<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1998.
/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________.
- -------------------------------------------------------------------------------
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
(Address of principal executive offices) (Zip Code)
(843)723-4653
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
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 report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
--- ---
On August 14, 1998 there were 7,637,488 common shares outstanding of the
registrant's only class of common stock.
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997. . . . . . . . . . 3
Consolidated Statements of Income for the Three Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Income for the Six Months Ended June 30, 1998, the Period
from February 12, 1997 (inception) through June 30, 1997 and the Pro Forma Six Months
Ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity for the Period from February 12, 1997
(inception) through December 31, 1997 and for the Six Months Ended June 30, 1998. . . . . 6
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and the
Period from February 12, 1997 (inception) through June 30, 1997. . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 23
ITEM 2. CHANGES IN SECURITIES 23
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 23
ITEM 5. OTHER INFORMATION 24
ITEM 6. EXHIBITS INDEX AND REPORT ON FORM 8-K 25
SIGNATURES 27
</TABLE>
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Property and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . $ 44,043 $ 25,796
Golf course improvements . . . . . . . . . . . . 131,280 58,494
Buildings and improvements . . . . . . . . . . . 64,898 22,199
Furniture, fixtures, and equipment . . . . . . . 37,414 8,556
--------- ---------
Total property and equipment . . . . . . . . . . . 277,635 115,045
Less accumulated depreciation. . . . . . . . . . 18,266 14,001
--------- ---------
Property and equipment, net. . . . . . . . . . . . 259,369 101,044
--------- ---------
Mortgage notes receivable. . . . . . . . . . . . . 68,856 65,129
Cash and cash equivalents. . . . . . . . . . . . . 1,325 14,968
Receivable from affiliates (Note 7). . . . . . . . 1,091 1,004
Other lessee receivables . . . . . . . . . . . . . 1,484 1,196
Other assets . . . . . . . . . . . . . . . . . . . 10,098 2,965
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . $ 342,223 $ 186,306
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable (Note 4) . . . . . . . . . . . . . . $ 142,834 $ 4,325
Accounts payable and other liabilities . . . . . . 11,153 3,029
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . 153,987 7,354
--------- ---------
Minority interest. . . . . . . . . . . . . . . . . 63,982 54,625
--------- ---------
Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued . . . . . . . . . . - -
Common stock, $.01 par value, 90,000,000 shares
authorized, 7,637,488 shares issued and outstanding 76 76
Additional paid-in capital . . . . . . . . . . . 128,254 127,488
Retained earnings. . . . . . . . . . . . . . . . 1,236 1,774
Unamortized restricted stock compensation. . . . (2,014) (1,713)
Note receivable from stock sale. . . . . . . . . (3,298) (3,298)
--------- ---------
Stockholders' equity . . . . . . . . . . . . . . . 124,254 124,327
--------- ---------
Total liabilities and stockholders' equity . . . . $ 342,223 $ 186,306
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997
-----------------------------
<S> <C> <C>
REVENUES:
Rent from affiliates (Note 7). . . . . . . . . . $ 3,152 $ 3,065
Rent . . . . . . . . . . . . . . . . . . . . . . 5,113 752
Mortgage interest. . . . . . . . . . . . . . . . 2,183 181
-------- --------
Total revenues . . . . . . . . . . . . . . . . . . 10,448 3,998
-------- --------
EXPENSES:
Depreciation and amortization. . . . . . . . . . 2,452 803
General and administrative . . . . . . . . . . . 1,304 597
-------- --------
Total expenses . . . . . . . . . . . . . . . . . . 3,756 1,400
-------- --------
Operating income . . . . . . . . . . . . . . . . . 6,692 2,598
-------- --------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . 91 317
Interest expense . . . . . . . . . . . . . . . . (2,006) (250)
Loss on sale of assets . . . . . . . . . . . . . (370) -
-------- --------
Total other income (expense) . . . . . . . . . . . (2,285) 67
-------- --------
Net income before minority interest. . . . . . . . 4,407 2,665
Income applicable to minority interest . . . . . . 1,768 1,373
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 2,639 $ 1,292
-------- --------
-------- --------
Basic earnings per share . . . . . . . . . . . . . $ .35 $ .33
-------- --------
-------- --------
Weighted average number of shares - basic. . . . . 7,632 3,924
-------- --------
-------- --------
Diluted earnings per share . . . . . . . . . . . . $ .33 $ .32
-------- --------
-------- --------
Weighted average number of shares - diluted. . . . 7,928 4,007
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
FOR THE SIX FEBRUARY 12 FOR THE SIX
MONTHS ENDED THROUGH MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
1998 1997 1997
--------------------------------------------
(PRO FORMA)
<S> <C> <C> <C>
REVENUES:
Rent from affiliates (Note 7). . . . . . . . . . $ 6,307 $ 4,697 $ 6,097
Rent . . . . . . . . . . . . . . . . . . . . . . 8,752 1,162 1,516
Mortgage interest. . . . . . . . . . . . . . . . 4,309 181 181
-------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . 19,368 6,040 7,794
-------- -------- --------
EXPENSES:
Depreciation and amortization. . . . . . . . . . 4,273 1,149 2,120
General and administrative . . . . . . . . . . . 2,460 910 1,070
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . 6,733 2,059 3,190
-------- -------- --------
Operating income . . . . . . . . . . . . . . . . . 12,635 3,981 4,604
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . 163 448 448
Interest expense . . . . . . . . . . . . . . . . (2,922) (290) (290)
Loss on sale of assets . . . . . . . . . . . . . (370) - -
-------- -------- --------
Total other income (expense) . . . . . . . . . . . (3,129) 158 158
-------- -------- --------
Net income before minority interest. . . . . . . . 9,506 4,139 4,762
Income applicable to minority interest . . . . . . 3,786 2,129 2,384
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 5,720 $ 2,010 $ 2,378
-------- -------- --------
-------- -------- --------
Basic earnings per share . . . . . . . . . . . . . $ .75 $ .51 $ .61
-------- -------- --------
-------- -------- --------
Weighted average number of shares - basic. . . . . 7,632 3,924 3,924
-------- -------- --------
-------- -------- --------
Diluted earnings per share . . . . . . . . . . . . $ .73 $ .50 $ .59
-------- -------- --------
-------- -------- --------
Weighted average number of shares - diluted. . . . 7,826 4,007 4,007
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NOTE
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
------ ----- --------- -------- --------- --------- ---------
Issuance of restricted stock . . . 21 - 607 - (607) - -
Issuance of shares for option
exercise and employee stock
purchase plans . . . . . . . . . . 5 - 159 - - - 159
Amortization of restricted
stock compensation . . . . . . . . - - - - 306 - 306
Dividends. . . . . . . . . . . . . - - - (6,258) - - (6,258)
Net income . . . . . . . . . . . . - - - 5,720 - - 5,720
------ ----- --------- -------- --------- --------- ---------
BALANCE, June 30, 1998 . . . . . . 7,637 $ 76 $ 128,254 $ 1,236 $ (2,014) $ (3,298) $ 124,254
------ ----- --------- -------- --------- --------- ---------
------ ----- --------- -------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS FEBRUARY 12
ENDED THROUGH
JUNE 30, JUNE 30,
1998 1997
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 5,720 $ 2,010
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . 4,265 1,149
Loan cost amortization . . . . . . . . . . . . . . . 280 -
Straight-line interest . . . . . . . . . . . . . . . (664) -
Amortization of restricted stock compensation. . . . 306 -
Income applicable to minority interest . . . . . . . 3,786 2,492
Increase in receivables. . . . . . . . . . . . . . . (375) (1,451)
Increase in other assets . . . . . . . . . . . . . . (4,938) (1,495)
Increase in accounts payable and other liabilities . 2,522 873
-------- -------
Net cash provided by operating activities. . . . . . . . 10,902 3,578
-------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements. . . . . . . (136,236) (54,898)
Increase in mortgage notes receivable. . . . . . . . . (3,063) (61,599)
-------- -------
Net cash used in investing activities. . . . . . . . . . (139,299) (116,497)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit . . . . . . . . . . . 120,675 43,825
Payments on notes. . . . . . . . . . . . . . . . . . . (92) -
Bridge loan proceeds . . . . . . . . . . . . . . . . . 5,000 -
Financing costs. . . . . . . . . . . . . . . . . . . . (765) -
Net proceeds from issuance of common stock . . . . . . 159 73,055
Distributions to partners. . . . . . . . . . . . . . . (3,965) (869)
Dividends paid . . . . . . . . . . . . . . . . . . . . (6,258) (821)
-------- -------
Net cash provided by financing activities. . . . . . . . 114,754 115,190
-------- -------
Net increase in cash . . . . . . . . . . . . . . . . . . (13,643) 2,271
Cash and cash equivalents, beginning of period . . . . . 14,968 -
-------- -------
Cash and cash equivalents, end of period . . . . . . . . $ 1,325 $ 2,271
-------- -------
-------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period . . . . . . . . . . . . $ 2,834 $ -
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Net assets of Legends Golf transferred to the Company. . $ - $ 981
Property and equipment in accruals or deferred purchase. $ 3,992 $ -
OP Units issued in golf course acquisitions. . . . . . . $ 9,716 $ -
Debt acquired with acquisition (Note 4). . . . . . . . . $ 12,927 $ -
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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") and Sandpiper-Golf
Trust LLC. a wholly-owned subsidiary of 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 59.7 percent interest in the
Operating Partnership. GTA GP is the sole general partner of the Operating
Partnership and owns a 0.2 percent interest therein. GTA LP is a limited
partner in the Operating Partnership and owns a 59.5 percent interest
therein. Larry D. Young, a director of the Company, along with his
affiliates, owns 29.2 percent of the Operating Partnership and is a
significant lessee. The remaining interest in the Operating Partnership is
held by operators of the golf courses, their affiliates and officers of the
Company.
The accompanying unaudited financial statements have been prepared by
the management of Golf Trust of America, Inc. in accordance with generally
accepted accounting principles for interim financial statements and in
conformity with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring adjustments) considered necessary for a
fair presentation have been included. The results of operations for the
three months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the full year. These financial statements
should be read in conjunction with the Company's December 31, 1997 audited
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K.
The unaudited Pro Forma Consolidated Statement of Income for the six
months ended June 30, 1997 is presented as if the Formation Transactions (i.e.,
the events occurring or resulting from the Company's initial public offering
on February 11, 1997) had occurred January 1, 1997 and includes the pro forma
period from January 1, 1997 to February 11, 1997 and actual results for the
period from February 12 to June 30, 1997. In management's opinion, all
adjustments necessary to reflect the effects of the Formation Transaction
have been made.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
This pronouncement specifies the computation, presentation and disclosure
requirements for earnings per share. The new standard had no material impact
on the Company's financial statements as "diluted" earnings per share
disclosure required by the pronouncement were the same as earnings per share
previously reported. The only difference in "basic" and "diluted" weighted
average shares is the dilutive effect of the Company's stock options
outstanding (approximately 296,000 and 83,000 shares added to weighted shares
outstanding for the three months ended June 30, 1998 and 1997, respectively).
8
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITION OF GOLF COURSES
During the three months ended March 31, 1998, the Company purchased 6
golf courses for an aggregate initial investment of approximately $79.6
million in cash and repayment of indebtedness, the assumption of a property
subject to a lien of $12.9 million and $7.6 million in OP Units
(approximately 280,000 units).
During the three months ended June 30, 1998, the Company purchased an
additional 5.5 eighteen hole equivalent golf courses for an aggregate initial
investment of approximately $55.3 million of which $53.2 million was paid in
cash and $2.0 million in OP Units (approximately 62,000 units). The
aforementioned golf courses are leased to third party operators pursuant to
long-term triple net leases.
The following is a summary of the acquisitions for 1998:
<TABLE>
<CAPTION>
INITIAL
ACQUISITION INVESTMENT
DATE COURSE NAME LOCATION (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1/2/98 Bonaventure - East and West Courses Fort Lauderdale, FL $23,700
1/16/98 Mystic Creek Golf Club & Banquet Center Dearborn, MI 10,000
2/1/98 Emerald Dunes Golf Course West Palm Beach, FL 22,400
3/6/98 Sandpiper Golf Course Santa Barbara, CA 36,500
3/9/98 Persimmon Ridge Country Club Louisville, KY 7,500
5/22/98 Eagle Ridge Inn & Resort Galena, IL 47,000
5/29/98 Tierra Del Sol Albuquerque, NM 3,600
6/17/98 Silverthorn Country Club Brooksville, FL 4,700
---------
$155,400
---------
---------
</TABLE>
The Emerald Dunes Golf Course was acquired subject to a lien which is
explained in Note 4. In conjunction with the purchase of the Emerald Dunes
Golf Course, Raymon Finch, Sr. and Ray Finch, Jr. (collectively the Finches)
were granted 50,000 options each, of which 25,000 in the aggregate will vest
when in any calendar year, the Company acquires $25 million in courses as
identified by the Finches. After year five, all options immediately vest if
the stock price is $10.00 over the strike price at which the options were
issued ($28) and if the Finches have otherwise undertaken to promote and
market the Company.
Concurrent with the acquisition of the Sandpiper Golf Course, the
Company formed Sandpiper-Golf Trust LLC, of which the Operating Partnership
is the sole member, to hold title to the golf course. 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.
On May 22, 1998, the Company acquired Eagle Ridge Inn and Resort,
located in Galena, Illinois for $47.0 million. The facility, comprised of
three 18-hole golf courses, a 9-hole executive course, the 80-room Eagle
Ridge Hotel, conference center facilities and other resort related amenities,
is leased by the Company to an affiliate of Starwood Capital and Troon Golf.
Troon Golf also manages the Westin Innisbrook Resort Courses which is owned
by an affiliate of Starwood Capital and Troon Golf, as is the Lost Oaks of
Innisbrook course. This transaction was funded by approximately $45.8 million
from the line of credit and $1.2 million of OP Units.
9
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITION OF GOLF COURSES (CONT'D)
On May 29, 1998, the Company acquired Tierra Del Sol, an 18-hole upscale
golf facility located near Albuquerque, New Mexico for $3.6 million. The
course is leased to an affiliate of the prior owner, Golf Classic Resorts.
This transaction was funded by $2.7 million in cash from the Bridge Loan and
$.9 million in OP Units.
On June 22, 1998, the Company acquired Silverthorn Country Club, an
18-hole private championship golf facility located in Brooksville, Florida,
north of Tampa, for $4.7 million. The Company leases the golf course to
Granite Golf Group, Inc. Granite Golf Group now operates five courses which
are owned by the Company.
3. COMMITMENTS
LEASES
The Company, typically, 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 up to 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 to 5 percent of the annual gross golf revenue of each course for
capital expenditure reimbursement to the lessee subject to approval by the
Company. At June 30, 1998, the amount reserved was $696,000 compared to
$248,000 for June 30, 1997.
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 quarter in the amount, if
any, by which the Gross Golf Revenue exceeds the Gross Golf Revenue for the
Golf Course for the base year times 33 1/3%. Participating rent was $155,000
and $74,000 for the three months ended June 30, 1998 and 1997, respectively.
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, including Base Rent Escalation
and Participating Rents, are generally limited to 5% to 7% for a given period.
COMMITMENTS
Under certain circumstances, the Company agrees to fund significant
capital improvements, to expand the existing golf facilities and in limited
circumstances to provide working capital to existing lessees. When
significant capital improvements are funded, the underlying Base Rent will be
increased. Working capital lines are evidenced by promissory notes or set
forth in the lease agreement. The Company has agreed to fund the
construction of an additional nine holes at Northgate Country Club ($3.0
million), fund the construction at Lost Oaks of Innisbrook for renovations of
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 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 ($3.2 million) and pay for renovations
at the Sandpiper Golf Course ($6.0 million) and to fund a working capital
line ($5.0 million) at that course. The Company has currently funded $10.6
million and is obligated to fund an additional $17.6 million over the next
two years.
The Company is in various stages of negotiation and due diligence review
for several acquisitions. Completion of these transactions is subject to
negotiation and execution of definitive documentation 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
course acquisitions.
4. NOTES PAYABLE
On June 20, 1997, the Company entered into a Credit Facility with a
consortium of banks led by NationsBank N.A., as agent, to be used primarily
for the acquisition of 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. Prior to amendment, the Company had a $100
million secured revolving Credit Facility with a floating interest rate of
LIBOR plus 1.75%. On February 27, 1998, the Company amended and restated the
Credit Facility to increase the amount available to $125 million on an
unsecured basis. The Credit Facility has only interest due currently, with
the principal balance due February 2000 (the third anniversary of the closing
date). The Credit Facility availability is limited to the unencumbered pool
calculation (as defined in the Credit Facility) and up to 20% of the Facility
may be used for working capital needs. Financial covenants include net
worth, liquidity and cash flow covenants. Non-financial covenants include
restrictions on loans outstanding, construction in progress, loans to
officers and changes to the Board of Directors. At the present time, these
covenants have been met.
10
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. NOTES PAYABLE (CONT'D)
On May 6, 1998, the Company negotiated an amendment to the Credit
Facility whereby the Company now has a grid pricing arrangement which
provides incentives for the Company to maintain a low ratio of total debt to
total assets. The Company expanded the definition of eligible properties for
qualification into the unencumbered pool in a manner consistent with the
Company's own underwriting methods. The Company also negotiated to reduce
the coverage ratio for the unencumbered pool calculation to offer greater
flexibility for future capital needs.
On May 22, 1998, Eagle Ridge was purchased for approximately $45.5
million in cash and $1.2 million in OP units. This increased the amount
borrowed under the Credit Facility to its limit of $125.0 million. Also on
May 22, 1998, a $5.0 million temporary (30 day) bridge loan was obtained from
NationsBank N.A. for the purchase of the Silverthorn and Tierra Del Sol
courses. This temporary loan was rolled over into the $100.0 million Bridge
Loan on July 9, 1998 with NationsBank N.A. and Bank of America National Trust
and Savings Association.
The $100.0 million Bridge Loan has the same interest rates and covenant
requirements as the $125.0 million Credit Facility. The Bridge Loan has an
original term of 90 days with 3 options to extend for an additional 30 days.
The Company has an obligation to pay off this Bridge Loan at the end of its
term. As a result, the Company is currently considering several equity and
debt financing options. The total unsecured loans as of June 30, 1998 were
$125.0 under the Credit Facility and $5.0 million under the Bridge Loan.
Effective February 1, 1998, the Company purchased the Emerald Dunes
property subject to an existing lien whose principal balance was
approximately $12.9 million at the time of the purchase. This loan has fixed
monthly payments of approximately $117,000 (including interest of 8.75%) due
on the first of each month with the term expiring in November 2016. The
balance at June 30, 1998 was approximately $12.8 million.
The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owners' efforts to seek to minimize certain adverse tax consequences from
their contribution of their courses to the Company.
11
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. STOCK OPTIONS AND AWARDS
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 relating in the
aggregate up to 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
twenty five percent per year from the date of grant. On June 3, 1998, 25,000
options were granted to a new employee.
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION SHARES SHARES EXERCISE PRICE
------------- ------ --------------
<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
--------- --------
--------- --------
Granted . . . . . . . . . . . . . . . . 70,000 29.82
Exercised . . . . . . . . . . . . . . . (4,666) (25.75)
Expired and/or canceled . . . . . . . . - -
--------- --------
Outstanding at June 30, 1998. . . . . . 1,030,334 $ 24.42
--------- --------
--------- --------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------ -----------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------ -----------------------
RANGE OF REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
- --------- -------- ----------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
$21 335,000 8.6 $21.00 125,000 $21.00
$24 - $26 600,334 8.8 $25.48 - -
$29 - $32 70,000 9.6 $29.00 20,000 $29.00
$32 - $35 25,000 9.9 $32.13 - -
</TABLE>
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. As of June 30, 1998 1,128 shares have
been issued.
12
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information set forth below is presented as if
the second quarter 1998 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 Six For the Pro forma Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
-------------------------------------------------------------------------
<S> <C> <C>
Revenues $25,373 $15,840
Net income $ 5,668 $ 1,235
Basic earnings per share $ .74 $ .31
Diluted earnings per share $ .71 $ .31
</TABLE>
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 for
1997 only; (iii) a increase in interest expense; and (iv) an increase in
income applicable to minority interest.
13
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. 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 green 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>
JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1998 1997
-------------------------------------------------------------------
<S> <C> <C>
Current assets $ 2,504 $ 2,454
Non-current assets 23,492 19,765
-------- --------
Total assets $ 25,996 $ 22,218
-------- --------
-------- --------
Payable to Golf Trust of America, LP $ 1,091 $ 1,004
Other current liabilities 1,511 1,720
Total long-term liabilities 13,652 10,897
Total owners' equity 9,742 8,597
-------- --------
Total liabilities and owners' equity $ 25,996 $ 22,218
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
(IN THOUSANDS) 1998 1997
-------------------------------------------------------------------------
<S> <C> <C>
Total Revenues $ 7,908 $7,889
Operating Income $ 516 $ 252
Net Income $ 1,815 $1,471
</TABLE>
Total revenues from golf course operations for Legends Golf remained the
same for the three months ended June 30, 1998 compared to 1997. An increase
attributed to increased greens fees at the Myrtle Beach area courses and a
full quarter of operations at the Virginia courses was offset by reduced cart
rentals.
Operating income increased by $.3 million to $.5 million for the three
months ended June 30, 1998 compared to $.3 million for the corresponding
period in 1997. The increase was primarily the result of reductions in
administrative and maintenance expenses. Net income was $1.8 million for the
three months ended June 30, 1998 compared to net income of $1.5 million for
the three months ended June 30, 1997 primarily due to the increase in the
equity in the earnings of Golf Trust of America, L.P. and the reductions in
adminstrative and maintenance expense.
14
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONT'D)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS) 1998 1997
--------------------------------------------------------------------------
<S> <C> <C>
Total Revenues $13,207 $12,996
Operating Loss $ 654 $ 352
Net Income $ 2,094 $ 1,144
</TABLE>
Total revenues from golf course operations for Legends Golf increased by
$.2 million to $13.2 million for the six months ended June 30, 1998. The
increase was primarily attributed to increased greens fees at the Myrtle
Beach area courses net of reduced cart rentals.
Operating loss increased by $.3 million to $.7 million for the six
months ended June 30, 1998 compared to $.4 million for the corresponding
period in 1997. The increase was primarily the result of lease payments to
Golf Trust of America, L.P. for the full six months in 1998 versus only four
and one-half months in 1997 offset by the related reductions in depreciation
expense. Net income was $2.1 million for the six months ended June 30, 1998
compared to $1.1 million for the six months ended June 30, 1997 primarily due
to the increase in equity in the earnings of Golf Trust of America, L.P. of
$.9 million net of the items above.
8. SUBSEQUENT EVENTS
DECLARATION OF DIVIDENDS
On May 18, 1998, the Board of Directors declared a quarterly dividend
distribution of $.44 per share for the quarter ended June 30, 1998, to
stockholders of record on June 30, 1998, which was paid on July 15, 1998.
ACQUISITIONS
On July 10, 1998, the Company acquired Polo Trace Golf and Country Club,
an 18-hole upscale golf facility located in Delray Beach, Florida for $12.3
million. The Company leases the golf facility to an affiliate of Emerald
Dunes Golf Course. Emerald Dunes Golf Management and its affiliates now
lease four courses from the Company (Bonaventure (2), Emerald Dunes and Polo
Trace). For this acquisition the Company assumed a loan with NationsCredit
for approximately $5.0 million. The Company has agreed to maintain this debt
until January of 1999 to avoid certain prepayment penalties.
