liability company
Date of
Agreement: December 18, 1997
Wildewood
Golf Course: Wildewood Country Club
(address): 90 Mallet Hill Road
Columbia, South Carolina 29223
Trade Name: Wildewood Country Club
Woodcreek
Golf Course: The Country Club at Woodcreek Farms
(address): 90 Mallet Hill Road
Columbia, South Carolina 29223
Trade Name: The Country Club at Woodcreek Farms
Notice Address
of Transferor: Lyndell Young
Stonehenge Golf Development, LLC
90 Mallet Hill Road
Columbia, South Carolina 29223
<PAGE>
Notice Address
of Transferee: Scott D. Peters
Golf Trust of America, Inc.
14 N. Adger's Wharf
Charleston, South Carolina 29401
with a copy to: Peter T. Healy, Esq.
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
THIS CONTRIBUTION AND LEASEBACK AGREEMENT (this "Agreement") is
entered into by and between Transferee and Transferor.
RECITALS:
A. Transferor is the owner of Wildewood Golf Course and related
improvements located on the real property more particularly described in EXHIBIT
A-1 attached hereto, and Woodcreek Golf Course and related improvements located
on the real property more particularly described in EXHIBIT A-2 attached hereto
(collectively, the "Land").
B. Subject to the terms of this Agreement, Transferor hereby agrees
to contribute, assign and convey to Transferee, and Transferee hereby agrees to
acquire from Transferor, all of Transferor's right, title and interest in and to
the following:
1. The Land, together with the golf courses, driving ranges,
putting greens, clubhouse facilities, snack bars, restaurants, pro shops,
buildings, structures, parking lots, improvements, fixtures and other
items of real estate located on the Land (the "Improvements"), as more
particularly described in EXHIBIT B attached hereto.
2. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Transferor's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements, including, without limitation, concession agreements for spas
and the like (the Land, the Improvements and all such easements and
appurtenances are sometimes collectively hereinafter referred to as the
"Real Property").
3. All items of tangible personal property and fixtures (if any)
owned or leased by Transferor and located on or used in connection with
the Real Property, including, but not limited to, machinery, equipment,
furniture, furnishings, movable walls or partitions, phone systems and
other control systems, restaurant equipment, computers or trade fixtures,
golf course operation and maintenance equipment, including mowers,
tractors, aerators, sprinklers, sprinkler and irrigation facilities and
equipment, valves or rotors, driving range equipment, athletic training
equipment, office equipment or machines, other decorations, and equipment
or machinery of every kind or nature located on or used in connection with
the operation of the Real Property whether on or off-site, including all
warranties and guaranties associated therewith (the "Tangible Personal
Property"), excluding all golf carts, whether owned or leased, which shall
be retained by Transferor. A schedule of the Tangible Personal Property is
attached to this
1
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Agreement as EXHIBIT C, indicating whether such Tangible Personal Property
is owned or leased. The schedule of Tangible Personal Property shall also
indicate those items of personal property, such as art and antiques, which
is excluded from the personal property being conveyed hereby.
4. All intangible personal property owned or possessed by Transferor
and used in connection with the ownership, operation, leasing or
maintenance of the Real Property or the Tangible Personal Property, all
goodwill attributed to the Property, and any and all trademarks and
copyrights, guarantees, Authorizations (as hereinafter defined), general
intangibles, business records, plans and specifications, surveys and title
insurance policies pertaining to the Property, all licenses, permits and
approvals with respect to the construction, ownership, operation or
maintenance of the Property, any unpaid award for taking by condemnation or
any damage to the Real Property by reason of a change of grade or location
of or access to any street or highway, excluding (a) any of the aforesaid
rights that Transferee elects not to acquire and (b) the Current Assets, as
hereinafter defined (collectively, the "Intangible Personal Property"). A
schedule of the Intangible Personal Property is attached to this Agreement
as EXHIBIT D. The Intangible Personal Property shall not include the right
to use the Trade Name, which shall be retained by Transferor and
transferred to the lessee of the Golf Course (and further provided in no
event shall Transferee have the right to use such trade name in connection
with any other property owned by Transferee or any Affiliate (hereinafter
defined) of Transferee). (The Real Property, Tangible Personal Property
and Intangible Personal Property are sometimes collectively referred to as
the "Property".)
C. Upon the acquisition by the Transferee of the Property, the
Transferee will lease the Property to an Affiliate of Transferor pursuant to a
lease (the "Golf Course Lease"), substantially in the form attached hereto as
EXHIBIT E.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
"ACT OF BANKRUPTCY" shall mean if a party hereto or any general
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession
2
<PAGE>
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its Property, (b) admit in writing its inability to pay
its debts as they become due, (c) make a general assignment for the benefit
of its creditors, (d) file a voluntary petition or commence a voluntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in
effect) or any new bankruptcy statute, (e) be adjudicated bankrupt or
insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition
or adjustment of debts, (g) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect) or any new bankruptcy statute, or (h) take any corporate
or partnership action for the purpose of effecting any of the foregoing; or
if a proceeding or case shall be commenced, without the application or
consent of a party hereto or any general partner thereof, in any court of
competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of
such party or general partner, (2) the appointment of a receiver, custodian,
trustee or liquidator or such party or general partner or all or any
substantial part of its assets, or (3) other similar relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.
"AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
"BASE PURCHASE PRICE" shall mean Ten Million Five Hundred Thousand
Dollars ($10,500,000).
"BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale
conveying title to the Tangible Personal Property and Intangible Personal
Property from Transferor to Transferee, substantially in the form of EXHIBIT F
attached hereto.
"CLOSING" shall mean the time the Deed and each of the deliveries
to be made by Transferor (as provided in Section 6.2) and Transferee (as
provided in Section 6.3) are made and each of the Closing conditions of
Transferee and Transferor in Sections 5.1 and 5.2, respectively, have been
satisfied or waived.
"CLOSING DATE" shall mean the date on which the Closing occurs.
3
<PAGE>
"CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
"CONTINGENT PURCHASE PRICE" shall mean the amount as calculated by
the procedure set forth in Exhibit K attached hereto.
"CURRENT ASSETS" shall mean cash, accounts receivable, Inventory
and Restaurant Supplies (each as hereinafter defined) held by Transferor prior
to the Closing Date.
"DEED" shall mean a grant deed or special warranty deed,
substantially in the form of EXHIBIT G attached hereto (or lease assignment, if
the Property is owned by Transferor pursuant to a ground lease), in form and
substance satisfactory to Transferee, conveying the title of Transferor to the
Real Property, with such grant or warranty covenants of title from Transferor to
Transferee as are customary in the state in which the Property is located,
subject only to Permitted Title Exceptions. If there is any difference between
the description of the Land, as shown on EXHIBIT A-1 and EXHIBIT A-2 attached
hereto and the description of the Land as shown on the Survey, the description
of the Land to be contained in the Deed and the description of the Land set
forth in the Owner's Title Policy, as defined herein, shall conform to the
description shown on the Survey.
"DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
"DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00
a.m., California time, on the date hereof, and continuing through 5:00 p.m.,
California time, on the date that is sixty (60) days from the date hereof.
"EMPLOYMENT AGREEMENTS" shall mean all employment agreements,
written or oral, between Transferor or its managing agent and the persons
employed with respect to the Property in effect as of the date hereof.
"ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or
judicial action, suit, demand, letter, claim, lien, notice of non-compliance or
violation, investigation or proceeding relating in any way to any Environmental
Laws or any permit issued under any Environmental Law including, without
limitation, (i) by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Laws, and (ii) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Substances or arising from alleged injury or threat of
injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and
4
<PAGE>
reauthorization Act of 1986, Pub. L. 99-499 and 99-563; the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. Section 651, et seq.;
the Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq.; the Safe
Drinking Water Act, as amended, 42 U.S.C. Section 201, et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq.; and
all federal, state and local environmental health and safety statutes,
ordinance, codes, rules, regulations, orders and decrees regulating, relating
to or imposing liability or standards concerning or in connection with
Hazardous Substances.
"ESCROW AGENT" shall mean the Title Company.
"FIRPTA CERTIFICATE" shall mean the affidavit of Transferor under
Section 1445 of the Internal Revenue Code certifying that Transferor is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT H attached hereto.
"GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Transferor for purchase in connection with golfing
privileges at the Property.
"GOLF COURSE LEASE" shall have the meaning set forth in Recital C.
"GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"HAZARDOUS SUBSTANCES" shall mean any substance, material, waste,
gas or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(4).
5
<PAGE>
"INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Transferor's
business.
"LAND" shall have the meaning set forth in Recital A.
"MORTGAGE INDEBTEDNESS" shall have the meaning set forth in Section
2.2(d).
"OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the date hereof, as more particularly set forth on EXHIBIT I attached hereto.
"OWNER'S SHARES" shall mean limited partnership interests in the
Partnership.
"OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land Title
Association extended coverage owner's policy of title insurance issued to
Transferee by the Title Company, pursuant to which the Title Company insures
Transferee's ownership of fee simple title (or ground lease interest, as
applicable) to the Real Property (including the marketability thereof) subject
only to Permitted Title Exceptions and shall include those title endorsements
required by Transferee. The Owner's Title Policy shall insure Transferee in the
amount designated by Transferee and shall be acceptable in form and substance to
Transferee.
"PARTNERSHIP AGREEMENT" shall mean that certain amended and
restated limited partnership agreement relating to Transferee, which shall be
substantially in the form attached hereto as EXHIBIT J.
"PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title
to the Real Property that are satisfactory to Transferee as determined under
this Agreement, and as evidenced by a pro forma title report.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
"PROPERTY" shall have the meaning set forth in Recital B(4).
"REAL PROPERTY" shall have the meaning set forth in Recital B(2).
6
<PAGE>
"REGISTERED OFFERING" shall have the same meaning set forth in
Section 3.19.
"RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECURITIES" shall have the meaning set forth in Section 7.4.
"STATE" shall mean the state or commonwealth in which the Property
is located.
"SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
"SURVEY" shall mean the survey prepared pursuant to Section 2.2(c).
"TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
"TITLE COMPANY" shall mean a title insurance company selected by
Transferee and authorized to conduct a title insurance business in the State.
"TITLE OBJECTIONS" shall have the meaning set forth in Section
2.2(d).
"TRANSFEROR'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Transferor.
"UTILITIES" shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of the
Property.
"WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to
the construction and interpretation of this Agreement:
7
<PAGE>
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine
and the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Agreement or any exhibits hereto.
ARTICLE 2
PURCHASE AND CONTRIBUTION; PAYMENT OF BASE PURCHASE PRICE
2.1 PURCHASE AND CONTRIBUTION. Transferor agrees to contribute
and Transferee agrees to acquire the Property for the Base Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) Transferee shall have the right, during the Due Diligence
Period, and thereafter if Transferee notifies Transferor that Transferee
has elected to proceed to Closing in the manner described below, to enter
upon the Real Property and to perform, at Transferor's expense, such
surveying, engineering, and environmental studies and investigations as
Transferee may deem appropriate. If such tests, studies and investigations
warrant, in Transferee's sole, absolute and unreviewable discretion, the
purchase of the Property for the purposes contemplated by Transferee, then
Transferee may elect to proceed to Closing and shall so notify Transferor
and the Escrow Agent, in writing, prior to the expiration of the Due
Diligence Period. If for any reason Transferee does not so notify
Transferor and Escrow Agent of its determination to proceed to Closing
prior to the expiration of the Due Diligence Period, or if Transferee
notifies Transferor and Escrow Agent, in writing, prior to the expiration
of the Due Diligence Period that it has determined not to proceed to
Closing, this Agreement automatically shall terminate and Transferee and
Escrow Agent shall be released from any further liability or obligation
under this Agreement and, if requested by Transferor, Transferee will
deliver such reports and materials to Transferor.
(b) During the Due Diligence Period, Transferor shall make
available to Transferee, its agents, auditors, engineers, attorneys and
other designees, for
8
<PAGE>
inspection and/or copying, copies of all existing architectural and
engineering studies, surveys, title insurance policies, zoning and site
plan materials, correspondence, environmental audits and reviews, books,
records, tax returns, bank statements, financial statements, fee
schedules and any and all other material or information relating to the
Property which are in, or come into, Transferor's possession or control,
or which Transferor may attain. Such information is more particularly
described in EXHIBIT L attached hereto, as the same may be amended or
supplemented by Transferor from time to time.
(c) Within thirty (30) days from the date hereof, if requested
by Transferee, Transferor shall deliver to Transferee an ALTA/ACSM survey
or a boundary survey, as reasonably required by Transferee, of the Land and
the Improvements, prepared by a surveyor licensed to practice as such in
the State, bearing a date not earlier than sixty (60) days from the date of
its delivery and certified to both Transferee, Transferor and the Title
Company (and any lender or other party designated by Transferee), showing
the legal description of the Land, all dimensions thereof, and showing the
location of Improvements on the Land and the setbacks thereof from the
property line, as well as the setbacks required by applicable zoning laws
or regulations (the "Survey"). The Survey shall locate all easements which
serve and affect the Land. The Survey shall reflect that no buildings or
improvements located on any other property encroach upon the Land and that
the Improvements located upon the Land do not encroach upon any other
property. The surveyor preparing the Survey shall certify that (i) the
Survey is an accurate Survey of the Land and the Improvements, (ii) that
the Survey was made under the surveyor's supervision, (iii) that the Survey
meets (a) the requirements of the Title Company for the issuance of the
Owner's Title Policy free of any general survey exception, and (b) the
minimum technical standards for land boundary surveys with improvements,
set forth by applicable statutes or applicable professional organizations,
and (iv) all buildings and other structures and their relation to the
property lines are shown and that there are no encroachments, overlaps,
boundary line disputes, easements, or claims of easements visible on the
ground, other than those shown on the Survey. If Transferee has any
objection to Survey matters, the same shall be treated for all purposes as
Title Objections within the provisions of this Agreement.
(d) Transferor agrees to provide to Transferee, within five (5)
business days following the date of this Agreement, a copy of any existing
title insurance policies which Transferor may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Transferee, at its expense, shall cause an examination of title to the
Property to be made and a preliminary title report to be issued (the
"Preliminary Title Report"), and, prior to the expiration of the Due
Diligence Period, shall notify Transferor of any defects in title shown by
such examination that Transferee is unwilling to accept by delivering a pro
forma copy of the Preliminary Title Report that reflects such unacceptable
defects in title, which shall be designated as the Title Objections.
Within ten (10) days after such
9
<PAGE>
notification, Transferor shall notify Transferee whether Transferor is
willing to cure such defects. If Transferor is willing to cure such
defects, Transferor shall act promptly and diligently to cure such defects
at its expense. If any of such defects consist of mortgages, deeds of
trust, construction or mechanics' liens, tax liens or other liens or
charges in a fixed sum or capable of computation as a fixed sum, then, to
that extent, and notwithstanding the foregoing, Transferor shall be
obligated to pay and discharge such defects at Closing, except for the
mortgages scheduled and set forth in EXHIBIT M attached hereto (the
"Mortgage Indebtedness") which Transferee shall take subject to as
provided in Section 2.3(a). For such purposes, Transferor may use all
or a portion of the cash to close. If Transferor is unable to cure such
defects by Closing, after having attempted to do so diligently and in good
faith, Transferee shall elect (1) to waive such defects and proceed to
Closing without any abatement in the Base Purchase Price, or (2) to
terminate this Agreement. Transferor shall not, after the date of this
Agreement, subject the Property to any liens, encumbrances, leases,
covenants, conditions, restrictions, easements or other title matters or
seek any zoning changes or take any other action which may affect or modify
the status of title without Transferee's prior written consent. All title
matters revealed by Transferee's title examination and not objected to by
Transferee as provided above shall be deemed Permitted Title Exceptions.
If Transferee shall fail to examine title and notify Transferor of any such
Title Objections by the end of the Due Diligence Period, all such title
exceptions (other than those rendering title unmarketable and those that
are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions. Notwithstanding the foregoing, Transferee shall not be
required to take title to the Property subject to any matters which may
arise subsequent to the effective date of its examination of title to the
Property made during the Due Diligence Period.
(e) Transferor shall deliver to Transferee within fourteen (14)
days after the date of the execution of this Agreement by Transferor and
Transferee a disclosure schedule that accurately and completely identifies
and describes (a) all Employment Agreements (including name of employee,
social security number, wage or salary, accrued vacation benefits, other
fringe benefits, etc.), and (b) an updated Golf Club membership list,
setting forth the names of the members of the Golf Club, the length of
their membership, the payment obligations of the members and a summary of
the terms of the memberships (the "Disclosure Schedule").
(f) Transferor shall deliver to Transferee within thirty (30)
days after the date of execution of this Agreement by Transferor and
Transferee current searches of all Uniform Commercial Code financing
statements filed with the Secretary of State of the State respecting
Transferor, together with searches for pending litigation, tax liens and
bankruptcy filings in all appropriate jurisdictions.
2.3 PAYMENT OF BASE PURCHASE PRICE. The Base Purchase Price
shall be paid to Transferor in the following manner:
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(a) Transferee shall (i) take subject to the Mortgage
Indebtedness in an aggregate amount not in excess of the Base Purchase
Price and (ii) receive a credit against the Base Purchase Price in an
amount equal to a sum necessary to pay off in full the Mortgage
Indebtedness, including any prepayment premium, and to obtain a release of
such deeds of trust or mortgages evidencing the Mortgage Indebtedness as of
the Closing Date, as evidenced by a payoff letter from the beneficiary of
each such deed of trust or mortgage in form and substance satisfactory to
Transferee and the Title Company.
(b) Transferee shall pay Four Million Five Hundred Thousand
($4,500,000) of the Base Purchase Price to Transferor in Owner's Shares.
The number of Owner's Shares required for such payment shall be One Hundred
Sixty-Nine Thousand Eight Hundred Eleven (169,811), which is the quotient
obtained by dividing Four Million Five Hundred Thousand ($4,500,000) by
Twenty-Six and Fifty-Hundredths Dollars ($26.50).
(c) Transferee shall pay the balance of the Base Purchase Price
in cash, which shall include any amounts necessary to pay for certain costs
incurred by Transferor in connection with the preparation of certain
audited financial statements, due diligence costs and closing costs and to
permit the liquidation of certain third party-interests in Transferor, as
set forth in a schedule to be prepared by Transferor and delivered to
Transferee prior to the expiration of the Due Diligence Period, which
schedule shall be subject to Transferee's review and approval, which
approval shall not be unreasonably withheld.
(d) Transferee shall hold back One Million Dollars ($1,000,000)
(the "Holdback Amount") from the Base Purchase Price which shall be
retained by Transferee, and not delivered to Transferor, until the later of
(i) January 1, 1999, or (ii) the date on which Transferor provides to
Transferee a release agreement in form and substance reasonably acceptable
to Transferee pursuant to which Lewis Young releases all claims he may have
or have in the future against Transferor, Lyndell Young or the Property
resulting from any alleged debt or equity interest of Lewis Young in
Transferor or the Property, at which time the Holdback Amount shall be paid
to Transferor.
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferee to enter into this Agreement and to purchase
the Property, and to pay the Base Purchase Price therefor, Transferor hereby
makes the following representations, warranties and covenants with respect to
the Property, subject to the Warranty Disclosure Schedule attached hereto as
EXHIBIT P, upon each of which Transferor acknowledges and agrees that Transferee
is entitled to rely and has relied:
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3.1 ORGANIZATION AND POWER. Transferor is duly formed or
organized, validly existing and in good standing under the laws of the state of
its formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document or instrument required
to be executed and delivered by or on behalf of Transferor hereunder.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and
each of the agreements and certificates of Transferor to be delivered to
Transferee at Closing as provided in Section 5.1 will be, duly authorized by all
necessary action on the part of Transferor, has been duly executed and delivered
by Transferor, constitutes the valid and binding agreement of Transferor and is
enforceable against Transferor in accordance with its terms. There is no other
person or entity who has an ownership interest in the Property or whose consent
is required in connection with Transferor's performance of its obligations
hereunder. All action required pursuant to this Agreement necessary to
effectuate the transactions contemplated herein has been, or will at Closing be,
taken promptly and in good faith by Transferor and its representatives and
agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the
performance by Transferor of its obligations under, this Agreement do not and
will not contravene, or constitute a default under, any provision of applicable
law or regulation, Transferor's Organizational Documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon Transferor,
or result in the creation of any lien or other encumbrance on any asset of
Transferor. There are no outstanding agreements (written or oral) pursuant to
which Transferor (or any predecessor to or representative of Transferor) has
agreed to contribute or has granted an option or right of first refusal to
purchase the Property or any part thereof. Other than the rights of tenants, as
tenants only, under any leases of any portion of the Property (copies of which
have been provided to Transferee by Transferor), there are no purchase
contracts, options or other agreements of any kind, written or oral, recorded or
unrecorded, whereby any person or entity other than Transferor will have
acquired or will have any basis to assert any right, title or interest in, or
right to possession, use, enjoyment or proceeds of, all or any portion of the
Property. There are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or to otherwise acquire
any interest or profit participation of any kind in the Property or any part
thereof.
3.4 NO SPECIAL TAXES. Transferor has no knowledge of, nor has
it received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Transferor's knowledge, there is not
any proposed increase in the assessed valuation of the Real Property for tax
purposes (except as may relate to the transfer contemplated by this Agreement).
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3.5 COMPLIANCE WITH EXISTING LAWS. Transferor possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Transferor has not misrepresented or failed to disclose
any relevant fact in obtaining all Authorizations, and Transferor has no
knowledge of any change in the circumstances under which any of those
Authorizations were obtained that result in their termination, suspension,
modification or limitation. Transferor has not taken any action (or failed to
take any action), the omission of which would result in the revocation of any of
the Authorizations. Transferor has no knowledge, nor has it received notice
within the past three years, of any existing or threatened violation of any
provision of any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Property or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof.
3.6 REAL PROPERTY. To the best of Transferor's knowledge, (i)
the Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, (iii) all contractors and subcontractors retained by Transferor
who have performed work on or supplied materials to the Property have been fully
paid, and all materials used at or on the Property have been fully paid for,
(iv) the Improvements have been completed in all material respects in a
workmanlike manner of first-class quality, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and is
presently operative in good working order. Transferor has not received any
written notice which is still in effect that there is, and, to the best of
Transferor's knowledge, there does not exist, any violation of a condition or
agreement contained in any easement, restrictive covenant or any similar
instrument or agreement effecting the Real Property, or any portion thereof.
3.7 PERSONAL PROPERTY. All of the Tangible Personal Property
and Intangible Personal Property being conveyed by Transferor to Transferee is
free and clear of all liens and encumbrances and will be so on the Closing Date
and Transferor has good, merchantable title thereto and the right to convey same
in accordance with the terms of this Agreement.
3.8 OPERATING AGREEMENTS. Each of the Operating Agreements
may be terminated upon not more than thirty (30) days prior written notice
and without the payment of any penalty, fee, premium or other amount.
Transferor has performed all of its obligations under each of the Operating
Agreements and no fact or circumstance has occurred which, by itself or with
the passage of time or the giving of notice or both, would constitute a
default under any of the Operating Agreements. Transferor shall not enter
into any new Operating Agreements, supply contract, vending or service
contract or other agreements with respect to the Property, nor shall
Transferor enter into any agreements modifying the Operating Agreements,
unless (a) any such agreement or modification will not bind Transferee or the
Property after the Closing Date, or (b)
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Transferor has obtained Transferee's prior written consent to such agreement
or modification. Transferor acknowledges that Transferee will not assume any
of the Operating Agreements and none of the Operating Agreements will be
binding on Transferee or the Property after Closing.
3.9 WARRANTIES AND GUARANTIES. Transferor shall not before or
after Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
Transferee.
3.10 INSURANCE. All of Transferor's insurance policies are valid
and in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by Transferor on or before the due date therefor. Transferor shall pay
all premiums on, and shall not cancel or voluntarily allow to expire, any of
Transferor's insurance policies unless such policy is replaced, without any
lapse of coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. Transferor has not received
any notice from any insurance company of any defect or inadequacies in the
Property to any part thereof which would adversely affect the insurability of
the Property, or which would increase the cost of insurance beyond that which
would ordinarily and customarily be charged for similar properties in the
vicinity of the Real Property. The Property is fully insured in accordance with
prudent and customary practice.
3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Transferor has received
no notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Transferor has no knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real Property. To the
best of Transferor's knowledge, no fact or condition exists which would result
in the termination or material impairment of access to the Real Property from
adjoining public or private streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other utilities or services.
3.12 LITIGATION. Except as disclosed in writing to Transferor,
there is no action, suit or proceeding pending or known to be threatened against
or affecting Transferor or any of its properties in any court, before any
arbitrator or before or by any Governmental Body which (a) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which Transferor is a party or by which it is
bound and that is or is to be used in connection with, or is contemplated by,
this Agreement, (b) could materially and adversely affect the business,
financial position or results of operations of Transferor, (c) could materially
and adversely affect the ability of Transferor to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Property, any part thereof or any interest therein, (e) the
subject matter of which concerns any past or present employee of Transferor or
its managing agent, or (f) could
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otherwise adversely materially affect the Property, any part thereof or any
interest therein or the use, operation, condition or occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes
pending or, to the best of Transferor's knowledge, threatened as to the
operation or maintenance of the Property or any part thereof. Transferor is not
a party to any union or other collective bargaining agreement with employees
employed in connection with the ownership, operation or maintenance of the
Property. Transferor is not a party to any employment contracts or agreements,
other than the Employment Agreements, and neither Transferor nor its managing
agent will, between the date hereof and the Closing Date, enter into any new
employment contracts or agreements, amend any existing Employment Agreement,
except with the prior written consent of Transferee. Transferor acknowledges
that Transferee will not assume any of the Employment Agreements and Transferor
has complied with and shall be responsible for compliance with the WARN Act and
any other applicable employment-related laws or ordinances. Transferor has
complied with the requirements of the federal Immigration and Reform Control Act
respecting the employment of undocumented workers.
3.14 FINANCIAL INFORMATION. To the best of Transferor's
knowledge, all of Transferor's financial information, including, without
limitation, all books and records and financial statements, is correct and
complete in all material respects and presents accurately the results of the
operations of the Property for the periods indicated.
3.15 ORGANIZATIONAL DOCUMENTS. Transferor's Organizational
Documents are in full force and effect and have not been modified or
supplemented, and no fact or circumstance has occurred that, by itself or with
the giving of notice or the passage of time or both, would constitute a default
thereunder.
3.16 OPERATION OF PROPERTY. Transferor covenants, that between
the date hereof and the Closing Date, it will (a) operate the Property in the
usual, regular and ordinary manner consistent with Transferor's prior practice,
(b) maintain its books of account and records in the usual, regular and ordinary
manner, in accordance with sound accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years and (c) use
all reasonable efforts to preserve intact its present business organization,
keep available the services of its present officers, partners and employees and
preserve its relationships with suppliers and others having business dealings
with it. Except as otherwise permitted hereby, from the date hereof until
Closing, Transferor shall not take any action or fail to take action the result
of which would have a material adverse effect on the Property or Transferee's
ability to continue the operation thereof after the Closing Date in
substantially the same manner as presently conducted, or which would cause any
of the representations and warranties contained in this Article III to be untrue
as of Closing.
From and after the execution and delivery of this Agreement,
Transferor shall not, other than in the ordinary course of business, (a) make
any agreements which shall be binding upon Transferee with respect to the
Property, or (b) reduce or cause to
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be reduced any green fees, membership fees, tournament fees, driving range
fees or any other charges over which Transferor has operational control.
Between the date hereof and the Closing Date, if and to the extent requested
by Transferee, Transferor shall deliver to Transferee such periodic
information with respect to the above information as Transferor customarily
keeps internally for its own use. Transferor agrees that it will operate the
Property in accordance with the provisions of this Section 3.16 between the
date hereof and the Closing Date.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect
to Transferor.
3.18 LAND USE. The current use and occupancy of the Property for
golfing and all other related purposes (including, without limitation, the sale
of merchandise and food and beverages) are permitted as a matter of right as a
principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special permit,
permission or consent and Transferor is not aware of any proposal to change or
restrict such use. Transferor has all necessary certificates of occupancy or
completion to operate the Property as presently operated and there are no
unfulfilled conditions respecting the development of the Property.
3.19 PUBLIC OFFERING; PREPARATION OF S-11. Transferor shall
cooperate in the preparation by an Affiliate of Transferee of a Form S-11 or, if
applicable, a Form S-3 under the Securities Act of 1933, as amended, to be filed
with the SEC in connection with any public offering (the "Registered Offering").
The Registered Offering shall be for purposes of selling shares of common stock
in an Affiliate of Transferee. Transferor shall provide Transferee access to
all financial and other information relating to the Property which would be
sufficient to enable them to prepare financial statements in conformity with
Regulation S-X of the SEC and to enable the Transferee to prepare a registration
statement, report or disclosure statement for filing with the SEC. At
Transferee's request, Transferor shall provide to Transferee's representatives a
signed representation letter sufficient to enable an independent public
accountant to render an opinion on the financial statements related to the
Property.
3.20 HAZARDOUS SUBSTANCES. Except as may be disclosed in the
Phase I environmental assessment report for the Property, to the best of
Transferor's knowledge, (i) no Hazardous Substances are or have been located on
(except in immaterial amounts used in the ordinary course for the operation or
maintenance of the Property by Transferor in accordance with all applicable
laws), in or under the Property or have been released into the environment, or
discharged, placed or disposed of at, on or under the Property; (ii) no
underground storage tanks are, or have been, located at the Property; (iii) the
Property has never been used to store, treat or dispose of Hazardous Substances;
and (iv) the Property and its prior uses comply with, and at all times have
complied with all applicable Environmental Laws or any other governmental law,
regulation or requirement relating to environmental and occupational health and
safety matters and Hazardous Substances. To the best of Transferor's knowledge,
there currently exist no
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facts or circumstances that could reasonably be expected to give rise to a
material non-compliance with Environmental Laws, material environmental
liability or material Environmental Claim.