On July 17, 1998, the Company acquired Ohio Prestwick Country Club for
$6.4 million. The 18-hole upscale private facility, located near Akron,
Ohio, is leased to the lessee of Raintree Country Club, another current GTA
course.
15
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
OVERVIEW AND FORMATION
Golf Trust of America, Inc. (the "Company") conducts business through
Golf Trust of America, L.P. (the "Operating Partnership"), of which the
Company owns 59.7 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 29.2 percent of the Operating Partnership and is a
significant lessee. The remaining interest in the Operating Partnership is
held by operators of the golf courses, their affiliates and officers of the
Company.
"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 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.
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. 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 it 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.
GOLF COURSE ACQUISITIONS
During the first quarter of 1998, the Company acquired interests in 6
courses for an aggregate of approximately $100 million.
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, and 18-hole daily fee golf facility located in West Palm Beach,
Florida for a total purchase of $22.4 million, which includes $6.1 million in
OP Units. The Company acquired the course subject to an existing first lien
of $12.9 million.
16
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
GOLF COURSE ACQUISITIONS (CONT'D)
On March 6, 1998, the Company acquired Sandpiper Golf Course, an 18-hole
upscale daily fee golf facility 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 course to comply with
certain REIT restrictions. Mr. Blair and Mr. Young hold an approximate 5%
interest in the taxable subsidiary which holds the development site.
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 is leased to an affiliate of Granite Golf Group.
During the second quarter of 1998, the Company has acquired interest in
an additional 5.5 eighteen hole equivalent golf courses for an aggregate of
approximately $55.3 million. These acquisitions included Eagle Ridge Inn and
Resort, Silverthorn and Tierra Del Sol.
On May 22, 1998, the Company acquired Eagle Ridge Inn and Resort,
located in Galena, Illinois for $47.0 million. The facility, comprised of
three 18-hole golf courses, a 9-hole executive course, the 80-room Eagle
Ridge Hotel, conference center facilities and other resort related amenities
is leased by the Company to an affiliate of Starwood Capital and Troon Golf.
This transaction was funded by approximately $45.8 million from the line of
credit and $1.2 million in OP Units.
On May 29, 1998, the Company acquired Tierra Del Sol, an 18-hole upscale
golf facility located near Albuquerque, New Mexico for $3.6 million. The
course is leased to an affiliate of the prior owner, Golf Classic Resorts.
This transaction was funded by $2.7 million in cash and $.9 million in OP
Units.
On June 17, 1998, the Company acquired Silverthorn Country Club, an
18-hole private championship golf facility located in Brooksville, Florida,
north of Tampa, for $4.7 million. The Company leases the golf course to an
affiliate of Granite Golf Group, Inc. This transaction was all cash funded by
the bridge loan and operating proceeds.
17
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
GOLF COURSE ACQUISITIONS (CONT'D)
Thus far in the third quarter of 1998, the Company has purchased two
golf courses, Polo Trace and Ohio Prestwick. On July 10, 1998, the Company
acquired Polo Trace Golf and Country Club, an 18-hole upscale golf facility
located in Delray Beach, Florida for $12.3 million. The Company leases the
golf facility to an affiliate of Emerald Dunes Golf Management. On July 17,
1998, the Company acquired Ohio Prestwick Country Club for $6.4 million. The
18-hole upscale private facility, located near Akron, Ohio, is leased to the
lessee of Raintree Country Club, another current GTA course.
REVENUE GROWTH
The Company's primary sources of revenue are Lease Payments under the
Participating Leases and mortgage payments under the Participating Mortgage.
Participating Rent is generally equal to 33-1/3% of the increase in Gross
Golf Revenues over the Gross Golf Revenues for the Golf Course for the base
year. Base Rent will increase each year by the Base Rent Escalator during
the first five years of the lease term, generally equal to the lesser of (i)
3% or (ii) 200% of the change in the CPI over the prior year. Annual
increases in Lease Payments, including Annual Base Rent Escalation increases
and Participating Rents are generally limited to a maximum of 5% to 7% for a
given period.
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. 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.
RESULTS OF OPERATIONS OF THE COMPANY
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
For the three months ended June 30, 1998, the Company received
$10,448,000 in revenue from the Participating Leases and the Mortgage Note
Receivable, including $155,000 in Participating Rent. For the three months
ended June 30, 1997, the Company received $3,998,000 in revenue from the
Participating Leases and the Mortgage Note Receivable, including $74,000 in
Participating Rent. The increase in revenues is due to 1) minimum rent
increases of approximately $95,000, 2) rent of $4,091,000, from new course
acquisitions and expansions, 3) the $81,000 increase in participating rent to
$155,000 from $74,000, and 4) $2,183,000 of interest recognized from the
Mortgage Note Receivable for 1998 compared to $181,000 for 1997. The
Mortgage was obtained on June 20, 1997.
Expenses totaling $3,756,000 for the three months ended June 30, 1998
and $1,400,000 for three months ended June 30, 1997, reflect depreciation,
amortization, general and administrative expenses. The increase in expenses
reflects 1) additional depreciation of $1,624,000 for the acquisitions made
subsequent to June 30, 1997 and 2) additional general and administrative
costs of $732,000, including additional compensation expense of $415,000,
loan amortization of $150,000 and increased administrative costs of $167,000.
Additional interest expense of $1,756,000 results from the approximate
$100,100,000 of acquisitions made in the first quarter of 1998 and the
$55,300,000 made in the second quarter of 1998.
The loss on the sale of assets was from one location where the golf carts
were traded in as part of a new leasing program and another location where a
new clubhouse was built and the old facility was disposed of.
For the three months ended June 30, 1998 net income was $2,639,000
compared to $1,292,000 for the three months ended, 1997.
18
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS OF THE COMPANY (CONT'D)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE PROFORMA SIX MONTHS ENDED
JUNE 30, 1997
For the six months ended June 30, 1998 and the proforma six months ended
June 30, 1997, the Company would have received $19,352,000 and $6,040,000 in
revenue from the Participating Leases and from the Mortgage Note Receivable
in 1998, including $520,000 and $112,000 in Participating Rent/Interest for
1998 and 1997, respectively. The 1997 proforma results have been computed
using actual results for 1997 and projected results for the period from
January 1 to February 12, 1997. The increase in revenues is due to 1) minimum
increases of approximately $190,000, 2) rent of $6,848,000 from new course
acquisitions and expansions 3) $4,128,000 of interest from the Mortgage Note
Receivable which was issued June 20, 1997 and 4) the $408,000 increase in
Participating Rent.
Expenses would have totaled $6,733,000 and $3,190,000 for the six months
ended June 30, 1998 and the proforma six months ended June 30, 1997, and
reflect depreciation, amortization, general and administrative expenses. The
increase reflects 1) additional depreciation of $2,153,000 for the
acquisitions made after June 30, 1998 and 2) additional general and
administrative costs of $1,390,000, including additional compensation expense
of $593,000, loan amortization of $280,000 and increased administrative costs
of $517,000.
Additional interest expense of $2,632,000 results from the acquisitions
made during and after the second quarter of 1997.
The loss on the sale of assets was from one location where the golf carts
were traded in as part of a new leasing program and another location where a
new clubhouse was built and the old facility was disposed of.
Net income for the six months ended June 30, 1998 and the proforma six
months ended 1997 would have been $5,720,000 and $2,378,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash flow from operating activities for the six months ended June 30,
1998 was $10,902,000 compared to $3,578,000 for the period from February 12,
1997 to June 30, 1997. 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 Westin Innisbrook
facility of $3,063,000 and golf course acquisitions of $136,236,000 for the
six months ended June 30, 1998. This compares to acquisitions of the ten
initial courses $54,898,000 and the Westin Innisbrook Mortgage for
$61,599,000 for the period from February 12 to June 30, 1997. Cash flows
provided by financing activities, totaling $114,754,000 represents the net
borrowing of $124,910,000 under the Credit and Bridge Facility less dividends
and partner distributions totaling $10,223,000 for the six months ended June
30, 1998. This compares to borrowings of $43,825,000 for the Westin
Innisbrook Mortgage and the initial offering proceeds of $73,055,000 for the
period from February 12, 1997 to June 30, 1997. Distributions to partners and
shareholders totaled $1,690,000 represented a partial period distribution of
$.21 per share through June 30, 1997.
On June 20, 1997, the Company entered into a Credit Facility with a
consortium of banks led by NationsBank N.A., as agent, to be used primarily
for the acquisition of 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. Prior to amendment, the Company had a $100
million secured revolving Credit Facility with a floating interest rate of
LIBOR plus 1.75%. On February 27, 1998, the Company amended and restated the
Credit Facility to increase the amount available to $125 million on an
unsecured basis. The Credit Facility availability is limited to the
unencumbered pool calculation (as defined in the Credit Facility) and up to
20% of the Facility may be used for working capital needs. Financial
covenants include 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 of June 30, 1998, these covenants have been met.
19
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
At the beginning of the second quarter, the Company had $73.7 million
outstanding debt on its $125.0 million Facility. On May 6, 1998, the
Company negotiated an amendment to the Credit Facility whereby the Company
now has a grid pricing arrangement which provides incentives for the Company
to maintain a low ratio of total debt to total assets. The Company expanded
the definition of eligible properties for qualification into the unencumbered
pool in a manner consistent with the Company's own underwriting methods. The
Company also negotiated to reduce the coverage ratio for the unencumbered
pool calculation to offer greater flexibility for future capital needs.
On May 22, 1998, Eagle Ridge was purchased for approximately $45.0
million in cash and $2.0 million in OP units. This pushed the amount
borrowed under the Credit Facility to its limit of $125.0 million. Also on
May 22, 1998, a $5.0 million temporary (30 day) bridge loan was obtained from
NationsBank N.A. for the purchase of the Silverthorn and Tierra Del Sol
courses. This temporary loan was rolled over into the $100.0 million bridge
facility on July 9, 1998 with NationsBank N.A. and Bank of America National
Trust and Savings Association.
The terms of the $100.0 million Bridge Loan has the same interest rates
and covenant requirements as the $125.0 million Credit Facility. The Bridge
Loan has an original term of 90 days with 3 options to extend for an
additional 30 days. As a result, the Company is currently considering
several equity and debt financing options. The total unsecured loans as of
June 30, 1998 were $125 million under the Credit Facility and $5 million
under the Bridge Loan.
Effective February 1, 1998, the Company purchased the Emerald Dunes
property subject to an existing lien whose principal balance was
approximately $12.9 million at the time of the purchase. This loan has fixed
monthly payments of approximately $117,000 (including interest of 8.75%) due
on the first of each month with the term expiring in November 2016. The
balance at June 30, 1998 was approximately $12.8 million.
The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owners' efforts to minimize certain adverse tax consequences from their
contribution of their courses to the Company.
On July 10, 1998, the Company acquired Polo Trace Golf and Country Club,
an 18-hole upscale golf facility located in Delray Beach, Florida for $12.3
million. The Company leases the golf facility to an affiliate of Emerald
Dunes Golf Course. Emerald Dunes Golf Management and its affiliates now
lease four courses from the Company (Bonaventure (2), Emerald Dunes and Polo
Trace). For this acquisition the Company assumed a loan with NationsCredit
for approximately $5.0 million. The Company has agreed to maintain this debt
until January of 1999 to avoid certain prepayment penalties.
On July 17, 1998, the Company acquired Ohio Prestwick Country Club for
$6.4 million. The 18-hole upscale private facility, located near Akron,
Ohio, is leased to the lessee of Raintree Country Club, another current GTA
course.
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 Line
of Credit, 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 one binding agreement
to acquire an additional golf course for approximately $4.2 million, subject
to satisfaction of various due diligence conditions. The Company is in
active negotiations regarding the acquisition of additional 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.
20
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
COMMITMENTS
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
to fund capital expenditures. The Lessees will fund any capital expenditures
in excess of such amounts.
Under certain circumstances, the Company agrees to make available to the
Lessees to fund significant capital improvements, to expand the existing golf
facilities and in limited circumstances to provide working capital for
existing lessees. When significant capital improvements are funded, the
underlying Base Rent will be increased. Working capital lines are evidenced
by promissory notes or set forth in the lease agreement. The Company has
agreed to fund the construction of an additional nine holes at Northgate
Country Club ($3.0 million), fund the construction at Lost Oaks of Innisbrook
for renovations of 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 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 ($3.2 million)
and pay for renovations at the Sandpiper Golf Course ($6.0 million) and to
fund a working capital line of ($5.0 million) at that course. The Company has
currently funded $10.6 million and is obligated to fund an additional $17.6
million in the next two years.
The Company is in various stages of negotiation and due diligence
review for various of these acquisitions. Completion of these transactions is
subject to negotiation and execution of definitive documentation 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 course acquisitions.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Funds from Operations and Cash Available for Distribution are calculated
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
-----------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Income before minority interest. . . . . $ 4,442 $ 2,665
Depreciation and amortization for real
estate assets. . . . . . . . . . . . . . 2,452 803
Loss on sale of assets . . . . . . . . . 370 -
-------- --------
Funds from Operations. . . . . . . . . . 7,244 3,468
Adjustments:
Noncash mortgage interest. . . . . . . (332) (30)
Capital expenditure reserve (net). . . (155) (180)
-------- --------
Cash Available for Distribution. . . . . 6,757 1,776
-------- --------
-------- --------
</TABLE>
Noncash mortgage interest revenue represents the difference between
interest revenue on the Participating Mortgage reported by the Company in
accordance with generally accepted accounting principles ("GAAP") and the
actual cash payments received by the Company. 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 to fund capital expenditures.
The Lessees will fund any capital expenditures in excess of such amounts.
21
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION (CONT'D)
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 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") issued a ruling, EITF 97-11, entitled
"Accounting for Internal Costs Relating to Real Estate Property
Acquisitions". The ruling provides that internal costs of identifying and
acquiring operating property should be expensed as incurred. The effect of
the adoption of EITF 97-11 will not have a material impact on the financial
statements of the Company.
In May, 1998, the EITF of the FASB issued a ruling, EITF 98-9, entitled
"Accounting for Contingent Rent in Interim Financial Periods", that
potentially affects recognition of percentage rent of the Company. Under EITF
98-9, revenues from percentage rent are recognized in the quarterly periods
in which the specified target triggers the percentage rent is achieved. Under
the terms of the percentage leases entered into by the Company, percentage
rent is payable quarterly based on increases in revenue over a corresponding
quarter in a base year. The Company will continue to evaluate, together with
its accountants, the adoption of EITF 98-9 and any impact such adoption may
have on the Company in the future. Based on the structure of the Company's
leases, EITF 98-9 will not have a material effect on the Company's current
results of operations. Regardless of the application of EITF 98-9, no change
in the calculation of FFO will occur and on an annual basis there will be no
change in the Company's earnings.
22
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
On May 22, 1998, the Operating Partnership issued 35,794 OP Units to
Troon Eagle Ridge, LLC, for its contract right to acquire Eagle Ridge Inn &
Resort. On May 28, 1998, the Operating Partnership issued 26,357 OP units
to the Prior Owner of Tierra Del Sol for its interest in Tierra Del Sol
Golf Club. OP Units may generally be redeemed by their holder one year
after issuance for cash or, at the option of the Company, shares of Common
Stock on a one-for-one basis. In addition, options to acquire 20,000
shares of Common Stock were granted to J. Graffeo, J. Galcute, H. Rosthoff,
I. Sauder and D. Irelli as partial consideration for their interest in Polo
Trace Golf Course. One-half of the options vest on January 4, 1999 and
one-half vest on January 4, 2000, each at the trailing 5-day closing price
average immediately prior to vesting, and expire on July 1, 2000. 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May 18,
1998. The matters voted upon at the meeting were: (i) the election of two
directors to serve until the 2001 annual meeting of stockholders; and (ii)
the approval of the Company's 1997 Equity Participation Plan.
The results of the voting for election of Mr. David Dick Joseph and Mr.
Roy C. Chapman to the Board of Directors are as follows:
<TABLE>
<CAPTION>
AUTHORITY
DIRECTOR SHARES CAST FOR WITHHELD
-------- --------------- ---------
<S> <C> <C>
Mr. David Dick Joseph 5,370,354 7,325
Mr. Roy C. Chapman 5,370,354 7,325
</TABLE>
In addition to the above directors, the following directors will
continue in office:
<TABLE>
<CAPTION>
TERM
NAME EXPIRES
---- -------
<S> <C>
Mr. W. Bradley Blair, II 1999
Mr. Raymond V. Jones 1999
Mr. Larry D. Young 2000
Mr. Edward L. Wax 2000
Mr. Fred W. Reams 2000
</TABLE>
23
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONT'D)
The vote with respect to the approval of the Company's 1997 Stock-Based
Incentive Plan was as follows:
<TABLE>
<S> <C>
For: 3,665,882
Against: 549,188
Abstain: 21,099
Broker No Vote: 3,395,525
</TABLE>
The vote with respect to ratification to approve the amendment to the
Company's Charter regarding indemnification of directors and advance payment
of expenses was as follows:
<TABLE>
<S> <C>
For: 5,158,403
Against: 197,247
Abstain: 22,027
Broker No Vote: 2,254,017
</TABLE>
The vote with respect to the approval of the Employee Stock Purchase
Plan was as follows:
<TABLE>
<S> <C>
For: 5,377,679
Against: -
Abstain: -
Broker No Vote: -
</TABLE>
ITEM 5. OTHER INFORMATION
Not Applicable.
24
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are part of this quarterly report on Form 10-Q
for the quarterly period ended June 30, 1998 (and are numbered in accordance
with Item 601 of Regulation S-K). Items marked with an asterisk (*) are
filed herewith.
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- ---------------------------------------------------------------------
<S> <C>
3.1A 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).
3.1B* Articles of Amendment of the Company, as filed with the Maryland
State Department of Assessments and Taxation on June 9, 1998 and as
currently in effect.
3.2 Bylaws of the Company as amended by the Board of Directors on
February 16, 1998 and as currently in effect (previously filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
(Commission File No. 000-22091), filed May 15, 1998, and
incorporated herein by reference).
10.1.2 First Amendment to the Partnership Agreement, dated as of February 1,
1998 (previously filed as Exhibit 10.1.2 to the Company's Annual
Report on Form 10-K (Commission File No. 000-22091), filed March 31,
1998, and incorporated herein by reference).
10.2.12 Lease, dated May 22, 1998, between Golf Trust of America, L.P., as
Landlord, and Eagle Ridge Lease Company L.L.C., as Tenant
(previously filed as Exhibit 10.3 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).
10.2.13 Assignment and Assumption of Purchase and Sale Agreement, dated
May 20, 1998, between Eagle Ridge L.L.C., as Assignor, and Golf
Trust of America, L.P., as Assignee (previously filed as Exhibit
10.2 to the Company's Form 8-K (Commission File No. 000-22091),
filed June 5, 1998, and incorporated herein by reference).
10.2.14* Lease, dated June 19, 1998, by and between Golf Trust of America,
L.P., as landlord, and Granite Silverthorn, Inc., as tenant.
10.2.15* Lease, dated July 10, 1998, by and between Golf Trust of America,
L.P., as landlord, and Emerald Dunes-Polo Trace, Inc., as tenant.
10.2.16* Lease, dated May 29, 1998, by and between Golf Trust of America, L.P.,
as landlord, and GCR-New Mexico, L.L.C., as tenant.
10.2.17* Contribution and Leaseback Agreement dated May 29, 1998, by and
between Golf Classic Resorts, L.L.C., as Transferor, and Golf Trust of
America, L.P., as Transferee.
25
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)
10.2.18* Assignment, Assumption and Modification of Purchase Agreement, dated
June 17, 1998 by and between Scarborough, Sembler Joint Venture, II and
Silverthorn Country Club, collectively as Seller, Granite Golf Group,
Inc., as Assignor, and Golf Trust of America, L.P., as Assignee.
10.2.19* Purchase and Sale Agreement dated May 28, 1998, by and between Polo
Trace Management, Inc., as Seller, and Golf Trust of America, L.P., as
Buyer.
10.2.20 Purchase and Sale Agreement, dated March 12, 1998, between Eagle
Ridge, L.P., as Seller and Troon Eagle Ridge, L.L.C., as Purchaser,
(previously filed as Exhibit 10.1 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).
10.2.21* Lease, dated July 17, 1998, by and between Golf Trust of America,
L.P., as landlord, and Prestwick Golf Club, Inc., as tenant.
10.2.22* Purchase and Sale Agreement dated July 17, 1998, by and between John
J. Raineiri, Sr. and Betty Rainieri, husband and wife., as Seller, and
Golf Trust of America, L.P., as Buyer.
27.1* Financial Data Schedule
</TABLE>
* Filed Herewith
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLF TRUST OF AMERICA, INC., registrant
By: /s/ W. Bradley Blair, II
------------------------------------
W. Bradley Blair, II
President and Chief Executive Officer
/s/ W. Bradley Blair, II 8/14/98
- -------------------------------------- ------------------------------------
W. Bradley Blair, II Date
President, Chief Executive Officer and
Chairman of the Board of Directors
/s/ Scott D. Peters 8/14/98
- -------------------------------------- ------------------------------------
Scott D. Peters Date
Senior Vice President and
Chief Financial Officer
27
<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 Quarterly Report on Form 10-Q
(and are numbered in accordance with Item 601 of Regulation S-K). Items
marked with asterisk (*) are filed herewith.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- ---------------------------------------------------------------------
<S> <C>
3.1A 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).
3.1B* Articles of Amendment of the Company, as filed with the Maryland
State Department of Assessments and Taxation on June 9, 1998 and
as currently in effect.
3.2 Bylaws of the Company as amended by the Board of Directors on
February 16, 1998 and as currently in effect (previously filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
(Commission File No. 000-22091), filed May 15, 1998, and
incorporated herein by reference).
10.1.2 First Amendment to the Partnership Agreement, dated as of February 1,
1998 (previously filed as Exhibit 10.1.2 to the Company's Annual
Report on Form 10-K (Commission File No. 000-22091), filed March 31,
1998, and incorporated herein by reference).
10.2.12 Lease, dated May 22, 1998, between Golf Trust of America, L.P., as
landlord, and Eagle Ridge Lease Company, L.L.C., as tenant
(previously filed as Exhibit 10.3 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).
10.2.13 Assignment and Assumption of Purchase and Sale Agreement, dated
May 20, 1998, by and between Eagle Ridge, LLC, as Assignor, and Golf
Trust of America, L.P., as Assignee (previously filed as Exhibit
10.2 to the Company's Form 8-K (Commission File No. 000-22091),
filed June 5, 1998, and incorporated herein by reference).
10.2.14* Lease, dated June 19, 1998, by and between Golf Trust of America,
L.P., as landlord, and Granite Silverthorn, Inc., as tenant.
10.2.15* Lease, dated July 10, 1998, by and between Golf Trust of America,
L.P., as landlord, and Emerald Dunes-Polo Trace, Inc., as tenant.
10.2.16* Lease, dated May 29, 1998, by and between Golf Trust of America, L.P.,
as landlord, and GCR-New Mexico, L.L.C., as tenant.
10.2.17* Contribution and Leaseback Agreement dated May 29, 1998, by and
between Golf Classic Resorts, L.L.C., as Transferor, and Golf Trust of
America, L.P., as Transferee.