3.21 UTILITIES. All Utilities required for the operation of the
Property either enter the Property through adjoining streets, or they pass
through adjoining land and do so in accordance with valid public easements or
private easements, and all of said Utilities are installed and are in good
working order and repair and operating as necessary for the operation of the
Property and all installation and connection charges therefor have been paid in
full. The sewage, sanitation, plumbing, water retention and detention, refuse
disposal and utility facilities in and on and/or servicing the Real Property are
adequate to service the Real Property as it is currently being used and the Real
Property's utilization of such facilities is in compliance with all applicable
governmental and environmental protection authorities' laws, rules, regulations
and requirements.
3.22 CURB CUTS. All curb cut street opening permits or licenses
required for vehicular access to and from the Property from any adjoining public
street have been obtained and paid for and are in full force and effect.
3.23 LEASED PROPERTY. The Personal Property identified on
EXHIBIT C is all of the leased property at the Property, and such exhibit
reflects the date of each such lease, the name of the lessor, the name of the
lessee, the term of each such lease, the lease payment terms and a description
of the property demised by each such lease. All leases of such property are in
good standing and free from default.
3.24 SUFFICIENCY OF CERTAIN ITEMS. The Property, together with
the Current Assets, contain an amount of equipment and supplies, which is
sufficient to efficiently operate and maintain the Property in the manner in
which it is normally operated and maintained.
3.25 ACCREDITED INVESTOR. Transferor and all equity owners of
Transferor are as of the date hereof, and as of the Closing Date shall be,
"Accredited Investors". Concurrent herewith Transferor shall execute and
deliver to Transferee the Accredited Investor Questionnaire attached hereto as
EXHIBIT N.
Each of the representations, warranties and covenants contained in this
Article III are intended for the benefit of Transferee and any underwriter in
the Registered Offering. Each of said representations, warranties and
covenants shall survive the Closing for a period of one (1) year, at which
time they shall expire unless prior to such time Transferee has made a formal,
written claim alleging a breach of one or more of the representations,
warranties or covenants. No investigation, audit, inspection, review or the
like conducted by or on behalf of Transferee shall be deemed to terminate the
effect of any such representations, warranties and covenants, it being
understood that Transferee has the right to rely thereon and that each such
representation, warranty and
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covenant constitutes a material inducement to Transferee to execute this
Agreement and to close the transaction contemplated hereby and to pay the Base
Purchase Price to Transferor.
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferor to enter into this Agreement and to contribute
the Property, Transferee hereby makes the following representations, warranties
and covenants, upon each of which Transferee acknowledges and agrees that
Transferor is entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. Transferee is duly formed or
organized, validly existing and in good standing under the laws of the state of
its formation and has all governmental licenses, Authorizations, consents and
approvals required to carry on its business as now conducted and to enter into
and perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of Transferee hereunder.
4.2 NONCONTRAVENTION. The execution and delivery of this
Agreement and the performance by Transferee of its obligations hereunder do not
and will not contravene, or constitute a default under, any provisions of
applicable law or regulation, Partnership Agreement or any agreement, judgment,
injunction, order, decree or other instrument binding upon Transferee or result
in the creation of any lien or other encumbrance on any asset of Transferee.
4.3 LITIGATION. There is no action, suit or proceeding, pending
or known to be threatened, against or affecting Transferee in any court or
before any arbitrator or before any administrative panel or otherwise that (a)
could materially and adversely affect the business, financial position or
results of operations of Transferee, or (b) could materially and adversely
affect the ability of Transferee to perform its obligations hereunder, or under
any document to be delivered pursuant hereto.
4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect
to Transferee.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and
each of the agreements and certificates of Transferee to be delivered to
Transferor at Closing as provided in Section 5.2 will be, duly authorized by all
necessary action on the part of Transferee, has been duly executed and delivered
by Transferee, constitutes the valid and binding agreement of Transferee and is
enforceable against Transferee in accordance with its terms. All action
required pursuant to this Agreement necessary to effectuate the transactions
contemplated herein has been, or will at Closing be, taken promptly and in good
faith by Transferee and its representatives and agents.
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4.6 TRADE NAME. Transferee shall not use the trade name
referenced in Recital B(4) in connection with any other property owned by
Transferee or any Affiliate of Transferee.
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO TRANSFEREE'S OBLIGATIONS. Transferee's obligations
hereunder are subject to the satisfaction of the following conditions
precedent and the compliance by Transferor with the following covenants:
(a) TRANSFEROR'S DELIVERIES. Transferor shall have delivered to
or for the benefit of Transferee, as the case may be, on or before the
Closing Date, all of the documents and other information required of
Transferor pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
Transferor's representations and warranties made in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as if
then made, there shall have occurred no material adverse change in the
condition or financial results of the operation of the Property since the
date hereof. Transferor shall have performed all of its covenants and
other obligations under this Agreement and Transferor shall have executed
and delivered to Transferee on the Closing Date a certificate dated as of
the Closing Date to the foregoing effect in the form of EXHIBIT O attached
hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
(d) TITLE TO PROPERTY. Transferee shall have determined that
Transferor is the sole owner of good and marketable fee simple title (or
ground lease interest, as applicable) to the Real Property and to the
Tangible Personal Property, free and clear of all liens, encumbrances,
restrictions, conditions and agreements except for Permitted Title
Exceptions. Transferor shall not have taken any action or permitted or
suffered any action to be taken by others from the date hereof and through
and including the Closing Date that would adversely affect the status of
title to the Real Property or to the Tangible Personal Property.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving
range, putting greens, mechanical systems, plumbing, electrical wiring,
appliances, fixtures, heating, air conditioning and ventilating equipment,
elevators, boilers, equipment, roofs, structural members and furnaces)
shall be in the same condition at Closing as they are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, Transferor
shall not have diminished the quality or quantity of maintenance and upkeep
services heretofore provided to the Real Property and
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the Tangible Personal Property. Transferor shall not have removed or
caused or permitted to be removed any part or portion of the Real Property
or the Tangible Personal Property unless the same is replaced, prior to
Closing, with similar items of at least equal quality and acceptable to
Transferee.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal
of garbage and other waste from the Property. Between the date hereof and
the Closing Date, Transferor shall have received no notice of any material
increase or proposed material increase in the rates charged for the
Utilities from the rates in effect as of the date hereof.
(g) LIQUOR LICENSE. Transferee, or Transferee's nominee, shall
have obtained all liquor licenses, alcoholic beverage licenses and other
permits and Authorizations necessary to operate the restaurant, bars, snack
shops and lounges presently located at the Property. To that end,
Transferor and Transferee, or Transferee's nominee, shall have cooperated
with each other, and each shall have executed such transfer forms, license
applications and other documents as may be necessary to effect the
obtaining of the liquor licenses, alcoholic beverage licenses and other
Authorizations required hereby.
(h) PARTNERSHIP AGREEMENT. Transferor shall have delivered to
Transferee a countersigned copy of the Partnership Agreement in a form
prepared by Transferee, which shall be in substantially the form attached
hereto as EXHIBIT J.
(i) GOLF COURSE LEASE. An Affiliate of Transferor shall have
delivered to Transferee a countersigned copy of the Golf Course Lease in a
form prepared by Transferee, which shall be in substantially the form
attached hereto as EXHIBIT E.
(j) APPROVAL BY BOARD OF DIRECTORS. Approval of the Board of
Directors of Golf Trust of America, Inc. of the transaction contemplated by
this Agreement by an affirmative vote prior to the expiration of the Due
Diligence Period.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferee and may be waived in whole or in part
by Transferee, but only by an instrument in writing signed by Transferee.
5.2 AS TO TRANSFEROR'S OBLIGATIONS. Transferor's obligations
hereunder are subject to the satisfaction of the following conditions
precedent and the compliance by Transferee with the following covenants:
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(a) TRANSFEREE'S DELIVERIES. Transferee shall have delivered to
or for the benefit of Transferor, on or before the Closing Date, all of the
documents and payments required of Transferee pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
Transferee's representations and warranties made in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as if
then made and Transferee shall have performed all of its covenants and
other obligations under this Agreement.
(c) COUNTERSIGNED COPIES OF PARTNERSHIP AGREEMENT AND GOLF
COURSE LEASE. Transferee shall have delivered to Transferor countersigned
copies of the Partnership Agreement and Golf Course Lease.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferor and may be waived in whole or in part, by
Transferor, but only by an instrument in writing signed by Transferor.
ARTICLE 6
CLOSING
6.1 CLOSING. Closing shall be held at 9:00 a.m., New York
time, at the offices of Transferee (or counsel to Transferee) on a date that
is ten (10) days after the expiration of the Due Diligence Period; provided,
however, that such ten (10) day period may be extended for an additional
twenty (20) days by Transferee, at its sole discretion by providing written
notice to Transferor prior to the expiration of such ten (10) day period. If
the Closing Date falls on a Saturday, Sunday or other legal holiday, the
Closing shall take place on the first following business day thereafter.
Possession of the Property shall be delivered to Transferee at Closing,
subject only to Permitted Title Exceptions.
6.2 TRANSFEROR'S DELIVERIES. At Closing, Transferor shall
deliver to Transferee all of the following instruments, each of which shall
have been duly executed and, where applicable, acknowledged and/or sworn on
behalf of Transferor and shall be dated as of the Closing Date:
(a) The certificate required by Section 5.1(b).
(b) The Deed.
(c) The Bill of Sale - Personal Property.
(d) The Partnership Agreement.
(e) The Golf Course Lease.
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(f) Evidence of title acceptable to Transferee for any vehicle
owned by Transferor and used in connection with the Property.
(g) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy including
those endorsements requested by Transferee, and to eliminate the standard
exceptions as exceptions thereto, so that the Owner's Title Policy will be
subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and
gap affidavit.
(h) The FIRPTA Certificate.
(i) To the extent available, true, correct and complete copies
of all warranties, if any, of manufacturers, suppliers and installers
possessed by Transferor and relating to the Property, or any part thereof.
(j) Certified copies of Transferor's Organizational Documents.
(k) Appropriate resolutions of the board of directors or
partners, as the case may be, of Transferor, certified by the secretary or
an assistant secretary of Transferor or a general partner, as the case may
be, together with all other necessary approvals and consents of Transferor,
authorizing (i) the execution on behalf of Transferor of this Agreement and
the documents to be executed and delivered by Transferor prior to, at or
otherwise in connection with Closing, and (ii) the performance by
Transferor of its obligations hereunder and under such documents, or
appropriate resolutions of the partners of Transferor, as the case may be.
(l) A valid, final and unconditional certificate of occupancy
for the Real Property and Improvements, issued by the appropriate
Governmental Body allowing for the use of the Real Property as a golf
course and permitting the continued operation of the improvements as
presently operated.
(m) Such proof as Transferee may reasonably require with respect
to Transferor's compliance (or indemnity with respect to compliance) with
the bulk sales laws or similar statutes.
(n) Copy of each and every existing insurance policy covering
the Property and certificates evidencing such coverage.
(o) To the extent available, a set or copies of the plans and
specifications for the Improvements.
(p) A written instrument executed by Transferor, conveying and
transferring to Transferee all of Transferor's right, title and interest in
any telephone numbers, fax numbers or internet or electronic mail addresses
(if
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applicable) relating solely to the Property, and, if Transferor maintains
a post office box solely with respect to the Property, conveying to
Transferee all of its interest in and to such post office box and the
number associated therewith, so as to assure a continuity in operation and
communication.
(q) All current real estate and personal property tax bills in
Transferor's possession or under its control.
(r) All surveys and plot plans of the Real Property in
possession of or in the control of Transferor.
(s) A complete list of all scheduled tournaments, functions and
the like, in reasonable detail.
(t) A list of Transferor's outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each
account and the amount due Transferor.
(u) A pay off statement prepared by any holder of Mortgage
Indebtedness setting forth the amount, including accrued interest and
prepayment penalties, to pay off the Mortgage Indebtedness.
(v) Written notice executed by Transferor notifying all
interested parties, including all tenants under any leases of the Property,
that the Property has been conveyed to Transferee and directing that all
payments, inquiries and the like be forwarded to Transferee at the address
to be provided by Transferee.
(x) Any other document or instrument reasonably requested by
Transferee with respect to the Property.
6.3 TRANSFEREE'S DELIVERIES. At Closing, Transferee shall
pay or deliver to Transferor the following:
(a) The cash portion of the Base Purchase Price by federal funds
wire to an account designated by Transferor.
(b) The non-cash portion of the Base Purchase Price payable in
Owner's Shares issued to such holders and in such denominations to such
holders as specified by Transferor.
(c) Any other document or instrument reasonably requested by
Transferor relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Transferee and Transferor
shall mutually execute and deliver each to the other:
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(a) A closing statement for Transferor and a closing statement
for Transferee (collectively, the "Closing Statements") reflecting the
Purchase Price and the adjustments and prorations required hereunder and
the allocation of income and expenses required hereby.
(b) Such other documents, instruments and undertakings as may be
required by the liquor authorities of the State or of any county or
municipality or Governmental Body having jurisdiction with respect to the
transfer or issue of any liquor licenses or alcoholic beverage licenses or
permits for the Property, to the extent not theretofore executed and
delivered.
(c) The Golf Course Lease.
(d) The Partnership Agreement.
(e) Such other and further documents, papers and instruments as
may be reasonably required by the parties hereto or their respective
counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this
Agreement, each party hereto shall pay its own legal fees and expenses, and
Transferor shall pay for the cost of any audit required by Transferee with
respect to the Property. All filing fees for the Deed and the real estate
transfer, recording or other similar taxes due with respect to the transfer
of title and all charges for title insurance premiums shall be paid by
Transferor. Transferor shall pay for preparation of the documents to be
delivered by Transferor hereunder, and for the releases of any deeds of
trust, mortgages and other financing encumbering the Property and for any
costs associated with any corrective instruments, and for the cost of any due
diligence reports and surveys prepared by or for Transferee with respect to
the Property. Transferor shall receive a cash payment at closing to pay for
such closing costs as provided in Section 2.3(c).
6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses
with respect to the Property, and applicable to the period of time before and
after Closing, determined in accordance with generally accepted accounting
principles consistently applied, shall be allocated between Transferor and
Transferee (or, at Transferee's election, between Transferor and the lessee
under the Golf Course Lease to the extent such income or expenses will be
payable by or attributable to such lessee). Transferor shall be entitled to
all income and shall be responsible for all expenses for the period of time
up to but not including the Closing Date, and Transferee shall be entitled to
all income and shall be responsible for all expenses for the period of time
from, after and including the Closing Date. Such adjustments shall be shown
on the Closing Statements (with such supporting documentation as the parties
hereto may require being attached as exhibits to the Closing Statements) and
shall increase or decrease (as the case may be) the Base Purchase Price
payable by Transferee. Without limiting the generality of the foregoing, the
following items of income and expense shall be prorated at Closing:
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(a) Current and prepaid rents or fees, including, without
limitation, prepaid Golf Club membership fees, function receipts and other
reservation receipts.
(b) Real estate and personal property taxes.
(c) Utility charges (including but not limited to charges for
water, sewer and electricity).
(d) Value of fuel stored on the Property at the price paid for
such fuel by Transferor, including any taxes.
(e) Municipal improvement liens where the work has physically
commenced (certified liens) shall be paid by Transferor at Closing.
Municipal improvement liens which have been authorized, but where the work
has not commenced (pending liens) shall be assumed by Transferee.
(f) License and permit fees, where transferable.
(g) All other income and expenses of the Property, including,
but not being limited to such things as restaurant and snack bar income and
expenses and the like.
(h) Such other items as are usually and customarily prorated
between Transferees and Transferors of golf course properties in the area
in which the Property is located shall be prorated as of the Closing Date.
6.7 SALES TAXES. Transferor shall be required to pay all
sales taxes and like impositions arising from the ownership and operation of
the Property currently through the Closing Date.
6.8 POST-CLOSING ADJUSTMENTS.
(a) Transferee shall not be obligated to collect any accounts
receivable or revenues accrued prior to the Closing Date for Transferor,
but if Transferee collects same, such amounts will be promptly remitted to
Transferor in the form received. Transferee shall receive a credit at
Closing for the amount of any security deposits held by Transferor under
any lease of any portion of the Property that is being assigned to
Transferee in accordance herewith.
(b) If accurate allocations and prorations cannot be made at
Closing because current bills are not obtainable (as, for example, in the
case of utility bills and/or real estate or personal property taxes), the
parties shall allocate such income or expenses at Closing on the best
available information, subject to adjustment outside of escrow upon receipt
of the final bill or other evidence of the applicable income or expense.
Any income received or expense incurred by
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Transferor or Transferee with respect to the Property after the Closing
Date shall be promptly allocated in the manner described herein and the
parties shall promptly pay or reimburse any amount due. Transferor shall
pay at Closing all accrued special assessments and taxes applicable to
the Property.
ARTICLE 7
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened
taking, pursuant to the power of eminent domain, of all or any portion of the
Real Property, or any proposed sale in lieu thereof, Transferor shall give
written notice thereof to Transferee promptly after Transferor learns or
receives notice thereof. If all or any part of the Real Property is, or is
to be, so condemned or sold, Transferee shall have the right to terminate
this Agreement pursuant to Section 8.3. If Transferee elects not to
terminate this Agreement, all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid or
assigned, as applicable, to Transferee at Closing. Transferor will not
settle or compromise any such proceeding without Transferee's prior written
consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the
Property prior to the Closing Date shall remain upon Transferor. If any such
loss or damage occurs prior to Closing, Transferee shall have the right to
terminate this Agreement pursuant to Section 8.3. If Transferee elects not
to terminate this Agreement, all insurance proceeds and rights to proceeds
arising out of such loss or damage shall be paid or assigned, as applicable,
to Transferee at Closing.
7.3 REAL ESTATE BROKER. Except for a broker or finder who
may have been engaged by Transferor and for whom Transferor accepts sole
financial responsibility, and except for any broker or finder who may have
been engaged by Transferee and for whom Transferee accepts sole financial
responsibility, there is no real estate broker involved in this transaction.
Transferee warrants and represents to Transferor that Transferee has not
dealt with any other real estate broker in connection with this transaction,
nor has Transferee been introduced to the Property or to Transferor by any
other real estate broker, and Transferee shall indemnify Transferor and save
and hold Transferor harmless from and against any claims, suits, demands or
liabilities of any kind or nature whatsoever arising on account of the claim
of any person, firm or corporation to a real estate brokerage commission or a
finder's fee as a result of having dealt with Transferee, or as a result of
having introduced Transferee to Transferor or to the Property. In like
manner, Transferor warrants and represents to Transferee that Transferor has
not dealt with any real estate broker in connection with this transaction,
nor has Transferor been introduced to Transferee by any real estate broker,
and Transferor shall indemnify Transferee and save and hold Transferee
harmless from and against any claims, suits, demands or liabilities of any
kind or nature whatsoever arising on account of the claim of any person, firm
or corporation to a real estate brokerage commission or a finder's fee as a
result of having dealt with Transferor in connection with this transaction.
Transferee acknowledges that David J. Dick, an
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officer of the Transferee, is a licensed California real estate broker but is
not acting as a broker in relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from
and after the execution of this Agreement, Transferee and Transferor shall
keep the terms, conditions and provisions of this Agreement confidential and
neither shall make any public announcements hereof unless the other first
approves of same in writing, nor shall either disclose the terms, conditions
and provisions hereof, except to their respective attorneys, accountants,
engineers, surveyors, financiers and bankers. Notwithstanding the foregoing,
it is acknowledged that the Company is a public company and will make a
public announcement concerning this transaction and that the Company
anticipates that it will seek to sell shares of its common stock and other
securities (collectively, the "Securities") to the general public pursuant to
a public offering and that in connection therewith, Transferee will have the
absolute right to market the Securities and prepare and file all necessary or
required registration statements and other papers, documents and instruments
necessary or required in Transferee's judgment and that of its attorneys and
underwriters to file a registration statement with respect to the Securities
with the SEC and/or similar state authorities and to cause same to become
effective and to disclose therein and thus to its underwriters, to the SEC
and/or to similar state authorities and to the public all of the terms,
conditions and provisions of this Agreement. The obligations of this Section
7.4 shall survive any termination of this Agreement.
7.5 LIQUOR LICENSES. Transferor shall transfer or cause to
be transferred to Transferee or, at Transferee's discretion, Transferee's
nominee (which may include the lessee under the Golf Course Lease), all
liquor licenses and alcoholic beverage licenses, if any, necessary to operate
the restaurant, bars, snack bars and lounges presently located within the
Property, if any. To that end, Transferor and Transferee, or Transferee's
nominee, shall cooperate each with the other, and each shall execute such
transfer forms, license applications and other documents as may be necessary
to effect such transfer. If permitted under the laws of the jurisdiction in
which the Property is located, the parties shall execute and file all
necessary transfer forms, applications and papers with the appropriate liquor
and alcoholic beverage authorities prior to Closing, to the end that the
transfer shall take effect, if possible, on the Closing Date, simultaneously
with Closing. If not so permitted, then the parties agree each with the
other that they will promptly execute all transfer forms, applications and
other documents required by the liquor authorities in order to effect such
transfer at the earliest date in time possible consistent with the laws of
the State in order that all liquor licenses may be transferred from
Transferor to Transferee, or Transferee's nominee, at the earliest possible
time. If under the laws of the State such licenses cannot be transferred
until after the Closing of the transaction contemplated hereby, then
Transferor covenants and agrees that Transferor will cooperate with
Transferee, or Transferee's nominee, in keeping open the bars and liquor
facilities of the Property between the Closing Date and the time when such
liquor license transfers actually become effective, by exercising management
and supervision of such facilities until such time under Transferor's
licenses, provided, however, that Transferee shall indemnify and hold
Transferor harmless from any liability, damages or claims encountered in
27
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connection with such operations during said period of time, except for
Transferor's gross negligence or willful misconduct.
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS
8.1 LIABILITY OF TRANSFEREE. Except for any obligation
expressly assumed or agreed to be assumed by Transferee hereunder, Transferee
does not assume any obligation of Transferor or any liability for claims
arising out of any occurrence prior to Closing.
8.2 INDEMNIFICATION BY TRANSFEROR. Transferor hereby
indemnifies and holds Transferee harmless from and against any and all
claims, costs, penalties, damages, losses, liabilities and expenses
(including reasonable attorneys' fees) that may at any time be incurred by
Transferee, whether before or after Closing, as a result of any breach by
Transferor of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Transferor
pursuant hereto, for a period of one (1) year following the Closing. The
provisions of this section shall survive termination of this Agreement by
Transferee or Transferor.
8.3 TERMINATION BY TRANSFEREE. If any condition set forth
herein for the benefit of Transferee cannot or will not be satisfied prior to
Closing, or upon the occurrence of any other event that would entitle
Transferee to terminate this Agreement and its obligations hereunder, and
Transferor fails to cure any such matter within ten (10) business days after
notice thereof from Transferee, Transferee, at its option, may elect either
(a) to terminate this Agreement and all other rights and obligations of
Transferor and Transferee hereunder shall terminate immediately, or (b) to
waive its right to terminate (but without waiving any breach or default on
the part of Transferor) and, instead, to proceed to Closing. If Transferee
terminates this Agreement as a consequence of a misrepresentation or breach
of a warranty or covenant by Transferor, or a failure by Transferor to
perform its obligations hereunder, then Transferee shall retain all remedies
accruing as a result thereof, including, without limitation, specific
performance.
8.4 TERMINATION BY TRANSFEROR. If any condition set forth
herein for the benefit of Transferor (other than a default by Transferee)
cannot or will not be satisfied prior to Closing, and Transferee fails to
cure any such matter within ten (10) business days after notice thereof from
Transferor, Transferor may, at its option, elect either (a) to terminate this
Agreement, in which event the rights and obligations of Transferor and
Transferee hereunder shall terminate immediately, or (b) to waive its right
to terminate, and instead, to proceed to Closing. If, prior to Closing,
Transferee defaults in performing any of its obligations under this Agreement
(including its obligation to purchase the Property), and Transferee fails to
cure any such default within ten (10) business days after notice thereof from
Transferor, then Transferor's sole remedy for
28
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such default shall be to terminate this Agreement and Transferor waives any
claims for damages, actual, consequential or otherwise, that it may possess
against Transferee.
8.5 COSTS AND ATTORNEYS' FEES. In the event of any
litigation or dispute between the parties arising out of or in any way
connected with this Agreement, resulting in any litigation, arbitration or
other form of dispute resolution, then the prevailing party in such
litigation shall be entitled to recover its costs of prosecuting and/or
defending same, including, without limitation, reasonable attorneys' fees at
trial and all appellate levels.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes
the entire agreement between the parties hereto with respect to the
transactions contemplated hereby and supersedes all prior discussions,
understandings, agreements and negotiations between the parties hereto. This
Agreement may be modified only by a written instrument duly executed by the
parties hereto.
9.2 ASSIGNMENTS. Transferee may assign its rights hereunder
to an Affiliate of Transferee without the consent of Transferor. Transferee
may not otherwise assign its interest herein without the prior written
consent of Transferor. Transferor may not assign any of its rights pursuant
to this Agreement without the prior written consent of Transferee, which may
be withheld in Transferee's sole and absolute discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors
and assigns.
9.4 DAYS. If any action is required to be performed, or if
any notice, consent or other communication is given, on a day that is a
Saturday or Sunday or a legal holiday in the jurisdiction in which the action
is required to be performed or in which is located the intended recipient of
such notice, consent or other communication, such performance shall be deemed
to be required, and such notice, consent or other communication shall be
deemed to be given, on the first business day following such Saturday, Sunday
or legal holiday. Unless otherwise specified herein, all references herein
to a "day" or "days" shall refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred
to herein shall be governed by and construed and interpreted in accordance
with the laws of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required. It shall not be
necessary that the signature on behalf of both parties hereto appear on each
counterpart hereof. All counterparts hereof shall collectively constitute a
single agreement.
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9.7 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or
the application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
9.8 COSTS. Regardless of whether Closing occurs hereunder,
and except as otherwise expressly provided herein, each party hereto shall be
responsible for its own costs in connection with this Agreement and the
transactions contemplated hereby, including without limitation, fees of
attorneys, engineers and accountants.
9.9 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
transmitted by facsimile transmission, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States mail,
certified, postage prepaid, return receipt requested, at the addresses and
with such copies as on the Summary Sheet or to such other address as the
intended recipient may have specified in a notice to the other party. Any
party hereto may change its address or designate different or other persons
or entities to receive copies by notifying the other party and Escrow Agent
in a manner described in this Section. Any notice, request, demand or other
communication delivered or sent in the manner aforesaid shall be deemed given
or made (as the case may be) when actually delivered to the intended
recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached
hereto are by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all
of the representations, warranties, covenants and agreements of Transferor
and Transferee made in, or pursuant to, this Agreement shall survive Closing
and shall not merge into the Deed or any other document or instrument
executed and delivered in connection herewith.
9.12 FURTHER ASSURANCES. Transferor and Transferee each
covenant and agree to sign, execute and deliver, or cause to be signed,
executed and delivered, and to do or make, or cause to be done or made, upon
the written request of the other party, any and all agreements, instruments,
papers, deeds, acts or things, supplemental, confirmatory or otherwise, as
may be reasonably required by either party hereto for the purpose of or in
connection with consummating the transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Transferor and
Transferee specifically established hereby.
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9.14 CONFIDENTIALITY. Any confidential information delivered
by Transferor to Transferee hereunder shall be used solely for the purpose of
acquiring the Property and Transferee will keep such information
confidential; provided Transferee shall have the right to provide such
information to its consultants and advisors and to disclose such information
as Transferee determines is necessary or appropriate in connection with any
public offering of the Securities. If Transferee does not acquire the
Property, it shall deliver to Transferor copies of all proprietary
information delivered to Transferee by Transferor. Transferor agrees to keep
confidential the terms and conditions of this Agreement; provided, Transferor
shall have the right to provide such information to its consultants and
advisors.
IN WITNESS WHEREOF, Transferor and Transferee have hereunder
affixed their signatures to this Contribution and Leaseback Agreement, all as
of December 18, 1997.
"TRANSFEREE"
GOLF TRUST OF AMERICA, L.P., A DELAWARE LIMITED
PARTNERSHIP
By: GTA GP, Inc. a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair
-------------------------------------
Its: President
------------------------------------
"TRANSFEROR"
STONEHENGE GOLF DEVELOPMENT, LLC, A SOUTH CAROLINA
LIMITED LIABILITY COMPANY
By: /s/ Lyndell L. Young
--------------------------------
Its: President
-------------------------------
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REAL PROPERTY PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
BY AND BETWEEN
ARADON CORPORATION,
A CALIFORNIA CORPORATION
AS SELLER
AND
GOLF TRUST OF AMERICA, L.P.,
A DELAWARE LIMITED PARTNERSHIP
AS BUYER
JANUARY 9, 1998
RELATING TO CERTAIN REAL PROPERTY
LOCATED IN THE COUNTY OF SANTA BARBARA
(AREA OF GOLETA), STATE OF CALIFORNIA
KNOWN AS "SANDPIPER GOLF COURSE"
AND CERTAIN ADJACENT REAL PROPERTY
- -------------------------------------------------------------------------------
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Agreement to Buy and Sell. . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.6 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2. ACTIONS PENDING CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1 Due Diligence Limited. . . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 Buyer's Termination. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Seller's Termination . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 No Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3. ADDITIONAL AGREEMENTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . .5
3.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . .5
3.2 Reaffirmation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Hazardous Material Release . . . . . . . . . . . . . . . . . . . . . . .6
3.4 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.5 Damage or Destruction. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.6 Development Conditions . . . . . . . . . . . . . . . . . . . . . . . . .8
3.7 Plaque . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.8 Golf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.1 Deposits Into Escrow . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.2 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.3 Payment of Closing Costs . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Closing of Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Failure to Close; Cancellation . . . . . . . . . . . . . . . . . . . . 11
4.6 LIQUIDATED DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-i-
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5. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Legal Advice; Neutral Interpretation; Headings . . . . . . . . . . . . 12
5.4 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 Waiver of Covenants, Conditions or Remedies. . . . . . . . . . . . . . 13
5.7 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 Relationship of Parties. . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Third Party Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Time of the Essence. . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Further Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.13 Recordation; Actions to Clear Title. . . . . . . . . . . . . . . . . . 13
5.14 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.16 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.17 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.18 Manner of Giving Notice. . . . . . . . . . . . . . . . . . . . . . . . 15
5.19 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION REFERENCE
<S><C>
Exhibit "A-1" LEGAL DESCRIPTION OF
SANDPIPER GOLF COURSE. . . . . . . . . Section 1.1.1
Exhibit "A-2" LEGAL DESCRIPTION OF THE
14-ACRE PROPERTY . . . . . . . . . . . Section 1.1.1
Exhibit "B" DEVELOPMENT . . . . . . . . . . . . . . . . Section 1.1.3
Exhibit "C" DISCLOSURES . . . . . . . . . . . . . . . . Section 2.1
Exhibit "D" ARCO AMENDMENT. . . . . . . . . . . . . . . Section 3.3.5
Exhibit "E" ARCO ASSUMPTION . . . . . . . . . . . . . . Section 3.3.5
Exhibit "F-1" GOLF COURSE GRANT DEED. . . . . . . . . . . Section 4.1.1(a)
Exhibit "F-2" 14-ACRE GRANT DEED. . . . . . . . . . . . . Section 4.1.1(a)
Exhibit "G" BILL OF SALE . . . . . . . . . . . . . . . Section 4.1.1(e)
Exhibit "H-1" TITLE EXCEPTIONS
GOLF COURSE PROPERTY. . . . . . . . . . . . Section 4.4.1
Exhibit "H-2" TITLE EXCEPTIONS
FOURTEEN ACRE PROPERTY. . . . . . . . . . . Section 4.4.1
</TABLE>
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<PAGE>
REAL PROPERTY PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
THIS REAL PROPERTY PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
(this "AGREEMENT") is entered into as of January 9, 1998 (the "EFFECTIVE
DATE"), by and between ARADON CORPORATION, a California corporation (the
"SELLER"), and GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
(the "BUYER").
RECITALS:
A. Seller is the fee owner of that certain real property located in
the County of Santa Barbara, State of California, consisting of (i) an
18-hole golf course (including club house and parking facilities) commonly
known as Sandpiper Golf Course, situated upon approximately 196 acres
(included within this site is an approximately 17.4 acre development site)
(the "GOLF COURSE"), and (ii) certain real property of approximately fourteen
(14) acres currently zoned for a housing site (the "FOURTEEN ACRES").
B. Buyer now desires to purchase that property, and Seller desires to
sell that property on the terms and conditions contained in this Agreement.
C. S. Piper Corporation, a California corporation ("SPC") is the
ground lessee of the golf course property pursuant to a lease dated December
30, 1994 (the "GROUND LEASE"). Concurrently with and conditioned upon the
"Closing"(as defined below), SPC is entering into an agreement with Buyer
(the "SPC AGREEMENT") terminating the Ground Lease with Seller and selling
SPC's assets to Buyer.
D. Sandpiper's Nineteenth Hole, Inc., a California corporation ("19TH
HOLE") operates the food and liquor concessions (the "CONCESSIONS") at the
Golf Course pursuant to a February 10, 1995 Gross Sublease/Concession
Agreement between 19th Hole and Seller (the "CONCESSION AGREEMENT").
Concurrently with and conditioned upon the Closing, 19th Hole is entering
into an agreement with Buyer (the "19TH HOLE AGREEMENT") terminating the
Concession Agreement with Seller and selling 19th Hole's assets to Buyer.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, Buyer and Seller agree as follows:
1. PURCHASE AND SALE
1.1 AGREEMENT TO BUY AND SELL. Subject to all of the terms and
conditions of this Agreement, and subject to and conditioned upon the
concurrent termination of the Ground Lease by Seller, the termination of the
Concession Agreement by Seller and the closing of the SPC Agreement and the
19th Hole Agreement, Seller hereby agrees to sell and convey to Buyer and
Buyer hereby agrees to acquire and purchase from Seller the following (all of
which are collectively called the "PROPERTY" in this Agreement):
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1.1.1 All of Seller's right, title and interest in those
certain parcels of real property (collectively, the "LAND") described on
EXHIBIT "A-1" (the "GOLF COURSE") and EXHIBIT "A-2" (the "FOURTEEN ACRES"),
attached hereto and made a part hereof, and all of Seller's right, title and
interest in and to all easements, rights and privileges appurtenant thereto,
water and water rights, development rights and permits, including any right,
title and interest of Seller in and to adjacent streets, alleys or rights of
way, together with all of Seller's right, title and interest in and to all
improvements, structures, equipment and fixtures currently located on the
land, but specifically excluding oil, gas and mineral rights, with no right
of surface entry.
1.1.2 All of Seller's right, title and interest in all
improvements, structures and fixtures (collectively, the "IMPROVEMENTS") now
or hereafter located on the Land.
1.1.3 All of Seller's right, title and interest in and to all
tangible personal property, if any, located on, affixed to or pertaining to
the Land or the Improvements and used in connection with the ownership,
operation or maintenance thereof, together with all intangible property now
or hereafter owned or held by Seller in connection with the Land or the
Improvements (collectively, the "PERSONAL PROPERTY"), including, without
limitation, studies, reports, permits, development rights, applications,
authorizations and all other entitlements, covering the housing development
(the "DEVELOPMENT"), including, but not limited to, those described in
EXHIBIT "B" attached hereto and made a part hereof or otherwise.
1.1.4 All of Seller's right, title and interest, if any, in
and to any and all leases, service contracts, landscaping contracts,
maintenance agreements, construction contracts, architect's agreements,
parking agreements, consultant agreements, warranties, guaranties, management
contracts, bonds and all other contracts and agreement relating to the
Property.
1.2 PURCHASE PRICE. The purchase price of the Property shall be
TWENTY FIVE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($25,750,000) (the
"PURCHASE PRICE").
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
as follows:
1.3.1 On Monday, January 12, 1998, Buyer shall deposit into
"Escrow" (defined below) TWO MILLION DOLLARS ($2,000,000) (the "DEPOSIT") by
certified check or wire transfer of federal funds, or in another immediately
available form. Buyer may not make any announcements, interview employees or
enter onto the Golf Course until Seller is in receipt of such funds. Subject
to Section 2.1, as set forth below, prior to the Effective Date, Buyer has
completed, to its satisfaction, its due diligence of the Property and of all
matters relating to the Property and has either approved in writing the same
or waived in writing its objections thereto, and, therefore, as of the
"Decision Date" (as defined below), the Deposit shall be non-refundable to
Buyer. Unless Buyer has previously terminated this Agreement pursuant to
Section 2.2, then, provided Seller is not in default, on the Decision Date,
without requiring further instructions from Buyer or Seller, "Escrow Holder"
(as defined below) shall release to the Seller the entire Deposit plus
interest accrued thereon while in Escrow by wire transfer in accordance with
wiring instructions to be provided to Escrow Holder by Seller. The Deposit,
interest accrued thereon while in Escrow and a sum equal to the interest that
would have additionally been earned while in Escrow until the Closing shall
be applied
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<PAGE>
to the Purchase Price upon Closing. The Escrow Holder shall be entitled to
comply with this instruction without receipt of further instructions from the
Buyer or the Seller.
1.3.2 At least one (1) business day prior to the Closing
Date, Buyer shall deposit into Escrow the balance of the Purchase Price
(approximately $23,750,000), subject to adjustment by reason of any
applicable prorations and the allocation of closing costs described below and
subject to all of the terms and conditions of this Agreement. The deposit
required by this paragraph shall be made by wire transfer of federal funds or
in another immediately available form.
1.4 ESCROW. On the Effective Date, an escrow (the "ESCROW") shall be
opened with the Escrow Division of Chicago Title Insurance Company, whose
address is 2222 South Broadway, Suite G, Santa Maria, California 93454,
Attention: Cindy Ioimo, Escrow Officer ("ESCROW HOLDER"). The terms and
conditions set forth in this Agreement shall constitute both an agreement
between Seller and Buyer and escrow instructions for Escrow Holder.
1.5 CLOSING. As used in this Agreement, "Closing" means the
recordation of the "Deed" (as defined below) with the Office of the County
Recorder in the County of Santa Barbara, State of California in accordance
with the terms of this Agreement.
1.6 CLOSING DATE. Subject to the terms and conditions of this
Agreement, Escrow shall close on March 2, 1998 (the "CLOSING DATE"). Seller
has advised Buyer that this transaction must occur on the first (1st)
business day of a month in order for SPC to be able to pay off the existing
loan on the Property with Textron Financial Corporation (the "TEXTRON LOAN").
2. ACTIONS PENDING CLOSING
2.1 LIMITED DUE DILIGENCE. Except as set forth in this Section 2.1,
Buyer agrees that it has completed its due diligence investigation of the
Property, and that upon execution of this Agreement it shall have no further
right to terminate this Agreement or receive a refund of the Deposit due to
the condition of the Property, the Personal Property, or any matters relating
thereto. Buyer acknowledges that, prior to the Effective Date of this
Agreement, Seller has disclosed to Buyer the items listed on EXHIBIT "C"
attached hereto. Notwithstanding the foregoing, prior to the thirtieth
(30th) day from the Effective Date (the "DECISION DATE") Buyer shall confirm
to its reasonable satisfaction only the following:
2.1.1 that no material adverse change has occurred in the
condition of Property solely with respect to the environmental condition
represented in the "Reports" (as defined in Exhibit "C");
2.1.2 that no material adverse change has occurred in the
condition of Property solely with respect to the ALTA survey prepared by
Penfield & Smith dated 1990 ("SURVEY").
2.1.3 that the accountant prepared financials for years 1996
and 1997 provided by Seller to Buyer do not overstate total sales by greater
than ten percent (10%) in the aggregate and/or understate total expenses by
ten percent (10%) in the aggregate.
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<PAGE>
In that regard, prior to the Decision Date, Buyer shall either waive the
foregoing condition(s) or cause an updated Phase I to be prepared, a limited
Survey to be prepared and an audit to be prepared. In order for Buyer to be
entitled to terminate this Agreement pursuant to this Section, such updates
or audit must indicate that a new material adverse condition(s) has occurred
since the last date of the Reports and/or the Survey, respectively, and such
material adverse condition was not referred to in the Reports or the Survey
or that total sales were overstated by greater than 10% or total expenses
understated by greater than 10%. If Buyer determines in its reasonable
discretion that such updates do reflect a new material adverse condition, or
such overstatement or understatement does in fact exist, then Buyer may
terminate this Agreement pursuant to Section 2.2. The truth and accuracy of
Section 2.1.1 shall be applicable also as a condition to Closing. If such a
material adverse condition were to occur prior to Closing, the Seller may, at
its option, terminate this Agreement pursuant to Section 2.2 below.
2.2 BUYER'S TERMINATION. Buyer shall have the right to terminate
this Agreement only in the event of a material default hereunder or under the
SPC Agreement or under the 19th Hole Agreement by Seller or pursuant to
Sections 2.1, 3.3.5, 3.4, 3.5 or 3.6 below. Except as provided in this
Section, Buyer shall have no right to terminate this Agreement as a result of
the condition of the Property, title to the Property, the Personal Property
or any matters relating thereto. If Buyer elects to terminate this Agreement
as a result of a material default by Seller or pursuant to Sections 2.1,
3.3.5, 3.4, 3.5 or 3.6 below, Buyer shall give Seller and Escrow Holder
written notice that Buyer elects to terminate this Agreement. In the event
Buyer elects to terminate this Agreement pursuant to this Section 2.2, Escrow
or Seller, as applicable, shall return to Buyer the Deposit with interest and
deemed interest, if applicable; Buyer shall deliver to Seller a duly executed
and acknowledged quitclaim deed as described in Section 5.13 below; Buyer
shall pay all title and escrow charges; unless due to Seller's material
default, in which case Seller shall pay same; Buyer shall have no further
right to purchase the Property; and neither party shall thereafter have any
further rights or obligations under this Agreement unless expressly provided
otherwise herein.
2.3 SELLER'S TERMINATION. Seller shall deliver to Buyer written
notice of any material default by Buyer. Buyer shall have seven (7) days
from the date of Seller's notice to cure such default. If Buyer has not
cured such default within such seven (7) day period, then Seller may
terminate this Agreement pursuant to this Section 2.3. If Seller elects to
terminate this Agreement because of an uncured material default by Buyer, the
termination of the SPC Agreement or the termination of the 19th Hole
Agreement, then Seller shall give Buyer and Escrow Holder written notice that
Seller elects to terminate this Agreement. In the event Seller elects to
terminate this Agreement pursuant to this Section 2.3, Seller shall retain
the Deposit as liquidated damages in accordance with Section 4.6; Buyer shall
deliver to Seller a duly executed and acknowledged quitclaim deed as
described in Section 5.13 below; Buyer shall pay all title and escrow
charges; Buyer shall have no further right to purchase the Property; and
neither party shall thereafter have any further rights or obligations under
this Agreement unless expressly provided otherwise herein.
2.4 NO PROCESSING. Until the Closing Date, without Seller's prior
written consent, which shall not be unreasonably withheld or delayed, Buyer
shall not make any application to any governmental agency for any permit,
approval, license or other entitlement for the Property or the use or
development thereof.
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<PAGE>
3. ADDITIONAL AGREEMENTS OF THE PARTIES
3.1 REPRESENTATIONS AND WARRANTIES.
3.1.1 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby
represents, warrants and covenants to and agrees with Seller as follows:
(a) BUYER'S INVESTIGATION. (i) Except as
otherwise provided herein, there are no representations or warranties of any
kind whatsoever, express or implied, made by Seller in connection with this
Agreement, the purchase of the Property by Buyer, the physical condition of
the Property or whether the Property is appropriate for Buyer's intended use;
(ii) Prior to the Effective Date hereof, Buyer, has to its satisfaction,
fully investigated the Property and all matters pertaining thereto; (iii)
Except as otherwise provided herein, Buyer is not relying on any statement or
representation of Seller, its agents or its representatives nor on any
information supplied by Seller, its agents or its representatives, except as
expressly provided in this Agreement; (iv) Buyer, in entering into this
Agreement and in completing its purchase of the Property, is relying entirely
on its own investigation of the Property, including the documents delivered
to Buyer hereunder, based on its extensive experience in and knowledge of
real property; (v) prior to the Decision Date hereof, Buyer has become aware,
to its satisfaction, of all zoning regulations, other governmental
requirements, site and physical conditions, and other matters affecting the
use and condition of the Property; and (vi) Buyer shall purchase the Property
in "AS IS" condition as of the date of Closing.
(b) AUTHORITY. Buyer is a Delaware limited
partnership duly formed and validly existing in the State of Delaware, and
will be qualified to do business in the State of California to the extent
necessary to do business. Buyer has the power and authority to own the
Property and to consummate the transactions contemplated by this Agreement.
This Agreement and all instruments, documents and agreements to be executed
by Buyer in connection herewith are or when delivered shall be duly
authorized, executed and delivered by Buyer and are valid, binding and
enforceable obligations of Buyer. Each individual executing this Agreement
on behalf of Buyer represents and warrants to Seller that he or she is duly
authorized to do so.
(c) CONSENTS. Buyer is not required to obtain any
consents or approvals to consummate the purchase of the Property contemplated
in this Agreement.
3.1.2 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller
hereby represents, warrants and covenants to and agrees with Buyer and Golf
Trust of America, Inc. as follows:
(a) AUTHORITY. Seller is a corporation duly
formed and validly existing in the State of California. Seller has the power
and authority to sell the Property and to consummate the transactions
contemplated by this Agreement. This Agreement and all instruments, documents
and agreements to be executed by Seller in connection herewith are or when
delivered shall be duly authorized, executed and delivered by Seller and are
valid, binding and enforceable obligations of Seller. Each individual
executing this Agreement on behalf of Seller represents and warrants to Buyer
that he or she is duly authorized to do so.
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<PAGE>
(b) CONSENTS. Except as provided in Section 3.3.5
and except for SPC's and 19th Hole's concurrent closing and Ground Lease and
Concession Agreement terminations, Seller is not required to obtain any
consents or approvals to consummate the transactions contemplated in this
Agreement.
(c) DEVELOPMENT CONDITIONS. Seller hereby agrees
that it shall not undertake to change the conditions imposed upon the
Development in any material adverse manner and will undertake to obtain the
maximum extension of its preliminary development plan possible.
(d) FILES. Seller shall use its best efforts to
deliver to Buyer all material, non-privileged, information in its and in its
agents possession relating to the Property. Seller agrees to promptly
deliver any new information received by Seller relating to the Property.
(e) COUNTY FINANCIAL OBLIGATIONS. To Seller's
actual knowledge, other than real property taxes, there are no material
outstanding financial obligations owed to governmental agencies which are due
and owing and, except as provided herein, Seller shall be responsible for any
of its unknown outstanding financial obligations.
(f) TERMINATIONS. Concurrently with the Closing,
Seller shall cause the Ground Lease and the Concession Agreement to be
terminated.
3.2 REAFFIRMATION. The representations and warranties of Buyer and
Seller set forth in Section 3.1 are true and correct as of the Effective
Date and shall be true and correct as of the Closing. The Closing shall
constitute Buyer's and Seller's reaffirmation of those representations and
warranties as of the Closing. Seller shall be entitled to rely upon Buyer's
representations and warranties set forth in Section 3.1.1(a), notwithstanding
any inspection or investigation of the Property which was made or could have
been made by Buyer.
3.3 HAZARDOUS MATERIAL RELEASE.
3.3.1 RELEASE. If this transaction closes and Buyer acquires
title to the Property, Buyer, on behalf of itself, its successors, assigns
and successors-in-interest, hereby releases Seller, its officers, partners,
directors, employees, contractors, agents, subsidiaries, affiliates,
including SPC and 19th Hole, and its and their respective successors and
assigns ("INDEMNITEES"), from and against any and all liabilities, claims,
demands, suits, judgments, causes of action (including, but not limited to,
causes of action arising under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601 et. SEQ.),
losses, costs, damages, injuries, penalties, enforcement actions, fines,
taxes, remedial actions, removal and disposal costs, investigation and
remediation costs and expenses (including, without limit, reasonable
attorneys' fees, litigation, arbitration and administrative proceeding costs,
expert and consultant fees and laboratory costs), sums paid in settlement of
claims, whether direct or indirect, known or unknown, arising out of, related
in any way to, or resulting from or in connection with, in whole or in part,
the presence or suspected presence of "Hazardous Materials" (defined below)
in, on, under, or about the Property. The foregoing release does not release
Seller from financial obligations to governmental agencies which are due and
owing as of the Closing.
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3.3.2 WAIVER OF CALIFORNIA CIVIL CODE SECTION 1542. In that
connection, and in connection with any other release in this Agreement, Buyer,
on behalf of itself, its successors, assigns and successors-in-interest and
such other persons and entities, waives the benefit of California Civil Code
Section 1542, which provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with
the debtor."
3.3.3 DEFINITION. "HAZARDOUS MATERIAL(S)" means any
chemical, substance, material, controlled substance, object, condition, waste
living organisms or combination thereof which is or may be hazardous to human
health or safety or to the environment due to its radioactivity,
ignitability, corrosivity, reactivity, explosivity, toxicity,
carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful
or potentially harmful properties or effects, including, without limitation,
petroleum hydrocarbons and petroleum products, lead, asbestos, radon,
polychlorinated biphenyls (PCBs) and all of those chemicals, substances,
materials, controlled substances, objects, conditions, wastes, living
organisms or combinations thereof which are now or become in the future
listed, defined or regulated in any manner by any federal, state or local law
based upon, directly or indirectly, such properties or effects.
3.3.4 NO LIMITATION TO LIABILITY. The provisions of this
Section 3.3 shall not be limited in any way by any other terms of this
Agreement including, but not limited to, Section 4.6 of this Agreement
(Liquidated Damages).
3.3.5 ARCO INDEMNITY. Seller purchased the Property from
Atlantic Richfield Company ("ARCO") on October 4, 1990. In connection with
such sale both ARCO and Seller committed in the Purchase and Sale Contract,
as amended by the First and Second Amendments (collectively, the "ARCO
CONTRACT") to continuing certain obligations, including, without limitation,
environmental indemnities. Subject to the restrictions contained in the
ARCO Contract, Seller agrees to assign its interests in the ARCO Contract to
Buyer. When ARCO executes the Third Amendment to the ARCO Contract (the "ARCO
AMENDMENT") attached hereto as EXHIBIT "D", Buyer agrees to assume, and be
primarily responsible for Seller's obligations under the ARCO Contract (the
"ARCO ASSUMPTION") attached hereto as EXHIBIT "E". ARCO's execution of the
ARCO Amendment is a condition to Closing. Seller's failure to obtain
ARCO's signature shall be a material breach by Seller entitling Buyer to
terminate this Agreement under Section 2.2 and receive the return of its
Deposit and interest thereon. ARCO's execution of the ARCO Amendment in the
attached form satisfies such condition. Seller, however, agrees to cooperate
with Buyer and discuss Buyer's suggested modifications to the ARCO Amendment
with ARCO, however, making any modification thereto is NOT a condition to
close or a contingency for Buyer's termination.
3.4 CONDEMNATION. If, prior to Closing, any portion of the Property
shall be condemned or becomes the subject of any pending or threatened
condemnation action, Seller shall promptly notify Buyer in writing thereof.
("MATERIAL" for purposes of this paragraph shall mean any portion of the
Property with a fair market value of $100,000 or greater.) If the portion of
the Property that shall be condemned or that has become the subject of any
pending or threatened condemnation
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<PAGE>
action is not a Material portion of the Property, this Agreement shall remain
in full force and effect, regardless of such condemnation or threatened or
pending action, and if any condemnation award is received by Seller prior to
Closing, the amount of such award shall be applied as a credit against the
Purchase Price. Any condemnation awards received by Seller on or after
Closing shall be promptly delivered by Seller to Buyer. If the portion of
the Property that shall be condemned or that has become the subject of any
pending or threatened action is a Material portion of the Property, Buyer
shall have the right to terminate this Agreement pursuant to Section 2.2 by
providing Seller with written notice within ten (10) days after receipt of
Seller's notification thereof.
3.5 DAMAGE OR DESTRUCTION. In the event of any damage to or
destruction of the Property prior to the Closing, Seller shall provide Buyer
with prompt written notification thereof. If the damage or destruction would
cost less than $50,000 to repair, the Closing shall nevertheless occur as
otherwise provided for in this Agreement except Buyer shall receive a $50,000
credit against the Purchase Price. If the damage or destruction would cost
$50,000 or more to repair, Buyer shall have the right to either: (a)
terminate this Agreement pursuant to Section 2.2 by providing Seller with
written notice within ten (10) days after receipt of Seller's written
notification thereof; or (b) close and receive a $50,000 credit against the
Purchase Price, and Seller shall assign to Buyer upon the Closing all
insurance proceeds payable to Seller in connection with such occurrences over
and above $50,000. In no event shall Seller shall have an obligation to
repair such damage or destruction.
3.6 DEVELOPMENT CONDITIONS. It shall be a condition to Closing that
no materially adverse conditions are imposed upon the Development. In the
event that a material adverse condition is imposed upon the Development, then
Buyer may terminate this Agreement pursuant to Section 2.2 and receive the
return of its Deposit plus interest.
3.7 PLAQUE. Buyer shall maintain that certain bronze plaque
embedded in stone, in an area of high public visibility, as such may be moved
from time to time, memorializing Mr. Hunter's role in developing Sandpiper
Golf Course. Buyer shall cause the maintenance of such plaque until April 1,
2014.
3.8 GOLF. Pursuant to the Lease Termination, dated March 11, 1994,
previously executed by Seller, Mr. Kenneth H. Hunter, Jr. and his wife shall
be afforded unlimited no-fee playing privileges for themselves only during
Mr. Hunter's lifetime subject to normal reservation requirements. Also, Mr.
Hunter, during his lifetime, shall receive each year thirty (30) passes
entitling the holder and one guest to each play one eighteen hole round of
golf during that year only with no charge for the green fee. Buyer, at its
expense, shall honor all previously issued complementary golf/gift
certificates listed on the financials. Upon reasonable prior written notice
and subject to availability, a foursome reasonably designated by Seller or
its assignee, each calender year for the next fifteen (15) years, shall be
afforded three (3) no-fee for golf and carts playing privileges at Sandpiper
and three (3) no-fee for golf and carts, in the aggregate, at any other
courses owned by Buyer or its affiliates and its subsidiaries, including its
publicly traded REIT.
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4. CLOSING
4.1 DEPOSITS INTO ESCROW.
4.1.1 Prior to the Decision Date, Seller shall deposit into
Escrow (and such delivery shall be a condition to Closing and Buyer's
obligations hereunder):
(a) Duly executed grant deeds conveying the
Property to Buyer (the "DEED") substantially in the forms of and upon the
terms contained in EXHIBIT "F-1 AND F-2", attached hereto and incorporated
herein.
(b) An affidavit or qualifying statement which
satisfies the requirements of Section 1445 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the "NON-FOREIGN
AFFIDAVIT").
(c) A Withholding Exemption Certificate, Form 590
(the "WITHHOLDING CERTIFICATE").
(d) A counterpart original of the ARCO Assumption
executed by Seller.
(e) A counterpart original of a Bill of Sale (the
"BILL OF SALE"), duly executed by Seller, assigning and conveying to Buyer
all of Seller's right, title and interest in and to the Personal Property.
The Bill of Sale shall be substantially in the form of and upon the terms
contained in EXHIBIT "G", attached hereto and incorporated herein.
(f) The ARCO Amendment, executed by ARCO and Seller.
4.1.2 At least one (1) business day prior to the Closing
Date, Buyer shall deposit into Escrow (and such delivery shall be a condition
to Closing and Seller's obligations hereunder):
(a) Funds in accordance with the provisions of
Section 1.3.2.
(b) A counterpart original of the ARCO Assumption
executed by Buyer.
(c) A counterpart original of the Bill of Sale duly
executed by Buyer.
(d) A counterpart original of the ARCO Amendment.
4.1.3 Seller and Buyer shall each deposit such other
instruments and funds as are reasonably required by Escrow Holder or
otherwise required to close Escrow and consummate the sale of the Property in
accordance with the terms of this Agreement.
4.2 PRORATIONS.
4.2.1 The following prorations shall be made as of 12:01 a.m.
on the day the Closing occurs on the basis of a 365-day year. At least five (5)
business days prior to the Closing
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Date, Escrow Holder shall deliver to Seller and Buyer a tentative proration
schedule setting forth a preliminary determination.
(a) Non-delinquent general and special real estate
taxes, assessments and levies shall be prorated as of the Closing on the
basis of the most recent tax statement for the Property. If prorations are
not made on the basis of the current tax year or if supplemental taxes are
assessed after the Closing for the period prior to the Closing, the parties
shall make any necessary adjustment after Closing by cash payment to the
party entitled thereto so that Seller shall have borne all taxes allocable to
the period prior to the Closing (including all supplemental taxes which are
allocable to the period prior to the Closing) and Buyer shall bear all taxes
allocable to the period after the Closing (including all supplemental taxes
which are allocable to the period after the Closing).
(b) All utility charges, costs of maintenance, and
other items of expense shall be prorated as customarily prorated in similar
transactions as of the Closing on the basis of schedules prepared by Seller
for that purpose and reasonably approved by Buyer prior to the Decision Date,
with post-closing adjustments made between Seller and Buyer by cash payment
upon demand to the party entitled thereto.
4.3 PAYMENT OF CLOSING COSTS.
4.3.1 CLOSING COSTS BORNE BY SELLER. Seller shall bear and
Escrow Holder shall discharge on Seller's behalf out of the sums payable to
Seller hereunder the following: (a) the portion of the costs associated with
the standard coverage premium for the "Owner's Policy" (defined below), equal
to the premium on a CLTA owner's policy of title insurance in the amount of
the Purchase Price; (b)the sums necessary to obtain and the cost of recording
any reconveyance required hereby; and (c) one-half of Escrow Holder's fee.
4.3.2 CLOSING COSTS TO BE BORNE BY BUYER. Buyer shall
deposit with Escrow Holder for disbursement by Escrow Holder the following:
(a) one-half of Escrow Holder's fee; (b) all costs and expenses of the
owner's policy in excess of the portion of the premium to be borne by Seller
(including, without limitation, any additional premium(s) charged for any
extended coverage title insurance policy and/or endorsements thereto,
requested by Buyer); (c) the cost of any survey that may be required by the
"Title Company" (as defined below); (d) recording fees required in connection
with the transfer of the Property to Buyer; and (e) documentary transfer tax
and all sales and use taxes required in connection with the transfer of the
Property to Buyer.
4.4 CLOSING OF ESCROW.
4.4.1 Escrow Holder shall hold the Closing on the Closing
Date if: (a) it has received in a timely manner all the funds and materials
required to be delivered into Escrow by Buyer and Seller; and (b) it has
received assurances satisfactory to it that, effective as of the Closing,
Chicago Title Company, 2222 South Broadway, Suite G, Santa Maria, California
93454 (the "TITLE COMPANY") will issue to Buyer its extended coverage title
insurance policy in the amount of the Purchase Price, insuring Buyer as the
owner of the Property, subject only to the "Permitted Exceptions" (defined
below) other than any encumbrance created by an act or omission of Buyer (the
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<PAGE>
"OWNER'S POLICY"). ("PERMITTED EXCEPTIONS" means all exceptions set forth in
Chicago Title Company's Preliminary Title Report, Order No. 4970987-DL, dated
May 23, 1997 other than exceptions listed on EXHIBIT "H" ATTACHED HERETO, and
other than installments of general and special real property taxes and
assessments not then delinquent.) Notwithstanding the foregoing, Seller
agrees to take such actions and execute such documents, as are reasonably
requested by Buyer, to eliminate additional title exceptions prior to Closing.