10.2.18* Assignment, Assumption and Modification of Purchase Agreement dated
June 17, 1998 by and between Scarborough, Sembler Joint Venture, II and
Silverthorn Country Club, collectively as Seller, Granite Golf Group,
Inc., as Assignor, and Golf Trust of America, L.P., as Assignee.
10.2.19* Purchase and Sale Agreement dated May 28, 1998, by and between Polo
Trace Management, Inc., as Seller, and Golf Trust of America, L.P., as
Buyer.
10.2.20 Purchase and Sale Agreement, dated March 12, 1998, between Eagle
Ridge, L.P., as Seller and Troon Eagle Ridge, L.L.C., as Purchaser,
(previously filed as Exhibit 10.1 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).
<PAGE>
10.2.21* Lease, dated July 17, 1998, by and between Golf Trust of America,
L.P., as landlord, and Prestwick Golf Club, Inc., as tenant.
10.2.22* Purchase and Sale Agreement dated July 17, 1998, by and between John
J. Raineiri, Sr. and Betty Rainieri, husband and wife, as Seller, and
Golf Trust of America, L.P., as Buyer.
27.1* Financial Data Schedule
</TABLE>
* Filed Herewith
<PAGE>
EXHIBIT 3.1 B
ARTICLES OF AMENDMENT
OF
GOLF TRUST OF AMERICA, INC.
Golf Trust of America, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by deleting in
its entirety Section 1 of Article VIII of the Articles of Amendment and
Restatement filed with the State of Maryland Department of Assessments and
Taxation on January 31, 1997 and by inserting, in lieu thereof, the following:
SECTION 1. INDEMNIFICATION.
(a) INDEMNIFICATION OF AGENTS. The Corporation shall indemnify,
in the manner and to the fullest extent permitted by law, any person
(or the estate of any person) who is or was a party to, or is
threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is
or was a director or officer of the Corporation, or such director or
officer is or was serving at the request of the Corporation as a
director, officer, agent, trustee, partner or employee of another
corporation, partnership, joint venture, limited liability company,
trust, real estate investment trust, employee benefit plan or other
enterprise. To the fullest extent permitted by law, the
indemnification provided herein shall include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement and
any such expenses shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding. The Corporation
shall indemnify other employees and agents to such extent as shall be
authorized by the Board of Directors or the Corporation's Bylaws and
be permitted by law. Any repeal or modification of this Section 1(a)
by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any right to indemnification or advancement
of expenses hereunder existing at the time of such repeal or
modification.
(b) INSURANCE. The Corporation shall, to the fullest extent
permitted by law, purchase and maintain insurance on behalf of any
such person against any liability which may be asserted against such
person.
(c) INDEMNIFICATION NON-EXCLUSIVE. The indemnification provided
herein shall not be deemed to limit the right of the Corporation to
indemnify any other person for any such expenses to the fullest extent
permitted by law, nor shall it be deemed exclusive of any other rights
to which any person seeking indemnification from the Corporation may
be entitled under any agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such
office.
SECOND: The amendment to the Charter of the Corporation as
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation, as required by law.
<PAGE>
THIRD: The amendment to the Charter of the Corporation does not
change the authorized stock of the Corporation.
FOURTH: The undersigned Executive Vice President and Secretary
acknowledges these Articles of Amendment to be the corporate act of the
Corporation and as to all matters or facts required to be verified under oath,
the undersigned Executive Vice President and Secretary acknowledges that to the
best of his knowledge, information, and belief, these matters and facts are true
in all material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed in its name and on its behalf by its Executive Vice
President and Secretary and witnessed by its Senior Vice President and Assistant
Secretary as of the 4th day of June, 1998.
By: /s/ David J. Dick
---------------------------------------
David J. Dick
Executive Vice President and Secretary
WITNESS:
By: /s/ Scott D. Peters
--------------------------------------
Scott D. Peters
Senior Vice President and Assistant Secretary
<PAGE>
_______________________________________________________________________________
SILVERTHORN COUNTRY CLUB
BROOKSVILLE
HERNANDO COUNTY
FLORIDA
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
GRANITE SILVERTHORN, INC.
TENANT
DATED AS OF JUNE 18, 1998
____________________________________________________________________________
<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 . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.1 Initial Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.2 Extension Options . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.3 Second Extension Option . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Right of First Offer to Lease . . . . . . . . . . . . . . . . . . . .16
3.5 Landlord's Right to Purchase Remaining Lease Term . . . . . . . . . 17
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . . . .18
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . . . .19
4.5 Increase in Base Rent Following Conversion Date. . . . . . . . . . .19
4.6 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . . .19
4.7 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . .20
4.8 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . .20
4.9 Net Lease; Capital Replacement Reserve . . . . . . . . . . . . . . .21
4.10 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . . .21
4.11 Working Capital Line . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.1 Pledge of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .21
5 2 Obligation to Withhold Distributions. . . . . . . . . . . . . . . . .21
5 3 Cross-Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.4 Landlord's Lien . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.5 Collateral Conversion and Termination Payment . . . . . . . . . . . .22
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
6.1 Payment of Impositions. . . . . . . . . . . . . . . . . . . . . . . .23
i
<PAGE>
6.2 Information and Reporting . . . . . . . . . . . . . . . . . . . . . .23
6.3 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
6.4 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
6.5 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . .24
6.6 Assessment Districts. . . . . . . . . . . . . . . . . . . . . . . . .24
6.7 Additional Impositions. . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 7
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. . . . . . . . . . . . . . . . . . . . . . .29
9.3 Membership Sales. . . . . . . . . . . . . . . . . . . . . . . . . . .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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . . .31
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . .32
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . . .33
10.9 Environmental Violations at Expiration
or Termination of Lease. . . . . . . . . . . . . . . . . . . . . . .33
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . .33
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . . .34
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . .35
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11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . . .35
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS;
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . . .35
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . . .36
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . . .36
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . . .37
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . . .38
12.6 Landlord's Right to Audit Calculation
of Gross Golf Revenue. . . . . . . . . . . . . . . . . . . . . . .38
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . .42
13 1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . . .43
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . .44
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . . .45
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . .45
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .47
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . .47
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . .47
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . . .47
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . . .48
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . . .48
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .49
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . . .49
15.10 Excess Proceeds, Deficiency of Proceeds . . . . . . . . . . . . . .51
15.11 Reconstruction Covered by Insurance . . . . . . . . . . . . . . . .51
15.12 Reconstruction Not Covered by Insurance . . . . . . . . . . . . . .52
15.13 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . . .52
15.14 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
15.15 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . . .53
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
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16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . .53
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . . .53
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . .54
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . .54
17.2 Payment of Costs and Closing Costs . . . . . . . . . . . . . . . . .57
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . .57
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . .59
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . . .59
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . .59
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . .60
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . .61
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . . .62
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . . .63
22.4 Survival of Indemnification Obligations
Available Insurance Proceeds . . . . . . . . . . . . . . . . . . .63
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .64
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . . .64
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . . .66
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23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . . .67
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . . .67
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . . .69
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . .69
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . .69
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . . .70
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . .70
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . . .71
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . . .71
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . . .71
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . .72
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . . .73
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . . .73
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . . .73
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . . .74
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . .74
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . . .74
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . .75
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . .75
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
28.10 Survival of Claims. . . . . . . . . . . . . . . . . . . . . . . . .75
28.11 Invalidity of Terms or Provisions . . . . . . . . . . . . . . . . .76
28.12 Prohibition Against Usury . . . . . . . . . . . . . . . . . . . . .76
28.13 Amendments to Lease . . . . . . . . . . . . . . . . . . . . . . . .76
28.14 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .76
28.15 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
28.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . .76
28.17 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . .76
28.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . .76
28.19 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . 77
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28.20 Non-Recourse as to Landlord . . . . . . . . . . . . . . . . . . . .77
28.21 No Relationship . . . . . . . . . . . . . . . . . . . . . . . . . .77
28.22 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
28.23 Year 2000 Problem . . . . . . . . . . . . . . . . . . . . . . . . 77
28.24 Billboards . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
28.25 Landlord's Obligations Under the Purchase Agreement . . . . . . . 78
28.26 Landlord's Right to Golf Rounds . . . . . . . . . . . . . . . . . 78
</TABLE>
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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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SILVERTHORN COUNTRY CLUB
BROOKSVILLE
HERNANDO COUNTY
FLORIDA
LEASE
THIS LEASE (this "Lease"), dated as of June 18, 1998, is entered into by
and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and GRANITE SILVERTHORN, 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 Agreement (the "Agreement") dated as
of May 13, 1998 by and between GRANITE GOLF GROUP, INC., ("Granite Golf"), as
buyer, and SCARBOROUGH SEMBLER JOINT VENTURE II, a Florida general partnership,
and SILVERTHORN COUNTRY CLUB, INC., a Florida corporation
(collectively,"Transferor"), with Granite Golf's interest in such Agreement
being assigned pursuant to that certain Assignment, Assumption and Modification
of Purchase Agreement by and between Granite Golf and Landlord as of even date
herewith, 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,
1
<PAGE>
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 and Section 4.11.
"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.
2
<PAGE>
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period beginning on January 1,
1998, and ending on December 31, 1998; 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.
"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)Fifty Thousand
and No/100 Dollars ($50,000.00).
"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
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 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.
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 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.
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.
"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
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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:
(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 $458,250 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.
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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.
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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, 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
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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 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.
"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,
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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 Silverthorn, Inc., a Florida 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%).
"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.
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"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.
3.2 FIRST EXTENSION OPTION. Provided that 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,(the
"Renewal Condition"),
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Tenant shall have 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,
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 has 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 SECOND EXTENSION OPTION. Provided that at the end of the second
Extended Term of the Lease, (i) Landlord has not formed an affiliate entity in
the business of managing golf course operations, 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, Tenant shall have the right to purchase an extension of the
Term of this Lease for a period of ten (10) years for either (i) $500,000 cash;
or (ii) additional Percentage Rent of five percent (5%), such that the
Percentage Rent shall be increased to forty-five percent (45%) 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.
3.4 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
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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.
3.5 LANDLORD'S RIGHT TO PURCHASE REMAINING LEASE TERM. If either (i) a
majority of the common stock of Pledgor or a substantial portion of its assets
are sold, transferred or conveyed to an entity other than Landlord or a Landlord
affiliate entity and five (5) years have passed since the Commencement Date, or
(ii) the Initial Term of the Lease has expired, Landlord or its designee shall
have the right at any time thereafter to purchase the remaining Term of the
Lease from Tenant at the following purchase price: the stabilized value of
Tenant's cash flow from Tenant's prior Fiscal Year inclusive of management fees
multiplied by the number of years remaining on the Lease (calculated to the
nearest month), including credit for the First Extension Option, discounted at
12% per annum. In order to exercise such right, Landlord shall provide written
notice of its intention to purchase the Lease and the parties shall work
together in good faith to effectuate the sale within fifteen (15) days after
such notice is provided to Tenant. Upon Landlord's purchase of the Lease from
Tenant in this manner, all of the Pledged Shares and other collateral securing
the Lease shall be released to Tenant.
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 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 July 1, 1999 increase shall be pro
rated for the number of days in the Lease Term in the second 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.
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
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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 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.
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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 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
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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 WORKING CAPITAL LINE. Landlord shall provide a working capital line
to Tenant in an amount of up to $125,000 ("Working Capital Line"), the proceeds
of which shall be used by Tenant for working capital and capital improvements on
the Property, and prior to Landlord disbursing any such proceeds, Tenant shall
rquest an advance under the Working Capital Line with at least 5 business days
notice and Tenant shall provide documentation to Landlord satisfactory to
Landlord supporting such request for advance. Payments on the Working Capital
Line by Tenant shall be capitalized and become Rent payable 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 of the common stock of Pledgor valued
at the close of the last trading day of each month during the previous one (1)
year does 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
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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,
effluent, 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
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be unreasonably withheld or unless Landlord agrees to pay the cost thereof.
6.7 ADDITIONAL IMPOSITIONS. As of the Commencement Date, Transferor is
conveying its interest in the following permits and agreements to Landlord: (1)
State of Florida Department of Transportation Utility Permit No. TP-08-U-001-96
dated May 3, 1996 and Purchase Agreement dated August 22, 1995; (ii) three (3)
construction permits, numbers 406795.03, 406795.04, and 406795.5 and an
Individual Water Use Permit No. 250755.04 dated August 26, 1997, having an
expiration date of August 26, 2003 issued by Southwest Florida Water Management
District; (iii) Sewer Service Agreement dated January 25, 1994 with Hernando
County Water and Sewer District recorded in O.R. Book 986, Page 0388, Public
Records of Hernando County, Florida and Water and Sewer Service Agreement dated
September 26, 1989, recorded in O.R. Book 759, Page 1304, Public Records of
Hernando County, Florida, including all amendments and related documents; and
(iv) Agreement dated January 8, 1998 between Transferor and Silverthorn/Hernando
Homeowners' Association, Inc. (collectively, all of the foregoing shall be
referred to herein as the "Assumed Permits and Agreements"). Tenant
acknowledges that it has reviewed the Assumed Permits and Agreements. During
the term of the Lease, Tenant agrees to assume all Landlord's payment and
performance obligations under the Assumed Permits and Agreements.
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 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.
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
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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.
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
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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 or usefulness for the
Primary Intended Use. Landlord shall not grant, release, dedicate or execute any
of the
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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 of the Property dated May 19, 1998, prepared by Dale E. Cronwell,
P.E. Project Manager of Coastal Engineering Associates, Inc., 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.
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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
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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 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
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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, including without limitation
storm water improvements and drainage retention areas on the Property, to the
extent Landlord is responsible to maintain such storm water improvements and
drainage retention areas. 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
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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:
(a) Tenant shall diligently seek all governmental approvals and
any other necessary private approvals
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(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
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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 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,
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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 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.
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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
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
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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;
(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
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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.
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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;
(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
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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 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
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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 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
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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.
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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 (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
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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
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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; or
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)
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(g) and (i)) 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 Landlord shall
advance funds for such Closing costs 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
$23,500, and such amount shall be capitalized as Rent under the Lease.
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,
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(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 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.
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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 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
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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 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:
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(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.
(i) any liability Landlord may incur or suffer as a result of
Tenant's failure to comply with Landlord's obligations described in Sections
6.7, 28.24 and 28.25 herein.
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
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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 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 requested by Landlord with respect
to the proposed transaction and the proposed assignee or
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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 provide adequate assurance that the
Trustee will "promptly" cure defaults
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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
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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
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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 the cure of said default before invoking
any remedies Tenant may have by reason thereof.
ARTICLE 26
SALE OF FEE INTEREST
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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 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.
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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.
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
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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, 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
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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
With a Copy to: Nexsen Pruet Jacobs Pollard
& Robinson, LLP
200 Meeting Street, Suite 301
Charleston, South Carolina 29401
Attention: Matthew J. Norton, Esq.
If to Tenant: Granite Golf Group, Inc.
15170 N. Hayden Road, Suite 106
Scottsdale, AZ 85260-2512
Attention: T. Marney Edwards
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
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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.
28.23 YEAR 2000 PROBLEM. Tenant either has or shall take action necessary
to assure that Tenant's computer based systems are able to operate and
effectively recognize and perform date-sensitive functions involving certain
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). Tenant
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to the operation of the Property will
on a timely basis be able to perform properly date-sensitive functions related
to the Year 2000 Problem (that is, be "Year 2000 Compliant"). Tenant shall
indemnify and hold Landlord harmless from any and all claims, losses, damages
and liabilities incurred as a result of Tenant's failure to be Year 2000
Compliant.
28.24 BILLBOARDS. In accordance with Section 5.2 "BILLBOARDS" of the
Purchase Agreement, Tenant agrees to assume all of Landlord's performance and
payment obligations thereunder, including without limitation the payment of
twenty-five percent (25%) of the rental cost of advertising billboards which
jointly promote the residential properties adjacent to the Property and the
Property.
28.25 LANDLORD'S OBLIGATIONS UNDER THE PURCHASE AGREEMENT. Tenant has
reviewed the Purchase Agreement and all amendments related thereto and agrees to
comply with and assist Landlord in complying with all of Landlord's obligations
arising thereunder set forth in Section 4.6 - Discounted Facility Access,
Section 4.7 - Golf Course Maintenance Standards, Section 4.8 - Membership Sales,
Section 4.9 - Current Memberships, Section 5.1 - Landscaping, Section 5.1 -
Silverthorn Tradename, and Section 5.1 - Seller's Retained Membership.
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28.26 LANDLORD'S RIGHT TO GOLF ROUNDS. Tenant agrees that Landlord or
Landlord's designee shall have the right to play without charge up to eight (8)
rounds of golf per month on the golf course Property. Landlord may assign the
rounds for use to any designee, and may make reservations with Tenant for any
open tee times.
SIGNATURES ON FOLLOWING PAGES
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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/
--------------------------------
Name: W. Bradley Blair, II
Title: President and CEO
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TENANT: Granite Silverthorn, INC.
a Florida corporation
By: /s/
--------------------------------
Name:
------------------------------
Title:
------------------------------
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
A-1
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EXHIBIT B
SCHEDULE OF IMPROVEMENTS
B-1
<PAGE>
EXHIBIT C
OTHER LEASED PROPERTIES
1. Tiburon Golf Course, Omaha, Nebraska
2. Black Bear Golf Club, Lake County, Florida
3. Persimmon Ridge Golf Course, Louisville, Kentucky
C-1
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EXHIBIT D
GRANITE SHARES PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is entered into as of this ______
day of June , 1998, by and between (i) GOLF TRUST OF AMERICA, L.P., a Delaware
limited partnership, ("Secured Party"), and (ii) GRANITE GOLF GROUP, INC., a
Nevada corporation ("Pledgor").
RECITALS:
This Agreement is entered into based on the following understandings:
A. Pursuant to that certain Purchase Agreement (as assigned and described
hereunder as the "Purchase Agreement") dated as of May 13, 1998 by and between
Pledgor and Scarborough Sembler Joint Venture II, a Florida general partnership,
and Silverthorn Country Club, Inc., a Florida Corporation ("Seller"), Seller
agreed to sell and convey to Pledgor, as buyer all of its right, title and
interest in and to certain real and personal property as described in the
Purchase Agreement (collectively, the "Property"), and Pledgor's interest in the
Purchase Agreement as buyer was subsequently assigned to Secured Party pursuant
to that certain Assignment Agreement dated June ______, 1998.
B. Pursuant to that certain lease dated as of June ______, 1998, (the
"Lease") Secured Party, as landlord, leased its interest in the Property to
Granite Silverthorn, Inc. ("Tenant"), as tenant, an affiliated entity of
Pledgor.
C. As a condition to Secured Party entering into the Lease with Tenant,
Secured Party has required that Pledgor pledge the Pledged Shares (as
hereinafter defined) as security for the Obligations (as hereinafter defined).
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Secured Party and Pledgor hereby
agree as follows:
1. DEFINITIONS
(a) Capitalized terms not otherwise defined herein shall have the meaning
given to them in the Lease.
(b) The following terms shall have the indicated meanings:
"AGREEMENT" has the meaning set forth in the introductory Paragraph of this
Agreement.
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"EVENT OF DEFAULT" has the meaning set forth in Section 14(a) of this
Agreement.
"INDEMNITY EVENT" has the meaning set forth in Section 2(a) of this
Agreement.
"LEASE" has the meaning set forth in Recital B of this Agreement.
"OBLIGATIONS" has the meaning set forth in Section 2(a) of this Agreement.
"PLEDGED SHARES" means shares of common stock of Granite Golf
Group, Inc.; provided, however, that the number of Pledged Shares shall reflect
a value of $1,175,000.00, and shall be priced at the closing trading average for
the previous five (5) business days prior to the Commencement Date.
"PLEDGOR" has the meaning set forth in the introductory Paragraph of this
Agreement.
"PLEDGOR'S GUARANTY" has the meaning set forth in Section 3(a) of this
Agreement.
"PROPERTY" has the meaning set forth in Recital A of this Agreement.
"PURCHASE AGREEMENT" has the meaning set forth in Recital A of this
Agreement.
"SECURED PARTY" has the meaning set forth in the introductory Paragraph of
this Agreement.
"SECURITY FUND" has the meaning set forth in Section 2(a) of this
Agreement.
"TENANt" has the meaning set forth in Recital B of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Secured Party and Pledgor hereby agree as
follows:
2. GRANT OF SECURITY INTEREST.
(a) As security for the payment and performance of all obligations and
liabilities (including, without limitation, indemnities, fees and interest
thereon) of Pledgor, Tenant or any of Pledgor's direct or indirect subsidiaries
arising under: (i) the
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Lease; (ii) any leases entered into with Secured Party by Pledgor, or any of
Pledgor's direct or indirect subsidiaries related to the Other Properties (as
defined in the Lease); (iii) the Pledgor's Guaranty pursuant to Section 3 of
this Agreement and all other provisions of this Agreement; or (iv) in
connection with any agreement, instrument or extension contemplated by the
foregoing documents (collectively, the "Obligations"), Pledgor hereby
pledges, hypothecates and grants to Secured Party a first and prior security
interest in Pledged Shares, which shall include any increase or decrease in
the Pledged Shares, in accordance with the formula set forth on Exhibit D-1
attached hereto), together with, after an occurrence and during the
continuance of an Event of Default hereunder(an "Indemnity Event"), any and
all proceeds thereof, including without limitation, any and all dividends,
income, interest and distributions earned from or attributable to the
investment or deposit of the Pledged Shares (the Pledged Shares, together
with all of the foregoing being collectively referred to herein as the
"Security Fund"). Pledgor shall have the right to pledge, as substitute
collateral, cash or other security that is acceptable to Secured Party in its
sole and absolute discretion. Prior to (x) any Event of Default under the
Lease (and after the cure or satisfaction thereof by Tenant or Pledgor, at
its sole election), (y) an Indemnity Event, or (z) an Event of Default
(defined below) all dividends, income, interest and/or distributions earned
from or attributable to the investment or deposit of the Security Fund shall
be payable to Pledgor; following an Event of Default under the Lease such
amounts shall be added to and become a part of the Security Fund and shall
only be disbursed in accordance with the terms of this Agreement. By its
execution of this Agreement, Pledgor acknowledges that it has delivered the
Pledged Shares to Secured Party as required by this Agreement. The word
"Obligations" is used herein in its most comprehensive sense and includes
without limitation any and all debts, obligations and liabilities of Pledgor,
Tenant or any of Pledgor's direct or indirect subsidiaries, arising as a
result of a breach of any of the representations and warranties made by
Pledgor pursuant to the Lease or this Agreement, now or hereafter made,
incurred or created, whether voluntary or involuntary and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether Pledgor, Tenant or any of Pledgor's
direct or indirect subsidiaries may be liable individually or jointly, or
whether recovery upon such Obligations may be or hereafter become
unenforceable. Pledged Shares shall be released in accordance with the
provisions of EXHIBIT D-1 attached hereto (so long as no Event of Default
exists) or upon expiration of the Lease and fulfillment of the obligations.
(b) If the Pledgor shall become entitled to receive or shall receive, in
connection with any of the Security Fund, any:
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(i) Stock certificate, including, without limitation, any certificate
representing a stock dividend or in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spin-off or split-off;
(ii) Option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Security Fund, or otherwise;
(iii) Dividend or distribution payable in property, including securities
issued by a person other than the issuer of any of the Pledged Shares; or
(iv) Dividends or distributions of any sort, then, except for dividends
received by Pledgor at such time as there does not exist an uncured Event of
Default with respect to Pledgor, Pledgor shall accept the same as the agent of
Secured Party, in trust for Secured Party, and shall deliver them forthwith to
Secured Party, in the exact form received, with, as applicable, the Pledgor's
endorsement when necessary, or appropriate stock powers duly executed in blank
by Pledgor, to be held by Secured Party, subject to the terms hereof, as part of
the Security Fund.