4.4.2 To Close the Escrow, Escrow Holder shall:
(a) Cause the Deed, without transfer tax stamps
attached, to be recorded and thereafter mailed to Buyer, and deliver the
Owner's Policy, Non-Foreign Affidavit, Bill of Sale, Assignment and
Assumption Agreement, ARCO Assumption, the ARCO Amendment and Withholding
Certificate to Buyer; and
(b) Deliver to Seller the ARCO Assumption, a
counterpart original of the Bill of Sale, a counterpart original of the
Assignment and Assumption Agreement, and by wire transfer of federal funds,
funds in the amount of the Purchase Price, less the Deposit, plus or less any
net debit or credit to Seller by reason of the prorations and allocations of
closing costs provided for in this Agreement.
4.4.3 Pursuant to Section 6045 of the Internal Revenue Code,
Escrow Holder shall be designated the closing agent hereunder and shall be
solely responsible for complying with the tax reform act of 1986 with regard
to reporting all settlement information to the Internal Revenue Service.
4.5 FAILURE TO CLOSE; CANCELLATION. If the Escrow Holder is not in a
position to Close the Escrow on the Closing Date, then, except as provided in
Section 4.6, Escrow Holder shall return to the depositor thereof any
materials previously placed in Escrow. No such return shall relieve either
party of liability for any failure to comply with the terms of this Agreement.
4.6 LIQUIDATED DAMAGES. BUYER AND SELLER AGREE THAT IN THE EVENT OF
A MATERIAL DEFAULT OR BREACH HEREUNDER BY BUYER, THE DAMAGES TO SELLER WOULD
BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN, AND THAT THEREFORE, IN
THE EVENT OF A MATERIAL DEFAULT OR BREACH HEREUNDER BY BUYER, THE DEPOSIT IS
A REASONABLE ESTIMATE OF THE DAMAGES TO SELLER, SUCH DAMAGES INCLUDING COSTS
OF NEGOTIATING AND DRAFTING OF THIS AGREEMENT, COSTS OF COOPERATING IN
SATISFYING CONDITIONS TO CLOSING, COSTS OF SEEKING ANOTHER BUYER UPON BUYER'S
DEFAULT, OPPORTUNITY COSTS IN KEEPING THE PROPERTY OUT OF THE MARKETPLACE,
AND OTHER COSTS INCURRED IN CONNECTION HEREWITH. ACCORDINGLY, BUYER AND
SELLER AGREE THAT, EXCEPT FOR ANY DAMAGES, COSTS AND EXPENSES INCURRED IN
CONNECTION WITH OR RESULTING FROM BUYER'S DEFAULT, OR BREACH OF ITS
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OBLIGATIONS, UNDER SECTIONS 3.3.4, 5.13 AND 5.17, RECEIPT AND RETENTION OF
THE SPCEIFIED SUM SHALL BE THE SOLE LEGAL AND/OR EQUITABLE REMEDY OF SELLER
IN THE EVENT OF ANY BREACH OR DEFAULT BY BUYER HEREUNDER.
INITIALS OF BUYER: INITIALS OF SELLER:
(ILLEGIBLE) (ILLEGIBLE)
------------------- -------------------
4.7 POSSESSION. Possession of the Property shall be delivered to Buyer
upon Closing.
5. GENERAL PROVISIONS
5.1 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which, taken together,
shall constitute one and the same instrument.
5.2 ENTIRE AGREEMENT. This Agreement (and all Exhibits and closing
documents referenced herein), the SPC Agreement and the 19th Hole Agreement
contain the entire integrated agreement between the parties respecting the
subject matter of this Agreement and supersede all prior understandings and
agreements, whether oral or in writing, between the parties respecting the
subject matter of this Agreement. There are no representations, agreements,
arrangements or understandings, oral or in writing, between or among the
parties to this Agreement relating to the subject matter of this Agreement
which are not fully expressed in this Agreement. The terms of this Agreement
are intended by the parties as a final expression of their agreement with
respect to those terms and they may not be contradicted by evidence of any
prior agreement or of any contemporaneous agreement. The parties further
intend that this Agreement constitute the complete and exclusive statement of
its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial proceeding involving this Agreement.
5.3 LEGAL ADVICE; NEUTRAL INTERPRETATION; HEADINGS. Each party has
received independent legal advice from its attorneys with respect to the
advisability of executing this Agreement and the meaning of the provisions
hereof. The provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any party based upon any attribution to such
party as the source of the language in question. Headings used in this
Agreement are for convenience of reference only and shall not be used in
construing this Agreement.
5.4 CHOICE OF LAW. This Agreement shall be governed by the laws of
the State of California.
5.5 SEVERABILITY. If any term, covenant, condition or provision of
this Agreement, or the application thereof to any person or circumstance,
shall to any extent be held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, covenants,
conditions or provisions of this Agreement, or the application thereof to any
person or circumstance, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby.
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5.6 WAIVER OF COVENANTS, CONDITIONS OR REMEDIES. The waiver by one
party of the performance of any covenant, condition or promise under this
Agreement shall not invalidate this Agreement nor shall it be considered a
waiver by it of any other covenant, condition or promise under this
Agreement. The waiver by either or both parties of the time for performing
any act under this Agreement shall not constitute a waiver of the time for
performing any other act or an identical act required to be performed at a
later time. The exercise of any remedy provided in this Agreement shall not
be a waiver of any consistent remedy provided by law, and the provision in
this Agreement for any remedy shall not exclude other consistent remedies
unless they are expressly excluded.
5.7 EXHIBITS. All exhibits to which reference is made in this
Agreement are deemed incorporated in this Agreement, whether or not actually
attached.
5.8 AMENDMENT. This Agreement may be amended at any time by the
written agreement of Buyer and Seller. All amendments, changes, revisions
and discharges of this Agreement, in whole or in part, and from time to time,
shall be binding upon the parties despite any lack of legal consideration, so
long as the same shall be in writing and executed by the parties hereto.
5.9 RELATIONSHIP OF PARTIES. The parties agree that their
relationship is that of seller and buyer, and that nothing contained herein
shall constitute either party the agent or legal representative of the other
for any purpose whatsoever, nor shall this Agreement be deemed to create any
form of business organization between the parties hereto, nor is either party
granted any right or authority to assume or create any obligation or
responsibility on behalf of the other party, nor shall either party be in any
way liable for any debt of the other.
5.10 THIRD PARTY BENEFICIARY. This Agreement is intended to benefit
only Golf Trust of America, Inc., a Maryland Corporation as a third party
beneficiary and the parties hereto agree that there shall be no other
assignees and no other person or entity has or shall acquire any rights
hereunder.
5.11 TIME OF THE ESSENCE. Time shall be of the essence as to all
dates and times of performance, whether contained herein or contained in any
escrow instructions to be executed pursuant to this Agreement, and all escrow
instructions shall contain a provision to this effect.
5.12 FURTHER ACTS. Each party agrees to perform any further acts and
to execute, acknowledge and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
5.13 RECORDATION; ACTIONS TO CLEAR TITLE. Buyer shall not record this
Agreement, any memorandum of this Agreement, any assignment of this Agreement
or any other document which would cause a cloud on the title to the Property.
If Buyer fails to complete its purchase of the Property for any reason other
than solely as a result of Seller's default hereunder, or if this Agreement
shall terminate for any reason not solely due to Seller's default hereunder,
then Buyer shall, at no cost to Seller, promptly execute, acknowledge and
deliver to Seller, all within five (5) days after written request from
Seller, a quitclaim deed, in recordable form, in favor of Seller and
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any other documents reasonably requested by Seller to remove the cloud on
title to the Property that may exist as the result of the existence of this
Agreement or any escrow relating to this Agreement. In the event Buyer fails
to so execute and deliver any such document, in addition to any liquidated
damages payable to Seller pursuant to this Agreement, Buyer shall pay all
losses, damages, costs and expenses, including but not limited to Seller's
reasonable attorneys' fees, incurred in connection with Buyer's breach of its
obligations under this Section 5.13 or the clearing of any such cloud on
title.
5.14 ASSIGNMENT. Buyer shall not assign Buyer's rights or delegate
its obligations hereunder without the prior written consent of Seller in each
instance, which consent Seller may withhold in Seller's sole and absolute
discretion; provided that Buyer may assign its rights, under this Agreement
to either or both the Golf Course and Fourteen Acres to an affiliate who
assumes the liabilities set forth in this Agreement. If Buyer assigns its
rights or delegates its obligations hereunder in violation of this Section,
Seller shall have the right to terminate this Agreement pursuant to Section
2.3 above. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the parties to
this Agreement.
5.15 ATTORNEYS' FEES. In the event of any litigation involving the
parties to this Agreement to enforce any provision of this Agreement, to
enforce any remedy available upon default under this Agreement, or seeking a
declaration of the rights of either party under this Agreement, the
prevailing party shall be entitled to recover from the other such attorneys'
fees and costs as may be reasonably incurred, including the costs of
reasonable investigation, preparation and professional or expert consultation
incurred by reason of such litigation. All other attorneys' fees and costs
relating to this Agreement and the transactions contemplated hereby shall be
borne by the party incurring the same.
5.16 BROKERS. Buyer and Seller each represent and warrant to the
other that (a) they have not dealt with any brokers or finders in connection
with the purchase and sale of the Property, and (b) insofar as such party
knows, no broker or other person is entitled to any commission or finder's
fee in connection with the purchase and sale of the Property. Seller and
Buyer each agree to indemnify and hold harmless the other against any loss,
liability, damage, cost, claim or expense incurred by reason of any brokerage
fee, commission or finder's fee which is payable or alleged to be payable to
any broker or finder because of any agreement, act, omission or statement of
the indemnifying party.
5.17 CONFIDENTIALITY. Pursuant to the terms of this Agreement, Seller
shall furnish to Buyer certain information concerning the condition,
development or value of the Property (the "INFORMATION") which is either
confidential, proprietary or otherwise not available to the public. Any such
information furnished to Buyer by a director, officer, employee, agent,
contractor or representative of Seller shall be deemed for purposes of this
Agreement to have been Information furnished by Seller. As a condition to
Seller furnishing the Information, Buyer hereby represents, warrants and
agrees that without the prior written consent of Seller, which consent may be
withheld in Seller's sole and absolute discretion, Buyer will: (a) Keep the
Information used by Buyer confidential, except information which is in the
public domain or which Buyer may have received from sources other than Seller
and except for disclosures to such advisors and consultants that Buyer
reasonably determines need to have access to such Information for purposes of
Buyer's Investigation of the Property and Buyer shall require such advisors
and consultants to maintain the confidentiality
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of such Information, and the Information will not be used other than in
connection with the Buyer's Investigation of the Property; (b) Use the same
efforts that Buyer would use to safeguard its own confidential or proprietary
information to safeguard the Information from unauthorized disclosure; (c) to
the extent legally permitted, not disclose to any person (i) that the
Information has been made available to Buyer, (ii) that Buyer has inspected
any portion of the Information, or (iii) any facts with respect to the sale.
Buyer shall indemnify Seller from and against any and all claims, demands,
causes of action, loss, damage or liability resulting from, arising out of or
in connection with Buyer's breach of its obligations under this Section 5.17.
5.18 MANNER OF GIVING NOTICE. All notices and demands which either
party is required or desires to give to the other shall be given in writing
by personal delivery, express courier service or by telecopy followed by next
day delivery of a hard copy to the address or telecopy number set forth below
for the respective party, provided that if any party gives notice of a change
of name, address or telecopy number notices to that party shall thereafter be
given as demanded in that notice. All notices and demands so given shall be
effective upon receipt by the party to whom notice or a demand is being given.
TO SELLER: WITH COPIES TO:
Aradon Corporation Lamb & Baute LLP
c/o Musick, Peeler & Garrett 601 South Figueroa Street
One Wilshire Blvd., Suite 2100 Suite 4100
Los Angeles, California 90071 Los Angeles, California 90017
Telephone: (213) 629-7600 Telephone: (213) 630-5000
Telecopier: (213) 624-1376 Telecopier: (213) 683-1225
Attn: Robert Y. Nagata, Esq. Attn: Kevin J. Lamb, Esq.
TO BUYER: WITH COPIES TO:
Golf Trust of America O'Melveny & Myers LLP
14 North Adgers Wharf Embarcadero Center West
Charleston, South Carolina 20401 275 Battery Street
Telephone: (803) 723-4653 San Francisco, CA 94111
Telecopier: (803) 723-0479 Telephone: (415) 984-8700
Attn: Mr. Bradley Blair Telecopier: (415) 984-8701
Mr. David J. Dick Attn: Peter T. Healy, Esq.
5.19 SURVIVAL. The provisions of Sections 2.1 Limited Diligence), 3.1
(Representations and Warranties), 3.2 (Reaffirmation), 3.3 (Hazardous
Material Release), 3.4 (Condemnation), 3.5 (Damage or Destruction), 3.6
(Development Conditions), 3.7 (Plaque), 3.8 (Golf) 4.2 (Prorations), 4.3
(Payment of Closing Costs), 4.6 (Liquidated Damages), 4.7 (Possession) and
Article 5 (General Provisions) shall survive the Closing and the consummation
of the transactions contemplated by this Agreement or the termination of this
Agreement for any reason without the conveyance of the Property to Buyer.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
"SELLER": "BUYER":
ARADON CORPORATION, GOLF TRUST OF AMERICA, L.P.,
a California corporation a Delaware limited partnership
By: GTA GP, INC.,
a Maryland corporation,
/s/ Robert Y. Nagata its General Partner
- -----------------------------
Robert Y. Nagata, President
By: /s/ W. Bradley Blair II
-----------------------------------
Name: W. Bradley Blair II
---------------------------------
Title: President
--------------------------------
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CONTRIBUTION AND LEASEBACK AGREEMENT
dated as of January 23, 1998
by and between
OKEECHOBEE CHAMPIONSHIP GOLF, INC.,
as Transferor,
and
GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Emerald Dunes
West Palm Beach, Florida
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2
PURCHASE AND CONTRIBUTION;
PAYMENT OF BASE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Purchase and Contribution. . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Payment of Base Purchase Price . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS,
WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . . . . . 14
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . . . . . 15
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . . . . . 15
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . . . . . 16
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.19 Public Offering; Preparation of S-11 . . . . . . . . . . . . . . . . . . 17
3.20 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.21 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.23 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.24 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . . . . . 19
3.25 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . 19
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 As to Transferee's Obligations . . . . . . . . . . . . . . . . . . . . . 20
5.2 As to Transferor's Obligations . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Transferor's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Transferee's Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . . . . . 26
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Liability of Transferee. . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Indemnification by Transferor. . . . . . . . . . . . . . . . . . . . . . 30
8.3 Termination by Transferee. . . . . . . . . . . . . . . . . . . . . . . . 30
8.4 Termination by Transferor. . . . . . . . . . . . . . . . . . . . . . . . 31
8.5 Termination by Transferor. . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
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ARTICLE 9
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . 33
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.15 Radon Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
EXHIBITS
Exhibit A-Legal Description of the Land
Exhibit B-Description of Improvements
Exhibit C-Tangible Personal Property
Exhibit D-Intangible Personal Property
Exhibit E-Golf Course Lease
Exhibit F-Bill of Sale - Personal Property
Exhibit G-Deed
Exhibit H-FIRPTA Affidavit of Transferor
Exhibit I-Contracts and Operating Agreements
Exhibit J-Partnership Agreement
Exhibit K-Calculation of Purchase Price
Exhibit L-Due Diligence List
Exhibit M-Schedule of Mortgages
Exhibit N-Accredited Investor Questionnaire
Exhibit O-Transferor's Certificate
Exhibit P-Warranty Disclosure Schedule
Exhibit Q-1-Non-Qualified Stock Option Agreement (Raymon R. Finch, Jr.)
Exhibit Q-2-Non-Qualified Stock Option Agreement (Raymon R. Finch, III)
Exhibit R-Permitted Title Exceptions
iii
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CONTRIBUTION AND LEASEBACK AGREEMENT
SUMMARY SHEET
Transferee: GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Transferor: OKEECHOBEE CHAMPIONSHIP GOLF, INC.,
a Florida corporation
Date of
Agreement: _________ __, 1998
Golf Course: Emerald Dunes Golf Course
(address): 2100 Emerald Dunes Drive
West Palm Beach, Florida
Trade Name: Emerald Dunes Golf Course
Notice Address
of Transferor: 2100 Emerald Dunes Drive
West Palm Beach, Florida 33411
with a copy to: Cherry & Spencer, P.A.
The Forum
1665 Palm Beach Lakes Blvd., Suite 600
West Palm Beach, Florida 33401
Notice Address
of Transferee: Scott D. Peters
Golf Trust of America, Inc.
14 N. Adger's Wharf
Charleston, South Carolina 29401
with a copy to: David G. Estes, Esq.
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
THIS CONTRIBUTION AND LEASEBACK AGREEMENT (this "Agreement") is
entered into by and between Transferee and Transferor.
RECITALS:
A. Transferor is the owner of that certain Golf Course and related
improvements located on the real property more particularly described in EXHIBIT
A attached hereto (the "Land").
B. Subject to the terms of this Agreement, Transferor hereby agrees
to contribute, assign and convey to Transferee, and Transferee hereby agrees to
acquire from Transferor, all of Transferor's right, title and interest in and to
the following:
1. The Land, together with the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, fixtures and other items of real
estate located on the Land (the "Improvements"), as more particularly
described in EXHIBIT B attached hereto.
2. All rights, privileges, easements and appurtenances to the Land
and the Improvements, if any, including, without limitation, all of
Transferor's right, title and interest, if any, in and to all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Land and the
Improvements, including, without limitation, concession agreements for spas
and the like (the Land, the Improvements and all such easements and
appurtenances are sometimes collectively hereinafter referred to as the
"Real Property").
3. All items of tangible personal property and fixtures (if any)
owned or leased by Transferor and located on or used in connection with
the Real Property, including, but not limited to, Inventory, Restaurant
Supplies (as such terms are hereinafter defined), golf carts, machinery,
equipment, furniture, furnishings, movable walls or partitions, phone
systems and other control systems, restaurant equipment, computers or trade
fixtures, golf course operation and maintenance equipment, including
mowers, tractors, aerators, sprinklers, sprinkler and irrigation facilities
and equipment, valves or rotors, driving range equipment, athletic training
equipment, office equipment or machines, other decorations, and equipment
or machinery of every kind or nature located on or used in connection with
the operation of the Real Property whether on or off-site, including all
warranties and guaranties associated therewith (the "Tangible Personal
Property"). A schedule of the Tangible Personal Property is attached to
this Agreement as
<PAGE>
EXHIBIT C, indicating whether such Tangible Personal Property is owned or
leased. The schedule of Tangible Personal Property shall also indicate
those items of personal property, such as art and antiques, which are
excluded from the personal property being conveyed hereby.
4. All intangible personal property owned or possessed by Transferor
and used in connection with the ownership, operation, leasing or
maintenance of the Real Property or the Tangible Personal Property, all
goodwill attributed to the Property, and any and all trademarks and
copyrights, guarantees, Authorizations (as hereinafter defined), general
intangibles, business records, plans and specifications, surveys and title
insurance policies pertaining to the Property, all licenses, permits and
approvals with respect to the construction, ownership, operation or
maintenance of the Property, to the extent transferable, any unpaid award
for taking by condemnation or any damage to the Real Property by reason of
a change of grade or location of or access to any street or highway,
excluding (a) any of the aforesaid rights that Transferee elects not to
acquire and (b) the Current Assets, as hereinafter defined (collectively,
the "Intangible Personal Property"). A schedule of the Intangible Personal
Property is attached to this Agreement as EXHIBIT D. The Intangible
Personal Property shall not include the right to use the Trade Name, which
shall be retained by Transferor and transferred to the lessee of the Golf
Course (and further provided in no event shall Transferee have the right to
use such trade name in connection with any other property owned by
Transferee or any Affiliate (hereinafter defined) of Transferee). (The
Real Property, Tangible Personal Property and Intangible Personal Property
are sometimes collectively referred to as the "Property".)
C. Upon the acquisition by the Transferee of the Property, the
Transferee will lease the Property to an Affiliate of Transferor pursuant to a
lease (the "Golf Course Lease"), substantially in the form attached hereto as
EXHIBIT E.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
"ACT OF BANKRUPTCY" shall mean if a party hereto or any general
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession
2
<PAGE>
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its Property, (b) admit in writing its inability to pay its
debts as they become due, (c) make a general assignment for the benefit of its
creditors, (d) file a voluntary petition or commence a voluntary case or
proceeding under the Federal Bankruptcy Code (as now or hereafter in effect) or
any new bankruptcy statute, (e) be adjudicated bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect) or any new
bankruptcy statute, or (h) take any corporate or partnership action for the
purpose of effecting any of the foregoing; or if a proceeding or case shall be
commenced, without the application or consent of a party hereto or any general
partner thereof, in any court of competent jurisdiction seeking (1) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of debts, of such party or general partner, (2) the appointment of
a receiver, custodian, trustee or liquidator or such party or general partner or
all or any substantial part of its assets, or (3) other similar relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.
"AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
"BASE PURCHASE PRICE" shall mean Twenty-Two Million Four Hundred
Thousand Dollars ($22,400,000).
"BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale conveying
title to the Tangible Personal Property and Intangible Personal Property from
Transferor to Transferee, substantially in the form of EXHIBIT F attached
hereto.
"CLOSING" shall mean the time the Deed and each of the deliveries to
be made by Transferor (as provided in Section 6.2) and Transferee (as provided
in Section 6.3) are made and each of the Closing conditions of Transferee and
Transferor in Sections 5.1 and 5.2, respectively, have been satisfied or waived.
"CLOSING DATE" shall mean the date on which the Closing occurs.
3
<PAGE>
"CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
"CONTINGENT PURCHASE PRICE"" shall mean the amount as calculated by
the procedure set forth in Exhibit K attached hereto.
"CURRENT ASSETS" shall mean cash and accounts receivable held by
Transferor prior to the Closing Date.
"DEED" shall mean a special warranty deed, substantially in the form
of EXHIBIT G attached hereto (or lease assignment, if the Property is owned by
Transferor pursuant to a ground lease), in form and substance satisfactory to
Transferee, conveying the title of Transferor to the Real Property, with such
grant or warranty covenants of title from Transferor to Transferee as are
customary in the state in which the Property is located, subject only to
Permitted Title Exceptions. If there is any difference between the description
of the Land, as shown on EXHIBIT A attached hereto and the description of the
Land as shown on the Survey, the description of the Land to be contained in the
Deed and the description of the Land set forth in the Owner's Title Policy, as
defined herein, shall conform to the description shown on the Survey.
"DEPOSIT" shall mean the sum of Twenty-Five Thousand Dollars
($25,000), together with all accrued interest thereon, which shall be deposited
with Escrow Agent, and held by Escrow Agent pursuant to the terms of this
Agreement.
"DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
"DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00 a.m.,
California time, on the date hereof, and continuing through 5:00 p.m.,
California time, on the date that is thirty (30) days from the date hereof,
provided Transferee, at its sole election by written notice given to Transferor
prior to expiration of the Due Diligence Period, shall have the right to extend
the Due Diligence Period for up to thirty (30) days.
"EMPLOYMENT AGREEMENTS" shall mean all employment agreements, written
or oral, between Transferor or its managing agent and the persons employed with
respect to the Property in effect as of the date hereof.
"ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory or
judicial action, suit, demand, letter, claim, lien, notice of non-compliance or
violation, investigation or proceeding relating in any way to any Environmental
Laws or any permit issued under any Environmental Law including, without
limitation, (i) by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Laws, and (ii) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Substances or arising from alleged injury or threat of
injury to health, safety or the environment.
4
<PAGE>
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as amended,
29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Substances.
"ESCROW AGENT" shall mean the Title Company.
"FIRPTA CERTIFICATE" shall mean the affidavit of Transferor under
Section 1445 of the Internal Revenue Code certifying that Transferor is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT H attached hereto.
"GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Transferor for purchase in connection with golfing
privileges at the Property.
"GOLF COURSE LEASE" shall have the meaning set forth in Recital C.
"GOVERNMENTAL BODY" shall mean any federal state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"GTA" shall mean Golf Trust of America, Inc., a Maryland Corporation.
"HAZARDOUS SUBSTANCES" shall mean any substance, material, waste, gas
or particulate matter which is regulated by any local, state of federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
5
<PAGE>
"IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(4).
"INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Transferor's
business.
"LAND" shall have the meaning set forth in Recital A.
"MORTGAGE INDEBTEDNESS" shall have the meaning set forth in Section
2.2(d).
"OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the date hereof, as more particularly set forth on EXHIBIT I attached hereto.
"OWNER'S SHARES" shall mean limited partnership interests in the
Partnership.
"OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land Title
Association extended coverage owner's policy of title insurance issued to
Transferee by the Title Company, pursuant to which the Title Company insures
Transferee's ownership of fee simple title (or ground lease interest, as
applicable) to the Real Property (including the marketability thereof) subject
only to Permitted Title Exceptions and shall include those title endorsements
required by Transferee. The Owner's Title Policy shall insure Transferee in the
amount designated by Transferee and shall be acceptable in form and substance to
Transferee.
"PARTNERSHIP AGREEMENT" shall mean that certain amended and restated
limited partnership agreement relating to Transferee, which shall be
substantially in the form attached hereto as EXHIBIT J.
"PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title to
the Real Property that are set forth on EXHIBIT R hereto or are satisfactory to
Transferee as determined under this Agreement, and as evidenced by a pro forma
title report.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PRELIMINARY TITLE REPORT" shall have the meaning set forth in Section
2.2(d).
6
<PAGE>
"PROPERTY" shall have the meaning set forth in Recital B(4).
"REAL PROPERTY" shall have the meaning set forth in Recital B(2).
"REGISTERED OFFERING" shall have the same meaning set forth in Section
3.19.
"RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES" shall have the meaning set forth in Section 7.4.
"STATE" shall mean the state or commonwealth in which the Property is
located.
"SUMMARY SHEET" shall mean the summary page attached to this Agreement
and incorporated herein by reference.
"SURVEY" shall mean the survey prepared pursuant to Section 2.2(c).
"TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B (3).
"TITLE COMPANY" shall mean a title insurance company selected by
Transferor and authorized to conduct a title insurance business in the State,
which the parties agree shall be Fidelity National Title Insurance Company.
"TITLE OBJECTIONS" shall have the meaning set forth in Section 2.2(d).
"TRANSFEROR'S KNOWLEDGE" shall mean the actual, and not the
constructive or imputed, knowledge of any person having an ownership interest in
the Transferor.
"TRANSFEROR'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Transferor.
"UTILITIES" shall mean public sanitary and storm sewers, natural gas,
telephone, public water facilities, electrical facilities and all other utility
facilities and services necessary for the operation and occupancy of the
Property.
"WARN ACT" shall mean the Worker Adjustment Retraining and
Notification Act, as amended.
7
<PAGE>
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Agreement or any exhibits hereto.
ARTICLE 2
PURCHASE AND CONTRIBUTION; PAYMENT OF BASE PURCHASE PRICE
2.1 PURCHASE AND CONTRIBUTION. Transferor agrees to contribute and
Transferee agrees to acquire the Property for the Base Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) Transferee shall have the right, during the Due Diligence Period,
and thereafter if Transferee notifies Transferor that Transferee has
elected to proceed to Closing in the manner described below, to enter upon
the Real Property and to perform, at Transferor's expense, such surveying,
engineering, and environmental studies and investigations as Transferee may
deem appropriate. No invasive inspection shall be performed without
Transferor's prior written consent (which consent shall not be unreasonably
withheld or delayed, but it shall be deemed reasonable for Transferor to
refuse to consent to any inspections which would be materially disruptive
to Transferor's business). Transferee shall give not less than twenty-four
(24) hours prior written notice to Transferor prior to any entry upon the
Property for the purpose of conducting such inspections, and such entry
shall be scheduled and coordinated with Transferor. At Transferor's
election, a representative of Transferor shall be present during any entry
by Transferee or Transferee's representative upon the Property for
conducting such inspections. Transferee shall not cause or permit any
mechanic's liens, materialmen's liens, or other liens to be filed against
the Property as a result of the inspections. Transferee shall repair and
restore any damage to the
8
<PAGE>
Property caused by entry upon the Property by Transferee or Transferee's
representative. Transferee shall indemnify, defend, and hold harmless
Transferor and Transferor's officers, directors, shareholders, partners,
tenants, agents, and employees (collectively, the "Indemnified Parties"),
from and against any and all actions, losses, costs, damages, claims,
liabilities, and expenses (including court costs and reasonable attorneys'
fees) brought, sought, or incurred by or against any of the Indemnified
Parties resulting from, arising out of, or relating to, entry upon the
Property or Improvements by Transferee or any of the other Transferee's
representatives. Notwithstanding anything to the contrary hereof, the
foregoing indemnification and repair and restoration obligations shall
expressly survive the termination of this Agreement. If such tests,
studies and investigations warrant, in Transferee's sole, absolute and
unreviewable discretion, the purchase of the Property for the purposes
contemplated by Transferee, then Transferee may elect to proceed to Closing
and shall so notify Transferor and the Escrow Agent, in writing, prior to
the expiration of the Due Diligence Period. If for any reason Transferee
does not so notify Transferor and Escrow Agent of its determination to
proceed to Closing prior to the expiration of the Due Diligence Period, or
if Transferee notifies Transferor and Escrow Agent, in writing, prior to
the expiration of the Due Diligence Period that it has determined not to
proceed to Closing, this Agreement automatically shall terminate and
Transferee and Escrow Agent shall be released from any further liability or
obligation under this Agreement and, if requested by Transferor, Transferee
will deliver such reports and materials to Transferor.
(b) During the Due Diligence Period, Transferor shall make available
to Transferee, its agents, auditors, engineers, attorneys and other
designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies,
zoning and site plan materials, correspondence, environmental audits and
reviews, books, records, tax returns, bank statements, financial
statements, fee schedules and any and all other material or information
relating to the Property which are in, or come into, Transferor's
possession or control, or which Transferor may attain. Such information is
more particularly described in EXHIBIT L attached hereto, as the same may
be amended or supplemented by Transferor from time to time.
(c) Within fifteen (15) days from the date hereof, Transferor shall
deliver to Transferee a modified ALTA/ACSM survey of the Land and the
Improvements, prepared by a surveyor licensed to practice as such in the
State, bearing a date not earlier than sixty (60) days from the date of its
delivery and certified to both Transferee, Transferor and the Title Company
(and any lender or other party designated by Transferee), showing the legal
description of the Land, all dimensions thereof, and showing the location
of Improvements on the Land and the setbacks thereof from the property
line, as well as the setbacks required by applicable zoning laws or
regulations (the "Survey"). The Survey shall locate all easements which
serve and affect the Land. The Survey shall reflect that no buildings or
improvements located on any other property encroach upon
9
<PAGE>
the Land and that the Improvements located upon the Land do not encroach
upon any other property, except for minor encroachments of the golf cart
paths serving the Property on to the adjacent property. The surveyor
preparing the Survey shall certify that (i) the Survey is an accurate
Survey of the Land and the Improvements, (ii) that the Survey was made
under the surveyor's supervision, (iii) that the Survey meets (a) the
requirements of the Title Company for the issuance of the Owner's Title
Policy free of any general survey exception, and (b) the minimum technical
standards for land boundary surveys with improvements, set forth by
applicable statutes or applicable professional organizations, and (iv) all
buildings and other structures and their relation to the property lines are
shown and that there are no encroachments, overlaps, boundary line
disputes, easements, or claims of easements visible on the ground, other
than those shown on the Survey. If Transferee has any objection to Survey
matters, the same shall be treated for all purposes as Title Objections
within the provisions of this Agreement.
(d) Transferor agrees to provide to Transferee, within five (5)
business days following the date of this Agreement, a copy of any existing
title insurance policies which Transferor may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Transferee, at its expense, shall cause an examination of title to the
Property to be made and a preliminary title report to be issued (the
"Preliminary Title Report"), and, prior to the expiration of the Due
Diligence Period, shall notify Transferor of any defects in title shown by
such examination that Transferee is unwilling to accept by delivering a pro
forma copy of the Preliminary Title Report that reflects such unacceptable
defects in title, which shall be designated as the Title Objections. The
matters described on EXHIBIT R shall not be included as Title Objections.
Within ten (10) days after such notification, Transferor shall notify
Transferee whether Transferor is willing to cure such defects. If
Transferor is willing to cure such defects, Transferor shall act promptly
and diligently to cure such defects at its expense. If any of such defects
consist of mortgages, deeds of trust, construction or mechanics' liens, tax
liens or other liens or charges in a fixed sum or capable of computation as
a fixed sum, then, to that extent, and notwithstanding the foregoing,
Transferor shall be obligated to pay and discharge such defects at Closing,
except for the mortgages and other indebtedness scheduled and set forth in
EXHIBIT M attached hereto (the "Mortgage Indebtedness") which Transferee
shall take subject to as provided in Section 2.3(b). For such purposes,
Transferor may use all or a portion of the cash to close. If Transferor is
unable to cure such defects by Closing, after having attempted to do so
diligently and in good faith, Transferee shall elect (1) to waive such
defects and proceed to Closing without any abatement in the Base Purchase
Price, or (2) to terminate this Agreement. Transferor shall not, after the
date of this Agreement, subject the Property to any liens, encumbrances,
leases, covenants, conditions, restrictions, easements or other title
matters or seek any zoning changes or take any other action which may
affect or modify the status of title without Transferee's prior written
consent. All title matters revealed by
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Transferee's title examination and not objected to by Transferee as
provided above shall be deemed Permitted Title Exceptions. If Transferee
shall fail to examine title and notify Transferor of any such Title
Objections by the end of the Due Diligence Period, all such title
exceptions (other than those rendering title unmarketable and those that
are to be paid at Closing as provided above) shall be deemed Permitted
Title Exceptions. Notwithstanding the foregoing, Transferee shall not be
required to take title to the Property subject to any matters which may
arise subsequent to the effective date of its examination of title to the
Property made during the Due Diligence Period.
(e) Transferor shall deliver to Transferee within fourteen (14) days
after the date of the execution of this Agreement by Transferor and
Transferee a disclosure schedule that accurately and completely identifies
and describes (a) all Employment Agreements (including name of employee,
social security number, wage or salary, accrued vacation benefits, other
fringe benefits, etc.), and (b) an updated Golf Club membership list,
setting forth the names of the members of the Golf Club, the length of
their membership, the payment obligations of the members and a summary of
the terms of the memberships (the "Disclosure Schedule").
(f) Transferor shall deliver to Transferee within thirty (30) days
after the date of execution of this Agreement by Transferor and Transferee
current searches of all Uniform Commercial Code financing statements filed
with the Secretary of State of the State respecting Transferor, together
with searches for pending litigation, tax liens and bankruptcy filings in
all appropriate jurisdictions.
(g) Transferor shall have received the written approval of Pacific
Mutual Insurance Company ("Pacific Mutual") for Transferee to assume (or
take subject to, if approved by Pacific Mutual and Transferor) the Mortgage
Indebtedness held by Pacific Mutual.
2.3 PAYMENT OF BASE PURCHASE PRICE. The Base Purchase Price shall be
paid to Transferor in the following manner:
(a) Within two (2) Business Days following execution of this
Agreement, Transferee shall deliver the Deposit to Escrow Agent. The
Deposit shall be placed in an interest-bearing account in the name of
Escrow Agent. The Deposit shall be tendered to Transferor or Transferee in
accordance with the terms of this Agreement. Escrow Agent has agreed to
act as escrow agent for the convenience of the Transferee and Transferor
without fee or other charges for such service. Escrow Agent shall not be
liable for: (i) any acts taken in good faith but only for its intentional
misconduct or gross negligence; (ii) any loss or impairment of funds in the
course of collection or on deposit in a financial institution arising out
of failure, insolvency or suspension of such financial institution; (iii)
expiration of any time limit or other consequence of delay unless a
properly executed written instruction, accepted by Escrow Agent, has
instructed
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Escrow Agent to comply with such time limit; (iv) default, error, action or
omission of any party to the Agreement; (v) compliance with any legal
process, subpoena, writ, order, judgment or decree, whether issued with or
without jurisdiction and whether subsequently vacated, modified, set aside
or reversed; (vi) any legal effect, insufficiency or undesirability of any
instrument deposited with or delivered by Escrow Agent or exchanged by the
parties to this Agreement whether or not Escrow Agent prepared such
instrument; or (vii) any default, error, action or omission of any party to
this Agreement. Escrow Agent may rely upon the written notices,
communications, orders or instructions given by any party or reasonably
believed by it to be genuine. The parties will indemnify and hold Escrow
Agent harmless against any matters directly or indirectly related to the
Deposit, including, without limitation, attorneys' fees. Notwithstanding
anything to the contrary in this Agreement, if prior to Closing either
party makes a demand upon Escrow Agent for the Deposit, Escrow Agent shall
give notice to the other party of such demand. Should Escrow Agent not
receive an objection from the non-demanding party to the proposed payment
within 10 days after such notice, Escrow Agent is authorized to make
payment to the demanding party; if an objection is received within such
10-day period or if for any other reason Escrow Agent is in good faith
uncertain about its responsibilities, it shall continue to hold the Deposit
until otherwise directed by written instructions from Seller and Buyer or
by final judgment of a court of competent jurisdiction. In the event of
any dispute, Escrow Agent may at any time deposit the Deposit with the
Clerk of the Court of the County in which the Property is located and be
relieved and discharged of all obligations under this Agreement.
Transferee acknowledges that Cherry & Spencer, P.A. is acting as Escrow
Agent and is counsel to Transferor. In the event of any dispute between
Transferor and Transferee, Cherry & Spencer, P.A. shall be permitted to
continue to represent Transferor in such dispute, including, without
limitation, any litigation over payment of the Deposit.
(b) Transferee shall (i) assume (or take subject to, if approved by
Pacific Mutual and Transferor) the Mortgage Indebtedness in an aggregate
amount not in excess of the Base Purchase Price and (ii) receive a credit
against the Base Purchase Price in an amount equal to the outstanding
principal amount, together with accrued interest thereon, as of the Closing
Date, as evidenced by (A) estoppel letters (or other evidence acceptable to
Transferee, in its sole discretion) from the holders of the indebtedness
described in EXHIBIT M (other than Pacific Mutual); and (B) an estoppel
letter from Pacific Mutual in form and substance satisfactory to Transferee
and Title Company.
(c) Transferee shall pay in cash (including an application of the
Deposit) an amount necessary to pay for certain costs incurred by
Transferor in connection with the preparation of certain audited financial
statements, due diligence costs and closing costs and to permit the
liquidation of certain third party-interests in Transferor, as set forth in
a schedule to be prepared by Transferor and delivered to Transferee prior
to the expiration of the Due
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Diligence Period, which schedule shall be subject to Transferee's review
and approval, which approval shall not be unreasonably withheld.
(d) Transferee shall pay the balance of the Base Purchase Price to
Transferor in Owner's Shares. The number of Owner's Shares required for
such payment shall be the quotient obtained by dividing the balance of the
Base Purchase Price by the lesser of (i) $27.00; or (ii) the average
closing price for the common stock of GTA, Inc. for the five (5) day period
prior to Closing.
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferee to enter into this Agreement and to purchase the
Property, and to pay the Base Purchase Price therefor, Transferor hereby makes
the following representations, warranties and covenants with respect to the
Property, subject to the Warranty Disclosure Schedule attached hereto as EXHIBIT
P, upon each of which Transferor acknowledges and agrees that Transferee is
entitled to rely and has relied:
3.1 ORGANIZATION AND POWER. Transferor is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document or instrument required
to be executed and delivered by or on behalf of Transferor hereunder.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Transferor to be delivered to Transferee
at Closing as provided in Section 5.1 will be, duly authorized by all necessary
action on the part of Transferor, has been duly executed and delivered by
Transferor, constitutes the valid and binding agreement of Transferor and is
enforceable against Transferor in accordance with its terms. Other than Pacific
Mutual, there is no other person or entity who has an ownership interest in the
Property or whose consent is required in connection with Transferor's
performance of its obligations hereunder. All action required pursuant to this
Agreement necessary to effectuate the transactions contemplated herein has been,
or will at Closing be, taken promptly and in good faith by Transferor and its
representatives and agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the
performance by Transferor of its obligations under, this Agreement do not and
will not contravene, or constitute a default under, any provision of applicable
law or regulation, Transferor's Organizational Documents or any agreement
(excluding the Mortgage Indebtedness), judgment, injunction, order, decree or
other instrument binding upon Transferor, or result in the creation of any lien
or other encumbrance on any asset of Transferor. There are no outstanding
agreements (written or oral) pursuant to which Transferor (or any predecessor to
or representative of Transferor) has agreed to
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contribute or has granted an option or right of first refusal to purchase the
Property or any part thereof. Other than the rights of third parties pursuant
to that certain Warranty Deed from Gould Electronics, Inc. to Transferor
recorded on October 2, 1996 in O.R. Book 9467, Page 456, in the Public Records
of Palm Beach County, Florida, there are no purchase contracts, options or other
agreements of any kind, written or oral, recorded or unrecorded, whereby any
person or entity other than Transferor will have acquired or will have any basis
to assert any right, title or interest in, or right to possession, use,
enjoyment or proceeds of, all or any portion of the Property. There are no
rights, subscriptions, warrants, options, conversion rights or agreements of any
kind outstanding to purchase or to otherwise acquire any interest or profit
participation of any kind in the Property or any part thereof.
3.4 NO SPECIAL TAXES. Transferor has no knowledge of, nor has it
received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Preliminary Title Report. To the best of Transferor's knowledge, there is not
any proposed increase in the assessed valuation of the Real Property for tax
purposes (except as may relate to the transfer contemplated by this Agreement).
3.5 COMPLIANCE WITH EXISTING LAWS. Transferor possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Transferor has not misrepresented or failed to disclose
any relevant fact in obtaining all Authorizations, and Transferor has no
knowledge of any change in the circumstances under which any of those
Authorizations were obtained that result in their termination, suspension,
modification or limitation. Transferor has not taken any action (or failed to
take any action), the omission of which would result in the revocation of any of
the Authorizations. Transferor has no knowledge, nor has it received notice
within the past three years, of any existing or threatened violation of any
provision of any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Property or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof.
3.6 REAL PROPERTY. To the best of Transferor's knowledge, (i) the
Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, except for minor encroachments of the golf cart paths serving the
Property on to adjacent land, (iii) all contractors and subcontractors retained
by Transferor who have performed work on or supplied materials to the Property
have been fully paid, and all materials used at or on the Property have been
fully paid for, (iv) the Improvements have been completed in all material
respects in a workmanlike manner of first-class quality, and (v) all equipment
necessary or appropriate for the use or operation of the
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Property has been installed and is presently operative in good working order.
Transferor has not received any written notice which is still in effect that
there is, and, to the best of Transferor's knowledge, there does not exist, any
violation of a condition or agreement contained in any easement, restrictive
covenant or any similar instrument or agreement effecting the Real Property, or
any portion thereof.
3.7 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Transferor to Transferee is free
and clear of all liens and encumbrances, other than the Mortgage Indebtedness,
and will be so on the Closing Date and Transferor has good, merchantable title
thereto and the right to convey same in accordance with the terms of this
Agreement, except to the extent of approvals necessary to transfer any of the
leased property.
3.8 OPERATING AGREEMENTS. Except as set forth on EXHIBIT I, each of
the Operating Agreements, a copy of each of which has been provided to
Transferee) may be terminated upon not more than thirty (30) days prior written
notice and without the payment of any penalty, fee, premium or other amount.
Transferor has performed all of its obligations under each of the Operating
Agreements and no fact or circumstance has occurred which, by itself or with the
passage of time or the giving of notice or both, would constitute a default
under any of the Operating Agreements. Transferor shall not enter into any new
Operating Agreements, supply contract, vending or service contract or other
agreements with respect to the Property, nor shall Transferor enter into any
agreements modifying the Operating Agreements, unless (a) any such agreement or
modification will not bind Transferee or the Property after the Closing Date, or
(b) Transferor has obtained Transferee's prior written consent to such agreement
or modification. Transferor acknowledges that Transferee will not assume any of
the Operating Agreements and none of the Operating Agreements will be binding on
Transferee or the Property after Closing.
3.9 WARRANTIES AND GUARANTIES. Transferor shall not before or after
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
Transferee.
3.10 INSURANCE. All of Transferor's insurance policies are valid and
in full force and effect, all premiums for such policies were paid when due and
all future premiums for such policies (and any replacements thereof) shall be
paid by Transferor on or before the due date therefor. Transferor shall pay all
premiums on, and shall not cancel or voluntarily allow to expire, any of
Transferor's insurance policies unless such policy is replaced, without any
lapse of coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. Transferor has not received
any notice from any insurance company of any defect or inadequacies in the
Property to any part thereof which would adversely affect the insurability of
the Property, or which would increase the cost of insurance beyond that which
would ordinarily and customarily be charged for similar properties in the
vicinity of the Real Property. The Property is fully insured in accordance with
prudent and customary practice.
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3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Except with respect to a
possible relocation of an access road to the Property (which shall be done at no
cost to Transferor), Transferor has received no notice of any condemnation or
eminent domain proceeding pending or threatened against the Property or any part
thereof. Except for such possible relocation, Transferor has no knowledge of
any change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real Property. To the
best of Transferor's knowledge, no fact or condition exists which would result
in the termination or material impairment of access to the Real Property from
adjoining public or private streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other utilities or services.
3.12 LITIGATION. Except as disclosed in writing to Transferor, there
is no action, suit or proceeding pending or known to be threatened against or
affecting Transferor or any of its properties in any court, before any
arbitrator or before or by any Governmental Body which (a) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which Transferor is a party or by which it is
bound and that is or is to be used in connection with, or is contemplated by,
this Agreement, (b) could materially and adversely affect the business,
financial position or results of operations of Transferor, (c) could materially
and adversely affect the ability of Transferor to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Property, any part thereof or any interest therein, (e) the
subject matter of which concerns any past or present employee of Transferor or
its managing agent, or (f) could otherwise adversely materially affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes
pending or, to the best of Transferor's knowledge, threatened as to the
operation or maintenance of the Property or any part thereof. Transferor is not
a party to any union or other collective bargaining agreement with employees
employed in connection with the ownership, operation or maintenance of the
Property. Transferor is not a party to any employment contracts or agreements,
other than the Employment Agreements, and neither Transferor nor its managing
agent will, between the date hereof and the Closing Date, enter into any new
employment contracts or agreements, amend any existing Employment Agreement,
except with the prior written consent of Transferee. Transferor acknowledges
that Transferee will not assume any of the Employment Agreements and Transferor
has complied with and shall be responsible for compliance with the WARN Act and
any other applicable employment-related laws or ordinances. Transferor has
complied with the requirements of the federal Immigration and Reform Control Act
respecting the employment of undocumented workers.
3.14 FINANCIAL INFORMATION. To the best of Transferor's knowledge,
all of Transferor's financial information, including, without limitation, all
books and records and financial statements, is correct and complete in all
material respects and presents accurately the results of the operations of the
Property for the periods indicated.
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3.15 ORGANIZATIONAL DOCUMENTS. Transferor's Organizational Documents
are in full force and effect and have not been modified or supplemented, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default thereunder.
3.16 OPERATION OF PROPERTY. Transferor covenants, that between the
date hereof and the Closing Date, it will (a) operate the Property in the usual,
regular and ordinary manner consistent with Transferor's prior practice, (b)
maintain its books of account and records in the usual, regular and ordinary
manner, in accordance with sound accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years and (c) use
all reasonable efforts to preserve intact its present business organization,
keep available the services of its present officers, partners and employees and
preserve its relationships with suppliers and others having business dealings
with it. Except as otherwise permitted hereby, from the date hereof until
Closing, Transferor shall not take any action or intentionally fail to take
action the result of which would have a material adverse effect on the Property
or Transferee's ability to continue the operation thereof after the Closing Date
in substantially the same manner as presently conducted, or which would cause
any of the representations and warranties contained in this Article III to be
untrue as of Closing.
From and after the execution and delivery of this Agreement,
Transferor shall not, other than in the ordinary course of business, (a) make
any agreements which shall be binding upon Transferee with respect to the
Property, or (b) reduce or cause to be reduced any green fees, membership fees,
tournament fees, driving range fees or any other charges over which Transferor
has operational control. Between the date hereof and the Closing Date, if and
to the extent requested by Transferee, Transferor shall deliver to Transferee
such periodic information with respect to the above information as Transferor
customarily keeps internally for its own use. Transferor agrees that it will
operate the Property in accordance with the provisions of this Section 3.16
between the date hereof and the Closing Date.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferor.
3.18 LAND USE. The current use and occupancy of the Property for
golfing and all other related purposes (including, without limitation, the sale
of merchandise and food and beverages including the sale of alcoholic beverages
pursuant to a validly issued liquor license) are permitted as a matter of right
as a principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special permit,
permission or consent and Transferor is not aware of any proposal to change or
restrict such use. Transferor has all necessary certificates of occupancy or
completion to operate the Property as presently operated and there are no
unfulfilled conditions respecting the development of the Property.
3.19 PUBLIC OFFERING; PREPARATION OF S-11. Transferor shall cooperate
in the preparation by an Affiliate of Transferee of a Form S-11 or, if
applicable, a Form S-
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3 under the Securities Act of 1933, as amended, to be filed with the SEC in
connection with any public offering (the "Registered Offering"). The Registered
Offering shall be for purposes of selling shares of common stock in an Affiliate
of Transferee. Transferor shall provide Transferee access to all financial and
other information relating to the Property which would be sufficient to enable
them to prepare financial statements in conformity with Regulation S-X of the
SEC and to enable the Transferee to prepare a registration statement, report or
disclosure statement for filing with the SEC. At Transferee's request,
Transferor shall provide to Transferee's representatives a signed representation
letter sufficient to enable an independent public accountant to render an
opinion on the financial statements related to the Property.
3.20 HAZARDOUS SUBSTANCES. Except as may be disclosed in the Phase I
environmental assessment report for the Property, to the best of Transferor's
knowledge, (i) no Hazardous Substances are or have been located on (except in
immaterial amounts used in the ordinary course for the operation or maintenance
of the Property by Transferor in accordance with all applicable laws), in or
under the Property or have been released into the environment, or discharged,
placed or disposed of at, on or under the Property; (ii) no underground storage
tanks are, or have been, located at the Property; (iii) the Property has never
been used to store, treat or dispose of Hazardous Substances; and (iv) the
Property and its prior uses comply with, and at all times have complied with all
applicable Environmental Laws or any other governmental law, regulation or
requirement relating to environmental and occupational health and safety matters
and Hazardous Substances. To the best of Transferor's knowledge, there
currently exist no facts or circumstances that could reasonably be expected to
give rise to a material non-compliance with Environmental Laws, material
environmental liability or material Environmental Claim.
3.21 UTILITIES. To Transferor's knowledge, all Utilities required for
the operation of the Property either enter the Property through adjoining
streets, or they pass through adjoining land and do so in accordance with valid
public easements or private easements, and all of said Utilities are installed
and are in good working order and repair and operating as necessary for the
operation of the Property and all installation and connection charges therefor
have been paid in full. To Transferor's knowledge, the sewage, sanitation,
plumbing, water retention and detention, refuse disposal and utility facilities
in and on and/or servicing the Real Property are adequate to service the Real
Property as it is currently being used and the Real Property's utilization of
such facilities is in compliance with all applicable governmental and
environmental protection authorities' laws, rules, regulations and requirements.
3.22 CURB CUTS. To Transferor's knowledge, all curb cut street
opening permits or licenses required for vehicular access to and from the
Property from any adjoining public street have been obtained and paid for and
are in full force and effect.
3.23 LEASED PROPERTY. The Personal Property identified on EXHIBIT C
is all of the leased property at the Property, and such exhibit reflects the
date of each such
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lease, the name of the lessor, the name of the lessee, the term of each such
lease, the lease payment terms and a description of the property demised by each
such lease. All leases of such property are in good standing and free from
default.
3.24 SUFFICIENCY OF CERTAIN ITEMS. The Property, together with the
Current Assets, contain an amount of equipment and supplies, which is sufficient
to efficiently operate and maintain the Property in the manner in which it is
normally operated and maintained.
3.25 ACCREDITED INVESTOR. Transferor and all equity owners of
Transferor are as of the date hereof, and as of the Closing Date shall be,
"Accredited Investors". Concurrent herewith Transferor shall execute and
deliver to Transferee the Accredited Investor Questionnaire attached hereto as
EXHIBIT N.
Each of the representations, warranties and covenants contained in this
Article III are intended for the benefit of Transferee and any underwriter in
the Registered Offering. In the event Transferee determines that there is a
breach of any representation, warranty or covenant of Transferor prior to
Closing, Transferee's sole remedy shall be to terminate this Agreement and
receive a return of the Deposit. No breach of any representation, warranty or
covenant of Transferor shall be actionable following closing if Transferee
obtained actual knowledge of such breach prior to Closing but nevertheless
elected to close. Each of said representations, warranties and covenants shall
survive the Closing for a period of one (1) year, at which time they shall
expire unless prior to such time Transferee has made a formal, written claim
alleging a breach of one or more of the representations, warranties or
covenants. No investigation, audit, inspection, review or the like conducted by
or on behalf of Transferee shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that Transferee
has the right to rely thereon and that each such representation, warranty and
covenant constitutes a material inducement to Transferee to execute this
Agreement and to close the transaction contemplated hereby and to pay the Base
Purchase Price to Transferor.
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Transferor to enter into this Agreement and to contribute
the Property, Transferee hereby makes the following representations, warranties
and covenants, upon each of which Transferee acknowledges and agrees that
Transferor is entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. Transferee is duly formed or organized,
validly existing and in good standing under the laws of the state of its
formation and has all governmental licenses, Authorizations, consents and
approvals required to carry on its business as now conducted and to enter into
and perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of Transferee hereunder.
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4.2 NONCONTRAVENTION. The execution and delivery of this Agreement
and the performance by Transferee of its obligations hereunder do not and will
not contravene, or constitute a default under, any provisions of applicable law
or regulation, Partnership Agreement or any agreement, judgment, injunction,
order, decree or other instrument binding upon Transferee or result in the
creation of any lien or other encumbrance on any asset of Transferee.
4.3 LITIGATION. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting Transferee in any court or before
any arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely affect the business, financial position or results of
operations of Transferee, or (b) could materially and adversely affect the
ability of Transferee to perform its obligations hereunder, or under any
document to be delivered pursuant hereto.
4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to
Transferee.
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each
of the agreements and certificates of Transferee to be delivered to Transferor
at Closing as provided in Section 5.2 will be, duly authorized by all necessary
action on the part of Transferee, has been duly executed and delivered by
Transferee, constitutes the valid and binding agreement of Transferee and is
enforceable against Transferee in accordance with its terms. All action
required pursuant to this Agreement necessary to effectuate the transactions
contemplated herein has been, or will at Closing be, taken promptly and in good
faith by Transferee and its representatives and agents.
4.6 TRADE NAME. Transferee shall not use the trade name referenced
in Recital B(4) in connection with any other property owned by Transferee or any
Affiliate of Transferee.
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO TRANSFEREE'S OBLIGATIONS. Transferee's obligations
hereunder are subject to the satisfaction of the following conditions precedent
and the compliance by Transferor with the following covenants:
(a) TRANSFEROR'S DELIVERIES. Transferor shall have delivered to or
for the benefit of Transferee, as the case may be, on or before the Closing
Date, all of the documents and other information required of Transferor
pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Transferor's
representations and warranties made in this Agreement shall be true and
correct, in all material respects, as of the date hereof and as of the
Closing Date as if then made, there shall have occurred no material adverse
change in the condition or
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financial results of the operation of the Property since the date hereof.
Transferor shall have performed all of its covenants and other obligations
under this Agreement and Transferor shall have executed and delivered to
Transferee on the Closing Date a certificate dated as of the Closing Date
to the foregoing effect in the form of EXHIBIT O attached hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered a
commitment to issue the Owner's Title Policy, subject only to the Permitted
Title Exceptions.
(d) TITLE TO PROPERTY. Transferee shall have determined that
Transferor is the sole owner of good and marketable fee simple title (or
ground lease interest, as applicable) to the Real Property and to the
Tangible Personal Property, free and clear of all liens, encumbrances,
restrictions, conditions and agreements except for the Mortgage
Indebtedness and the Permitted Title Exceptions. Transferor shall not have
taken any action or permitted or suffered any action to be taken by others
from the date hereof and through and including the Closing Date that would
adversely affect the status of title to the Real Property or to the
Tangible Personal Property.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving
range, putting greens, mechanical systems, plumbing, electrical wiring,
appliances, fixtures, heating, air conditioning and ventilating equipment,
elevators, boilers, equipment, roofs, structural members and furnaces)
shall be in the same condition at Closing as they are as of the date
hereof, reasonable wear and tear excepted. Prior to Closing, Transferor
shall not have diminished the quality or quantity of maintenance and upkeep
services heretofore provided to the Real Property and the Tangible Personal
Property. Transferor shall not have removed or caused or permitted to be
removed any part or portion of the Real Property or the Tangible Personal
Property unless the same is replaced, prior to Closing, with similar items
of at least equal quality and acceptable to Transferee.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal
of garbage and other waste from the Property. Between the date hereof and
the Closing Date, Transferor shall have received no notice of any material
increase or proposed material increase in the rates charged for the
Utilities from the rates in effect as of the date hereof.
(g) LIQUOR LICENSE. Transferee, or Transferee's nominee, shall have
obtained all liquor licenses, alcoholic beverage licenses and other permits
and Authorizations necessary to operate the restaurant, bars, snack shops
and lounges presently located at the Property. To that end, Transferor and
Transferee, or Transferee's nominee, shall have cooperated with each other,
and each shall have executed such transfer forms, license applications and
other documents as may be
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necessary to effect the obtaining of the liquor licenses, alcoholic
beverage licenses and other Authorizations required hereby.
(h) PARTNERSHIP AGREEMENT. Transferor shall have delivered to
Transferee a countersigned copy of the Partnership Agreement in a form
prepared by Transferee, which shall be in substantially the form attached
hereto as EXHIBIT J.
(i) GOLF COURSE LEASE. An Affiliate of Transferor shall have
delivered to Transferee a countersigned copy of the Golf Course Lease in a
form prepared by Transferee, which shall be in substantially the form
attached hereto as EXHIBIT E.
(j) APPROVAL BY BOARD OF DIRECTORS. Approval of the Board of
Directors of GTA, Inc. of the transaction contemplated by this Agreement by
an affirmative vote prior to the expiration of the Due Diligence Period.
(k) STOCK OPTION AWARD AGREEMENT. Transferor shall have delivered to
Transferee for the benefit of Raymon R. Finch, Jr. and Raymon Finch III a
copy of the Stock Option Award Agreement (the "Stock Option Award
Agreement") attached hereto as EXHIBIT Q with respect to an aggregate of
100,000 shares of Common Stock of GTA.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferee and may be waived in whole or in part by
Transferee, but only by an instrument in writing signed by Transferee.
5.2 AS TO TRANSFEROR'S OBLIGATIONS. Transferor's obligations
hereunder are subject to the satisfaction of the following conditions precedent
and the compliance by Transferee with the following covenants:
(a) TRANSFEREE'S DELIVERIES. Transferee shall have delivered to or
for the benefit of Transferor, on or before the Closing Date, all of the
documents and payments required of Transferee pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Transferee's
representations and warranties made in this Agreement shall be true and
correct, in all material respects, as of the date hereof and as of the
Closing Date as if then made and Transferee shall have performed all of its
covenants and other obligations under this Agreement.