(c) Pledgor shall execute and deliver to Secured Party such financing and
continuation statements covering the Security Fund and take such other actions
as Secured Party may from time to time require to perfect and continue the
perfection of Secured Party's security interest in the Security Fund.
3. GUARANTY OF OBLIGATIONS.
(a) Pledgor irrevocably and unconditionally guarantees the full and prompt
payment when due of the Obligations and the due performance and compliance with
any of the terms of the Lease ("Pledgor's Guaranty").
(b) Pledgor hereby waives notice of acceptance of this Agreement and notice
of any liability to which it may apply, and waives presentment, demand of
payment, protest, notice of dishonor or nonpayment of any such liability, suit
or taking of other action by Secured Party against Pledgor or Tenant.
(c) Pledgor's Guaranty shall not be released, modified, impaired or
otherwise affected by the following (whether or not Pledgor shall have had
notice or knowledge of the same): (i) any extension or indulgence by Secured
Party in respect to the performance of or compliance with the Obligations; (ii)
any failure, omission or inability of Secured Party to enforce any right, power
or remedy in respect to the Lease or this Agreement; (iii) any amendment of the
Lease or the Purchase Agreement; (iv)
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any receipt of security including, without limitation, the Security Fund, or
any sale, exchange, release or subordination of security held by Secured
Party with respect to the Obligations; (v) any release from any liability of
any person liable under the terms of the Lease or this Agreement or any other
guarantor; (vi) any limitation or impairment of Secured Party's remedies
against Tenant or any other party liable under the terms of the Lease or this
Agreement; (vii) any action or inaction of Secured Party with respect to the
Lease or this Agreement; (viii) any change in the name or identity of Tenant
or any other person or entity referred to in this Agreement; (ix) the
invalidity or unenforceability of the Lease; or (x) the death or incapacity
of Tenant or any other person or entity referred to in this Agreement.
(d) If all or any portion of the Obligations of Pledgor as described in
Section 3(a) of this Agreement are paid or performed, the responsibilities of
Pledgor pursuant to Pledgor's Guaranty shall continue and remain in full force
and effect in the event that all or any part of such payment(s) or
performance(s) is avoided or recovered directly or indirectly from Secured Party
as a preference, fraudulent transfer or otherwise, irrespective of payment in
full of all sums due pursuant to such obligations.
(e) The liability of Pledgor pursuant to Pledgor's Guaranty is not
conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Lease or the pursuit by Secured Party of any remedies
which it now has or may hereafter have with respect thereto, at law, in equity
or otherwise, and Pledgor hereby waives any and all benefits and defenses that
it may have to the contrary and agrees that by doing so Pledgor shall be liable
even if Tenant had no liability at the time of the execution of the Lease or
thereafter ceases to be liable. Pledgor further agrees that by doing so
Pledgor's liability may be larger in amount and more burdensome than that of
Tenant, notwithstanding any benefits or defenses that Pledgor may have to the
contrary. Pledgor agrees that its liability hereunder shall continue and shall
not be limited or affected in any way by an impairment or any diminution in loss
of value in any security or collateral for the ease (including, but not limited
to the Security Fund, the leased premises or any personal property or fixtures
thereon), whether caused by hazardous substance or otherwise, or Secured Party's
failure to perfect a security interest in the Security Fund.
(f) Pledgor hereby waives: (i) all notices to Pledgor, to Tenant, or to any
other person, including, but not limited to, the creation, renewal, extension,
assignment, modification or accrual of any of the Obligations and enforcement of
any right or remedy with respect thereto, and notice of any other matters
relating thereto; (ii) demand of payment, presentation and protest; (iii) any
right to require Secured Party to apply to any default the Security Fund or
other security it may hold under the Lease; (v)
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notice of any sale of personal property security of Tenant held by Secured
Party; (vi) any and all statutes of limitations affecting Pledgor's and/or
Tenant's liability under this Agreement or the Lease, as applicable, and/or
the enforcement of this Agreement or the Lease, as applicable; and (vii) all
principles or provisions of law which conflict with the terms of this
Agreement. Pledgor further agrees that Landlord may enforce Pledgor's
Guaranty upon the occurrence of a default under the Lease, notwithstanding
any dispute between Secured Party and Tenant or Pledgor with respect to the
existence of said default or the payment or performance of the Obligations or
any counterclaim, set-off or other claim which Tenant or Pledgor may allege
against Secured Party with respect thereto. Pledgor also agrees that upon the
abandonment of the Property by Tenant, even if accepted by Secured Party, or
the eviction of Tenant, Pledgor shall remain liable for future payments of
rent, subject to Secured Party's reasonable efforts to mitigate damages.
(g) Pledgor hereby waives any and all benefits and defenses it may have
with respect to the right to require Landlord to: (i) proceed against Tenant or
any other guarantor of the Obligations; (ii) proceed against or exhaust any
security or collateral Secured Party may hold, including without limitation, the
Security Fund; or (iii) pursue any other right or remedy for Pledgor's benefit;
and Pledgor agrees that Secured Party may proceed against Pledgor for the
Obligations without taking any action against Tenant or any other guarantor and
without proceeding against or exhausting any security or collateral Secured
Party holds, including, without limitation, the Security Fund. Pledgor agrees
that Secured Party may unqualifiedly exercise in its sole discretion any or all
rights and remedies available to it against Tenant or any other guarantor
without impairing Secured Party's rights and remedies in enforcing Pledgor's
Guaranty, under which Pledgor's liabilities shall remain independent and
unconditional. Pledgor agrees that Secured Party's exercise of certain of such
rights or remedies may affect or eliminate Pledgor's right of subrogation or
recovery against Tenant and that, as a result thereof, Pledgor may incur a
partially or totally nonreimbursable liability under Pledgor's Guaranty.
(h) Pledgor hereby agrees that Pledgor shall have no right of subrogation
or reimbursement against Tenant or any right of contribution against any other
guarantor unless and until all rentals and all other sums due under the Lease
have been paid in full and all of the Obligations have been satisfied and waives
any benefits or defenses that Pledgor may have to the contrary. Pledgor further
agrees that, to the extent of the waiver of Pledgor's rights of subrogation,
reimbursement and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation or reimbursement Pledgor may have against Tenant shall be junior and
subordinate to any rights Secured Party may have against Tenant, and any rights
of
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contribution Pledgor may have against any other guarantor shall be junior and
subordinate to any rights Secured Party may have against such other
guarantor. Pledgor also agrees that Pledgor's Guaranty is in addition to the
guaranty of any other guarantor and any and all of Pledgor's other guarantees
of Tenant's obligations or liabilities to Secured Party and that this
Guaranty shall in no way limit or lessen any other liability, however
arising, that Pledgor may have for the payment of any other indebtedness of
Tenant to Secured Party.
(i) To the extent any dispute exists at any time (whether or not this
Agreement or the Lease shall have previously terminated) between or among Tenant
and/or any other guarantor as to any rights to subrogation, reimbursement,
contribution or otherwise, Pledgor agrees to indemnify, defend and hold Secured
Party harmless from and against any loss, damage, claim, demand, cost or any
other liability (including, without limitation, reasonable attorneys' fees and
costs) Secured Party may suffer as a result of such dispute.
(j) The obligations of Pledgor under Pledgor's Guaranty shall not be
altered, limited or affected by any case, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Tenant or by any defense which Tenant may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such case. Secured Party shall have the sole right to accept or reject any plan
on behalf of Pledgor proposed in such case and to take any other action which
Pledgor would be entitled to take, including, without limitation, the decision
to file or not file a claim. Pledgor acknowledges and agrees that any payment
which accrues with respect to Tenant's obligations under the Lease (including,
without limitation, the payment of rent) after the commencement of any such
proceeding (or, if any such payment ceases to accrue by operation of law by
reason of the commencement of said proceeding, such payment as would have
accrued if said proceedings had not been commenced) shall be included in the
Obligations because it is the intention of the parties that said Obligations be
determined without regard to any rule or law or order which may relieve Tenant
of any of its obligations under the Lease. Pledgor hereby permits any trustee in
bankruptcy, receiver, debtor-in-possession, assignee for the benefit of
creditors or similar person to pay Secured Party, or allow the claim of Secured
Party in respect of, any such payment accruing after the date on which such
proceeding is commenced. Pledgor assigns to Secured Party Pledgor's right to
receive any payments from any trustee in bankruptcy, receiver, debtor-in-
possession, assignee for the benefit of creditors or similar person by way of
dividend, adequate protection payment or otherwise.
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<PAGE>
4. CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS.
This is a continuing agreement and all rights, powers and remedies hereunder
shall apply to all past, present and future obligations of Tenant or Pledgor to
Secured Party under the Lease. This Agreement shall not terminate except in
accordance with its terms or Secured Party's written release of Pledgor from its
Obligations under this Agreement.
5. OBLIGATIONS INDEPENDENT: SEPARATE ACTIONS; WAIVER OF STATUTE OF
LIMITATIONS: REINSTATEMENT OF LIABILITY. The Obligations hereunder are
independent of the obligations of Tenant and Pledgor, and a separate action or
actions may be brought and prosecuted against Pledgor hereunder whether action
is brought against Tenant, Pledgor (under the Contribution Agreement), or any
other person, or whether Tenant or any other person is joined in any such action
or actions. Pledgor acknowledges that there are no conditions precedent to the
effectiveness of this Agreement, and that this Agreement is in full force and
effect and is binding on Pledgor as of the date written below, regardless of
whether Secured Party obtains additional collateral or any guaranties from
others or takes any other action contemplated by Pledgor. Pledgor waives the
benefit of any statute of limitations affecting Pledgor's liability hereunder or
the enforcement thereof, and Pledgor agrees that any payment of any Obligations
or other act which shall toll any statute of limitations applicable thereto
shall similarly operate to toll such statute of limitations applicable to
Pledgor's liability under this Agreement. The liability of Pledgor under this
Agreement shall be reinstated and revived and the rights of Secured Party shall
continue if and to the extent for any reason any amount at any time paid on
account of the Obligations is rescinded or must be otherwise restored by Secured
Party, whether as a result of any proceedings in bankruptcy, insolvency,
reorganization or otherwise, all as though such amount had not been paid. The
determination as to whether any amount so paid must be rescinded or restored
shall be made by Secured Party in its sole discretion; provided, however, that
if Secured Party chooses to contest any such matter at the request of Pledgor,
Pledgor agrees to indemnify and hold Secured Party harmless from and against all
costs and expenses, including reasonable attorneys' fees, expended or incurred
by Secured Party in connection therewith, including without limitation, in any
litigation with respect thereto.
6. REPRESENTATIONS AND WARRANTIES.
(a) Pledgor represents and warrants to Secured Party that: (i) Pledgor is
the owner, directly or indirectly, and has possession or control of the Pledged
Shares; (ii) Pledgor has the right to pledge the Pledged Shares; (iii) the
Pledged Shares are genuine, free from liens, adverse claims, setoffs, default,
prepayment, defenses and conditions precedent of any kind or character, except
as previously disclosed to Secured Party in writing by Pledgor; (iv)
specifically
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with respect to Pledged Shares consisting of investment securities,
instruments, chattel paper, documents, contracts, insurance policies or any
like property, all persons appearing to be obligated thereon have authority
and capacity to contract and are bound as they appear to be, and the same
comply with applicable laws concerning form, content and manner of
preparation and execution) (v) all statements contained herein and, where
applicable, in the Pledged Shares are true and complete; and (vi) no
financing statement covering any of the Pledged Owner's Shares and naming any
secured party other than Secured Party, is on file in any public office.
(b) Pledgor further represents and warrants to Secured Party that with
respect to the Pledged Shares securing Tenant's obligations under the Lease
pursuant to this Agreement: (i) such Pledged Shares are so pledged at Tenant's
request; (ii) Secured Party has made no representation to Pledgor as to the
creditworthiness of Tenant; and (iii) Pledgor has established adequate means of
obtaining from Tenant on a continuing basis financial and other information
pertaining to Tenant's financial condition. Pledgor agrees to keep adequately
informed by such means of any facts, events or circumstances which might in any
way affect Pledgor's risks hereunder, and Pledgor further agrees that Secured
Party shall have no obligation to disclose to Pledgor any information or
material about Tenant which is acquired by Secured Party in any manner. Pledgor
further warrants and represents that it has reviewed and approved copies of the
Lease and is fully informed of the remedies that Secured Party may pursue under
the Lease or at law or in equity, with or without notice to Pledgor, in the
event of a default under the Lease.
(c) Pledgor understands that but for Pledgor's pledge of the Pledged Shares
and the other agreements contained herein, Secured Party would not enter into
the Lease with Tenant and that the Security Fund pledged pursuant to this
Agreement will serve as collateral for the Lease on the terms and conditions of
this Agreement.
7. COVENANTS OF PLEDGOR.
(a) PLEDGOR AGREES IN GENERAL: (i) to indemnify Secured Party against all
losses, claims, demands, liabilities and expenses of every kind caused by
property subject hereto; (ii) to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Secured Party any time after the
occurrence of an Event of Default under the Lease, in the realization,
enforcement and exercise of its rights, powers and remedies hereunder; (iii) to
permit Secured Party to exercise its powers; (iv) to execute and deliver such
documents as Secured Party deems necessary to create, perfect and continue the
security interests contemplated hereby; and (v) not to change its chief place of
business or the place where Pledgor keeps
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any records concerning the Pledged Owner's Shares without first giving
Secured Party written notice of the address to which Pledgor is moving same.
(b) PLEDGOR AGREES WITH REGARD TO THE SECURITY FUND: (i) not to permit any
lien on the Security Fund except in favor of Secured Party; (ii) not to withdraw
any funds from any deposit account pledged to Secured Party hereunder without
Secured Party's prior written consent; (iii) not to sell, hypothecate or
otherwise dispose of any of the Pledged Shares or any interest therein, without
the prior written consent of Secured Party; (iv) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Pledged Shares and to permit Secured Party to inspect the same at
any reasonable time; (v) if requested by Secured`Party following an Event of
Default under the Lease or an Indemnity Event, to receive and use reasonable
diligence to collect proceeds from the Pledged Shares, in trust and as part of
the Security Fund to be held in accordance with Section 2(a) above; (vi) not to
commingle Pledged Shares with other property; (vii) to provide any service and
do any other acts or things necessary to keep the Pledged Shares free and clear
of all defenses, rights of offset and counterclaims; and (viii) if the Pledged
Shares consists of securities and so long as no Event of Default or Indemnity
Event exists, to vote said securities and to give consents, waivers and
ratifications with respect thereto, provided that no vote shall be cast or
consent, waiver or ratification given or action taken which would impair Secured
Party's interest in the Security Fund or be inconsistent with or violate any
provisions of this Agreement.
(c) REGISTRATION RIGHTS AGREEMENT. If the Pledged Shares (including any
subsequently pledged shares) are not registered securities within the meaning of
the Securities Act of 1933, as amended, Pledgor shall use its best efforts to
file a shelf registration statement as soon as possible(on Form S-3, if Pledgor
is eligible to use such form) covering the Pledged Shares and to cause such
registration statement to be declared effective no later than December 31, 1998
and to keep it continuously effective until such time as Secured Party shall
have received a favorable opinion from counsel to Pledgor that the Pledged
Shares may be sold without restriction. The cost of the filing and updating
such registration statement shall be borne by Pledgor. In addition, if at any
time Secured Party elects to sell the Pledged Shares as provided in Section 2.d,
or following an Event of Default or an Indemnity Event, Pledgor shall have the
absolute right, without limitation or cutback, to include the Pledged Shares in
any firm commitment private or public underwritten offering of Pledgor involving
the common stock of Pledgor, without cost to Secured Party, except for payment
of customary underwriting commissions and discounts.
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8. POWERS OF SECURED PARTY. Pledgor appoints Secured Party its true
attorney in fact to perform any of the following powers, which are coupled with
an interest and are irrevocable until this Agreement has been terminated
pursuant to its terms and may be exercised from time to time by Secured Party's
officers and employees: (a) to perform any obligation of Pledgor hereunder in
Pledgor's name or otherwise; (b) to notify any person obligated on any security,
instrument or other document subject to this Agreement of Secured Party's rights
hereunder; (c) to collect by legal proceedings or otherwise all dividends,
interest, principal or other sums now or hereafter payable upon or on account of
the Security Fund; (d) to enter into any extension, reorganization, deposit,
merger or consolidation agreement, or any other agreement relating to or
affecting the Security Fund and in connection therewith to deposit or surrender
control of the Security Fund to accept other property in exchange for the
Security Fund, and to do and perform such acts and things as Secured Party may
deem proper, with any money or property received in exchange for the Security
Fund at Secured Party's option, to be applied to the Obligations or held by
Secured Party under this Agreement; (e) to make any compromise or settlement
Secured Party deems desirable or proper in respect of the Security Fund; (f) to
insure, process and preserve the Security Fund; (g) to exercise all rights,
powers and remedies which Pledgor would have, but for this Agreement, under all
the Pledged Shares subject to this Agreement; (h) to do all acts and things and
execute all documents in the name of Pledgor or otherwise that are deemed by
Secured Party as necessary, proper or convenient in connection with the
preservation, perfection or enforcement of its rights hereunder; and (i) to
execute and file in Pledgor's name any financing statements and amendments
thereto required to perfect Secured Party's security interest hereunder;
provided, however, that until the occurrence and only during the continuation of
an Event of Default or an Indemnity Event shall Secured Party have the right to
exercise the power of attorney for the purposes described in paragraphs (a),
(c), (d), (e), (f), (g), or (h). If an Event of Default or Indemnity Event has
occurred and is continuing, any or all of the Security Fund consisting of
securities may be registered, without notice, in the name of Secured Party or
its nominee, and thereafter Secured Party or its nominee may exercise, without
notice, all voting and partnership rights at any meeting of the partners of the
issuer thereof, any and all rights of conversion, exchange or subscription, or
any other rights, privileges or options pertaining to any Pledged Shares all as
if it were the absolute owner thereof. The foregoing shall include, without
limitation, the right of Secured Party or its nominee to exchange, at its
discretion, any and all Pledged Shares upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer thereof, or
upon the exercise by the issuer thereof or Secured Party of any right, privilege
or option pertaining to any Pledged Shares and in connection therewith, the
right to deposit and deliver any and all
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of the Pledged Shares with any committee, depository, transfer agent,
registrar or other designated agent upon such terms and conditions as Secured
Party may determine. All of the foregoing rights, privileges or options may
be exercised without liability except to account for property actually
received by Secured Party. Secured Party shall have no duty to exercise any
of the foregoing, or any other rights, privileges or options with respect to
the Pledged Shares and shall not be responsible for any failure to do so or
delay in so doing.
9. CASH COLLATERAL ACCOUNT. Any money received by Secured Party in respect
of the Security Fund will be retained in an interest bearing cash collateral
account and the same shall, for all purposes, be deemed part of the Security
Fund hereunder.
10. SECURED PARTY'S CARE AND DELIVERY OF PLEDGED OWNER'S SHARES. Secured
Party's obligation with respect to the Security Fund in its possession shall be
strictly limited to the duty to exercise reasonable care in the custody and
preservation of the Security Fund, and such duty shall not include any
obligation to ascertain or to initiate any action with respect to or to inform
Pledgor of maturity dates, conversion, call or exchange rights, or offers to
purchase the Pledged Shares or any similar matters, notwithstanding Secured
Party's knowledge of the same. Secured Party shall have no duty to take any
steps necessary to preserve the rights of Pledgor against prior parties, or to
initiate any action to protect against the possibility of a decline in the
market value of the Pledged Shares. Secured Party shall not be obligated to take
any actions with respect to the Pledged Owner's Shares requested by Pledgor
unless such request is made in writing and Secured Party determines, in its sole
discretion, that the requested action would not unreasonably jeopardize the
value of the Pledged Shares as security for the Obligations. Secured Party may
at any time deliver the Security Fund, or any part thereof, to Pledgor, and the
receipt thereof by Pledgor shall be a complete and full acquittance for the
Security Fund so delivered, and Secured Party shall thereafter be discharged
from any liability or responsibility therefor.
11. PLEDGOR'S WAIVERS.
(a) Pledgor waives any right to require Secured Party to: (i) proceed
against or exhaust any security held from Tenant; (ii) give notice of the terms,
time and place of any public or private sale of personal property security held
from Tenant or any other person or otherwise comply with any other provisions of
Section 9-504 Uniform Commercial Code; (iii) pursue any other remedy in Secured
Party's power; or (iv) make any presentments or demands for performance, or give
any notices of nonperformance, protests, notices of protest or notices of
dishonor in connection with any obligations or evidences of indebtedness held by
Secured Party as
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security or which constitute in whole or in part the Obligations secured
hereunder, or in connection with the creation of new or additional
Obligations.
(b) Pledgor waives any defense arising by reason of: (i) any disability or
other defense of Tenant, Pledgor or any other person; (ii) the cessation or
limitation from any cause whatsoever, other than payment in full, of the
Obligations of Tenant, Pledgor or any other person; (iii) any lack of authority
of any officer, director, partner, agent or any other person acting or
purporting to act on behalf of Tenant or Pledgor which is a corporation,
partnership or other type of entity, or any defect in the formation of Tenant or
Pledgor; (iv) any act or omission by Secured Party which directly or indirectly
results in or aids the discharge of Tenant or Pledgor or any Obligations by
operation of law or otherwise; or (v) any modification of the Obligations, in
any form whatsoever, including any modification made after revocation hereof to
any Obligations incurred prior to such revocation, and including, without
limitation, the renewal, extension, acceleration or other change in time for
payment of the Obligations, or other change in the terms of the Obligations, or
any part thereof. Until all Obligations shall have been paid in full, Pledgor
shall have no right of subrogation, and Pledgor waives any defense Pledgor may
have based upon an election of remedies by Secured Party which destroys
Pledgor's subrogation rights or Pledgor's rights to proceed against Tenant for
reimbursement, including without limitation, any loss of rights Pledgor may
suffer by reason of any rights, powers or remedies of Tenant in connection with
any anti-deficiency laws or any other laws limiting, qualifying or discharging
Tenant's Obligations. Until all Obligations of Tenant to Secured Party shall
have been paid in full, Pledgor further waives any right to enforce any remedy
which Secured Party now has or may hereafter have against Tenant or any other
person, and waives any benefit of, or any right to participate in, any security
whatsoever now or hereafter held by Secured Party.
12. AUTHORIZATIONS TO SECURED PARTY. Pledgor authorizes Secured Party
either before or after revocation hereof, without notice or demand and without
affecting Pledgor's liability hereunder, from time to time to: (a) alter,
compromise, renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the Obligations or any part thereof; (b)
take and hold security, other than the Pledged Shares, for the payment of the
Obligations or any part thereof and exchange, enforce, waive and release the
Pledged Shares, or any part thereof, or any such other security; (c) apply the
Pledged Shares or any other security and direct the order or manner of sale
thereof, including without limitation, a non-judicial sale permitted by the
terms of this Agreement, as Secured Party in its discretion may determine; (d)
release or substitute any one or more of the endorsers or guarantors of the
Obligations, or any part thereof, or
D-13
<PAGE>
any other parties thereto; and (e) apply payments received by Secured Party
from Tenant or Pledgor to any Obligations of Tenant or Pledgor to Secured
Party, in such order as Secured Party shall determine in its sole discretion,
whether or not any such Obligations is covered by this Agreement, and Pledgor
hereby waives any provision of law regarding application of payments which
specifies otherwise.