(c) COUNTERSIGNED COPIES OF PARTNERSHIP AGREEMENT AND GOLF COURSE
LEASE. Transferee shall have delivered to Transferor countersigned copies
of the Partnership Agreement and Golf Course Lease.
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(d) STOCK OPTION AWARD AGREEMENT. Transferor shall have delivered to
GTA a countersigned copy of the Stock Option Award Agreement.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Transferor and may be waived in whole or in part, by
Transferor, but only by an instrument in writing signed by Transferor.
ARTICLE 6
CLOSING
6.1 CLOSING. Closing shall be held on a date that is ten (10) days
after the expiration of the Due Diligence Period at a time and location mutually
acceptable to Transferor and Transferee. If the Closing Date falls on a
Saturday, Sunday or other legal holiday, the Closing shall take place on the
first following business day thereafter. Possession of the Property shall be
delivered to Transferee at Closing, subject only to Permitted Title Exceptions.
6.2 TRANSFEROR'S DELIVERIES. At Closing, Transferor shall deliver to
Transferee all of the following instruments, each of which shall have been duly
executed and, where applicable, acknowledged and/or sworn on behalf of
Transferor and shall be dated as of the Closing Date:
(a) The certificate required by Section 5.1 (b).
(b) The Deed.
(c) The Bill of Sale - Personal Property.
(d) The Partnership Agreement.
(e) The Golf Course Lease.
(f) Evidence of title acceptable to Transferee for any vehicle owned
by Transferor and used in connection with the Property.
(g) Such agreements, affidavits or other documents as may be required
by the Title Company to issue the Owner's Title Policy including those
endorsements requested by Transferee, and to eliminate the standard
exceptions as exceptions thereto, so that the Owner's Title Policy will be
subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and
gap affidavit.
(h) The FIRPTA Certificate.
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(i) To the extent available, true, correct and complete copies of all
warranties, if any, of manufacturers, suppliers and installers possessed by
Transferor and relating to the Property, or any part thereof.
(j) Certified copies of Transferor's Organizational Documents.
(k) Appropriate resolutions of the board of directors or partners, as
the case may be, of Transferor, certified by the secretary or an assistant
secretary of Transferor or a general partner, as the case may be, together
with all other necessary approvals and consents of Transferor, authorizing
(i) the execution on behalf of Transferor of this Agreement and the
documents to be executed and delivered by Transferor prior to, at or
otherwise in connection with Closing, and (ii) the performance by
Transferor of its obligations hereunder and under such documents, or
appropriate resolutions of the partners of Transferor, as the case may be.
(l) A valid, final and unconditional certificate of occupancy for the
Real Property and Improvements, issued by the appropriate Governmental Body
allowing for the use of the Real Property as a golf course and permitting
the continued operation of the improvements as presently operated.
(m) Such proof as Transferee may reasonably require with respect to
Transferor's compliance (or indemnity with respect to compliance) with the
bulk sales laws or similar statutes.
(n) Copy of each and every existing insurance policy covering the
Property and certificates evidencing such coverage.
(o) To the extent available, a set or copies of the plans and
specifications for the Improvements.
(p) A written instrument executed by Transferor, conveying and
transferring to Transferee all of Transferor's right, title and interest in
any telephone numbers, fax numbers or internet or electronic mail addresses
(if applicable) relating solely to the Property, and, if Transferor
maintains a post office box solely with respect to the Property, conveying
to Transferee all of its interest in and to such post office box and the
number associated therewith, so as to assure a continuity in operation and
communication.
(q) All current real estate and personal property tax bills in
Transferor's possession or under its control.
(r) All surveys and plot plans of the Real Property in possession of
or in the control of Transferor.
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(s) A complete list of all scheduled tournaments, functions and the
like, in reasonable detail.
(t) A list of Transferor's outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each
account and the amount due Transferor.
(u) A Beneficiary Statement prepared by any holder of Mortgage
Indebtedness setting forth the amount, including outstanding Principal and
accrued interest, and any other amounts outstanding, with respect to the
Mortgage Indebtedness.
(v) Consent to the Transferee's assumption of (or taking subject to,
if approved by Pacific Mutual and Transferor) the Mortgage Indebtedness executed
by Pacific Mutual.
(w) Written notice executed by Transferor notifying all interested
parties, including all tenants under any leases of the Property, that the
Property has been conveyed to Transferee and directing that all payments,
inquiries and the like be forwarded to Transferee at the address to be provided
by Transferee.
(x) Any other document or instrument reasonably requested by
Transferee with respect to the Property.
6.3 TRANSFEREE'S DELIVERIES. At Closing, Transferee shall pay or
deliver to Transferor the following:
(a) The cash portion of the Base Purchase Price by federal funds wire
to an account designated by Transferor.
(b) The non-cash portion of the Base Purchase Price payable in
Owner's Shares issued to such holders and in such denominations to such
holders as specified by Transferor.
(c) Documentation, in form and substance reasonably approved by
Transferor and Pacific Mutual, reflecting Transferee's assumption of the
Pacific Mutual Mortgage Indebtedness (or Transferee taking subject to such
mortgage if approved by Pacific Mutual and Transferor).
(d) Any other document or instrument reasonably requested by
Transferor relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Transferee and Transferor shall
mutually execute and deliver each to the other:
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(a) A closing statement for Transferor and a closing statement for
Transferee (collectively, the "Closing Statements") reflecting the Base
Purchase Price and the adjustments and prorations required hereunder and
the allocation of income and expenses required hereby.
(b) Such other documents, instruments and undertakings as may be
required by the liquor authorities of the State or of any county or
municipality or Governmental Body having jurisdiction with respect to the
transfer or issue of any liquor licenses or alcoholic beverage licenses or
permits for the Property, to the extent not theretofore executed and
delivered.
(c) The Golf Course Lease.
(d) The Partnership Agreement.
(e) Such other and further documents, papers and instruments as may
be reasonably required by the parties hereto or their respective counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this
Agreement, each party hereto shall pay its own legal fees and expenses, and
Transferor shall pay for the cost of any audit required by Transferee with
respect to the Property. All filing fees for the Deed and the real estate
transfer, recording or other similar taxes due with respect to the transfer of
title and all charges for title insurance premiums shall be paid by Transferor.
Transferor shall pay for preparation of the documents to be delivered by
Transferor hereunder, and for the releases of any deeds of trust, mortgages and
other financing encumbering the Property and for any costs associated with any
corrective instruments, and for the cost of any due diligence reports and
surveys prepared by or for Transferee with respect to the Property. Transferor
shall pay for the cost of any assumption fees, documentary stamp taxes and other
incidental closing costs payable in connection with the Transferee assuming (or
taking subject to, if Pacific Mutual and Transferor approve) the Mortgage
Indebtedness in favor of Pacific Mutual. Transferor shall receive a cash
payment at closing to pay for such closing costs as provided in Section 2.3(c).
6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Transferor and Transferee (or,
at Transferee's election, between Transferor and the lessee under the Golf
Course Lease to the extent such income or expenses will be payable by or
attributable to such lessee). Transferor shall be entitled to all income and
shall be responsible for all expenses for the period of time up to but not
including the Closing Date, and Transferee shall be entitled to all income and
shall be responsible for all expenses for the period of time from, after and
including the Closing Date. Such adjustments shall be shown on the Closing
Statements (with such supporting documentation as the parties hereto may require
being attached as exhibits to the Closing Statements) and shall increase or
decrease (as the case may be)
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the Base Purchase Price payable by Transferee. Without limiting the generality
of the foregoing, the following items of income and expense shall be prorated at
Closing:
(a) Current and prepaid rents or fees, including, without limitation,
prepaid Golf Club membership fees, function receipts and other reservation
receipts.
(b) Real estate and personal property taxes.
(c) Utility charges (including but not limited to charges for water,
sewer and electricity).
(d) Value of fuel stored on the Property at the price paid for such
fuel by Transferor, including any taxes.
(e) Municipal improvement liens where the work has physically
commenced (certified liens) shall be paid by Transferor at Closing.
Municipal improvement liens which have been authorized, but where the work
has not commenced (pending liens) shall be assumed by Transferee.
(f) License and permit fees, where transferable.
(g) All other income and expenses of the Property, including, but not
being limited to such things as restaurant and snack bar income and
expenses and the like.
(h) Such other items as are usually and customarily prorated between
Transferees and Transferors of golf course properties in the area in which
the Property is located shall be prorated as of the Closing Date.
6.7 SALES TAXES. Transferor shall be required to pay all sales taxes
and like impositions arising from the ownership and operation of the Property
currently through the Closing Date.
6.8 POST-CLOSING ADJUSTMENTS.
(a) Transferee shall not be obligated to collect any accounts
receivable or revenues accrued prior to the Closing Date for Transferor,
but if Transferee collects same, such amounts will be promptly remitted to
Transferor in the form received. Transferee shall receive a credit at
Closing for the amount of any security deposits held by Transferor under
any lease of any portion of the Property that is being assigned to
Transferee in accordance herewith.
(b) If accurate allocations and prorations cannot be made at Closing
because current bills are not obtainable (as, for example, in the case of
utility bills and/or real estate or personal property taxes), the parties
shall allocate such
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income or expenses at Closing on the best available information, subject to
adjustment outside of escrow upon receipt of the final bill or other
evidence of the applicable income or expense. Any income received or
expense incurred by Transferor or Transferee with respect to the Property
after the Closing Date shall be promptly allocated in the manner described
herein and the parties shall promptly pay or reimburse any amount due.
Transferor shall pay at Closing all accrued special assessments and taxes
applicable to the Property.
ARTICLE 7
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Transferor shall give written
notice thereof to Transferee promptly after Transferor learns or receives notice
thereof. If all or any part of the Real Property is, or is to be, so condemned
or sold, Transferee shall have the right to terminate this Agreement pursuant to
Section 8.3. If Transferee elects not to terminate this Agreement, all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to Transferee
at Closing. Transferor will not settle or compromise any such proceeding
without Transferee's prior written consent.
7.2 RISK OF LOSS. The risk of any loss or damage to the Property
prior to the Closing Date shall remain upon Transferor. In the event that
damage or destruction of the Property, or any part thereof, by fire or other
casualty occurs prior to Closing which is in excess of Three Hundred Thousand
Dollars ($300,000) Transferee shall, within ten (10) days after receipt from
Transferor of written notice of the occurrence of such damage or destruction
elect, in writing, at its option, one of the following:
(a To terminate this Agreement, in which event each party shall
be released from all obligations hereunder, and the Deposit shall immediately be
returned to Transferee;
(b To accept from Transferor the assignment of any insurance
proceeds payable by reason of such damage or destruction and proceed with
Closing.
In the event that damage or destruction occurs prior to Closing which is less
than Three Hundred Thousand Dollars ($300,000), then Transferor shall (i) assign
to Transferee any insurance proceeds payable by reason of such damage or
destruction, and (ii) give Transferee a credit against the Purchase Price in the
amount of any deductible in connection with such insurance, and Transferee and
Transferor shall proceed with Closing.
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7.3 REAL ESTATE BROKER. Except for a broker or finder who may have
been engaged by Transferor and for whom Transferor accepts sole financial
responsibility, and except for any broker or finder who may have been engaged by
Transferee and for whom Transferee accepts sole financial responsibility, there
is no real estate broker involved in this transaction. Transferee warrants and
represents to Transferor that Transferee has not dealt with any other real
estate broker in connection with this transaction, nor has Transferee been
introduced to the Property or to Transferor by any other real estate broker, and
Transferee shall indemnify Transferor and save and hold Transferor harmless from
and against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation to
a real estate brokerage commission or a finder's fee as a result of having dealt
with Transferee, or as a result of having introduced Transferee to Transferor or
to the Property. In like manner, Transferor warrants and represents to
Transferee that Transferor has not dealt with any real estate broker in
connection with this transaction, nor has Transferor been introduced to
Transferee by any real estate broker, and Transferor shall indemnify Transferee
and save and hold Transferee harmless from and against any claims, suits,
demands or liabilities of any kind or nature whatsoever arising on account of
the claim of any person, firm or corporation to a real estate brokerage
commission or a finder's fee as a result of having dealt with Transferor in
connection with this transaction. Transferor acknowledges that David J. Dick,
an officer of the Transferee, is a licensed California real estate broker but is
not acting as a broker in relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and after
the execution of this Agreement, Transferee and Transferor shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
except to their respective attorneys, accountants, engineers, surveyors,
financiers and bankers. Notwithstanding the foregoing, it is acknowledged that
the Company is a public company and will make a public announcement concerning
this transaction and that the Company anticipates that it will seek to sell
shares of its common stock and other securities (collectively, the "Securities")
to the general public pursuant to a public offering and that in connection
therewith, Transferee will have the absolute right to market the Securities and
prepare and file all necessary or required registration statements and other
papers, documents and instruments necessary or required in Transferee's judgment
and that of its attorneys and underwriters to file a registration statement with
respect to the Securities with the SEC and/or similar state authorities and to
cause same to become effective and to disclose therein and thus to its
underwriters, to the SEC and/or to similar state authorities and to the public
all of the terms, conditions and provisions of this Agreement. The obligations
of this Section 7.4 shall survive any termination of this Agreement.
7.5 LIQUOR LICENSES. Transferor shall transfer or cause to be
transferred to Transferee or, at Transferee's discretion, Transferee's nominee
(which may include the lessee under the Golf Course Lease), all liquor licenses
and alcoholic beverage licenses, if any, necessary to operate the restaurant,
bars, snack bars and lounges
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presently located within the Property, if any. To that end, Transferor and
Transferee, or Transferee's nominee, shall cooperate each with the other, and
each shall execute such transfer forms, license applications and other documents
as may be necessary to effect such transfer. If permitted under the laws of the
jurisdiction in which the Property is located, the parties shall execute and
file all necessary transfer forms, applications and papers with the appropriate
liquor and alcoholic beverage authorities prior to Closing, to the end that the
transfer shall take effect, if possible, on the Closing Date, simultaneously
with Closing. If not so permitted, then the parties agree each with the other
that they will promptly execute all transfer forms, applications and other
documents required by the liquor authorities in order to effect such transfer at
the earliest date in time possible consistent with the laws of the State in
order that all liquor licenses may be transferred from Transferor to Transferee,
or Transferee's nominee, at the earliest possible time. If under the laws of
the State such licenses cannot be transferred until after the Closing of the
transaction contemplated hereby, then Transferor covenants and agrees that
Transferor will cooperate with Transferee, or Transferee's nominee, in keeping
open the bars and liquor facilities of the Property between the Closing Date and
the time when such liquor license transfers actually become effective, by
exercising management and supervision of such facilities until such time under
Transferor's licenses, provided, however, that Transferee shall indemnify and
hold Transferor harmless from any liability, damages or claims encountered in
connection with such operations during said period of time, except for
Transferor's gross negligence or willful misconduct.
ARTICLE 8
LIABILITY OF TRANSFEREE; INDEMNIFICATION BY TRANSFEROR;
TERMINATION RIGHTS
8.1 LIABILITY OF TRANSFEREE. Except for any obligation expressly
assumed or agreed to be assumed by Transferee hereunder, Transferee does not
assume any obligation of Transferor or any liability for claims arising out of
any occurrence prior to Closing.
8.2 INDEMNIFICATION BY TRANSFEROR. Transferor hereby indemnifies and
holds Transferee harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and expenses (including reasonable attorneys' fees)
that may at any time be incurred by Transferee, after Closing, as a result of
any breach by Transferor of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Transferor
pursuant hereto, for a period of one (1) year following the Closing. The
provisions of this section shall survive termination of this Agreement by
Transferee or Transferor.
8.3 TERMINATION BY TRANSFEREE. If any condition set forth herein for
the benefit of Transferee cannot or will not be satisfied prior to Closing, or
upon the occurrence of any other event that would entitle Transferee to
terminate this Agreement and its obligations hereunder, and Transferor fails to
cure any such matter within ten (10) business days after notice thereof from
Transferee, Transferee, at its option, may
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elect either (a) to terminate this Agreement and all other rights and
obligations of Transferor and Transferee hereunder shall terminate immediately,
or (b) to waive its right to terminate (waiving any breach or default on the
part of Transferor) and, instead, to proceed to Closing. If Transferee
terminates this Agreement as a consequence of a misrepresentation or breach of a
warranty or covenant by Transferor, or a failure by Transferor to perform its
obligations hereunder, then Transferee shall retain all remedies accruing as a
result thereof, including, without limitation, specific performance.
8.4 TERMINATION BY TRANSFEROR. If any condition set forth herein for
the benefit of Transferor (other than a default by Transferee) cannot or will
not be satisfied prior to Closing, and Transferee fails to cure any such matter
within ten (10) business days after notice thereof from Transferor, Transferor
may, at its option, elect either (a) to terminate this Agreement, in which event
the rights and obligations of Transferor and Transferee hereunder shall
terminate immediately except as provided in Section 8.5, or (b) to waive its
right to terminate, and instead, to proceed to Closing.
8.5 TERMINATION BY TRANSFEROR. IN THE EVENT THAT THIS TRANSACTION
DOES NOT CLOSE AS A CONSEQUENCE OF A DEFAULT BY TRANSFEREE, TRANSFEROR MAY
TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO TRANSFEREE, AND TRANSFEREE SHALL
PAY TO TRANSFEROR, AS LIQUIDATED DAMAGES, THE DEPOSIT AND EACH PARTY'S
OBLIGATIONS AND LIABILITIES UNDER THIS AGREEMENT SHALL TERMINATE. THE PARTIES
AGREE THAT (A) TRANSFEROR'S ACTUAL DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE TO
DETERMINE IF TRANSFEREE DEFAULTS, (B) THE DEPOSIT IS THE BEST ESTIMATE OF THE
AMOUNT OF DAMAGES TRANSFEROR WOULD SUFFER, AND (C) THE PAYMENT OF THE DEPOSIT TO
TRANSFEROR AS LIQUIDATED DAMAGES IS NOT A PENALTY. THE DEPOSIT SHALL BE THE
AMOUNT THAT TRANSFEROR IS ENTITLED TO RECEIVE AS LIQUIDATED DAMAGES; AND
TRANSFEROR SHALL HAVE NO RIGHT, AND HEREBY WAIVES THE RIGHT, TO AN ACTION FOR
SPECIFIC PERFORMANCE OF THIS AGREEMENT OR ANY OTHER REMEDY AVAILABLE AT LAW OR
IN EQUITY. THE PARTIES WITNESS THEIR AGREEMENT TO THIS LIQUIDATED DAMAGES
PROVISION AND TRANSFEROR'S WAIVER OF SPECIFIC PERFORMANCE BY INITIALING THIS
SECTION BELOW.
Transferor: /s/ [ILLEGIBLE] Transferee: /s/ [ILLEGIBLE]
------------------- -------------------
8.6 COSTS AND ATTORNEYS' FEES. In the event of any litigation or
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, arbitration or other form of dispute
resolution, then the prevailing party in such litigation shall be entitled to
recover its costs of prosecuting and/or defending same, including, without
limitation, reasonable attorneys' fees at trial and all appellate levels.
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ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 ASSIGNMENTS. Transferee may assign its rights hereunder to an
Affiliate of Transferee without the consent of Transferor. Transferee may not
otherwise assign its interest herein without the prior written consent of
Transferor. Transferor may not assign any of its rights pursuant to this
Agreement without the prior written consent of Transferee, which may be withheld
in Transferee's sole and absolute discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
9.4 DAYS. If any action is required to be performed, or if any
notice, consent or other communication is given, on a day that is a Saturday or
Sunday or a legal holiday in the jurisdiction in which the action is required to
be performed or in which is located the intended recipient of such notice,
consent or other communication, such performance shall be deemed to be required,
and such notice, consent or other communication shall be deemed to be given, on
the first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to
herein shall be governed by and construed and interpreted in accordance with the
laws of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
9.7 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
9.8 COSTS. Regardless of whether Closing occurs hereunder, and
except as otherwise expressly provided herein, each party hereto shall be
responsible for its own
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costs in connection with this Agreement and the transactions contemplated
hereby, including without limitation, fees of attorneys, engineers and
accountants.
9.9 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as on the Summary Sheet or to such other address as the intended recipient may
have specified in a notice to the other party. Any party hereto may change its
address or designate different or other persons or entities to receive copies by
notifying the other party and Escrow Agent in a manner described in this
Section. Any notice, request, demand or other communication delivered or sent
in the manner aforesaid shall be deemed given or made (as the case may be) when
actually delivered to the intended recipient.
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all of the
representations, warranties, covenants and agreements of Transferor and
Transferee made in, or pursuant to, this Agreement shall survive Closing and
shall not merge into the Deed or any other document or instrument executed and
delivered in connection herewith.
9.12 FURTHER ASSURANCES. Transferor and Transferee each covenant and
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Transferor and Transferee
specifically established hereby.
9.14 CONFIDENTIALITY. Any confidential information delivered by
Transferor to Transferee hereunder shall be used solely for the purpose of
acquiring the Property and Transferee will keep such information confidential;
provided Transferee shall have the right to provide such information to its
consultants and advisors and to disclose such information as Transferee
determines is necessary or appropriate in connection with any public offering of
the Securities. If Transferee does not acquire the Property, it shall deliver
to Transferor copies of all proprietary information delivered to Transferee by
Transferor. Transferor agrees to keep confidential the terms and conditions of
this Agreement; provided, Transferor shall have the right to provide such
information to its consultants and advisors.
33
<PAGE>
9.15 RADON DISCLOSURE. In accordance with Section 404.056(7) of
Florida Statutes, Transferee is advised that radon is a naturally occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon testing
may be obtained from the county public health unit. The foregoing disclosure is
provided to comply with state law and is for informational purposes only.
Transferor represents that it has not conducted radon testing with respect to
the Property, is not aware of any specific radon problems at the Property and
specifically disclaims any and all representations and warranties as to the
absence of radon gas or radon producing conditions in connection with any
building and the Property.
IN WITNESS WHEREOF, Transferor and Transferee have hereunder affixed
their signatures to this Contribution and Leaseback Agreement, all as of the
23rd day of January, 1998.
"TRANSFEREE"
GOLF TRUST OF AMERICA, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair
--------------------------
Its: President and CEO
--------------------------
"TRANSFEROR"
OKEECHOBEE CHAMPIONSHIP GOLF, INC.,
A FLORIDA CORPORATION
By: /s/ Raymon R. Finch, III
--------------------------
Its: President
--------------------------
34
<PAGE>
-------------------------------
PURCHASE AND SALE AGREEMENT
-------------------------------
Seller: PERSIMMON RIDGE GOLF GROUP, L.P.,
a Delaware limited partnership
Buyer: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
Property: Persimmon Ridge Golf Club
Louisville, Kentucky
Purchase
Price: $7,500,000
Effective
Dated: February 26, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
<S> <C>
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . .2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
(a) Act of Bankruptcy . . . . . . . . . . . . . . . . . . . . . .3
(b) Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . .3
(c) Authorizations. . . . . . . . . . . . . . . . . . . . . . . .3
(d) Bill of Sale - Personal Property. . . . . . . . . . . . . . .4
(e) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(f) Closing Date. . . . . . . . . . . . . . . . . . . . . . . . .4
(g) Closing Statements. . . . . . . . . . . . . . . . . . . . . .4
(h) Current Assets. . . . . . . . . . . . . . . . . . . . . . . .4
(i) Deed. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(j) Disclosure Schedule . . . . . . . . . . . . . . . . . . . . .4
(k) Due Diligence Period. . . . . . . . . . . . . . . . . . . . .4
(l) Employment Agreements . . . . . . . . . . . . . . . . . . . .5
(m) Environmental Claim . . . . . . . . . . . . . . . . . . . . .5
(n) Environmental Laws. . . . . . . . . . . . . . . . . . . . . .5
(o) Escrow Agent. . . . . . . . . . . . . . . . . . . . . . . . .5
(p) FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . .5
(q) Golf Club . . . . . . . . . . . . . . . . . . . . . . . . . .6
(r) Golf Course Lease . . . . . . . . . . . . . . . . . . . . . .6
(s) Governmental Body . . . . . . . . . . . . . . . . . . . . . .6
(t) Hazardous Substances. . . . . . . . . . . . . . . . . . . . .6
(u) Improvements. . . . . . . . . . . . . . . . . . . . . . . . .6
(v) Intangible Personal Property. . . . . . . . . . . . . . . . .6
(w) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . .6
(x) Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(y) Mortgage Indebtedness . . . . . . . . . . . . . . . . . . . .7
(z) Operating Agreements. . . . . . . . . . . . . . . . . . . . .7
(aa) Owner's Title Policy. . . . . . . . . . . . . . . . . . . . .7
(ab) Permitted Title Exceptions. . . . . . . . . . . . . . . . . .7
(ac) Person. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(ad) Preliminary Title Report. . . . . . . . . . . . . . . . . . .7
(ae) Property. . . . . . . . . . . . . . . . . . . . . . . . . . .7
(af) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . .7
(ag) Real Property . . . . . . . . . . . . . . . . . . . . . . . .8
(ah) Restaurant Supplies . . . . . . . . . . . . . . . . . . . . .8
(ai) SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(aj) State . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(ak) Summary Sheet . . . . . . . . . . . . . . . . . . . . . . . .8
(al) Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(am) Tangible Personal Property. . . . . . . . . . . . . . . . . .8
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(an) Title Company . . . . . . . . . . . . . . . . . . . . . . . .8
(ao) Title Objections. . . . . . . . . . . . . . . . . . . . . . .8
(ap) Seller's Organizational Documents . . . . . . . . . . . . . .8
(aq) Utilities . . . . . . . . . . . . . . . . . . . . . . . . . .8
(ar) WARN Act. . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . .8
(a) Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(b) Section References. . . . . . . . . . . . . . . . . . . . . .9
(c) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .9
(d) Construction. . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE 2
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . .9
2.1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . .9
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . .9
(a) Site Inspection . . . . . . . . . . . . . . . . . . . . . . .9
(b) Inspection of Documents . . . . . . . . . . . . . . . . . . 10
(c) Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Preliminary Title Report. . . . . . . . . . . . . . . . . . 11
(e) Disclosure Schedule . . . . . . . . . . . . . . . . . . . . 12
(f) UCC Search. . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . 13
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 13
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . 13
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . 14
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . 15
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . 15
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . 16
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . 17
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . 17
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . 17
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . 17
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
3.20 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.21 Cub Cuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.22 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.23 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . 20
3.24 Survival of Representations. . . . . . . . . . . . . . . . . . . 20
ARTICLE 4
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . 20
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 20
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . 21
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . 21
5.1 As to Buyer's Obligations. . . . . . . . . . . . . . . . . . . . 21
(a) Seller's Deliveries . . . . . . . . . . . . . . . . . . . . 21
(b) Representations, Warranties and Covenants . . . . . . . . . 22
(c) Title Insurance . . . . . . . . . . . . . . . . . . . . . . 22
(d) Title to Property . . . . . . . . . . . . . . . . . . . . . 22
(e) Condition of Property . . . . . . . . . . . . . . . . . . . 22
(f) Utilities . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Liquor License. . . . . . . . . . . . . . . . . . . . . . . 23
5.2 As to Seller's Obligations . . . . . . . . . . . . . . . . . . . 23
(a) Buyer's Deliveries. . . . . . . . . . . . . . . . . . . . . 23
(b) Representations, Warranties and Covenants . . . . . . . . . 23
ARTICLE 6
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Seller's Deliveries. . . . . . . . . . . . . . . . . . . . . . . 24
(a) Seller's Certificate. . . . . . . . . . . . . . . . . . . . 24
(b) The Deed. . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) The Bill of Sale - Personal Property. . . . . . . . . . . . 24
(d) Evidence of Title . . . . . . . . . . . . . . . . . . . . . 24
(e) Title Requirements. . . . . . . . . . . . . . . . . . . . . 24
(f) The FIRPTA Certificate. . . . . . . . . . . . . . . . . . . 24
(g) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Organizational Documents. . . . . . . . . . . . . . . . . . 24
(i) Board Resolutions . . . . . . . . . . . . . . . . . . . . . 24
(j) Certificate of Occupancy. . . . . . . . . . . . . . . . . . 25
(k) Evidence of Bulk Sales Compliance . . . . . . . . . . . . . 25
(l) Insurance Policies. . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
(m) Improvements Plans. . . . . . . . . . . . . . . . . . . . . 25
(n) Communication; Addresses. . . . . . . . . . . . . . . . . . 25
(o) Tax Bills . . . . . . . . . . . . . . . . . . . . . . . . . 25
(p) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(q) Tournament Schedule . . . . . . . . . . . . . . . . . . . . 25
(r) Accounts Receivable . . . . . . . . . . . . . . . . . . . . 26
(s) Payoff Statement. . . . . . . . . . . . . . . . . . . . . . 26
(t) Tenant Notices. . . . . . . . . . . . . . . . . . . . . . . 26
(u) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Buyer's Deliveries . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 26
(b) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Closing Statements. . . . . . . . . . . . . . . . . . . . . 26
(b) Liquor License Transfer Documents . . . . . . . . . . . . . 27
(c) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . 27
(a) Rents and Fees. . . . . . . . . . . . . . . . . . . . . . . 28
(b) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Utilities . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Municipal Improvement Liens . . . . . . . . . . . . . . . . 28
(f) License and Permit Fees . . . . . . . . . . . . . . . . . . 28
(g) Income and Expenses . . . . . . . . . . . . . . . . . . . . 28
(h) Miscellaneous Prorations. . . . . . . . . . . . . . . . . . 28
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . 28
(a) Accounts Receivable . . . . . . . . . . . . . . . . . . . . 28
(b) Availability of Bills . . . . . . . . . . . . . . . . . . . 29
(c) Accounts Payable on Inventory . . . . . . . . . . . . . . . 29
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Liability of Buyer . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . 31
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
8.3 Termination by Buyer . . . . . . . . . . . . . . . . . . . . . . 32
8.4 Termination by Seller. . . . . . . . . . . . . . . . . . . . . . 32
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . 33
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 33
9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . 34
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 34
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
vi
<PAGE>
EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Description of Improvements
Exhibit C - Tangible Personal Property
Exhibit D - Intangible Personal Property
Exhibit E - Bill of Sale - Personal Property
Exhibit F - Deed
Exhibit G - FIRPTA Affidavit of Seller
Exhibit H - Contracts and Operating Agreements
Exhibit I - Due Diligence List
Exhibit J - Warranty Disclosure Schedule
Exhibit K - Seller's Certificate
vii
<PAGE>
PURCHASE AGREEMENT
Summary Sheet
Buyer: GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
Seller: PERSIMMON RIDGE GOLF CLUB, L.P.,
a Delaware limited partnership
Effective
Date: February 26, 1998
Golf Course: Persimmon Ridge Golf Club
Louisville, Kentucky
Trade Name: Persimmon Ridge Golf Club
Purchase Seven Million Five Hundred Thousand Dollars
Price: ($7,500,000)
Notice Address
of Seller: Persimmon Ridge Golf Club, L.P.
c/o International Golf Group, Inc.