13. PAYMENT OF TAXES, CHARGES, LIENS AND ASSESSMENTS. Pledgor agrees to
pay, prior to delinquency, all taxes, charges, liens and assessments against the
Security Fund, and upon the failure of Pledgor to do so, Secured Party at its
option may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same. Any such
payments made by Secured Party shall be obligations of Pledgor to Secured Party,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 17 of this Agreement,
and shall be secured by the Security Fund, subject to all terms and conditions
of this Agreement.
14. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, after
any applicable cure or grace period under the Lease which has not been cured by
pledgor within ten (10) days of the date such cure period of Tenant expired; or
(b) any representation or warranty made by Pledgor herein shall prove to be
incorrect in any material respect when made; or (c) an Indemnity Event; or (d)
Pledgor shall fail to observe or perform any obligation or agreement contained
herein after Secured Party has provided written notice describing such failure
and Pledgor has failed within thirty (30) days of receipt of such notice to cure
such failure, provided if such cure cannot be completed within such thirty (30)
day period, then such cure period shall be extended for so long as Pledgor is
diligently prosecuting such cure to completion up to a maximum of ninety (90)
days.
15. REMEDIES. Upon the occurrence of any Event of Default, Secured Party
shall have and may exercise without demand any and all rights, powers,
privileges and remedies granted to a secured party upon default under the
Uniform Commercial Code or otherwise provided to Secured Party by law. All
rights, powers, privileges and remedies of Secured Party shall be cumulative.
Secured Party may exercise its right of setoff with respect to the Obligations
in the same manner as if the Obligations were unsecured. No delay, failure or
discontinuance of Secured Party in exercising any right, power, privilege or
remedy hereunder shall affect or operate as a waiver of such right, power,
privilege or remedy; nor shall any single or partial exercise of any such right,
power, privilege or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power,
D-14
<PAGE>
privilege or remedy. Any waiver, permit, consent or approval of any kind by
Secured Party of any default hereunder, or any such waiver of any provisions
or conditions hereof, must be in writing and shall be effective only to the
extent set forth in writing. While an Event of Default exists: (a) Secured
Party may, at any time and at Secured Party's sole option, liquidate any time
deposits pledged to Secured Party hereunder, whether or not said time
deposits have matured and notwithstanding the fact that such liquidation may
give rise to penalties for early withdrawal of funds; (b) Secured Party may
appropriate the Security Fund and apply all proceeds toward repayment of the
Obligations in such order as Secured Party may from time to time elect or, at
Secured Party's sole option, place any proceeds in a cash collateral account;
and (c) at Secured Party's request, Pledgor will assemble and deliver all
Pledged Shares not already in the possession of Secured Party, and books and
records pertaining thereto, to Secured Party at a reasonably convenient place
designated by Secured Party. It is agreed that public or private sales, for
cash or on credit, to a wholesaler or retailer or investor, or user of
property of the types subject to this Agreement, or public auction, are all
commercially reasonable since differences in the sales prices generally
realized in the different kinds of sales are ordinarily offset by the
differences in the costs and credit risks of such sales. For any part of the
Security Fund consisting of securities, Secured Party shall be under no
obligation to delay a sale of any portion thereof for the period of time
necessary to permit the issuer thereof to register such securities for public
sale under any applicable state or federal law, even if the issuer thereof
would agree to do so.
16. DISPOSITION OF PLEDGED SHARES. Secured Party shall not transfer all or
any part of the Pledged Shares or Security Fund except in connection with the
exercise of remedies as provided in Section 15 above. Any proceeds of any
disposition of any of the Pledged Shares or any part thereof, shall be applied
by Secured Party to the payment of expenses incurred by Secured Party in
connection with the foregoing, including reasonable attorneys' fees, and the
balance of such proceeds shall be applied by Secured Party toward the payment of
the Obligations in such order of application as Secured Party may from time to
time elect.
17. PLEDGOR DELIVERIES. Pledgor shall provide Secured party on a monthly
basis with (i) profit and loss statements of Pledgor on a consolidated basis,
(ii) any filings by Pledgor with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended, (iii) any press releases
issued by Pledgor and (iv) any other information reasonably requested by Secured
Party relating to the financial position of Pledgor.
18. COSTS, EXPENSES AND ATTORNEYS' FEES. Pledgor shall pay to Secured Party
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including
D-15
<PAGE>
reasonable attorneys' fees incurred by Secured Party after the occurrence and
during the continuance of any Event of Default in exercising any right,
power, privilege or remedy conferred by this Agreement or in the enforcement
thereof, including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to Pledgor or the valuation of the Pledged
Shares including without limitation, the seeking of relief from or
modification of the automatic stay or the negotiation and drafting of a cash
collateral order. All of the foregoing shall be paid to Secured Party by
Pledgor with interest at a rate per annum equal to the lesser of ten percent
(10%) or the maximum rate permitted by law.
19. GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be governed by
and construed in accordance with the laws of the state in which the Property is
located, and shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties.
20. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
21. NON-RECOURSE. The obligations of Pledgor hereunder with respect to the
Lease and the obligations of Tenant thereunder are specifically non-recourse to
Pledgor except to the extent of the Pledged Shares. In no event shall Pledgor or
any assets of Pledgor or any general partner or affiliate of Pledgor be liable
for a default by Tenant under the Lease except to the extent of the Pledged
Shares then pledged to Secured Party.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
PLEDGOR
GRANITE GOLF GROUP, INC.
a Nevada corporation
By:
- --------------------- ------------------------------
Name:
----------------------------
D-16
<PAGE>
Its:
- --------------------- ------------------------------
SECURED PARTY
GOLF TRUST OF AMERICA, L.P.
a Delaware limited partnership
- ---------------------
GTA GP, Inc.
- --------------------- a Maryland corporation
Its: General Partner
By:
------------------------------
Name: W. Bradley Blair, II
Title: President and CEO
D-17
<PAGE>
EXHIBIT D-1
Schedule of Adjustments in the Number of Pledged Shares:
1. INCREASE OF OWNER'S SHARES. If Pledgor elects to receive Owner's Shares
as described in EXHIBIT K attached hereto then the Pledged Shares shall be
increased such that the value of the Pledged Shares held by Secured Party in the
Security Fund shall equal the sum of (i) the value of the initial Pledged Shares
(valued as the date of the Pledge Agreement), and (ii) fifteen percent (15%) of
the Contingent Purchase Price (such shares valued as of the date of the pledge).
This adjustment to the number of Pledged Shares shall occur simultaneously with
the circumstances triggering such an adjustment as described above, without the
necessity for any further action on the part of Pledgor or Secured Party.
Pledgor shall deliver to Secured Party certificates evidencing such additional
Pledged Shares immediately upon the occurrence of such triggering circumstances.
2. RELEASE OF PLEDGED SHARES. The Pledged Shares shall be released and
subtracted from the Security Fund in accordance with the following schedule:
(a). Pledged shares valued at $470,000.00 (or an equivalent dollar amount
if held in cash or other securities) at such time as either (i) the Net
Operating Income with respect to the Property, shall have been, for one (1)
prior Fiscal Year, at least one hundred thirteen and one-half percent (113.5%)
of all rent payable by Tenant under the Lease for such Fiscal Year (based on the
rent adjusted in accordance with the terms of the Lease, if applicable), or (ii)
the average share price of the common stock of Pledgor (valued at the close of
trading each day) is greater than $4.00 per share for a ninety (90) day period.
(b). One-third (1/3) of the remaining Pledged Shares (or an equivalent
dollar amount if held in cash or other securities) at such time as the Net
Operating Income with respect to the Property shall have been, for each of the
two (2) prior Fiscal Years, at least one hundred twenty percent (120%) of all
rent payable by Tenant under the Lease for each such Fiscal Year (based on the
rent adjusted in accordance with the terms of the Lease, if applicable).
(c). An aggregate of two-thirds (2/3) of the remaining Pledged Shares (or
an equivalent dollar amount if held in cash or other securities) at such time as
the Net Operating Income with respect to the Property shall have been, for each
of the two (2) prior Fiscal Years, at least one hundred and thirty percent
(130%) of all rent payable by Tenant under the Lease for each such Fiscal Year
(based on the rent adjusted in accordance with the terms of the Lease, if
applicable).
D-1-1
<PAGE>
(d). All of the Pledged Shares (or an equivalent dollar amount if held in
cash or other securities) provided that the Net Operating Income with respect to
the Property shall have been, for each of the two (2) prior Fiscal Years, one
hundred and forty percent (140%) of all rent payable by Tenant under the Lease
for each such Fiscal Year (based on the rent adjusted in accordance with the
terms of the Lease, if applicable).
(e). Subject to Section 5.5 of the Lease, promptly after the Expiration
Date (as defined in the Lease) and payment by Pledgor to Secured Party of all
amounts due under the Lease, Secured Party shall release all remaining Pledged
Shares, if any, to Pledgor.
This adjustment to the number of Pledged Shares shall occur simultaneously
with the circumstances triggering such an adjustment as described above, without
the necessity for any further action on the part of Pledgor or Secured Party.
D-1-2
<PAGE>
EXHIBIT E
ADJUSTMENTS TO CALCULATION OF GROSS GOLF REVENUE
FOR PRIVATE CLUBS
NONE
E-1
<PAGE>
EXHIBIT F
CALCULATION
Calculation of Gross Golf Revenue ($1,366,275) for the Base Year on a
Quarter-by-Quarter Basis
1st Quarter 1997 $449,987
2nd Quarter 1997 $324,973
3rd Quarter 1997 $272,382
4th Quarter 1997 $318,933
F-1
<PAGE>
EXHIBIT K
CONTINGENT PURCHASE PRICE FORMULA
A. DEFINITIONS. For purposes of this EXHIBIT K, the following terms shall
have the following meanings:
(1) "ADJUSTED NET OPERATING INCOME" means the Conversion Date Net Operating
Income, divided by 1.135.
(2) "CAPITALIZATION RATE" shall mean 10.50%.
(3) "COMPANY" means Golf Trust of America, Inc.
(4) "COMPANY'S FIRST CALL FFO" means the consensus FFO per share estimate
for the Company for the calendar year which includes the Conversion Date,
subtracting the Company's capital expenditure reserve per share as estimated for
that year as such estimate is reported by First Call (or, if First Call is no
longer in general use within the securities industry, by such other reporting
service as is then in general use within the securities industry) divided by the
average of the Company's closing share price for the thirty (30) trading days
immediately preceding the Conversion Date.
(5) "CONVERSION DATE" means a date after the second (2nd) full Fiscal Year
of the Initial Term and prior to the termination of the Initial Term that is the
fifteenth (15th) day following the date on which Company receives written notice
that Tenant has irrevocably elected to receive the Contingent Purchase Price.
(6) "CONVERSION DATE CAPITALIZATION RATE" shall mean the Company's first
Call FFO, plus 200 basis points (but in no event less than the Capitalization
Rate).
(7) "CONVERSION DATE NET OPERATING INCOME" means the Gross Operating
Revenue for the Property LESS the Gross Operating Expenses for the Conversion
Year.
(8) "CONVERSION YEAR" means the Fiscal Year (as defined in the Lease)
immediately preceding the Conversion Date.
(9) "CONVERSION NOTICES" shall mean a written notice delivered by Tenant to
Company whereby Company elects to receive the Contingent Purchase Price. The
Conversion Notice may only be given once and must be given on or before April
15 of a calendar year. If the Conversion Notice is not given on or before the
end of the Initial Term, Tenant's right to receive the Contingent Purchase
Price shall automatically and irrevocably terminate. The Conversion Notice may
not be given prior to the expiration of the second (2nd) full Fiscal Year of the
Initial Term.
K-1
<PAGE>
(10) "GROSS OPERATING EXPENSES" means the gross operating expenses of the
Property for the Conversion Year, calculated in accordance with generally
accepted accounting principles consistently applied as adjusted in Schedule K-1.
For purposes of calculating Gross Operating Expenses, Company may make
discretionary adjustments on a line item basis to reflect stabilized Gross
Operating Expenses, including the following adjustments:
(a) annual capital replacement reserves shall be included, as
reasonably determined by Company;
(b) annual cash expenditures (including depreciation) for golf carts
shall be included, as reasonably determined by Company;
(c) extraordinary expenditures (such as to repair storm damage) which
are not anticipated to recur in the ordinary course shall be excluded, as
reasonably determined by Company;
(d) other adjustments to reflect stabilized Gross Operating Expenses,
as reasonably determined by Company shall be made; and
(e) depreciation, amortization and debt service shall be excluded.
For purposes of determining the Contingent Purchase Price, Gross Operating
Expenses will be adjusted upward by Company to the extent such expenses (or any
major component thereof) have decreased at a compound annual rate greater than
2% per annum from the Base Year to the Conversion Year or more than 3% (on a
year-to-year basis) from the year immediately preceding the Conversion year,
unless, Company shall determine that such expense reductions were of a nature so
as to be reasonably expected to be sustained.
(11) "GROSS OPERATING REVENUE" means the gross operating revenue of the
Property; including revenue related to the golf course operating, food and
beverage operations and sale of merchandise, for the Conversion Year, calculated
in accordance with general accepted account principles consistently applied as
adjusted in Schedule K-1. For purposes of determining the Contingent Purchase
Price, Gross Operating Revenue will be adjusted downward to the extent such
revenue has increased by more than 5.0% from the year immediately preceding the
Conversion Year to the Conversion Year, unless Company shall have reasonably
determined that such revenue increase can reasonably be expected to be
sustained. Factors to determine sustainability shall include factors such as
the creation of new demand generators (i.e., hotel development or condominium
development) and the non-recurring nature of any revenue (i.e., a one-time
tournament fee). Company
K-2
<PAGE>
shall further retain the right to make downward adjustments to Gross
Operating Revenue so as to establish reasonable expectations of future cash
flow results.
(12) "NET INCREMENTAL INCOME AVAILABLE FOR CONTINGENT PURCHASE PRICE" means
the Adjusted Net Operating Income for the Conversion Year, taking into account
the increased rental payments due under the Lease as a result of Company's
election to receive the Contingent Purchase Price, including the annual capital
replacement reserve paid as additional rent.
(13) "NET OPERATING INCOME" means the Gross Operating Revenue of the
Property for the Conversion Year LESS the Gross Operating Expenses for the same
period.
B. CONTINGENT PURCHASE PRICE.
(1) Tenant shall have the right to receive the Contingent Purchase Price by
delivering the Conversion Notice to Company; provided that (i) the Tenant under
the Lease at the Property shall have paid Percentage Rent on an annual basis for
the prior calendar year, and (ii) at least one-half (1/2) of the increase in the
Adjusted Net Operating Income from the Base Year to the Conversion year is
attributable to an increase in Gross Operating Revenue (not including food and
beverage operations and sale of merchandise), as reasonably determined by
Company. The Contingent Purchase Price shall equal the Net Incremental Income
Available for Contingent Purchase Price divided by the Conversion Date
Capitalization Rate.
(2) Within forty-five (45) days of the Conversion Date, Company shall
deliver to Tenant the number of Owner's Units in Company that equals the
Contingent Purchase Price divided by the per share common stock price of the
Company on the Conversion Date.
C. EXAMPLE.
The calculation of the Contingent Purchase Price is attached as SCHEDULE
K-1 for purposes of illustration only.
Schedule K-1: Example of Contingent Purchase Price.
LANDLORD: GOLF TRUST OF AMERICA, L.P.
A Delaware limited Partnership
By: GTA GP, Inc., a Maryland
corporation
Its: General Partner
By:
-------------------------------
Name: W. Bradley Blair, II
K-3
<PAGE>
Title: President and CEO
TENANT: Granite Silverthorn, INC.
a Florida corporation
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
K-4
<PAGE>
SCHEDULE K-1
EXAMPLE OF CONTINGENT PURCHASE PRICE
K-1-1
<PAGE>
Exhibit 10.2.15
- -------------------------------------------------------------------------------
The Links at Polo Trace
Delray Beach
Palm Beach County
Florida
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
EMERALD DUNES - POLO TRACE, INC.
TENANT
DATED AS OF JULY __, 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 . . . . . . . . . . . . . . . . . . 15
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 INCREASE IN INITIAL BASE RENT . . . . . . . . . . . . . . . . . . 17
4.3 PERCENTAGE RENT . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT . . . . . . . . . . . . 17
4.5 INCREASE IN BASE RENT FOR CAPITAL IMPROVEMENTS . . . . . . . . . 18
4.6 RECORD-KEEPING . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 ADDITIONAL CHARGES . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 LATE PAYMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . 18
4.9 NET LEASE; CAPITAL REPLACEMENT RESERVE . . . . . . . . . . . . . 19
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 PLEDGE OF OWNER'S SHARES . . . . . . . . . . . . . . . . . . . . 19
5.2 OBLIGATION TO WITHHOLD DISTRIBUTIONS . . . . . . . . . . . . . . 19
5.3 LANDLORD'S LIEN . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 TERMINATION PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6
IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 PAYMENT OF IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . 20
6.2 INFORMATION AND REPORTING . . . . . . . . . . . . . . . . . . . . 20
6.3 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 REFUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 UTILITY CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 ASSESSMENT DISTRICTS . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(i)
<PAGE>
7.1 NO TERMINATION, ABATEMENT, ETC . . . . . . . . . . . . . . . . . . 21
7.2 CONDITION OF THE PROPERTY . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . 24
8.1 PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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
9.5 TENANT'S ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . 26
9.6 VALUATION OF REMAINDER INTEREST IN LEASE . . . . . . . . . . . . . 26
ARTICLE 10
HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.1 REMEDIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.2 TENANT'S INDEMNIFICATION OF LANDLORD . . . . . . . . . . . . . . . 27
10.3 SURVIVAL OF INDEMNIFICATION OBLIGATIONS . . . . . . . . . . . . . 28
10.4 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF LEASE . . 28
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.1 TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 29
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
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. . . . . . . . . . . . . . . . . . . 33
12.6 LANDLORD'S RIGHT TO AUDIT CALCULATION OF GROSS 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
(ii)
<PAGE>
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
ARTICLE 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 . . . . . . . . . . . . . . . . . . . . . . 45
15.14 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.15 DAMAGE NEAR END OF TERM . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.1 TOTAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.2 PARTIAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.3 RESTORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.4 AWARD-DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 46
16.5 TEMPORARY TAKING . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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 . . . . . . . . . . . . . . . . . 51
ARTICLE 19
(iii)
<PAGE>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23.3 TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
23.4 REIT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 56
23.5 RIGHT OF FIRST OFFER OF LANDLORD TO ACQUIRE LEASEHOLD . . . . . 57
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 . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
25.1 LANDLORD MAY GRANT LIENS . . . . . . . . . . . . . . . . . . . . 60
25.2 TENANT'S NON-DISTURBANCE RIGHTS . . . . . . . . . . . . . . . . 61
25.3 FACILITY MORTGAGE PROTECTION . . . . . . . . . . . . . . . . . . 61
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 62
27.1 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
27.2 ARBITRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 28
(iv)
<PAGE>
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.1 TRANSFER OF INVENTORY . . . . . . . . . . . . . . . . . . . . . 63
28.2 LANDLORD'S RIGHT TO INSPECT . . . . . . . . . . . . . . . . . . 63
28.3 BREACH BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . 63
28.4 COMPETITION BETWEEN LANDLORD AND TENANT . . . . . . . . . . . . 63
28.5 NO WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . 63
28.6 REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . 64
28.7 ACCEPTANCE OF SURRENDER . . . . . . . . . . . . . . . . . . . 64
28.8 NO MERGER OF TITLE . . . . . . . . . . . . . . . . . . . . . . 64
28.9 QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . 64
28.10 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
28.11 SURVIVAL OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . 65
28.12 INVALIDITY OF TERMS OR PROVISIONS . . . . . . . . . . . . . . . 65
28.13 PROHIBITION AGAINST USURY . . . . . . . . . . . . . . . . . . . 65
28.14 AMENDMENTS TO LEASE . . . . . . . . . . . . . . . . . . . . . . 65
28.15 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 65
28.16 TITLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.17 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 65
28.18 MEMORANDUM OF LEASE . . . . . . . . . . . . . . . . . . . . . . 65
28.19 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . 65
28.20 NO THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . . 66
28.21 NON-RECOURSE AS TO LANDLORD . . . . . . . . . . . . . . . . . . 66
28.22 NO RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . 66
28.23 RELETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
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 - Schedule of Capital Improvements
Exhibit G - Golf Percentage Rent Schedule
Exhibit H - Quarterly Allocations of Food and Beverage Revenue,
Merchandise Revenue and Gross Golf Revenue
(v)
<PAGE>
The Links at Polo Trace
Delray Beach
Palm Beach County
Florida
LEASE
THIS LEASE (this "Lease"), dated as of July ___, 1998, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Landlord"), and EMERALD DUNES--POLO TRACE, 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 May 28, 1998 by and between Landlord and Polo Trace
Management, 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, 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.
"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" shall mean items which are properly
capitalized in accordance with GAAP.
"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 on the earlier of
the commencement of the third (3rd) Fiscal Year or when the Initial
Improvement Funding has been fully advanced, 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). In no event shall the amount in the
Capital Replacement Reserve exceed Five Hundred Thousand Dollars ($500,000),
which amount shall be increased every ten (10) years by the change in the CPI
for such ten (10) year 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,
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;
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<PAGE>
(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 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.
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 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-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
5
<PAGE>
commencing after the Commencement Date, and each twelve-month period
thereafter, for the remainder of the Lease Term.
"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 PERCENTAGE RENT" means 10% of the positive
difference, if any, between (x) the Food and Beverage Revenue during the
applicable Fiscal Year and (y) Three Hundred Fifty Thousand Dollars
($350,000). Food and Beverage Percentage Rent is calculated on a Fiscal
Quarter basis, and on a cumulative basis for each Fiscal Year, based on the
quarterly allocation set forth on EXHIBIT H attached hereto.
"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);
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,
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<PAGE>
including the increased cost of a construction endorsement, less exclusions
provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GOLF PERCENTAGE RENT" means the positive difference, if any,
between (x) the Gross Golf Revenue during the applicable Fiscal Year and (y)
Two Million Eight Hundred Fifty Thousand Dollars ($2,850,000), and multiplied
by the percentage opposite the relevant year set forth on EXHIBIT G attached
hereto. Golf Percentage Rent is calculated on a Fiscal Quarter basis, and on
a cumulative basis for each Fiscal Year, based on the quarterly allocation
set forth on EXHIBIT H attached hereto.
"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 (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), (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) The ProLink commissions received or payments to ProLink for
the usage of the ProLink systems which are
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<PAGE>
collected from golfers and remitted to ProLink and which would otherwise be
included in Gross Golf 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.
"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, 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 (i) from the Commencement Date through
December 31, 1998, $ , and (ii) thereafter,
(subject to adjustment as provided in Section 4.2).
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"INITIAL IMPROVEMENT FUNDING" has the meaning provided in
Section 12.3
"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).
"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
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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 PERCENTAGE RENT" means 10% of the positive difference,
if any, between (x) the Merchandise Revenue during the applicable Fiscal Year
and (y) Two Hundred Fifty Thousand Dollars ($250,000).
"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 (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); 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 as:
(1) Gross Revenue; less cost of sales; reduced by
(2) Gross operating expenses of the Property for the then-current
Fiscal year (calculated in accordance with GAAP), which shall include, the
Capital Replacement Reserve payable for that Fiscal Year, if any, and which
shall exclude the rent due pursuant to the Lease and the sales tax thereon;
increased by
(3) the following items (a) lessee-shareholder related expenses
(if any), (b) depreciation, (c) equipment lease
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payments as interest and depreciation equivalents, and (d) interest (if any).
An example of Net Operating Income for Purposes of Coverage Ratio
is set forth on schedule K-1 attached as an exhibit to the Pledge 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 (i) pursuant to this Lease and (ii)
Bonaventure Country Club, 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.
"PARTNERSHIP" means Golf Trust of America, L.P., a Delaware limited
partnership.
"PERCENTAGE RENT" means the sum of Golf Percentage Rent, Food and
Beverage Percentage Rent and Merchandise Percentage Rent.
"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 First Amended and Restated
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 OWNER'S SHARES" means the Owner's Shares pledged pursuant
to the Pledge Agreement.
"PLEDGOR" means Okeechobee Championship Golf, Inc., a Florida
corporation and an affiliate 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.
"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, when
applicable.
"REVENUES" means the sum of Gross Golf Revenue, Food and Beverage
Revenue and Merchandise Revenue.
"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 Emerald Dunes--Polo Trace, 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, if at any time during the Initial
Term, Net Operating Income for Purposes of Coverage Ratio did not equal or
exceed one hundred and thirteen and one-half percent (113.5%) of Rent due
under this Lease, the collateral pledged under the Pledge Agreement, on a
pro-rata basis. An example of the calculation of the Termination Payment is
set forth on Exhibit D-2 to the Pledge Agreement.
"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
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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
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 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 beyond any applicable cure period. 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 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.
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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 28.10 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 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 first (1st)
day of the first (1st) Fiscal Quarter commencing after the one (1) year
anniversary of the Commencement Date, and on the first (1st) day of each
Fiscal Year thereafter for the remainder of the Lease Term, 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").
4.3 PERCENTAGE RENT. In addition to Base Rent, Tenant shall pay
Percentage Rent as provided herein. During the Initial Term and the Extended
Term, Tenant shall calculate the Revenues 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 calculations in
writing to Landlord by way of an Officer's Certificate. If there is due any
Percentage Rent for that Fiscal Quarter (or shorter period, if applicable),
then Tenant shall pay to Landlord the applicable 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 payable during any Fiscal Year shall
be limited to seven percent (7%) of the Rent payable for the prior Fiscal
Year. Tenant shall receive a credit against the payment of Percentage Rent
in an amount
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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 Revenues for the Fiscal Year just ended,
and (ii) a comparison of the amount of any 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 Revenues. 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.
For the purposes of this Section 4.4 and Section 4.3 above, each of the
Revenues and each Percentage Rent shall be calculated individually.
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 increase by
an amount equal to nine and five-tenths percent (9.5%) of the Quarterly
Capital Expenditure. Notwithstanding the foregoing, if Landlord funds
Quarterly Capital Expenditures not paid for or reimbursed by third parties
related to the relocation of hole number 11 and the related changes to holes
12, 16 and 17, or the items addressed in Section 3 of Exhibit J to the
Agreement, then only fifty percent (50%) of such Quarterly Capital
Expenditures shall increase the Annual Base Rent.
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
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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, beginning
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on the earlier of the commencement of the third (3rd) Fiscal Year or when the
Initial Improvement Funding has been fully advanced, 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 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
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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, 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, (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;
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(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. Landlord hereby represents and warrants to Tenant that Landlord
has made available to Tenant or an Affiliate of Tenant all information in
Landlord's possession regarding the condition of the Property prior to the
date hereof. 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 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 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)
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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 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, 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, 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 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
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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 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. Except for the conveyances and transfers contemplated
in the Fourth Amendment to the Joint Development Agreement, by and among K.
Hovnanian at Polo Trace, Inc., Polo Trace Country Club, Inc. and Polo Trace
Management, Inc., dated December 24, 1996, 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
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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.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in the Phase I Environmental Site
Assessment dated June 12, 1998, as supplemented by letter addendum June 26,
1998, prepared by Dames and Moore ("Environmental Report"), 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
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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, 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 existed before the Commencement Date that are
not exacerbated as a result of the willful misconduct or gross negligence of
Tenant, (iii) 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 (iv) 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.
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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 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
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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, 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 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.,
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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 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 Two Hundred Thousand Dollars
($200,000) (the "Initial Improvements Funding") for capital improvements and
certain other expense described in this Section 12.3 ("Capital
Improvements"). Landlord shall also make available the amount necessary to
enable Tenant to relocate hole number 11 and to make related changes to holes
12, 16 and 17 and the items outlined in Section 3 of Exhibit J to the
Agreement if and to the extent that the amounts paid for by such capital
improvements are not paid for or reimbursed by third parties. 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. An estimated schedule of the
construction of the Capital Improvements is more particularly
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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 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:
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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 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 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
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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 monthly 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 sixty (60) 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
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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.
(i) Tenant shall furnish to Landlord within ten (10) days after
the end of each month, a report detailing the number of rounds of golf played
on the Property, the revenue generated from the Property and a profit and
loss statement for the Property for the preceding calendar month.
(b) Tenant shall furnish to Landlord within twenty (20) 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
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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;
(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;
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(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 (which matters
shall be the responsibility of Landlord unless set forth in the Survey
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
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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,
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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, 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:
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(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.
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
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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 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
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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's 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 restore) shall be paid to Landlord and
deposited in
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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 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
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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
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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
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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:
(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 of notice from Landlord; provided, however, Tenant is only entitled
to three (3) such notices per twelve (12) month period and that
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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 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
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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 with respect to any Other Leased Property, 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,
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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 Bank of San Francisco at the time of the award plus
one percent (1%) and the Percentage Rent
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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 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
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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
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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, 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,
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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.
Notwithstanding the foregoing or any other provision of this
Lease, including, without limitation, Section 7.2, Article 10, Article 11, or
Article 13 hereof, Tenant shall not be liable or otherwise be required to
indemnify Landlord or to incur any costs in connection with: (i) any
conditions on the Property prior to the Commencement Date and not caused by
Tenant (as, for example, title problems, encroachments, environmental
matters, etc.); or (ii) any matters that arise after the Commencement Date
that are not caused by Tenant or that are directly caused by the breach by
Landlord of the terms of this Lease.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Notwithstanding
anything to the contrary in this Lease, 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 (i) Landlord's
active, gross negligence or willful misconduct; (ii) Landlord's
non-performance of its obligations under this Lease; or (iii) any conditions
existing on the Property prior to the Commencement Date and not caused by
Tenant (as, for example, title problems, encroachments, environmental
matters, etc.).
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably practicable
after receipt by the indemnified party of
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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, pledge, hypothecate, encumber or otherwise
transfer (except to an
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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.
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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 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 amended (the "Bankruptcy Code"), shall not seek or request
any extension of time to assume or reject this Lease or to perform
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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 Lease, shall constitute rent for the purposes of Title 11 of the
Bankruptcy Code.
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(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;
60
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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, 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
61
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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 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
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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
examine all books
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<PAGE>
and records of Landlord and Tenant regarding the Property during the
arbitration.
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
28.2.
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.
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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 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:
65
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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--Polo Trace, Inc.
2100 Emerald Dunes Drive
West Palm Beach, Florida 33411
Attn: Raymon R. Finch, III
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
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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 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: ________________________
Name:
Its:
TENANT: EMERALD DUNES--POLO TRACE, INC.,
a Florida corporation
By: _________________________
Its: ________________________
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
-----------------------------
<PAGE>
EXHIBIT B
DESCRIPTION OF IMPROVEMENTS
---------------------------
The golf course, driving range, putting green, clubhouse facilities, snack
bar, restaurant, pro shop, buildings, structures, parkinglots, improvements,
fixtures and other items of real estate as located on the Land including
without limitation the following:
1. Clubhouse
2. Enclosed bulidings with golf maintenance facilities
3. Outhouses
<PAGE>
EXHIBIT C
OTHER LEASED PROPERTIES
-----------------------
(i) Emerald Dunes Country Club
<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
----------------
To be agreed upon.
<PAGE>
EXHIBIT E
---------
Intentionally Omitted
<PAGE>
EXHIBIT F
SCHEDULE OF CAPITAL IMPROVEMENTS
--------------------------------
See Attached.
<PAGE>
EXHIBIT G
GOLF PERCENTAGE RENT SCHEDULE
-----------------------------
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------------
----------------------------------------------------------
Fiscal Year (1) Percentage Multiplier
----------------------------------------------------------
----------------------------------------------------------
1 33%
----------------------------------------------------------
2 34%
----------------------------------------------------------
3 35%
----------------------------------------------------------
4 36%
----------------------------------------------------------
5 37%
----------------------------------------------------------
6 38%
----------------------------------------------------------
7 39%
----------------------------------------------------------
8 40%
----------------------------------------------------------
9 41%
----------------------------------------------------------
10 42%
----------------------------------------------------------
Extension 45%
Terms
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
_______________________________
(1) The first Fiscal Year shall begin on the first day of the first Fiscal
Quarter following the Commencement Date.
G-1
<PAGE>
EXHIBIT H
QUARTERLY ALLOCATIONS OF FOOD AND BEVERAGE REVENUE, MERCHANDISE REVENUE AND
GROSS GOLF REVENUE
<TABLE>
<CAPTION>
Food Merchandise Gross
and Golf
BEVERAGE
------------- ------------ -------------
<S> <C> <C> <C>
January 1 - March 31 $ $ $
April 1 - June 30 $ $ $
July 1 - September 30 $ $ $
October 1 - December 31 $ $ $
$ $ $
</TABLE>
H-1
<PAGE>
- --------------------------------------------------------------------------------
Tierra Del Sol Golf & Country Club
Belen
Valencia County
New Mexico
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
GCR-NEW MEXICO, L.L.C.
TENANT
DATED AS OF MAY 29, 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 . . . . . . . . . . . . . . . . . . . . . . .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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.1 Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.2 Increase in Initial Base Rent . . . . . . . . . . . . . . . . . . .17
4.3 Percentage Rent . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.4 Annual Reconciliation of Percentage Rent. . . . . . . . . . . . . .18
4.5 Increase in Base Rent Following Conversion Date . . . . . . . . . .18
4.6 Record-keeping. . . . . . . . . . . . . . . . . . . . . . . . . . .18
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
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.1 Pledge of Owner's Shares. . . . . . . . . . . . . . . . . . . . . .20
5 2 Obligation to Withhold Distributions. . . . . . . . . . . . . . . .20
5 3 Cross-Collateral. . . . . . . . . . . . . . . . . . . . . . . . . .21
5.4 Landlord's Lien . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.5 Termination Payment . . . . . . . . . . . . . . . . . . . . . . . .21
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
6.1 Payment of Impositions. . . . . . . . . . . . . . . . . . . . . . .21
6.2 Information and Reporting . . . . . . . . . . . . . . . . . . . . .22
ii
<PAGE>
6.3 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.4 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.5 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.6 Assessment Districts. . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
7.1 No Termination, Abatement, Etc .. . . . . . . . . . . . . . . . . .23
7.2 Condition of the Property . . . . . . . . . . . . . . . . . . . . .24
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . .25
8.1 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.2 Tenant's Personal Property. . . . . . . . . . . . . . . . . . . . .26
8.3 Tenant's Obligations. . . . . . . . . . . . . . . . . . . . . . . .26
8.4 Landlord's Waivers. . . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
9.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
9.2 Specific Prohibited Uses. . . . . . . . . . . . . . . . . . . . . .27
9.3 Membership Sales. . . . . . . . . . . . . . . . . . . . . . . . . .27
9.4 Landlord to Grant Easements, Etc. . . . . . . . . . . . . . . . . .28
9.5 Tenant's Additional Covenants . . . . . . . . . . . . . . . . . . .28
9.6 Valuation of Remainder Interest in Lease. . . . . . . . . . . . . .29
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . .29
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . .30
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . .31
10.9 Environmental Violations at Expiration
or Termination of Lease. . . . . . . . . . . . . . . . . . . . .31
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . .32
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . .32
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . .32
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . .33
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . .33
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ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS;
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . .33
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . .34
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . .35
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . .35
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . .36
12.6 Landlord's Right to Audit Calculation
of Gross Golf Revenue. . . . . . . . . . . . . . . . . . . . . .36
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . .37
12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .38
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. . . . . . . . . . . . . . . . . . . . . . . . . . .42
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . .43
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . .43
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .45
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . .45
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . .45
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . .45
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 . . . . . . . . . . . . .49
15.11 Reconstruction Covered by Insurance . . . . . . . . . . . . . . .49
15.12 Reconstruction Not Covered by Insurance . . . . . . . . . . . . .50
15.13 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . .50
15.14 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
15.15 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . .51
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . .51
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . .51
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
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16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . .51
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . .52
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . .52
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . .55
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . .55
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . .56
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . .56
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . .57
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . 57
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . .59
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . .60
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . .60
22.4 Survival of Indemnification Obligations
Available Insurance Proceeds . . . . . . . . . . . . . . . . . .61
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . .61
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . .61
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . .64
23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . .64
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . .65
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . .66
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ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . .67
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . .67
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . .67
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . .68
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . .68
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . .68
ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
26.1 Right of First Offer to Purchase . . . . . . . . . . . . . . . . .69
26.2 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . .69
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . .70
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . .70
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . .70
28.2 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . .71
28.3 Competition Between Landlord and Tenant. . . . . . . . . . . . . .71
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . .71
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . .72
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . .72
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . .72
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
28.10 Survival of Claims. . . . . . . . . . . . . . . . . . . . . . . .72
28.11 Invalidity of Terms or Provisions . . . . . . . . . . . . . . . .73
28.12 Prohibition Against Usury . . . . . . . . . . . . . . . . . . . .73
28.13 Amendments to Lease . . . . . . . . . . . . . . . . . . . . . . .73
28.14 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . .73
28.15 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
28.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .73
28.17 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . .73
28.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . .74
28.19 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . .74
28.20 Non-Recourse as to Landlord . . . . . . . . . . . . . . . . . . .74
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28.21 No Relationship . . . . . . . . . . . . . . . . . . . . . . . . .74
28.22 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
28.23 Year 2000 Problem . . . . . . . . . . . . . . . . . . . . . . . .76
28.24 New Mexico Law Regarding Indemnification . . . . . . . . . . . .76
</TABLE>
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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
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Tierra Del Sol Golf & Country Club
Belen
Valencia County
New Mexico
LEASE
THIS LEASE (this "Lease"), dated as of May 29, 1998, is entered into by
and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and GCR-New Mexico, L.L.C., 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 Contribution and Leaseback Agreement (the
"Agreement") dated as of May 29, 1998 by and between Landlord and Golf Classic
Resorts, L.L.C., a Delaware limited liability company ("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;
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(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.
"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.
2
<PAGE>
"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.
"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) Thirty Thousand
Dollars ($30,000.00).
"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 or Golf Classic Resorts,
L.L.C., the owner of all the interests in 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
3
<PAGE>
Tenant as of the date hereof), and Tenant is not the surviving entity.
(e) notwithstanding the foregoing, any transaction pursuant to which
Terence J. Mulvihill ("Mulvihill") exercises his rights under a pledge of the
membership interest in Golf Classic Resorts, L.L.C. is a permitted change of
control, provided that Landlord and Mulvihill mutually agree on an acceptable
manager of the Property.
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 as a Contingent Purchase Price for the
contribution of the Property, (ii) the date
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<PAGE>
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 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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<PAGE>
"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.
"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
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<PAGE>
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.
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"INITIAL BASE RENT" means $378,000 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. Landlord acknowledges that Tenant has
a right, during the term of the Lease, to use the trade name "Tierra Del Sol"
in connection with the management and operation of the Property but may not use
such trade name in connection with any other property owned by Tenant or any
Affiliate of Tenant.
"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
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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 PARCELS" means those certain three (3) parcels of land adjacent to
or near the Land which are more particularly described on the plat of the
Property to be recorded as of the closing.
"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
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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 resort golf course and
other activities incidental to the operation of a resort 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 GCR-New Mexico, L.L.C., 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.
"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
(subject to the maximum Termination Payment described in SECTION 5.5) equal to
the positive difference, if any, between one hundred thirteen and one-half
percent (113.5%) of all
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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.
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
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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 (or any permitted assignee) 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 remain 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
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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 July 1, 1999 increase shall be pro
rated for the number of days in the Lease Term in the second 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.
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
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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.
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 (and agrees to do so, if applicable, after the expiration or
termination of this Lease), 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.
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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 any late charge or interest shall not
constitute a waiver of, nor
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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 by Transferor for the benefit of
Landlord. Landlord acknowledges that Tenant has provided a junior pledge of the
Pledged Owner's shares to Terence J. Mulvihill pursuant to a Junior Securities
Pledge Agreement dated even date herewith, the form of such Pledge Agreement
being approved by Landlord. Such junior pledge of the Pledged Owner's Shares to
Terence J. Mulvihill shall be deeply subordinated to Landlord's interest in the
Pledged Owner Shares until such time as the Pledged Owner's Shares are released
by Landlord pursuant to the terms of Exhibit D-1 to the Pledge Agreement.
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
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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 provided by Transferor
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.
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 canceled checks
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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 and Landlord'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. This obligation shall survive the
expiration or termination of the Lease provided no Event of Default had occurred
and was continuing at the time of the expiration or termination of the Lease.
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
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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
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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
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
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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, provided, however, that Landlord and Tenant agree to cooperate with
each other in the creation of appropriate vehicular and pedestrian access,
ingress, egress, utilities and maintenance easements related to the Other
Parcels,(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
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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 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
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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)
including without limitation in connection with the sale of the Other Parcels as
described in Section 7.2: (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 or as otherwise specified herein.
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 16, 1996, prepared by ETEC Environmental ,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, 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
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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
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,
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(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 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
construction, alteration, addition, repair or demolition of or to the Property
or
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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; provided,
however, that Tenant may depreciate the costs of such Tenant Improvements
subject to applicable federal and state tax laws provided the funds used to
construct such Tenant Improvements were not provided for as a capital
expenditure by Landlord or an Affiliate of Landlord. 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,
and such response shall not be unreasonably withheld or delayed (failure by
Landlord to provide such response within thirty (30) days after receipt of the
plans and specifications shall be deemed approval).
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
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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
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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.
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(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 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.
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(a) Tenant shall utilize, or cause to be utilized, an accounting practice
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
Belen, Valencia County, New Mexico. 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.
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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
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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 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:
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(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;
(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
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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 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
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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 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
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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 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
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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;
(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
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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.
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(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
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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 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 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) 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 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 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 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
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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 during the
month; and (iii) all other sums, if any, payable by
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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
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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 discretion,
further sublease or license portions of the Property to third parties, including
concessionaires or licensees. Without limiting the foregoing, Tenant's proposed
sublease of 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;
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(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) management agreement to operate restaurants by and between Transferor
and Tenant;
(vi) management agreement to operate bars by and between Transferor and
Tenant;
(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.
(ix) notwithstanding the foregoing, Landlord agrees that a sublease or
license to operate a casino on the Property is permitted subject to written
approval by Landlord of the terms and conditions of the arrangement and approval
of any third party casino operator. Tenant agrees to pay to Landlord as
additional Rent not less than ten (10%) percent of Tenant's gross revenues
related to any casino operation on the Property.
(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
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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
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
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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 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
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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 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
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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
(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
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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 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.
Landlord and Tenant agree to execute subordination, non-disturbance and
attornment agreements, estoppel agreements, and other similar documents
requested by mortgagees of Landlord or Tenant, which are in form and content
reasonably acceptable to Landlord and Tenant.
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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 to the Property. All such future
liabilities and obligations shall thereupon be binding upon the new owner.
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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
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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 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
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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.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
With a Copy to: Nexsen Pruet Jacobs Pollard & Robinson, LLP
200 Meeting Street
Suite 301
Charleston, South Carolina 29401
Attention: Neil C. Robinson, Jr. Esq.
Matthew J. Norton, Esq.
If to Tenant: GCR-New Mexico, L.L.C.
1000 Golf Course Road
Belen, New Mexico 87002
With a copy to: John Costello, Esq.
Wildman Harrold Allen & Dixon
275 West Wacker Drive
Chicago, Illinois 60606
Gregory Perry, Esq.
Pedersen & Houpt
161 North Clark Street
Suite 3100
Chicago, Illinois 60601-3224
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
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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.
28.23 YEAR 2000 PROBLEM. Tenant either has or shall take action necessary
to assure that Tenant's computer based systems are able to operate and
effectively recognize and perform date-sensitive functions involving certain
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). Tenant
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to the operation of the Property will
on a timely basis be able to perform properly date-sensitive functions related
to the Year 2000 Problem (that is, be "Year 2000 compliant"). Tenant shall
indemnify and hold Landlord harmless from any and all claims, losses, damages
and liabilities incurred as a result of Tenant's failure to be Year 2000
complaint.
28.24 NEW MEXICO LAW REGARDING INDEMNIFICATION. Notwithstanding any other
term or condition of this Lease, to the extent, if at all, Section 56-7-1 NMSA
1978 is applicable to any indemnification obligation set forth in this Lease,
the agreement to indemnify, defend and hold harmless set forth herein shall not
extend to liability, claims, damages, losses or expenses, including attorneys'
fees, arising out of (a) the preparation or approval of maps, drawings,
opinions, reports, surveys, change orders, designs or specifications by the
indemnitee, or the indemnitee's agents or employees; or (b) the giving or the
failure to give directions or instructions by the indemnitee, or the
indemnitee's agents or employees, or such giving or failure to give directions
or instructions is the primary cause of bodily injury to persons or damage to
property.
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/
------------------------------
Name: W. Bradley Blair, II
Title: President and CEO
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TENANT: GCR-NEW MEXICO, L.L.C.,
a Delaware limited liability company
By: GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability
company, sole member
By: /s/
------------------------------
Name: Donald R. Mohr
Title: Sole Member
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
[to be provided from survey]
A-1
<PAGE>
EXHIBIT B
SCHEDULE OF IMPROVEMENTS
The Land, together with the championship golf course (with agreed to
modifications to the 17th hole) driving range, putting greens, clubhouse,
facilities, snack bar, restaurant, pro-shop, buildings, structures, parking
lots, 2 tennis courts, 2 swimming pools, Seller's interest as lessee in the
Water Rights Lease from Terence J. Mulvihill, improvements, fixtures and other
items of real estate on the Land.
B-1
<PAGE>
EXHIBIT C
OTHER LEASED PROPERTIES
None.
C-1
<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is entered into as of this 29th
day of May, 1998, by and between (i) GOLF TRUST OF AMERICA, L.P., a Delaware
limited partnership, ("Secured Party"), and (ii) GOLF CLASSIC RESORTS, L.L.C., a
Delaware limited liability company ("Pledgor").
RECITALS:
This Agreement is entered into based on the following understandings:
A. Pursuant to that certain Contribution and Leaseback Agreement (the
"Contribution Agreement") dated as of May 29, 1998, by and between Secured Party
and Pledgor, Pledgor transferred to Secured Party all of its right, title and
interest in and to certain real and personal property as described in the
Contribution Agreement (collectively, the "Property").