167 Old Post Road
Southport, Connecticut 06490
Attention: Mr. William Reuckert
with a Tachau Maddox Hovious & Dickens PLC
copy to: 200 South 5th Street
Louisville, Kentucky 40202-3200
Attention: Victor B. Maddox, Esq.
Notice Address
of Buyer: Golf Trust of America, Inc.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
Scott D. Peters
with a Nexsen Pruet Jacobs Pollard & Robinson, LLP
copy to: 200 Meeting Street, Suite 301
Charleston, South Carolina 29401
Attention: Neil C. Robinson, Jr., Esq.
Matthew J. Norton, Esq.
viii
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into by and
between Buyer and Seller.
RECITALS:
A. Seller is the owner of that certain Persimmon Ridge Golf Course and
related improvements located on the real property more particularly described in
EXHIBIT A attached hereto (the "Land").
B. Subject to the terms of this Agreement, Seller hereby agrees to sell
to Buyer, and Buyer hereby agrees to buy from Seller, all of Seller's right,
title and interest in and to the following:
1. The Land, together with the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, fixtures and other items of real estate
located on the Land, as more particularly described in EXHIBIT B attached hereto
(the "Improvements").
2. All rights, privileges, easements and appurtenances to the Land and
the Improvements, if any, including, without limitation, all of Seller's right,
title and interest, if any, in and to all mineral and water rights and all
easements, rights-of-way and other appurtenances used or connected with the
beneficial use or enjoyment of the Land and the Improvements, including, without
limitation, concession agreements for spas and the like (the Land, the
Improvements and all such easements and appurtenances are sometimes collectively
hereinafter referred to as the "Real Property").
3. All items of tangible personal property and fixtures (if any) owned
or leased by Seller and located on or used in connection with the Real Property,
including, but not limited to, machinery, equipment, furniture, furnishings,
movable walls or partitions, phone systems and other control systems, restaurant
equipment, computers or trade fixtures, golf course operation and maintenance
equipment, including mowers, tractors, aerators, sprinklers, sprinkler and
irrigation facilities and equipment, valves or rotors, driving range equipment,
golf carts, athletic training equipment, office equipment or machines, other
decorations, and equipment or machinery of every kind or nature located on or
used in connection with the operation of the Real Property whether on or
off-site, including all warranties and guaranties associated therewith (the
"Tangible Personal Property"). A schedule of the Tangible Personal Property is
attached to this Agreement as EXHIBIT C, indicating whether such Tangible
Personal Property is owned or leased.
4. All intangible personal property owned or possessed by Seller and
used in connection with the ownership, operation,
1
<PAGE>
leasing or maintenance of the Real Property or the Tangible Personal
Property, all goodwill attributed to the Property, and any and all trademarks
and copyrights, trade names (including "Persimmon Ridge Golf Club and
"Persimmon Ridge"), guarantees, Authorizations (as hereinafter defined),
general intangibles, business records, plans and specifications, and surveys
pertaining to the Property, all licenses, permits and approvals with respect
to the construction, ownership, operation or maintenance of the Property, any
unpaid award for taking by condemnation or any damage to the Real Property by
reason of a change of grade or location of or access to any street or
highway, excluding (a) any of the aforesaid rights that Buyer elects not to
acquire and (b) the Current Assets, as hereinafter defined (collectively, the
"Intangible Personal Property"). A schedule of the Intangible Personal
Property is attached to this Agreement as EXHIBIT D. (The Real Property,
Tangible Personal Property and Intangible Personal Property are sometimes
collectively referred to as the "Property".)
C. Upon the acquisition by the Buyer of the Property, the Buyer will
lease the Property to a third-party lessee pursuant to a separate lease (the
"Golf Course Lease").
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, it is agreed:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings set forth on the Summary Sheet. The following terms shall
have the indicated meanings:
(a) "ACT OF BANKRUPTCY" shall mean if a party to this agreement or
any general partner thereof shall (a) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its Property, (b) admit in writing
its inability to pay its debts as they become due, (c) make a general assignment
for the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect) or any new bankruptcy statute, (e) be adjudicated bankrupt
or insolvent,(f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in
effect)or any new bankruptcy statute, or (h) take any corporate or partnership
action for the purpose of effecting any of the foregoing; or if a proceeding or
case shall be commenced, without
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the application or consent of a party hereto or any general partner thereof,
in any court of competent jurisdiction seeking (1) the liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment
of debts, of such party or general partner, (2) the appointment of a
receiver, custodian, trustee or liquidator or such party or general partner
or all or any substantial part of its assets, or (3) other similar relief
under any law relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts, and such proceeding or case shall
continue undismissed; or an order (including an order for relief entered in
an involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of sixty
(60)consecutive days.
(b) "AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
(c) "AUTHORIZATIONS" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof as a golf
course with the existing uses and operations, including clubhouse, bar and
related facilities, as applicable.
(d) "BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale
conveying title to the Tangible Personal Property and Intangible Personal
Property from Seller to Buyer, substantially in the form of EXHIBIT E attached
hereto.
(e) "CLOSING" shall mean the time the Deed and each of the deliveries
to be made by Seller (as provided in Section 6.2)and Buyer (as provided in
Section 6.3) are made and each of the Closing conditions of Buyer and Seller in
Sections 5.1 and 5.2, respectively, have been satisfied or waived.
(f) "CLOSING DATE" shall mean the date on which the Closing occurs.
(g) "CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
(h) "CURRENT ASSETS" shall mean cash, accounts receivable and
Inventory (as hereinafter defined) held by Seller prior to the Closing Date.
(i) "DEED" shall mean a limited warranty deed substantially in the
form of EXHIBIT F attached hereto (or lease assignment, if the Property is owned
by Seller pursuant to a ground lease), in form and substance satisfactory to
Buyer, conveying the title of Seller to the Real Property, with such grant or
warranty covenants of title from Seller to Buyer as are customary in the
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state in which the Property is located, subject only to Permitted Title
Exceptions. If there is any difference between the description of the Land,
as shown on EXHIBIT A attached hereto and the description of the Land as
shown on the Survey, the description of the Land to be contained in the Deed
and the description of the Land set forth in the Owner's Title Policy (as
defined herein) shall conform to the description shown on the Survey.
(j) "DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
(k) "DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00
a.m., Eastern Standard time, on the Effective Date, and continuing through 5:00
p.m., Eastern Standard time, on the date that is thirty (30) days from the
Effective Date; provided, however, the parties shall make a good faith effort to
consummate the Closing by March 9, 1998.
(l) "EMPLOYMENT AGREEMENTS" shall mean all employment agreements,
written or oral, between Seller or its managing agent and the persons employed
with respect to the Property in effect as of the Effective Date.
(m) "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory
or judicial action, suit, demand, letter, claim, lien, notice of non-compliance
or violation, investigation or proceeding relating in any way to any
Environmental Laws or any permit issued under any Environmental Law including,
without limitation, (i) by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Laws, and (ii) by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to health, safety or the environment.
(n) "ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as amended,
29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Substances.
(o) "ESCROW AGENT" shall mean the Title Company.
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(p) "FIRPTA CERTIFICATE" shall mean the affidavit of Seller under
Section 1445 of the Internal Revenue Code certifying that Seller is not a
foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), substantially in the form of EXHIBIT G attached hereto.
(q) "GOLF CLUB" shall mean any organization, club or group whereby
memberships are offered by Seller for purchase in connection with golfing
privileges at the Property.
(r) "GOLF COURSE LEASE" shall have the meaning set forth in Recital
C.
(s) "GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(t) "HAZARDOUS SUBSTANCES" shall mean any substance, material, waste,
gas or particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products;(iii) asbestos; (iv)
polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601.
et sea. (42 U.S.C. Section 9601).
(u) "IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
(v) "INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth
in Recital B(4).
(w) "INVENTORY" shall mean the merchandise located in any pro shop or
similar facility and held for sale in the ordinary course of Seller's business,
and any such merchandise that is on order as of the Closing Date.
(x) "LAND" shall have the meaning set forth in Recital A.
(y) "MORTGAGE INDEBTEDNESS" shall mean any indebtedness of Seller
which is secured by a mortgage or deed of trust on the Property.
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(z) "OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, supply contracts and other
agreements, if any, in effect with respect to the construction, ownership,
operation, occupancy or maintenance of the Property in force and effect as of
the Effective Date, as more particularly set forth on EXHIBIT H attached hereto.
(aa) "OWNER'S TITLE POLICY" shall mean a 1970 Form B American Land
Title Association extended coverage owner's policy of title insurance issued to
Buyer by the Title Company, pursuant to which the Title Company insures Buyer's
ownership of fee simple title (or ground lease interest, as applicable) to the
Real Property (including the marketability thereof) subject only to Permitted
Title Exceptions and shall include those title endorsements required by Buyer.
The Owner's Title Policy shall insure Buyer in the amount designated by Buyer
and shall be acceptable in form and substance to Buyer.
(ab) "PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to
title to the Real Property that are satisfactory to Buyer as determined under
this Agreement, and as evidenced by a pro forma title report.
(ac) "PERSON" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(ad) "PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
(ae) "PROPERTY" shall have the meaning set forth in Recital B(4).
(af) "PURCHASE PRICE" shall mean Seven Million Five Hundred Thousand
Dollars ($7,500,000).
(ag) "REAL PROPERTY" shall have the meaning set forth in Recital B(2).
(ah) "RESTAURANT SUPPLIES" shall mean the consumable goods, supplies
(including beverages) and all silverware, glassware, napkins, tablecloths, paper
goods and related goods necessary to efficiently operate the restaurant, bar,
lounge or snack shop located upon or within the Improvements.
(ai) "SEC" shall mean the United States Securities and Exchange
Commission.
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(aj) "STATE" shall mean the state or commonwealth in which the
Property is located.
(ak) "SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
(al) "SURVEY" shall mean the survey prepared pursuant to Section
2.2(c).
(am) "TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
(an) "TITLE COMPANY" shall mean a title insurance company selected by
Buyer and reasonably acceptable to Seller and authorized to conduct a title
insurance business in the State.
(ao) "TITLE OBJECTIONS" shall have the meaning set forth in Section
2.2(d).
(ap) "SELLER'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Seller.
(aq) "UTILITIES" shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of the
Property.
(ar) "WARN ACT" shall mean the Worker Adjustment Restraining and
Notification Act, as amended.
1.2 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) GENDER. Singular words shall connote the plural number as well
as the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) SECTION REFERENCES. All references herein to particular
articles, sections, subsections, clauses or exhibits are references to articles,
sections, subsections, clauses or exhibits of this Agreement.
(c) HEADINGS. The table of contents and headings contained herein
are solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) CONSTRUCTION. Each party hereto and its counsel have reviewed
and revised (or requested revisions of) this Agreement and have participated in
the preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement or
any exhibits hereto.
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ARTICLE 2
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND SALE. Seller agrees to sell and Buyer agrees to buy the
Property and all Inventory for the Purchase Price. The Purchase Price of
$7,500,000.00 shall be paid by Buyer to Seller as follows: (a) $7,300,000.00
shall be paid to Seller by federal funds wire to an account designated by Seller
on the Closing Date, and (b) $100,000.00 shall be paid to Seller in certified
funds or by federal funds wire on each of the first and second anniversary dates
of the Closing Date.
2.2 DUE DILIGENCE PERIOD.
(a) SITE INSPECTION. Buyer shall have the right, during the Due
Diligence Period, and thereafter if Buyer notifies Seller that Buyer has elected
to proceed to Closing in the manner described below, to enter upon the Real
Property and to perform, at Seller's expense, such surveying, engineering, and
environmental studies and investigations as Buyer may deem appropriate. If such
tests, studies and investigations warrant, in Buyer's sole, absolute and
unreviewable discretion, the purchase of the Property for the purposes
contemplated by Buyer, then Buyer may elect to proceed to Closing and shall so
notify Seller and the Escrow Agent, in writing, prior to the expiration of the
Due Diligence Period. If for any reason Buyer does not so notify Seller and
Escrow Agent of its determination to proceed to Closing prior to the expiration
of the Due Diligence Period, or if Buyer notifies Seller and Escrow Agent, in
writing, prior to the expiration of the Due Diligence Period that it has
determined not to proceed to Closing, this Agreement automatically shall
terminate and Buyer and Escrow Agent shall be released from any further
liability or obligation under this Agreement and, if requested by Seller, Buyer
will deliver such reports and materials to Seller.
(b) INSPECTION OF DOCUMENTS. During the Due Diligence Period, Seller
shall make available to Buyer, its agents, auditors, engineers, attorneys and
other designees, for inspection and/or copying, copies of all existing
architectural and engineering studies, surveys, title insurance policies, zoning
and site plan materials, correspondence, environmental audits and reviews,
books, records, tax returns, bank statements, financial statements, fee
schedules and any and all other material or information relating to the Property
which are in, or come into, Seller's possession or control, or which Seller may
attain. Such information is more particularly described in EXHIBIT I attached
hereto, as the same may be amended or supplemented by Seller from time to time.
(c) SURVEY. Within fifteen (15) days from the Effective Date, if
requested by Buyer, Seller shall deliver to Buyer an ALTA/ACSM survey or a
boundary survey, as reasonably required by Buyer, of the Land and the
Improvements, prepared by a surveyor licensed to practice as such in the State,
bearing a date not
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earlier than sixty (60) days from the date of its delivery and certified to
both Buyer, Seller and the Title Company (and any lender or other party
designated by Buyer), showing the legal description of the Land, all
dimensions thereof, and showing the location of Improvements on the Land and
the setbacks thereof from the property line, as well as the setbacks required
by applicable zoning laws or regulations (the "Survey"). The Survey shall
locate all easements which serve and affect the Land. The Survey shall
reflect that no buildings or improvements located on any other property
encroach upon the Land and that the Improvements located upon the Land do not
encroach upon any other property. The surveyor preparing the Survey shall
certify that (i) the Survey is an accurate Survey of the Land and the
Improvements, (ii) that the Survey was made under the surveyor's supervision,
(iii) that the Survey meets (a) the requirements of the Title Company for the
issuance of the Owner's Title Policy free of any general survey exception,
and (b) the minimum technical standards for land boundary surveys with
improvements, set forth by applicable statutes or applicable professional
organizations, and (iv) all buildings and other structures and their relation
to the property lines are shown and that there are no encroachments,
overlaps, boundary line disputes, easements, or claims of easements visible
on the ground, other than those shown on the Survey. If Buyer has any
objection to Survey matters, the same shall be treated for all purposes as
Title Objections within the provisions of this Agreement.
(d) PRELIMINARY TITLE REPORT. Seller agrees to provide to Buyer,
within five (5) business days following the Effective Date, a copy of any
existing title insurance policies which Seller may have in its possession or
control covering the Real Property, together with legible copies of all
exception documents referred to therein. During the Due Diligence Period,
Buyer, at its expense, shall cause an examination of title to the Property to be
made and a preliminary title report to be issued (the "Preliminary Title
Report"), and, prior to the expiration of the Due Diligence Period, shall notify
Seller of any defects in title shown by such examination that Buyer is unwilling
to accept by delivering a pro forma copy of the Preliminary Title Report that
reflects such unacceptable defects in title, which shall be designated as the
Title Objections. Within ten (10) days after such notification, Seller shall
notify Buyer whether Seller is willing to cure such defects. If Seller is
willing to cure such defects, Seller shall act promptly and diligently to cure
such defects at its expense. If any of such defects consist of mortgages, deeds
of trust, construction or mechanics' liens, tax liens or other liens or charges
in a fixed sum or capable of computation as a fixed sum, then, to that extent,
and notwithstanding the foregoing, Seller shall be obligated to pay and
discharge such defects at Closing. For such purposes, Seller may use all or a
portion of the cash to close. If Seller is unable to cure such defects by
Closing, after having attempted to do so diligently and in good faith, Buyer
shall elect (1) to waive such defects and proceed to Closing without any
abatement in the Purchase Price, or (2) to terminate this
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Agreement. Seller shall not, after the date of this Agreement, subject the
Property to any liens, encumbrances, leases, covenants, conditions,
restrictions, easements or other title matters or seek any zoning changes or
take any other action which may affect or modify the status of title without
Buyer's prior written consent. All title matters revealed by Buyer's title
examination and not objected to by Buyer as provided above shall be deemed
Permitted Title Exceptions. If Buyer shall fail to examine title and notify
Seller of any such Title Objections by the end of the Due Diligence Period,
all such title exceptions (other than those rendering title unmarketable and
those that are to be paid at Closing as provided above) shall be deemed
Permitted Title Exceptions. Notwithstanding the foregoing, Buyer shall not
be required to take title to the Property subject to any matters which may
arise subsequent to the effective date of its examination of title to the
Property made during the Due Diligence Period.
(e) DISCLOSURE SCHEDULE. Seller shall deliver to Buyer within
fourteen (14) days after the Effective Date a disclosure schedule that
accurately and completely identifies and describes (a) all Employment Agreements
(including name of employee, social security number, wage or salary, accrued
vacation benefits, other fringe benefits, etc.), and (b) an updated Golf Club
membership list, setting forth the names of the members of the Golf Club, the
length of their membership, the payment obligations of the members and a summary
of the terms of the memberships (the "Disclosure Schedule").
(f) AUDIT. Seller shall deliver to Buyer final audited financial
statements for the Golf Course for fiscal year 1996 and draft audited financial
statements for the Golf Course for fiscal year 1997 within five (5) days after
the Effective Date. Seller should deliver to Buyer final audited financial
statements for fiscal year 1997 for the Golf Course as soon as they are
available. Such audit shall be performed by nationally-recognized certified
public accountants and shall comply with the filing requirements of GTA, Inc.
with the SEC.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to Seller
at closing as set forth in SECTION 6.3 below.
ARTICLE 3
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Buyer to enter into this Agreement and to purchase the Property,
and to pay the Purchase Price therefor, Seller hereby makes the following
representations, warranties and covenants with respect to the Property, subject
to the Warranty Disclosure Schedule attached hereto as EXHIBIT J, upon each of
which Seller acknowledges and agrees that Buyer is entitled to rely and has
relied:
3.1 ORGANIZATION AND POWER. Seller is duly formed or organized, validly
existing and in good standing under the laws of
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the state of its formation and is qualified to transact business in the State
and has all requisite powers and all governmental licenses, authorizations,
consents and approvals to carry on its business as now conducted and to enter
into and perform its obligations under this Agreement and under any document
or instrument required to be executed and delivered by or on behalf of Seller
under this Agreement.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of the
agreements and certificates of Seller to be delivered to Buyer at Closing as
provided in Section 5.1 will be, duly authorized by all necessary action on the
part of Seller, has been duly executed and delivered by Seller, constitutes the
valid and binding agreement of Seller and is enforceable against Seller in
accordance with its terms. There is no other person or entity who has an
ownership interest in the Property or whose consent is required in connection
with Seller's performance of its obligations under this Agreement. All action
required pursuant to this Agreement necessary to effectuate the transactions
contemplated herein has been, or will at Closing be, taken promptly and in good
faith by Seller and its representatives and agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the performance
by Seller of its obligations under, this Agreement do not and will not
contravene, or constitute a default under, any provision of applicable law or
regulation, Seller's Organizational Documents or any agreement, judgment,
injunction, order, decree or other instrument binding upon Seller, or result in
the creation of any lien or other encumbrance on any asset of Seller. There are
no outstanding agreements (written or oral) pursuant to which Seller (or a
representative of Seller) has agreed to contribute or has granted an option or
right of first refusal to purchase the Property or any part thereof. Other than
the rights of tenants, as tenants only, under any leases of any portion of the
Property (copies of which have been provided to Buyer by Seller), there are no
purchase contracts, options or other agreements of any kind, written or oral,
recorded or unrecorded, whereby any person or entity other than Seller will have
acquired or will have any basis to assert any right, title or interest in, or
right to possession, use, enjoyment or proceeds of, all or any portion of the
Property. There are no rights, subscriptions, warrants, options, conversion
rights or agreements or any kind outstanding to purchase or to otherwise acquire
any interest or profit participation of any kind in the Property or any part
thereof.
3.4 NO SPECIAL TAXES. Seller has no knowledge of, nor has it received any
notice of, any special taxes or assessments relating to the Property or any part
thereof, including taxes relating to the business of the Property, or any
planned public improvements that may result in a special tax or assessment
against the Property, that are not otherwise disclosed in the Preliminary Title
Report. To the best of Seller's knowledge, there is not any proposed increase
in the assessed valuation of the Real Property
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for tax purposes (except as may relate to the transfer contemplated by this
Agreement).
3.5 COMPLIANCE WITH EXISTING LAWS. Seller possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Seller has not misrepresented or failed to disclose any
relevant fact in obtaining all Authorizations, and Seller has no knowledge of
any change in the circumstances under which any of those Authorizations were
obtained that result in their termination, suspension, modification or
limitation. Seller has not taken any action (or failed to take any action),
the omission of which would result in the revocation of any of the
Authorizations. Seller has no knowledge, nor has it received notice within
the past three years, of any existing or threatened violation of any
provision of any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance
boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of the Property or any part thereof, or requiring
any repairs or alterations other than those that have been made prior to the
Effective Date.
3.6 REAL PROPERTY. To the best of Seller's knowledge, (i) the
Improvements conform in all respects to all legal requirements, (ii) all
easements necessary or appropriate for the use or operation of the Property have
been obtained, (iii) all contractors and subcontractors retained by Seller who
have performed work on or supplied materials to the Property have been fully
paid, and all materials used at or on the Property have been fully paid for,
(iv) the Improvements have been completed in all material respects in a
workmanlike manner of first-class quality, and (v) all equipment necessary or
appropriate for the use or operation of the Property has been installed and is
presently operative in good working order. Seller has not received any written
notice which is still in effect that there is, and, to the best of Seller's
knowledge, there does not exist, any violation of a condition or agreement
contained in any easement, restrictive covenant or any similar instrument or
agreement affecting the Real Property, or any portion thereof.
3.7 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by Seller to Buyer is free and clear
of all liens and encumbrances and will be so on the Closing Date, including
without limitation seventy-two (72) EZ-GO golf carts and those other items of
Tangible Personal Property which are subject to equipment leases, such items
being identified by a "**" on EXHIBIT C attached hereto, and Seller has good,
merchantable title thereto and the right to convey same in accordance with the
terms of this Agreement.
3.8 OPERATING AGREEMENTS. Each of the Operating Agreements may be
terminated upon not more than thirty (30) days prior written
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notice and without the payment of any penalty, fee, premium or other amount.
Seller has performed all of its obligations under each of the Operating
Agreements and no fact or circumstance has occurred which, by itself or with
the passage of time or the giving of notice or both, would constitute a
default under any of the Operating Agreements. Seller shall not enter into
any new Operating Agreements, supply contract, vending or service contract or
other agreements with respect to the Property, nor shall Seller enter into
any agreements modifying the Operating Agreements, unless (a) any such
agreement or modification will not bind Buyer or the Property after the
Closing Date, or (b) Seller has obtained Buyer's prior written consent to
such agreement or modification. Seller acknowledges that Buyer may not
assume any of the Operating Agreements and none of the Operating Agreements
will be binding on Buyer or the Property after Closing.
3.9 WARRANTIES AND GUARANTIES. Seller shall not before or after Closing,
release or modify any warranties or guarantees, if any, of manufacturers,
suppliers and installers relating to the Improvements and the Personal Property
or any part thereof, except with the prior written consent of Buyer.
3.10 INSURANCE. All of Seller's insurance policies are valid and in full
force and effect, all premiums for such policies were paid when due and premiums
due as of the Closing Date for such policies (and any replacements thereof)
shall be paid by Seller on or before the due date therefor. Seller shall pay
all premiums on, and shall not cancel or voluntarily allow to expire, any of
Seller's insurance policies unless such policy is replaced, without any lapse of
coverage, by another policy or policies providing coverage at least as extensive
as the policy or policies being replaced. Seller has not received any notice
from any insurance company of any defect or inadequacies in the Property to any
part thereof which would adversely affect the insurability of the Property, or
which would increase the cost of insurance beyond that which would ordinarily
and customarily be charged for similar properties in the vicinity of the Real
Property. The Property is fully insured in accordance with prudent and customary
practice.
3.11 CONDEMNATION PROCEEDINGS; ROADWAYS. Seller has received no notice of
any condemnation or eminent domain proceeding pending or threatened against the
Property or any part thereof. Seller has no knowledge of any change or proposed
change in the route, grade or width of, or otherwise affecting, any street or
road adjacent to or serving the Real Property. To the best of Seller's
knowledge, no fact or condition exists which would result in the termination or
material impairment of access to the Real Property from adjoining public or
private streets or ways or which could result in discontinuation of presently
available or otherwise necessary sewer, water, electric, gas, telephone or other
utilities or services.
3.12 LITIGATION. Except as disclosed in writing to Seller, there is no
action, suit or proceeding pending or known to be
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threatened against or affecting Seller or any of its properties in any court,
before any arbitrator or before or by any Governmental Body which (a) in any
manner raises any question affecting the validity or enforceability of this
Agreement or any other agreement or instrument to which Seller is a party or
by which it is bound and that is or is to be used in connection with, or is
contemplated by, this Agreement, (b) could materially and adversely affect
the business, financial position or results of operations of Seller, (c)
could materially and adversely affect the ability of Seller to perform its
obligations under this Agreement, or under any document to be delivered
pursuant hereto, (d) could create a lien on the Property, any part thereof or
any interest therein, (e) the subject matter of which concerns any past or
present employee of Seller or its managing agent, or (f) could otherwise
adversely materially affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
3.13 LABOR DISPUTES AND AGREEMENTS. There are no labor disputes pending
or, to the best of Seller's knowledge, threatened as to the operation or
maintenance of the Property or any part thereof. Seller is not a party to any
union or other collective bargaining agreement with employees employed in
connection with the ownership, operation or maintenance of the Property. Seller
is not a party to any employment contracts or agreements, other than the
Employment Agreements, and neither Seller nor its managing agent will, between
the Effective Date and the Closing Date, enter into any new employment contracts
or agreements, amend any existing Employment Agreement, except with the prior
written consent of Buyer. Seller acknowledges that Buyer will not assume any of
the Employment Agreements and Seller has complied with and shall be responsible
for compliance with the WARN Act and any other applicable employment-related
laws or ordinances. Seller has complied with the requirements of the federal
Immigration and Reform Control Act respecting the employment of undocumented
workers.
3.14 FINANCIAL INFORMATION. To the best of Seller's knowledge, all of
Seller's financial information, including, without limitation, all books and
records and financial statements, is correct and complete in all material
respects and presents accurately the results of the operations of the Property
for the periods indicated.
3.15 ORGANIZATIONAL DOCUMENTS. Seller's Organizational Documents are in
full force and effect and have not been modified or supplemented, and no fact or
circumstance has occurred that, by itself or with the giving of notice or the
passage of time or both, would constitute a default thereunder.
3.16 OPERATION OF PROPERTY. Seller covenants, that between the Effective
Date and the Closing Date, it will (a) operate the Property in the usual,
regular and ordinary manner consistent with Seller's prior practice, (b)
maintain its books of account and records in the usual, regular and ordinary
manner, in accordance
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with sound accounting principles applied on a basis consistent with the basis
used in keeping its books in prior years, and (c) use all reasonable efforts
to preserve intact its present business organization, keep available the
services of its present officers, partners and employees and preserve its
relationships with suppliers and others having business dealings with it.
Except as otherwise permitted hereby, from the Effective Date until Closing,
Seller shall not take any action or fail to take action the result of which
would have a material adverse effect on the Property or Buyer's ability to
continue the operation thereof after the Closing Date in substantially the
same manner as presently conducted, or which would cause any of the
representations and warranties contained in this Article III to be untrue as
of Closing.
From and after the execution and delivery of this Agreement, Seller shall
not, other than in the ordinary course of business, (a) make any agreements
which shall be binding upon Buyer with respect to the Property, or (b) reduce or
cause to be reduced any green fees, membership fees, tournament fees, driving
range fees or any other charges over which Seller has operational control.
Between the Effective Date and the Closing Date, if and to the extent requested
by Buyer, Seller shall deliver to Buyer such periodic information with respect
to the above information as Seller customarily keeps internally for its own use.
Seller agrees that it will operate the Property in accordance with the
provisions of this Section 3.16 between the Effective Date and the Closing Date.
3.17 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to Seller.
3.18 LAND USE. The current use and occupancy of the Property for golfing
and all other related purposes (including, without limitation, the sale of
merchandise and food and beverages) are permitted as a matter of right as a
principal use under all laws and regulations applicable thereto without the
necessity of any special use permit, special exception or other special permit,
permission or consent and Seller is not aware of any proposal to change or
restrict such use. Seller has all necessary certificates of occupancy or
completion to operate the Property as presently operated and, to Seller's
knowledge, there are no unfulfilled conditions respecting the development of the
Property.
3.19 HAZARDOUS SUBSTANCES. Except as may be disclosed in the Phase I
environmental assessment report for the Property, to the best of Seller's
knowledge, (i) no Hazardous Substances are or have been located on (except in
typical amounts used in the ordinary course for the operation or maintenance of
the Property by Seller in accordance with all applicable laws), in or under the
Property or have been released into the environment, or discharged, placed or
disposed of at, on or under the Property; (ii) no underground storage tanks are,
or have been, located at the Property; (ii) the Property has never been used to
store, treat or dispose of Hazardous Substances (except in typical amounts used
in the
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ordinary course for the operation or maintenance of the Property by Seller in
accordance with all applicable laws); and (iv) the Property and its prior
uses comply with, and at all times have complied with all applicable
Environmental Laws or any other governmental law, regulation or requirement
relating to environmental and occupational health and safety matters and
Hazardous Substances. To the best of Seller's knowledge, there currently
exist no facts or circumstances that could reasonably be expected to give
rise to a material non-compliance with Environmental Laws, material
environmental liability or material Environmental Claim.
3.20 UTILITIES. All Utilities required for the operation of the Property
either enter the Property through adjoining streets, or they pass through
adjoining land and do so in accordance with valid public easements or private
easements, and all of the Utilities located on the Property are installed and
are in good working order and repair and operating as necessary for the
operation of the Property and all installation and connection charges therefor
have been paid in full. The sewage, sanitation, plumbing, water retention and
detention, refuse disposal and utility facilities in and on and/or servicing the
Real Property are adequate to service the Real Property as it is currently being
used and the Real Property's utilization of such facilities is in compliance
with all applicable governmental and environmental protection authorities' laws,
rules, regulations and requirements.
3.21 CURB CUTS. All curb cut street opening permits or licenses required
for vehicular access to and from the Property from any adjoining public street
have been obtained and paid for and are in full force and effect.
3.22 LEASED PROPERTY. The Personal Property identified on EXHIBIT C is all
of the leased property at the Property, and such exhibit reflects the date of
each such lease, the name of the lessor, the name of the lessee, the term of
each such lease, the lease payment terms and a description of the property
demised by each such lease. All leases of such property are in good standing
and free from default.
3.23 SUFFICIENCY OF CERTAIN ITEMS. The Property, together with the Current
Assets, contain an amount of equipment and supplies, which is sufficient to
efficiently operate and maintain the Property in the manner in which it is
normally operated and maintained in the season of the year in which the Closing
occurs.
3.24 SURVIVAL OF REPRESENTATIONS. Each of the representations, warranties
and covenants contained in this Article III are intended for the benefit of
Buyer. Each of said representations, warranties and covenants shall survive the
Closing for a period of one (1) year, at which time they shall expire unless
prior to such time Buyer has made a formal, written claim alleging a breach of
one or more of the representations, warranties or covenants. No investigation,
audit, inspection, review or the
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like conducted by or on behalf of Buyer shall be deemed to terminate the
effect of any such representations, warranties and covenants, it being
understood that Buyer has the right to rely thereon and that each such
representation, warranty and covenant constitutes a material inducement to
Buyer to execute this Agreement and to close the transaction contemplated
hereby and to pay the Purchase Price to Seller. Notwithstanding the
foregoing, Seller shall have no liability with respect to any of the
foregoing representations and warranties if, prior to the Closing, Buyer
obtains actual knowledge (from whatever source, including, without
limitation, as a result of Buyer's due diligence tests, investigations and
inspections of the Property, or disclosure by Seller or Seller's agents and
employees) that contradicts any of such foregoing representations and
warranties, or renders any of such foregoing representations and warranties
materially untrue or incorrect, and Buyer nevertheless consummates the
transaction contemplated by this Agreement.
ARTICLE 4
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce Seller to enter into this Agreement and to sell the Property,
Buyer hereby makes the following representations, warranties and covenants, upon
each of which Buyer acknowledges and agrees that Seller is entitled to rely and
has relied:
4.1 ORGANIZATION AND POWER. Buyer is duly formed or organized, validly
existing and in good standing under the laws of the state of its formation and
has all governmental licenses, Authorizations, consents and approvals required
to carry on its business as now conducted and to enter into and perform its
obligations under this Agreement and any document or instrument required to be
executed and delivered on behalf of Buyer under this Agreement.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement and
the performance by Buyer of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Buyer or result in the creation of any lien or other
encumbrance on any asset of Buyer.
4.3 LITIGATION. There is no action, suit or proceeding, pending or known
to be threatened, against or affecting Buyer in any court or before any
arbitrator or before any administrative panel or otherwise that (a) could
materially and adversely affect the business, financial position or results of
operations of Buyer, or (b) could materially and adversely affect the ability of
Buyer to perform its obligations under this Agreement, or under any document to
be delivered pursuant hereto.
4.4 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to Buyer.
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4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of the
agreements and certificates of buyer to be delivered to Seller at Closing as
provided in Section 5.2 will be, duly authorized by all necessary action on the
part of Buyer, has been duly executed and delivered by Buyer, constitutes the
valid and binding agreement of Buyer and is enforceable against Buyer in
accordance with its terms. All action required pursuant to this Agreement
necessary to effectuate the transactions contemplated herein has been, or will
at Closing be, taken promptly and in good faith by Buyer and its representatives
and agents.
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO BUYER'S OBLIGATIONS. Buyer's obligations under this Agreement
are subject to the satisfaction of the following conditions precedent and the
compliance by Seller with the following covenants:
(a) SELLER'S DELIVERIES. Seller shall have delivered to or for the
benefit of Buyer, as the case may be, on or before the Closing Date, all of the
documents and other information required of Seller pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Seller's
representations and warranties made in this Agreement shall be true and correct
as of the Effective Date and as of the Closing Date as if then made, there shall
have occurred no material adverse change in the condition or financial results
of the operation of the Property since the Effective Date. Seller shall have
performed all of its covenants and other obligations under this Agreement and
Seller shall have executed and delivered to Buyer on the Closing Date a
certificate dated as of the Closing Date to the foregoing effect in the form of
EXHIBIT K attached hereto.
(c) TITLE INSURANCE. The Title Company shall have delivered the
Owner's Title Policy, subject only to the Permitted Title Exceptions.
(d) TITLE TO PROPERTY. Buyer shall have determined that Seller is
the sole owner of good and marketable fee simple title (or ground lease
interest, as applicable ) to the Real Property and to the Tangible Personal
Property, free and clear of all liens, encumbrances, restrictions, conditions
and agreements except for, with regard to the Real Property only, Permitted
Title Exceptions. Seller shall not have taken any action or permitted or
suffered any action to be taken by others from the Effective Date and through
and including the Closing Date that would adversely affect the status of title
to the Real Property or to the Tangible Personal Property.
(e) CONDITION OF PROPERTY. The Real Property and the Tangible
Personal Property (including but not limited to the golf
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course, driving range, putting greens, mechanical systems, plumbing,
electrical wiring, appliances, fixtures, heating, air conditioning and
ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) shall be in the same condition at Closing as they are
as of the Effective Date, reasonable wear and tear excepted, and in
connection therewith, Inventory levels will increase or decrease in the
ordinary course of business. Prior to Closing, except in the ordinary course
of business, Seller shall not have materially changed the overall quality or
quantity of maintenance and upkeep services heretofore provided to the Real
Property and the Tangible Personal Property. Seller shall not have removed
or caused or permitted to be removed any part or portion of the Real Property
or the Tangible Personal Property unless the same is replaced, prior to
Closing, with similar items of at least equal quality and acceptable to
Buyer.
(f) UTILITIES. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property. Between the Effective Date and the
Closing Date, Seller shall have received no notice of any material increase or
proposed material increase in the rates charged for the Utilities from the rates
in effect as of the Effective Date.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Buyer and may be waived in whole or in part by
Buyer, but only by an instrument in writing signed by Buyer.
5.2 AS TO SELLER'S OBLIGATIONS. Seller's obligations under this are
subject to the satisfaction of the following conditions precedent and the
compliance by Buyer with the following covenants:
(a) BUYER'S DELIVERIES. Buyer shall have delivered to or for the
benefit of Seller, on or before the Closing Date, all of the documents and
payments required of Buyer pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of Buyer's
representations and warranties made in this Agreement shall be true and correct
as of the Effective Date and as of the Closing Date as if then made and Buyer
shall have performed all of its covenants and other obligations under this
Agreement.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Seller and may be waived in whole or in part, by
Seller, but only by an instrument in writing signed by Seller.
ARTICLE 6
CLOSING
6.1 CLOSING. Closing shall be held at the offices of Escrow Agent on
March 9, 1998; provided, however, that the Closing Date
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may be extended for an additional thirty (30) days by Buyer, at its sole
discretion by providing written notice to Seller prior to March 9, 1998. If
the Closing Date falls on a Saturday, Sunday or other legal holiday, the
Closing shall take place on the first following business day thereafter.
Possession of the Property shall be delivered to Buyer at Closing, subject
only to Permitted Title Exceptions.
6.2 SELLER'S DELIVERIES. At Closing, Seller shall deliver to Buyer all of
the following instruments, each of which shall have been duly executed and,
where applicable, acknowledged and/or sworn on behalf of Seller and shall be
dated as of the Closing Date.
(a) SELLER'S CERTIFICATE. The certificate required by Section
5.1(b).
(b) THE DEED.
(c) THE BILL OF SALE - PERSONAL PROPERTY
(d) EVIDENCE OF TITLE. Evidence of title acceptable to Buyer for any
vehicle owned by Seller and used in connection with the Property.
(e) TITLE REQUIREMENTS. Such agreements, affidavits or other
documents as may be required by the Title Company to issue the Owner's Title
Policy including those endorsements required by Buyer, and to eliminate the
standard exceptions as exceptions thereto, so that the Owner's Title Policy will
be subject only to the Permitted Title Exceptions, including, without
limitation, an appropriate mechanics' and construction lien, possession and gap
affidavit.
(f) THE FIRPTA CERTIFICATE.
(g) WARRANTIES. To the extent available, true, correct and complete
copies of all warranties, if any, of manufacturers, suppliers and installers
possessed by Seller and relating to the Property, or any part thereof.
(h) ORGANIZATIONAL DOCUMENTS. Certified copies of Seller's
Organizational Documents.
(i) BOARD RESOLUTIONS. Appropriate resolutions of the board of
directors or partners, as the case may be, of Seller, certified by the secretary
or an assistant secretary of Seller or a general partner, as the case may be,
together with all other necessary approvals and consents of Seller, authorizing
(i) the execution on behalf of Seller of this Agreement and the documents to be
executed and delivered by Seller prior to, at or otherwise in connection with
Closing, and (ii) the performance by Seller of its obligations under this
Agreement and under such documents, or appropriate resolutions of the partners
of Seller, as the case may be.
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(j) CERTIFICATE OF OCCUPANCY. A valid, final (except to the extent
continued compliance with local laws is required) certificate of occupancy for
the Real Property and Improvements, issued by the appropriate Governmental Body
allowing for the use of the Real Property as a golf course and permitting the
continued operation of the improvements as presently operated.
(k) EVIDENCE OF BULK SALES COMPLIANCE. Such proof as Buyer may
reasonably require with respect to Seller's compliance with, or exemption from,
the bulk sales laws or similar statutes.
(l) INSURANCE POLICIES. Copy of each and every existing insurance
policy covering the Property and certificates evidencing such coverage.
(m) IMPROVEMENT PLANS. To the extent available, a set or copies of
the plans and specifications for the Improvements.
(n) COMMUNICATION; ADDRESSES. A written instrument executed by
Seller, conveying and transferring to Buyer all of Seller's right, title and
interest in any telephone numbers, fax numbers or Internet or electronic mail
addresses (if applicable) relating solely to the Property, and, if Seller
maintains a post office box solely with respect to the Property, conveying to
Buyer all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.
(o) TAX BILLS. All current real estate and personal property tax
bills in Seller's possession or under its control.
(p) SURVEYS. All surveys and plot plans of the Real Property in
possession of or in the control of Seller.
(q) TOURNAMENT SCHEDULE. A complete list of all scheduled
tournaments, functions and the like, in reasonable detail.
(r) ACCOUNTS RECEIVABLE. A list of Seller's outstanding accounts
receivable as of midnight on the date prior to the Closing, specifying the name
of each account and the amount due Seller.
(s) PAYOFF STATEMENT. A payoff statement prepared by any holder of
Mortgage Indebtedness setting forth the amount, including accrued interest and
prepayment penalties, to pay off the Mortgage Indebtedness.
(t) TENANT NOTICES. Written notice executed by Seller notifying all
interested parties, including all tenants under any leases of the Property, that
the Property has been conveyed to Buyer and directing that all payments,
inquiries and the like be forwarded to Buyer at the address to be provided by
Buyer.
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(u) MISCELLANEOUS. Any other document or instrument reasonably
requested by Buyer with respect to the Property.
6.3 BUYER'S DELIVERIES. At Closing, Buyer shall pay or deliver to Seller
the following:
(a) PURCHASE PRICE. A portion of the Purchase Price equal to
$7,300,000.00 shall be remitted by Buyer to Seller by federal funds wire to an
account designated by Seller.
(b) PROMISSORY NOTE. A non-interest bearing Promissory Note in favor
of Seller, the form and content of which shall be mutually agreed to by Buyer
and Seller, in the amount of $200,000.00 in which $100,000.00 shall be paid to
Seller on each of the first and second anniversary dates of the Closing Date.
(c) MISCELLANEOUS. Any other document or instrument reasonably
requested by Seller relating to the transaction contemplated hereby.
6.4 MUTUAL DELIVERIES. At Closing, Buyer and Seller shall mutually
execute and deliver each to the other:
(a) CLOSING STATEMENTS. A closing statement for Seller and a closing
statement for Buyer (collectively, the "Closing Statements") reflecting the
Purchase Price and the adjustments and prorations required under this Agreement
and the allocation of income and expenses required hereby.
(b) LIQUOR LICENSE TRANSFER DOCUMENTS. Such other documents,
instruments and undertakings as may be required by the liquor authorities of the
State or of any county or municipality or Governmental Body having jurisdiction
with respect to the transfer or issue of any liquor licenses or alcoholic
beverage licenses or permits for the Property, to the extent not theretofore
executed and delivered.
(c) MISCELLANEOUS. Such other and further documents, papers and
instruments as may be reasonably required by the parties hereto or their
respective counsel.
6.5 CLOSING COSTS. Except as is otherwise provided in this Agreement,
each party hereto shall pay its own legal fees and expenses, and Seller shall
pay for the cost of any audit required by Buyer with respect to the Property.
All filing fees for the Deed and the real estate transfer, recording or other
similar taxes due including any deed stamps with respect to the transfer of
title shall be shared equally by Seller and Buyer. Seller shall pay for
preparation of the documents to be delivered by Seller under this Agreement, and
for the releases of any deeds of trust, mortgages and other financing
encumbering the Property and for any costs associated with any corrective
instruments, and for the cost of any due diligence reports and surveys prepared
by or for Buyer with
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respect to the Property. All charges for title insurance premiums shall be
paid by Buyer.
6.6 INCOME AND EXPENSE ALLOCATIONS. All income and expenses with respect
to the Property, and applicable to the period of time before and after Closing,
determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between Seller and Buyer (or, at
Buyer's election, between Seller and the lessee under the Golf Course Lease to
the extent such income or expenses will be payable by or attributable to such
lessee). Seller shall be entitled to all income and shall be responsible for
all expenses for the period of time up to but not including the Closing Date,
and Buyer shall be entitled to all income and shall be responsible for all
expenses for the period of time from, after and including the Closing Date.
Such adjustments shall be shown on the Closing Statements (with such supporting
documentation as the parties hereto may require being attached as exhibits to
the Closing Statements) and shall increase or decrease (as the case may be) the
Purchase Price payable by Buyer. Without limiting the generality of the
foregoing, the following items of income and expense shall be prorated as of the
Closing Date:
(a) RENTS AND FEES. Current and prepaid rents or fees, including,
without limitation, prepaid Golf Club membership fees, function receipts and
other reservation receipts.
(b) TAXES. Real estate and personal property taxes.
(c) UTILITIES. Utility charges (including but not limited to charges
for water, sewer and electricity).
(d) FUEL. Value of fuel stored on the Property at the price paid for
such fuel by Seller, including any taxes.
(e) MUNICIPAL IMPROVEMENT LIENS. Municipal improvement liens where
the work has physically commenced (certified liens) shall be paid by Seller at
Closing. Municipal improvement liens which have been authorized, but where the
work has not commenced (pending liens) shall be assumed by Buyer.
(f) LICENSE AND PERMIT FEES. License and permit fees, where
transferable.
(g) INCOME AND EXPENSES. All other income and expenses of the
Property, including, but not limited to such things as restaurant and snack bar
income and expenses and the like.
(h) MISCELLANEOUS PRORATIONS. Such other items as are usually and
customarily prorated between Buyers and Sellers of commercial properties in the
area in which the Property is located shall be prorated as of the Closing Date.
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6.7 SALES TAXES. Seller shall be required to pay all sales taxes and like
impositions arising from the ownership and operation of the Property currently
through the Closing Date.
6.8 POST-CLOSING ADJUSTMENTS.
(a) ACCOUNTS RECEIVABLE. Buyer shall use commercially reasonable
efforts to collect any accounts receivable or revenues accrued prior to the
Closing Date for Seller, and if Buyer collects same, such amounts (net of
Buyer's cost to collect same) will be promptly remitted to Seller in the form
received. Subsequent to the Closing Date, Seller may continue to pursue
collection of accounts receivable and revenues accrued prior to the Closing Date
and Buyer agrees to cooperate with Seller in this regard. Buyer shall receive a
credit at Closing for the amount of any security deposits held by Seller under
any lease of any portion of the Property that is being assigned to Buyer in
accordance herewith.
(b) AVAILABILITY OF BILLS. If accurate allocations and prorations
cannot be made at Closing because current bills are not obtainable (as, for
example, in the case of utility bills and/or real estate or personal property
taxes), the parties shall allocate such income or expenses at Closing on the
best available information, subject to adjustment outside of escrow upon receipt
of the final bill or the evidence of the applicable income or expense. Any
income received or expense incurred by Seller or Buyer with respect to the
Property after the Closing Date shall be promptly allocated in the manner
described herein and the parties shall promptly pay or reimburse any amount due.
Seller shall pay at Closing all accrued special assessments and taxes applicable
to the Property.
(c) ACCOUNTS PAYABLE ON INVENTORY. Buyer agrees to assume payment of
accounts payable on all Inventory ordered but not yet received as of the Closing
Date, provided that such orders were made in the ordinary course of business.
ARTICLE 7
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion (except for an
immaterial portion) of the Real Property, or any proposed sale in lieu thereof,
Seller shall give written notice thereof to Buyer promptly after Seller learns
or receives notice thereof. If all or any part of the Real Property is, or is
to be, so condemned or sold, Buyer shall have the right to terminate this
Agreement pursuant to Section 8.3. If Buyer elects not to terminate this
Agreement, all proceeds, awards and other payments arising out of such
condemnation or sale (actual or threatened) shall be paid or assigned, as
applicable, to Buyer at Closing. Seller will not settle or compromise any such
proceeding without Buyer's prior written consent.
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7.2 RISK OF LOSS. The risk of any loss or damage to the Property prior to
the Closing Date shall remain upon Seller. If any such loss or damage occurs
prior to Closing, Buyer shall have the right to terminate this Agreement
pursuant to Section 8.3. If Buyer elects not to terminate this Agreement, all
insurance proceeds and rights to proceeds (except for proceeds or rights to
proceeds from any business interruption insurance maintained by Seller that are
applicable to the period prior to Closing) arising out of such loss or damage
shall be paid or assigned, as applicable, to Buyer at Closing.
7.3 REAL ESTATE BROKER. Except for a broker or finder who may have been
engaged by Seller and for whom Seller accepts sole financial responsibility, and
except for any broker or finder who may have been engaged by Buyer and for whom
Buyer accepts sole financial responsibility, there is no real estate broker
involved in this transaction. Buyer warrants and represents to Seller that
Buyer has not dealt with any other real estate broker in connection with this
transaction, nor has Buyer been introduced to the Property or to Seller by any
other real estate broker, and Buyer shall indemnify Seller and save and hold
Seller harmless from and against any claims, suits, demands or liabilities of
any kind or nature whatsoever arising on account of the claim of any person,
firm, or corporation to a real estate brokerage commission or a finder's fee as
a result of having dealt with Buyer, or as a result of having introduced Buyer
to Seller or to the Property. In like manner, Seller warrants and represents to
Buyer that Seller has not dealt with any real estate broker in connection with
this transaction, nor has Seller been introduced to Buyer by any real estate
broker, and Seller shall indemnify Buyer and save and hold harmless from and
against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation to
a real estate brokerage commission or a finder's fee as a result of having dealt
with Seller in connection with this transaction. Buyer represents that David J.
Dick, an officer of the Buyer, is a licensed California real estate broker but
is not acting as a broker in relation to this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and after the
execution of this Agreement, Buyer and Seller shall keep the terms, conditions
and provisions of this Agreement confidential and neither shall make any public
announcements hereof unless the other first approves of same in writing, nor
shall either disclose the terms, conditions and provisions hereof, except to
their respective attorneys, accountants, engineers, surveyors, financiers and
bankers. Notwithstanding the foregoing, it is acknowledged that the Company is
a public company and will make a public announcement (which announcement shall
not be made earlier than the Closing Date without prior written notice to
Seller) concerning this transaction and that the Company anticipates that it
will seek to sell shares of its common stock and other securities (collectively,
the "Securities") to the general public pursuant to a public offering and that
in connection therewith,
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Buyer will have the absolute right to market the Securities and prepare and
file all necessary or required registration statements, and other papers,
documents and instruments necessary or required in Buyer's judgment and that
of its attorneys and underwriters to file a registration statement with
respect to the Securities with the SEC and/or similar state authorities and
to cause same to become effective and to disclose therein and thus to its
underwriters, to the SEC and/or to similar state authorities and to the
public all of the terms, conditions and provisions of this Agreement. The
obligations of this Section 7.4 shall survive any termination of this
Agreement.
7.5 LIQUOR LICENSES. Buyer acknowledges that Seller has informed Buyer
that Shelby County, Kentucky, the county in which the Property is located, is a
"dry" county and that consequently there are no liquor licenses or alcoholic
beverage licenses held by Seller, or any Affiliates of Seller, in connection
with the Property.
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS
8.1 LIABILITY OF BUYER. Except for any obligation expressly assumed or
agreed to be assumed by Buyer under this Agreement, Buyer does not assume any
obligation of Seller or any liability for claims arising out of any occurrence
prior to Closing.
8.2 INDEMNIFICATION BY SELLER. Seller hereby indemnifies and holds Buyer
harmless from and against any and all claims, costs, penalties, damages, losses,
liabilities and expenses (including reasonable attorneys' fees) that may at any
time be incurred by Buyer, whether before or after Closing, as a result of any
breach by Seller of any of its representations, warranties, covenants or
obligations set forth herein or in any other document delivered by Seller
pursuant hereto, for a period of one (1) year following the Closing, provided
written notice to such breach is given to Seller prior to expiration of such one
(1) year period. The provisions of this section shall survive termination of
this Agreement by Buyer or Seller.
8.3 TERMINATION BY BUYER. If any condition set forth herein for the
benefit of Buyer cannot or will not be satisfied prior to Closing, or upon the
occurrence of any other event that would entitle Buyer to terminate this
Agreement and its obligations under this Agreement, and Seller fails to cure any
such matter within ten (10) business days after notice thereof from Buyer,
Buyer, at its option, may elect either (a) to terminate this Agreement and all
other rights and obligations of Seller and Buyer under this Agreement shall
terminate immediately, or (b) to waive its right to terminate (but without
waiving any breach or default on the part of Seller) and, instead, to proceed to
Closing. If Buyer terminates this Agreement as a consequence of a
misrepresentation or breach of a warranty or covenant by Seller, or a failure by
Seller to perform
26
<PAGE>
its obligations under this Agreement, then Buyer shall retain all remedies
accruing as a result thereof, including, without limitation, specific
performance.
8.4 TERMINATION BY SELLER. If any condition set forth herein for the
benefit of Seller (other than a default by Buyer) cannot or will not be
satisfied prior to Closing, and Buyer fails to cure any such matter within ten
(10) business days after notice thereof from Seller, Seller may, at its option,
elect either (a) to terminate this Agreement, in which event the rights and
obligations of Seller and Buyer hereunder shall terminate immediately, or (b) to
waive its right to terminate (but without waiving any breach or default on the
part of Buyer), and instead, to proceed to Closing, If, Seller terminates this
Agreement as a consequence of a misrepresentation or breach of warranty or
covenant by Buyer, or a failure by Buyer to perform its obligations under this
Agreement, then Seller shall retain all remedies accruing as a result thereof,
including, without limitation, specific performance.
8.5 COSTS AND ATTORNEY'S FEES. In the event of any litigation or dispute
between the parties arising out of or in any way connected with this Agreement,
resulting in any litigation, arbitration or other form of dispute resolution,
then the prevailing party in such litigation shall be entitled to recover its
costs of prosecuting and/or defending same, including, without limitation,
reasonable attorneys' fees at trial and all appellate levels.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 COMPLETENESS; MODIFICATION. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 ASSIGNMENTS. Buyer may assign its rights under this Agreement to an
Affiliate of Buyer without the consent of Seller. Such assignment shall not
release Buyer from its obligations under this Agreement. Buyer may not
otherwise assign its interest herein without the prior written consent of
Seller. Seller may not assign any of its rights pursuant to this Agreement
without the prior written consent of Buyer, which may be withheld in Buyer's
sole and absolute discretion.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
27
<PAGE>
9.4 DAYS. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 GOVERNING LAW. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the State.
9.6 COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.
9.7 SEVERABILITY. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9.8 COSTS. Regardless of whether Closing occurs under this Agreement, and
except as otherwise expressly provided in this Agreement, each party to this
Agreement shall be responsible for its own costs in connection with this
Agreement and the transactions contemplated hereby, including without
limitation, fees of attorneys, engineers and accountants.
9.9 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be delivered by hand,
transmitted by facsimile transmission, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States mail,
certified, postage prepaid, return receipt requested, at the addresses and with
such copies as on the Summary Sheet or to such other address as the intended
recipient may have specified in a notice to the other party. Any party hereto
may change its address or designate different or other persons or entities to
receive copies by notifying the other party and Escrow Agent in a manner
described in this Section. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
28
<PAGE>
9.10 INCORPORATION BY REFERENCE. All of the exhibits attached hereto are
by this reference incorporated herein and made a part hereof.
9.11 SURVIVAL. Except as expressly provided in Section 3, all of the
representations, warranties, covenants and agreements of Seller and Buyer made
in, or pursuant to, this Agreement shall survive Closing and shall not merge
into the Deed or any other document or instrument executed and delivered in
connection herewith.
9.12 FURTHER ASSURANCES. Seller and Buyer each covenant and agree to sign,
execute and deliver, or cause to be signed, executed and delivered, and to do or
make, or cause to be done or made, upon the written request of the other party,
any and all agreements, instruments, papers, deeds, acts or things,
supplemental, confirmatory or otherwise, as may be reasonably required by either
party hereto for the purpose of or in connection with consummating the
transactions described herein.
9.13 NO PARTNERSHIP. This Agreement does not and shall not be construed to
create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Seller and Buyer specifically
established hereby.
9.14 CONFIDENTIALITY. Any confidential information delivered by Seller to
Buyer under this Agreement shall be used solely for the purpose of acquiring the
Property and Buyer will keep such information confidential; provided Buyer shall
have the right to provide such information to its consultants and advisors and
to disclose such information as Buyer determines is necessary or appropriate in
connection with any public offering of the Securities. If Buyer does not
acquire the Property, it shall deliver to Seller copies of all proprietary
information delivered to Buyer by Seller. Seller agrees to keep confidential
the terms and conditions of this Agreement provided, Seller shall have the right
to provide such information to its consultants and advisors.
29
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have hereunder affixed their
signatures to this Purchase and Sale Agreement, all as of the 28th day of
February, 1998.
"BUYER"
GOLF TRUST OF AMERICA, L.P., A DELAWARE
LIMITED PARTNERSHIP
By: GTA, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair
----------------------------------
Its: President and CEO
---------------------------------
"SELLER"
PERSIMMON RIDGE GOLF CLUB, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: International Golf Group, Inc.
Its: General Partner
By: /s/ William D. Reuckert
------------------------------------
Name: William D. Reuckert
Title: President
30
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF GOLF TRUST OF AMERICA, INC.
GTA GP, Inc., a Maryland corporation
GTA LP, Inc., a Maryland corporation
Sandpiper GTA Development, Inc.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-46659 of Golf Trust of America, Inc. on Form S-8 of our report dated March
9, 1998, appearing in this Annual Report on Form 10-K of Golf Trust of America,
Inc. for the year ended December 31, 1997.
Charlotte, North Carolina BDO Seidman, LLP
March 9, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF GOLF TRUST OF AMERICA, INC. & SUBSIDIARIES AS
OF 12-31-96 & 97 & THE RELATED CONSOLIDATED STATEMENTS OF INCOME,
STOCKHOLDERS' EQUITY & CASH FLOWS FOR THE PERIOD FROM 2-12-97 (INCEPTION)
THROUGH 12-31-97 & IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-12-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,968
<SECURITIES> 0
<RECEIVABLES> 1,004
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 115,045
<DEPRECIATION> 14,001
<TOTAL-ASSETS> 186,306
<CURRENT-LIABILITIES> 3,029<F1>
<BONDS> 4,325
0
0
<COMMON> 76
<OTHER-SE> 124,251
<TOTAL-LIABILITY-AND-EQUITY> 124,327
<SALES> 0
<TOTAL-REVENUES> 18,727
<CGS> 0
<TOTAL-COSTS> 5,705
<OTHER-EXPENSES> (624)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,879
<INCOME-PRETAX> 5,969
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,969
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.29
<FN>
<F1> AS A REAL ESTATE INVESTMENT TRUST, OUR BALANCE SHEET IS NOT CLASSIFIED
BETWEEN CURRENT AND NON-CURRENT INTEREST INCOME.
</FN>
</TABLE>