B. Pursuant to that certain lease dated as of May 29, 1998,
(the "Lease") Secured Party leased its interest in the Property to GCR-New
Mexico, L.L.C., a Delaware limited liability company, an affiliate of Pledgor
("Tenant").
C. As a condition to (i) Secured Party entering into the Lease with Tenant;
and (ii) Secured Party entering into the Contribution Agreement with Pledgor,
Secured Party has required that Pledgor pledge the Pledged Owner's Shares (as
hereinafter defined) as security for the Obligations (as hereinafter defined).
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Secured Party and Pledgor agree as follows:
1. DEFINITIONS
(a) Capitalized terms not otherwise defined herein shall have the meaning
given to them in the Lease.
(b) The following terms shall have the indicated meanings:
"AGREEMENT" has the meaning set forth in the introductory Paragraph of this
Agreement.
"CONTRIBUTION AGREEMENT" has the meaning set forth in Recital A of this
Agreement.
D-1
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"EVENT OF DEFAULT" has the meaning set forth in Section 14(a) of this
Agreement.
"INDEMNITY EVENT" has the meaning set forth in Section 2(a) of this
Agreement.
"LEASE" has the meaning set forth in Recital B of this Agreement.
"OBLIGATIONS" has the meaning set forth in Section 2(a) of this Agreement.
"PLEDGED OWNER'S SHARES" has the meaning set forth in Section 2(a) of this
Agreement.
"PLEDGOR" has the meaning set forth in the introductory Paragraph of this
Agreement.
"PLEDGOR'S GUARANTY" has the meaning set forth in Section 3(a) of this
Agreement.
"PROPERTY" has the meaning set forth in Recital A of this Agreement.
"SECURED PARTY" has the meaning set forth in the introductory Paragraph of
this Agreement.
"SECURITY FUND" has the meaning set forth in Section 2(a) of this
Agreement.
"TENANT" has the meaning set forth in Recital B of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Secured Party and Pledgor hereby agree as
follows:
2. GRANT OF SECURITY INTEREST.
(a) As security for the payment and performance of all obligations and
liabilities (including, without limitation, indemnities, fees and interest
thereon) of Pledgor, Tenant or any of Pledgor's direct or indirect subsidiaries
arising under: (i) Pledgor's obligation to indemnify Secured Party for breaches
of the representations and warranties made by Pledgor pursuant to Article 3 of
the Contribution Agreement (which obligations shall expire one (1) year from the
date of the Contribution Agreement); (ii) the Lease; (iii) the Pledgor's
Guaranty pursuant to Section 3 of this Agreement and all other provisions of
this Agreement; or (iv) in
D-2
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connection with any agreement, instrument or extension contemplated by the
foregoing documents (collectively, the "Obligations"), Pledgor hereby
pledges, hypothecates and grants to Secured Party a first and prior security
interest in 26,357 Owner's Shares (the "Pledged Owner's Shares") which
reflects a value of $880,000.00 which was priced at the closing trading
average for the previous five (5) business days prior to May 30, 1998 (which
shall include any increase or decrease in the Pledged Owner's Shares, in
accordance with the formula set forth on Exhibit D-1 attached hereto),
together with, after an occurrence and during the continuance of an Event of
Default hereunder or if any representation or warranty in Article 3 of the
Contribution Agreement is breached by Pledgor or proves to be false, as
applicable (an "Indemnity Event"), any and all proceeds thereof, including
without limitation, any and all dividends, income, interest and distributions
earned from or attributable to the investment or deposit of the Pledged
Owner's Shares (the Pledged Owner's Shares, together with all of the
foregoing being collectively referred to herein as the "Security Fund").
Pledgor shall have the right to pledge, as substitute collateral, cash or
other security that is acceptable to Secured Party in its sole and absolute
discretion. Prior to (x) any Event of Default under the Lease (and after the
cure or satisfaction thereof by Tenant or Pledgor, at its sole election), (y)
an Indemnity Event, or (z) an Event of Default (defined below) all dividends,
income, interest and/or distributions earned from or attributable to the
investment or deposit of the Security Fund shall be payable to Pledgor;
following an Event of Default under the Lease such amounts shall be added to
and become a part of the Security Fund and shall only be disbursed in
accordance with the terms of this Agreement. By its execution of this
Agreement, Pledgor acknowledges that it has delivered the Pledged Owner's
Shares to Secured Party as required by this Agreement. The word "Obligations"
is used herein in its most comprehensive sense and includes without
limitation any and all debts, obligations and liabilities of Pledgor, Tenant
or any of Pledgor's direct or indirect subsidiaries, arising as a result of a
breach of any of the representations and warranties made by Pledgor pursuant
to Article 3 of the Contribution Agreement, the Lease or this Agreement, now
or hereafter made, incurred or created, whether voluntary or involuntary and
however arising, whether due or not due, absolute or contingent, liquidated
or unliquidated, determined or undetermined, and whether Pledgor, Tenant or
any of Pledgor's direct or indirect subsidiaries may be liable individually
or jointly, or whether recovery upon such Obligations may be or hereafter
become unenforceable. The Pledged Owner's Shares shall be released in
accordance with the provisions of Exhibit D-1 attached hereto (so long as no
Event of Default exists) or upon expiration of the Lease and fulfillment of
the Obligations.
D-3
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(b) If the Pledgor shall become entitled to receive or shall receive, in
connection with any of the Security Fund, any:
(i) Stock certificate, including, without limitation, any certificate
representing a stock dividend or in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spin-off or split-off;
(ii) Option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Security Fund, or otherwise;
(iii) Dividend or distribution payable in property, including securities
issued by a person other than the issuer of any of the Pledged Owner's Shares;
or
(iv) Dividends or distributions of any sort, then, except for dividends
received by Pledgor at such time as there does not exist an uncured Event of
Default with respect to Pledgor, Pledgor shall accept the same as the agent of
Secured Party, in trust for Secured Party, and shall deliver them forthwith to
Secured Party, in the exact form received, with, as applicable, the Pledgor's
endorsement when necessary, or appropriate stock powers duly executed in blank
by Pledgor, to be held by Secured Party, subject to the terms hereof, as part of
the Security Fund.
(c) Pledgor shall execute and deliver to Secured Party such financing and
continuation statements covering the Security Fund and take such other actions
as Secured Party may from time to time require to perfect and continue the
perfection of Secured Party's security interest in the Security Fund.
3. GUARANTY OF OBLIGATIONS
(a) Pledgor irrevocably and unconditionally guarantees the full and prompt
payment when due of the Obligations and the due performance and compliance with
any of the terms of the Lease ("Pledgor's Guaranty").
(b) Pledgor hereby waives notice of acceptance of this Agreement and notice
of any liability to which it may apply, and waives presentment, demand of
payment, protest, notice of dishonor or nonpayment of any such liability, suit
or taking of other action by Secured Party against Pledgor or Tenant.
(c) Pledgor's Guaranty shall not be released, modified, impaired or
otherwise affected by the following (whether or not Pledgor shall have had
notice or knowledge of the same): (i) any extension or indulgence by Secured
Party in respect to the performance of or compliance with the Obligations; (ii)
any
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failure, omission or inability of Secured Party to enforce any right, power
or remedy in respect to the Lease, the Contribution Agreement or this
Agreement; (iii) any amendment of the Lease or the Contribution Agreement;
(iv) any receipt of security including, without limitation, the Security
Fund, or any sale, exchange, release or subordination of security held by
Secured Party with respect to the Obligations; (v) any release from any
liability of any person liable under the terms of the Lease, the Contribution
Agreement or this Agreement or any other guarantor; (vi) any limitation or
impairment of Secured Party's remedies against Tenant or any other party
liable under the terms of the Lease, the Contribution Agreement or this
Agreement; (vii) any action or inaction of Secured Party with respect to the
Lease, the Contribution Agreement or this Agreement; (viii) any change in the
name or identity of Tenant or any other person or entity referred to in this
Agreement; (ix) the invalidity or unenforceability of the Lease or the
Contribution Agreement; or (x) the death or incapacity of Tenant or any other
person or entity referred to in this Agreement.
(d) If all or any portion of the Obligations of Pledgor as described in
Section 3(a) of this Agreement are paid or performed, the responsibilities of
Pledgor pursuant to Pledgor's Guaranty shall continue and remain in full force
and effect in the event that all or any part of such payment(s) or
performance(s) is avoided or recovered directly or indirectly from Secured Party
as a preference, fraudulent transfer or otherwise, irrespective of payment in
full of all sums due pursuant to such obligations.
(e) The liability of Pledgor pursuant to Pledgor's Guaranty is not
conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Lease or the Contribution Agreement or the pursuit by
Secured Party of any remedies which it now has or may hereafter have with
respect thereto, at law, in equity or otherwise, and Pledgor hereby waives any
and all benefits and defenses that it may have to the contrary and agrees that
by doing so Pledgor shall be liable even if Tenant had no liability at the time
of the execution of the Lease or thereafter ceases to be liable. Pledgor further
agrees that by doing so Pledgor's liability may be larger in amount and more
burdensome than that of Tenant, notwithstanding any benefits or defenses that
Pledgor may have to the contrary. Pledgor agrees that its liability hereunder
shall continue and shall not be limited or affected in any way by an impairment
or any diminution in loss of value in any security or collateral for the ease
(including, but not limited to the Security Fund, the leased premises or any
personal property or fixtures thereon), whether caused by hazardous substance or
otherwise, or Secured Party's failure to perfect a security interest in the
Security Fund.
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(f) Pledgor hereby waives: (i) all notices to Pledgor, to Tenant, or to any
other person, including, but not limited to, the creation, renewal, extension,
assignment, modification or accrual of any of the Obligations and enforcement of
any right or remedy with respect thereto, and notice of any other matters
relating thereto; (ii) demand of payment, presentation and protest; (iii) any
right to require Secured Party to apply to any default the Security Fund or
other security it may hold under the Lease; (v) notice of any sale of personal
property security of Tenant held by Secured Party; (vi) any and all statutes of
limitations affecting Pledgor's and/or Tenant's liability under this Agreement
or the Lease, as applicable, and/or the enforcement of this Agreement or the
Lease, as applicable; and (vii) all principles or provisions of law which
conflict with the terms of this Agreement. Pledgor further agrees that Landlord
may enforce Pledgor's Guaranty upon the occurrence of a default under the Lease,
notwithstanding any dispute between Secured Party and Tenant or Pledgor with
respect to the existence of said default or the payment or performance of the
Obligations or any counterclaim, set-off or other claim which Tenant or Pledgor
may allege against Secured Party with respect thereto. Pledgor also agrees that
upon the abandonment of the Property by Tenant, even if accepted by Secured
Party, or the eviction of Tenant, Pledgor shall remain liable for future
payments of rent, subject to Secured Party's reasonable efforts to mitigate
damages.
(g) Pledgor hereby waives any and all benefits and defenses it may have
with respect to the right to require Landlord to: (i) proceed against Tenant or
any other guarantor of the Obligations; (ii) proceed against or exhaust any
security or collateral Secured Party may hold, including without limitation, the
Security Fund; or (iii) pursue any other right or remedy for Pledgor's benefit;
and Pledgor agrees that Secured Party may proceed against Pledgor for the
Obligations without taking any action against Tenant or any other guarantor and
without proceeding against or exhausting any security or collateral Secured
Party holds, including, without limitation, the Security Fund. Pledgor agrees
that Secured Party may unqualifiedly exercise in its sole discretion any or all
rights and remedies available to it against Tenant or any other guarantor
without impairing Secured Party's rights and remedies in enforcing Pledgor's
Guaranty, under which Pledgor's liabilities shall remain independent and
unconditional. Pledgor agrees that Secured Party's exercise of certain of such
rights or remedies may affect or eliminate Pledgor's right of subrogation or
recovery against Tenant and that, as a result thereof, Pledgor may incur a
partially or totally nonreimbursable liability under Pledgor's Guaranty.
(h) Pledgor hereby agrees that Pledgor shall have no right of subrogation
or reimbursement against Tenant or any right of contribution against any other
guarantor unless and until all rentals and all other sums due under the Lease
have been paid in
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full and all of the Obligations have been satisfied and waives any benefits
or defenses that Pledgor may have to the contrary. Pledgor further agrees
that, to the extent of the waiver of Pledgor's rights of subrogation,
reimbursement and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation or reimbursement Pledgor may have against Tenant shall be junior
and subordinate to any rights Secured Party may have against Tenant, and any
rights of contribution Pledgor may have against any other guarantor shall be
junior and subordinate to any rights Secured Party may have against such
other guarantor. Pledgor also agrees that Pledgor's Guaranty is in addition
to the guaranty of any other guarantor and any and all of Pledgor's other
guarantees of Tenant's obligations or liabilities to Secured Party and that
this Guaranty shall in no way limit or lessen any other liability, however
arising, that Pledgor may have for the payment of any other indebtedness of
Tenant to Secured Party.
(i) To the extent any dispute exists at any time (whether or not this
Agreement or the Lease shall have previously terminated) between or among Tenant
and/or any other guarantor as to any rights to subrogation, reimbursement,
contribution or otherwise, Pledgor agrees to indemnify, defend and hold Secured
Party harmless from and against any loss, damage, claim, demand, cost or any
other liability (including, without limitation, reasonable attorneys' fees and
costs) Secured Party may suffer as a result of such dispute.
(j) The obligations of Pledgor under Pledgor's Guaranty shall not be
altered, limited or affected by any case, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Tenant or by any defense which Tenant may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such case. Secured Party shall have the sole right to accept or reject any plan
on behalf of Pledgor proposed in such case and to take any other action which
Pledgor would be entitled to take, including, without limitation, the decision
to file or not file a claim. Pledgor acknowledges and agrees that any payment
which accrues with respect to Tenant's obligations under the Lease (including,
without limitation, the payment of rent) after the commencement of any such
proceeding (or, if any such payment ceases to accrue by operation of law by
reason of the commencement of said proceeding, such payment as would have
accrued if said proceedings had not been commenced) shall be included in the
Obligations because it is the intention of the parties that said Obligations be
determined without regard to any rule or law or order which may relieve Tenant
of any of its obligations under the Lease. Pledgor hereby permits any trustee in
bankruptcy, receiver, debtor-in-possession, assignee for the benefit of
creditors or similar person to pay Secured Party, or allow the claim of Secured
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Party in respect of, any such payment accruing after the date on which such
proceeding is commenced. Pledgor assigns to Secured Party Pledgor's right to
receive any payments from any trustee in bankruptcy, receiver, debtor-in-
possession, assignee for the benefit of creditors or similar person by way of
dividend, adequate protection payment or otherwise.
4. CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS.
This is a continuing agreement and all rights, powers and remedies hereunder
shall apply to all past, present and future obligations of Tenant or Pledgor to
Secured Party under the Lease or the Contribution Agreement. This Agreement
shall not terminate except in accordance with its terms or Secured Party's
written release of Pledgor from its Obligations under this Agreement.
5. OBLIGATIONS INDEPENDENT: SEPARATE ACTIONS; WAIVER OF STATUTE OF
LIMITATIONS: REINSTATEMENT OF LIABILITY. The Obligations hereunder are
independent of the obligations of Tenant and Pledgor (including, without
limitation, those obligations made pursuant to the Contribution Agreement), and
a separate action or actions may be brought and prosecuted against Pledgor
hereunder whether action is brought against Tenant, Pledgor (under the
Contribution Agreement), or any other person, or whether Tenant or any other
person is joined in any such action or actions. Pledgor acknowledges that there
are no conditions precedent to the effectiveness of this Agreement, and that
this Agreement is in full force and effect and is binding on Pledgor as of the
date written below, regardless of whether Secured Party obtains additional
collateral or any guaranties from others or takes any other action contemplated
by Pledgor. Pledgor waives the benefit of any statute of limitations affecting
Pledgor's liability hereunder or the enforcement thereof, and Pledgor agrees
that any payment of any Obligations or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute of
limitations applicable to Pledgor's liability under this Agreement. The
liability of Pledgor under this Agreement shall be reinstated and revived and
the rights of Secured Party shall continue if and to the extent for any reason
any amount at any time paid on account of the Obligations is rescinded or must
be otherwise restored by Secured Party, whether as a result of any proceedings
in bankruptcy, insolvency, reorganization or otherwise, all as though such
amount had not been paid. The determination as to whether any amount so paid
must be rescinded or restored shall be made by Secured Party in its sole
discretion; provided, however, that if Secured Party chooses to contest any such
matter at the request of Pledgor, Pledgor agrees to indemnify and hold Secured
Party harmless from and against all costs and expenses, including reasonable
attorneys' fees, expended or incurred by Secured Party in connection therewith,
including without limitation, in any litigation with respect thereto.
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<PAGE>
6. REPRESENTATIONS AND WARRANTIES.
(a) Pledgor represents and warrants to Secured Party that: (i) Pledgor is
the owner, directly or indirectly, and has possession or control of the Pledged
Owner's Shares; (ii) Pledgor has the right to pledge the Pledged Owner's Shares;
(iii) the Pledged Owner's Shares are genuine, free from liens, adverse claims,
setoffs, default, prepayment, defenses and conditions precedent of any kind or
character, except as previously disclosed to Secured Party in writing by
Pledgor; (iv) specifically with respect to Pledged Owner's Shares consisting of
investment securities, instruments, chattel paper, documents, contracts,
insurance policies or any like property, all persons appearing to be obligated
thereon have authority and capacity to contract and are bound as they appear to
be, and the same comply with applicable laws concerning form, content and manner
of preparation and execution) (v) all statements contained herein and, where
applicable, in the Pledged Owner's Shares are true and complete; and (vi) no
financing statement covering any of the Pledged Owner's Shares and naming any
secured party other than Secured Party, is on file in any public office.
(b) Pledgor further represents and warrants to Secured Party that with
respect to the Pledged Owner's Shares securing Tenant's obligations under the
Lease pursuant to this Agreement: (i) such Pledged Owner's Shares are so pledged
at Tenant's request; (ii) Secured Party has made no representation to Pledgor as
to the creditworthiness of Tenant; and (iii) Pledgor has established adequate
means of obtaining from Tenant on a continuing basis financial and other
information pertaining to Tenant's financial condition. Pledgor agrees to keep
adequately informed by such means of any facts, events or circumstances which
might in any way affect Pledgor's risks hereunder, and Pledgor further agrees
that Secured Party shall have no obligation to disclose to Pledgor any
information or material about Tenant which is acquired by Secured Party in any
manner. Pledgor further warrants and represents that it has reviewed and
approved copies of the Lease and is fully informed of the remedies that Secured
Party may pursue under the Lease or at law or in equity, with or without notice
to Pledgor, in the event of a default under the Lease.
(c) Pledgor understands that but for Pledgor's pledge of the Pledged
Owner's Shares and the other agreements contained herein, Secured Party would
not enter into the Lease with Tenant or the Contribution Agreement and that the
Security Fund pledged pursuant to this Agreement will serve as collateral for
the Lease and the Contribution Agreement on the terms and conditions of this
Agreement.
7. COVENANTS OF PLEDGOR.
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(a) Pledgor agrees in general: (i) to indemnify Secured Party against all
losses, claims, demands, liabilities and expenses of every kind caused by
property subject hereto; (ii) to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Secured Party any time after the
occurrence of an Event of Default under the Lease or as such costs and expenses
relate to a breach by Pledgor of any representation or warranty contained in
Article 3 of the Contribution Agreement, in the realization, enforcement and
exercise of its rights, powers and remedies hereunder; (iii) to permit Secured
Party to exercise its powers; (iv) to execute and deliver such documents as
Secured Party deems necessary to create, perfect and continue the security
interests contemplated hereby; and (v) not to change its chief place of business
or the place where Pledgor keeps any records concerning the Pledged Owner's
Shares without first giving Secured Party written notice of the address to which
Pledgor is moving same.
(b) Pledgor agrees with regard to the Security Fund: (i) not to permit any
lien on the Security Fund except in favor of Secured Party; (ii) not to withdraw
any funds from any deposit account pledged to Secured Party hereunder without
Secured Party's prior written consent; (iii) not to sell, hypothecate or
otherwise dispose of any of the Pledged Owner's Shares or any interest therein,
without the prior written consent of Secured Party which consent shall not be
unreasonably withheld and provided further that Pledgor may convey or otherwise
dispose of the Pledged Owner's Shares subject to Secured Party's written
approval provided Pledgor substitutes collateral of an equal value which is
approved by Secured Party (the Secured Party acknowledges that the junior lien
of the Pledged Owner's Shares to Terence J. Mulvihill does not constitute a
hypothecation as described in this subsection); (iv) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Pledged Owner's Shares and to permit Secured Party to inspect the
same at any reasonable time; (v) if requested by Secured Party following an
Event of Default under the Lease or an Indemnity Event, to receive and use
reasonable diligence to collect proceeds from the Pledged Owner's Shares, in
trust and as part of the Security Fund to be held in accordance with Section
2(a) above; (vi) not to commingle Pledged Owner's Shares with other property;
(vii) to provide any service and do any other acts or things necessary to keep
the Pledged Owner's Shares free and clear of all defenses, rights of offset and
counterclaims; and (viii) if the Pledged Owner's Shares consists of securities
and so long as no Event of Default or Indemnity Event exists, to vote said
securities and to give consents, waivers and ratifications with respect thereto,
provided that no vote shall be cast or consent, waiver or ratification given or
action taken which would impair Secured Party's interest in the Security Fund or
be inconsistent with or violate any provisions of this Agreement.
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8. POWERS OF SECURED PARTY. Pledgor appoints Secured Party its true
attorney in fact to perform any of the following powers, which are coupled with
an interest and are irrevocable until this Agreement has been terminated
pursuant to its terms and may be exercised from time to time by Secured Party's
officers and employees: (a) to perform any obligation of Pledgor hereunder in
Pledgor's name or otherwise; (b) to notify any person obligated on any security,
instrument or other document subject to this Agreement of Secured Party's rights
hereunder; (c) to collect by legal proceedings or otherwise all dividends,
interest, principal or other sums now or hereafter payable upon or on account of
the Security Fund; (d) to enter into any extension, reorganization, deposit,
merger or consolidation agreement, or any other agreement relating to or
affecting the Security Fund and in connection therewith to deposit or surrender
control of the Security Fund to accept other property in exchange for the
Security Fund, and to do and perform such acts and things as Secured Party may
deem proper, with any money or property received in exchange for the Security
Fund at Secured Party's option, to be applied to the Obligations or held by
Secured Party under this Agreement; (e) to make any compromise or settlement
Secured Party deems desirable or proper in respect of the Security Fund; (f) to
insure, process and preserve the Security Fund; (g) to exercise all rights,
powers and remedies which Pledgor would have, but for this Agreement, under all
the Pledged Owner's Shares subject to this Agreement; (h) to do all acts and
things and execute all documents in the name of Pledgor or otherwise that are
deemed by Secured Party as necessary, proper or convenient in connection with
the preservation, perfection or enforcement of its rights hereunder; and (i) to
execute and file in Pledgor's name any financing statements and amendments
thereto required to perfect Secured Party's security interest hereunder;
provided, however, that until the occurrence and only during the continuation of
an Event of Default or an Indemnity Event shall Secured Party have the right to
exercise the power of attorney for the purposes described in paragraphs (a),
(c), (d), (e), (f), (g), or (h). If an Event of Default or Indemnity Event has
occurred and is continuing, any or all of the Security Fund consisting of
securities may be registered, without notice, in the name of Secured Party or
its nominee, and thereafter Secured Party or its nominee may exercise, without
notice, all voting and partnership rights at any meeting of the partners of the
issuer thereof, any and all rights of conversion, exchange or subscription, or
any other rights, privileges or options pertaining to any Pledged Owner's Shares
all as if it were the absolute owner thereof. The foregoing shall include,
without limitation, the right of Secured Party or its nominee to exchange, at
its discretion, any and all Pledged Owner's Shares upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
issuer thereof, or upon the exercise by the issuer thereof or Secured Party of
any right, privilege or option pertaining to any Pledged Owner's Shares and in
connection therewith, the right to
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deposit and deliver any and all of the Pledged Owner's Shares with any
committee, depository, transfer agent, registrar or other designated agent
upon such terms and conditions as Secured Party may determine. All of the
foregoing rights, privileges or options may be exercised without liability
except to account for property actually received by Secured Party. Secured
Party shall have no duty to exercise any of the foregoing, or any other
rights, privileges or options with respect to the Pledged Owner's Shares and
shall not be responsible for any failure to do so or delay in so doing.
9. CASH COLLATERAL ACCOUNT. Any money received by Secured Party in respect
of the Security Fund will be retained in an interest bearing cash collateral
account and the same shall, for all purposes, be deemed part of the Security
Fund hereunder.
10. SECURED PARTY'S CARE AND DELIVERY OF PLEDGED OWNER'S SHARES. Secured
Party's obligation with respect to the Security Fund in its possession shall be
strictly limited to the duty to exercise reasonable care in the custody and
preservation of the Security Fund, and such duty shall not include any
obligation to ascertain or to initiate any action with respect to or to inform
Pledgor of maturity dates, conversion, call or exchange rights, or offers to
purchase the Pledged Owner's Shares or any similar matters, notwithstanding
Secured Party's knowledge of the same. Secured Party shall have no duty to take
any steps necessary to preserve the rights of Pledgor against prior parties, or
to initiate any action to protect against the possibility of a decline in the
market value of the Pledged Owner's Shares. Secured Party shall not be obligated
to take any actions with respect to the Pledged Owner's Shares requested by
Pledgor unless such request is made in writing and Secured Party determines, in
its sole discretion, that the requested action would not unreasonably jeopardize
the value of the Pledged Owner's Shares as security for the Obligations. Secured
Party may at any time deliver the Security Fund, or any part thereof, to
Pledgor, and the receipt thereof by Pledgor shall be a complete and full
acquittance for the Security Fund so delivered, and Secured Party shall
thereafter be discharged from any liability or responsibility therefor.
11. PLEDGOR'S WAIVERS.
(a) Pledgor waives any right to require Secured Party to: (i) proceed
against any person, including Tenant or Pledgor under the Contribution
Agreement; (ii) proceed against or exhaust any security held from Tenant; (iii)
give notice of the terms, time and place of any public or private sale of
personal property security held from Tenant or any other person or otherwise
comply with any other provisions of Section 9-504 Uniform Commercial Code; (iv)
pursue any other remedy in Secured Party's power; or (v) make any presentments
or demands for performance, or give any notices of
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nonperformance, protests, notices of protest or notices of dishonor in
connection with any obligations or evidences of indebtedness held by Secured
Party as security or which constitute in whole or in part the Obligations
secured hereunder, or in connection with the creation of new or additional
Obligations.
(b) Pledgor waives any defense arising by reason of: (i) any disability or
other defense of Tenant, Pledgor or any other person; (ii) the cessation or
limitation from any cause whatsoever, other than payment in full, of the
Obligations of Tenant, Pledgor or any other person; (iii) any lack of authority
of any officer, director, partner, agent or any other person acting or
purporting to act on behalf of Tenant or Pledgor which is a corporation,
partnership or other type of entity, or any defect in the formation of Tenant or
Pledgor; (iv) any act or omission by Secured Party which directly or indirectly
results in or aids the discharge of Tenant or Pledgor or any Obligations by
operation of law or otherwise; or (v) any modification of the Obligations, in
any form whatsoever, including any modification made after revocation hereof to
any Obligations incurred prior to such revocation, and including, without
limitation, the renewal, extension, acceleration or other change in time for
payment of the Obligations, or other change in the terms of the Obligations, or
any part thereof. Until all Obligations shall have been paid in full, Pledgor
shall have no right of subrogation, and Pledgor waives any defense Pledgor may
have based upon an election of remedies by Secured Party which destroys
Pledgor's subrogation rights or Pledgor's rights to proceed against Tenant for
reimbursement, including without limitation, any loss of rights Pledgor may
suffer by reason of any rights, powers or remedies of Tenant in connection with
any anti-deficiency laws or any other laws limiting, qualifying or discharging
Tenant's Obligations. Until all Obligations of Tenant to Secured Party shall
have been paid in full, Pledgor further waives any right to enforce any remedy
which Secured Party now has or may hereafter have against Tenant or any other
person, and waives any benefit of, or any right to participate in, any security
whatsoever now or hereafter held by Secured Party.
12. AUTHORIZATIONS TO SECURED PARTY. Pledgor authorizes Secured Party
either before or after revocation hereof, without notice or demand and without
affecting Pledgor's liability hereunder, from time to time to: (a) alter,
compromise, renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the Obligations or any part thereof; (b)
take and hold security, other than the Pledged Owner's Shares, for the payment
of the Obligations or any part thereof and exchange, enforce, waive and release
the Pledged Owner's Shares, or any part thereof, or any such other security; (c)
apply the Pledged Owner's Shares or any other security and direct the order or
manner of sale thereof, including without limitation, a non-judicial sale
permitted by the terms of this Agreement, as Secured Party in its
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discretion may determine; (d) release or substitute any one or more of the
endorsers or guarantors of the Obligations, or any part thereof, or any other
parties thereto; and (e) apply payments received by Secured Party from Tenant
or Pledgor to any Obligations of Tenant or Pledgor to Secured Party, in such
order as Secured Party shall determine in its sole discretion, whether or not
any such Obligations is covered by this Agreement, and Pledgor hereby waives
any provision of law regarding application of payments which specifies
otherwise.
13. PAYMENT OF TAXES, CHARGES, LIENS AND ASSESSMENTS. Pledgor agrees to
pay, prior to delinquency, all taxes, charges, liens and assessments against the
Security Fund, and upon the failure of Pledgor to do so, Secured Party at its
option may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same. Any such
payments made by Secured Party shall be obligations of Pledgor to Secured Party,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 17 of this Agreement,
and shall be secured by the Security Fund, subject to all terms and conditions
of this Agreement.
14. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, after
any applicable cure or grace period under the Lease which has not been cured by
pledgor within ten (10) days of the date such cure period of Tenant expired; or
(b) any representation or warranty made by Pledgor herein shall prove to be
incorrect in any material respect when made; or (c) an Indemnity Event; or (d)
Pledgor shall fail to observe or perform any obligation or agreement contained
herein after Secured Party has provided written notice describing such failure
and Pledgor has failed within thirty (30) days of receipt of such notice to cure
such failure, provided if such cure cannot be completed within such thirty (30)
day period, then such cure period shall be extended for so long as Pledgor is
diligently prosecuting such cure to completion up to a maximum of ninety (90)
days.
15. REMEDIES. Upon the occurrence of any Event of Default, Secured Party
shall have and may exercise without demand any and all rights, powers,
privileges and remedies granted to a secured party upon default under the
Uniform Commercial Code or otherwise provided to Secured Party by law. All
rights, powers, privileges and remedies of Secured Party shall be cumulative.
Secured Party may exercise its right of set off with respect to the Obligations
in the same manner as if the Obligations were unsecured. No delay, failure or
discontinuance of Secured Party in exercising any right, power, privilege or
remedy hereunder shall affect or operate as a waiver of such right, power,
privilege or
D-14
<PAGE>
remedy; nor shall any single or partial exercise of any such right, power,
privilege or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power, privilege or
remedy. Any waiver, permit, consent or approval of any kind by Secured Party
of any default hereunder, or any such waiver of any provisions or conditions
hereof, must be in writing and shall be effective only to the extent set
forth in writing. While an Event of Default exists: (a) Secured Party may, at
any time and at Secured Party's sole option, liquidate any time deposits
pledged to Secured Party hereunder, whether or not said time deposits have
matured and notwithstanding the fact that such liquidation may give rise to
penalties for early withdrawal of funds; (b) Secured Party may appropriate
the Security Fund and apply all proceeds toward repayment of the Obligations
in such order as Secured Party may from time to time elect or, at Secured
Party's sole option, place any proceeds in a cash collateral account; and (c)
at Secured Party's request, Pledgor will assemble and deliver all Pledged
Owner's Shares not already in the possession of Secured Party, and books and
records pertaining thereto, to Secured Party at a reasonably convenient place
designated by Secured Party. It is agreed that public or private sales, for
cash or on credit, to a wholesaler or retailer or investor, or user of
property of the types subject to this Agreement, or public auction, are all
commercially reasonable since differences in the sales prices generally
realized in the different kinds of sales are ordinarily offset by the
differences in the costs and credit risks of such sales. For any part of the
Security Fund consisting of securities, Secured Party shall be under no
obligation to delay a sale of any portion thereof for the period of time
necessary to permit the issuer thereof to register such securities for public
sale under any applicable state or federal law, even if the issuer thereof
would agree to do so.
16. DISPOSITION OF PLEDGED OWNER'S SHARES. Secured Party shall not transfer
all or any part of the Pledged Owner's Shares or Security Fund except in
connection with the exercise of remedies as provided in Section 15 above. Any
proceeds of any disposition of any of the Pledged Owner's Shares or any part
thereof, shall be applied by Secured Party to the payment of expenses incurred
by Secured Party in connection with the foregoing, including reasonable
attorneys' fees, and the balance of such proceeds shall be applied by Secured
Party toward the payment of the Obligations in such order of application as
Secured Party may from time to time elect.
17. COSTS. EXPENSES AND ATTORNEYS' FEES. Pledgor shall pay to Secured Party
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees incurred by Secured
Party after the occurrence and during the continuance of any Event of Default in
exercising any right, power, privilege or remedy conferred by this Agreement or
in the enforcement thereof, including any of the
D-15
<PAGE>
foregoing incurred in connection with any bankruptcy proceeding relating to
Pledgor or the valuation of the Pledged Owner's Shares including without
limitation, the seeking of relief from or modification of the automatic stay
or the negotiation and drafting of a cash collateral order. All of the
foregoing shall be paid to Secured Party by Pledgor with interest at a rate
per annum equal to the lesser of ten percent (10%) or the maximum rate
permitted by law.
18. GOVERNING LAW; SUCCESSORS. ASSIGNS. This Agreement shall be governed by
and construed in accordance with the laws of the state in which the Property is
located, and shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties.
19. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
20. NON-RECOURSE. The obligations of Pledgor hereunder with respect to the
Lease and the obligations of Tenant thereunder are specifically non-recourse to
Pledgor except to the extent of the Pledged Owner's Shares. In no event shall
Pledgor or any assets of Pledgor or any member, manager, or affiliate of
Pledgor, (except for Tenant) be liable for a default by Tenant under the Lease
except to the extent of the Pledged Owner's Shares then pledged to Secured
Party.
D-16
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
PLEDGOR
________________________ GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability
________________________ company
By:
----------------------------
Name: Donald R. Mohr
Title: Sole Member
D-17
<PAGE>
SECURED PARTY
GOLF TRUST OF AMERICA, L.P.
a Delaware limited partnership
GTA GP, Inc.
a Maryland corporation
Its: General Partner
By:
-------------------------------
Name: W. Bradley Blair, II
Title: President and CEO
D-18
<PAGE>
EXHIBIT D-1
Schedule of Adjustments in the Number of Pledged Owner's Shares
The Pledged Owner's Shares shall be adjusted as follows:
1. Increase of Pledged Owner's Shares. If Pledgor elects to receive
additional Owner's Shares as described in the Contribution Agreement, then the
Pledged Owner's Shares shall be increased such that the value of the Pledged
Owner's Shares held by Secured Party in the Security Fund shall equal the sum of
(i) the value of the initial Pledged Owner's Shares (valued as the date of the
Pledge Agreement), and (ii) fifteen percent (15%) of the Contingent Purchase
Price (such shares valued as of the date of the pledge). This adjustment to the
number of Pledged Owner's Shares shall occur simultaneously with the
circumstances triggering such an adjustment as described above, without the
necessity for any further action on the part of Pledgor or Secured Party.
Pledgor shall deliver to Secured Party certificates evidencing such additional
Pledged Owner's Shares immediately upon the occurrence of such triggering
circumstances.
2. Release of Pledged Owner's Shares. The Pledged Owner's Shares shall be
released and subtracted from the Security Fund in accordance with the following
schedule subsequent to the relocation and reconstruction of the 17th fairway and
green to Secured Party's satisfaction:
(a). Pledged Owner's Shares valued at $400,000 at such time as the Net
Operating Income with respect to the Property, shall have been, for the first
calendar year ending 1998, at least one hundred thirteen and one-half percent
(113.5%) of all rent payable by Tenant under the Lease for each such calendar
year (based on the rent adjusted in accordance with the terms of the Lease, if
applicable.
(b). One-third (1/3) of the remaining Pledged Owner's Shares (or an
equivalent dollar amount if held in cash or other securities) at such time as
the Net Operating Income with respect to the Property shall have been, for each
of the two (2) prior calendar years (tested annually commencing January 1,
1998), at least one hundred twenty percent (120%) of all rent payable by Tenant
under the Lease for each such calendar year (based on the rent adjusted in
accordance with the terms of the Lease, if applicable).
(c). An aggregate of two-thirds (2/3) of the remaining Pledged Owner's
Shares (or an equivalent dollar amount if held in cash or other securities) at
such time as the Net Operating Income with
D-1-1
<PAGE>
respect to the Property shall have been, for each of the two (2) prior
calendar years (tested annually commencing January 1, 1998), at least one
hundred and thirty percent (130%) of all rent payable by Tenant under the
Lease for each such calendar year (based on the rent adjusted in accordance
with the terms of the Lease, if applicable).
(d). All of the Pledged Owner's Shares (or an equivalent dollar amount if
held in cash or other securities) provided that the Net Operating Income with
respect to the Property shall have been, for each of the two (2) prior calendar
years (tested annually commencing January 1, 1998), one hundred and forty
percent (140%) of all rent payable by Tenant under the Lease for each such
calendar year (based on the rent adjusted in accordance with the terms of the
Lease, if applicable).
(e). Subject to Section 5.5 of the Lease, promptly after the Expiration
Date (as defined in the Lease) and payment by Pledgor to Secured Party of all
amounts due under the Lease, Secured Party shall release all remaining Pledged
Owner's Shares, if any, to Pledgor.
(f). In addition to the foregoing, Secured Party agrees that it may, but
is under no obligation to, release Pledged Owner's Shares valued at $80,000
subsequent to closing at request of Pledgor.
This adjustment to the number of Pledged Owner's Shares shall occur
simultaneously with the circumstances triggering such an adjustment as described
above, without the necessity for any further action on the part of Pledgor or
Secured Party.
D-1-2
<PAGE>
EXHIBIT E
ADJUSTMENTS TO CALCULATION OF GROSS GOLF REVENUE
FOR PRIVATE CLUBS
Not Applicable.
E-1
<PAGE>
EXHIBIT F
CALCULATION
Calculation of Gross Golf Revenue for the Base Year on a Quarter-by-Quarter
Basis
1st Quarter 1997 $253,000
2nd Quarter 1997 $319,000
3rd Quarter 1997 $308,000
4th Quarter 1997 $220,000
F-1
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
dated as of May 29, 1998
by and between
GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability company
as Transferor,
and
GOLF TRUST OF AMERICA, L.P., a Delaware Limited Partnership
Tierra Del Sol Golf & Country Club
Belen, New Mexico
<PAGE>
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2
PURCHASE AND CONTRIBUTION: PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . .
2.1 Purchase and Contribution. . . . . . . . . . . . . . . . . . . . .
2.2 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . .
2.3 Earnest Money Deposit and Payment of Base Purchase Price . . . . .
ARTICLE 3
TRANSFEROR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . .
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . .
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . .
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . .
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . .
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . .
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . .
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . .
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . .
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . .
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . .
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . .
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.19 Public Offering; Preparation of S-11 . . . . . . . . . . . . . . .
3.20 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . .
3.21 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.22 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
3.23 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . .
3.24 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . .
3.25 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4
TRANSFEREE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . .
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . .
4.6 Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS
5.1 As to Transferee's Obligations . . . . . . . . . . . . . . . . . .
5.2 As to Transferor's Obligations . . . . . . . . . . . . . . . . . .
ARTICLE 6
CLOSING
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2 Transferor's Deliveries. . . . . . . . . . . . . . . . . . . . . .
6.3 Transferee's Deliveries. . . . . . . . . . . . . . . . . . . . . .
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . .
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . .
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . .
6.7 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.8 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . .
ARTICLE 7
GENERAL PROVISIONS
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . .
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . .
P-ii
<PAGE>
ARTICLE 8
LIABILITY OF TRANSFEREE
8.1 Liability of Transferee. . . . . . . . . . . . . . . . . . . . . .
8.2 Indemnification by Transferor. . . . . . . . . . . . . . . . . . .
8.3 Termination by Transferee. . . . . . . . . . . . . . . . . . . . .
8.4 Termination by Transferor. . . . . . . . . . . . . . . . . . . . .
8.5 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . .
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Completeness; Modification . . . . . . . . . . . . . . . . . . . .
9.2 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . .
9.4 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . .
9.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . .
9.13 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . .
9.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .
9.15 Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.16 New Mexico Law Regarding Indemnification . . . . . . . . . . . . .
</TABLE>
P-iii
<PAGE>
EXHIBITS
- --------
Exhibit A-Legal Description of the Land and Other Parcels
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 and Permitted Liens
Exhibit N-Accredited Investor Questionnaire
Exhibit O-Transferor's Certificate
Exhibit P-Warranty Disclosure Schedule
P-iv
<PAGE>
CONTRIBUTION AND LEASEBACK AGREEMENT
Summary Sheet
Transferee: GOLF TRUST OF AMERICA, L.P., a Delaware Limited
Partnership
Transferror: GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability company
Date of
Agreement: May 29, 1998
Golf Course: Tierra Del Sol Golf & Country Club
(address): 1000 Golf Course Road
Belen, New Mexico 87002
Trade Name: Golf Classic Resorts, L.L.C.
Notice Address
of Transferor: 1000 Golf Course Road
Belen, New Mexico 87002
with a copy to: John Costello, Esq.
Wildman Harrold Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606; and
Gregory J. Perry, Esq.
Pedersen & Houpt
161 North Clark Street, Suite 3100
Chicago, Illinois 60601-3224
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: Nexsen Pruet Jacobs Pollard & Robinson, LLP
200 Meeting Street, Suite 301
<PAGE>
Charleston, South Carolina 29401
Attention: Neil C. Robinson, Jr., Esq.
Matthew J. Norton, Esq.
P-vi
<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 Tierra Del Sol Golf & Country
Club 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
1
<PAGE>
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 (including "Tierra Del Sol
Golf & Country Club" and "Tierra Del Sol"), 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 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
2
<PAGE>
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 Three Million Six Hundred Thousand Dollars
($3,600,000.00).
"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.
"COMPANY" means Golf Trust of America, Inc.
"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 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 Standard time, on the date hereof, and continuing through 5:00 p.m.,
Eastern Standard time, on the date that is sixty (60) days from the date hereof;
provided, however, the parties shall make a good faith effort to consummate the
Closing by May 29, 1998.
"EARNEST MONEY DEPOSIT" means One Hundred Thousand Dollars ($100,000.00).
The Earnest Money Deposit may be made simultaneously at Closing.
"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.
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"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 an 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).
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"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 and
any such merchandise that is on order as of the Closing Date.
"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.
"OTHER PARCELS" shall mean those certain three (3) parcels of land adjacent
to or near the Land which are more particularly described on the plat of the
Property to be recorded as of the Closing.
"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.
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"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).
"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.
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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.
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.
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(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 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
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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 EARNEST MONEY DEPOSIT AND PAYMENT OF BASE PURCHASE PRICE. The Base
Purchase Price shall be paid to Transferor in the following manner:
(a) The Earnest Money Deposit shall be paid by Transferee to Escrow Agent
on the date hereof, which amount shall be credited without interest to the
Transferor as a portion of the Base
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Purchase Price at closing or released to Transferee in the event that this
Agreement is terminated for any reason unless otherwise provided for in this
Agreement.
(b) 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.
(c) Transferee shall pay in cash 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 Diligence Period, which schedule shall be
subject to Transferee's review and approval, which approval shall not be
unreasonably withheld.
(d) Transferee shall pay a portion of the Base Purchase Price equal to
$880,000.00 to Transferor in Owner's Shares. The number of Owner's Shares
required for such payment shall be the quotient obtained by dividing the above
described portion of the Base Purchase Price by the average closing price for
the common stock of Company for the five (5) day period prior to May 30, 1998.
(e) Transferee shall pay the balance of the Base Purchase Price to
Transferor in cash.
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.
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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). Notwithstanding
the foregoing, Transferor discloses that the Town of Belen, New Mexico is
considering annexation of the Property into the Town of Belen.
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
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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, except as set forth as permitted
liens on Exhibit M attached hereto.
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.
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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
premiums due as of the Closing Date 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 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 dispute pending or,
to the best of Transferor's knowledge, threatened as to the operation or
maintenance of the Property or any part
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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 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
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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; (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 acts or circumstances hat could reasonably be expected to
give rise to a material non-compliance with Environmental Laws, material
environmental liability or material Environmental Claim.
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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
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.
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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.
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
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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 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
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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 (which is
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, or Transferee's nominee (which is
Transferor), 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:
(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.
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(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 2:00 p.m., Eastern Standard time,
at the offices of Transferee (or counsel to Transferee) on May 29, 1998;
provided, however, that the Closing Date period may be extended for an
additional thirty (30) days by Transferee, at its sole discretion by providing
written notice to Transferor prior to May 29, 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 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) Water Rights Lease Agreement, Amended and Restated Water Rights Lease
Agreement, or other conveyance document of all of Transferor's water rights on
the Property which shall allow Transferee the ability to access and use the
quantity and quality of potable and non-potable water needed to provide for the
operation of the Property as described herein and in the Golf Course Lease.
(e) The Golf Course Lease.
(f) (Reserved).
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(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
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
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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) The Pledge Agreement executed by Transferor encumbering Owner's Shares
as more particularly described in the Golf Course Lease.
(x) The Management Agreement by and between Transferor and Tenant with
respect to liquor licenses and alcoholic beverage permits related to the
Property.
(y) Restrictive covenants and perpetual easements for vehicular and
pedestrian access, ingress, egress, utilities, and maintenance as to the Other
Parcels such that Transferee shall have perpetual access to the Other Parcels,
and further so that Transferee shall have the right to approve in its reasonable
discretion permitted uses of the Other Parcels along with an architectural
review of the location, exterior design, and construction of any improvements
(other than single family residences and directly related improvements)
constructed on such Other Parcels.
(z) Assignment of Transferor's interest in the diversionary use of water
rights related to the Property in a form acceptable to Transferee.
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(aa) 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 less the Earnest Money
Deposit by federal funds wire to an account designated by Transferor.
Additionally, the Escrow Agent shall remit the Earnest Money Deposit to the
Transferor.
(b) The remaining portion of the Base 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.
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 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 continued
effectiveness of any liquor licenses or alcoholic beverage licenses or permits
for the Property, to the extent not theretofore executed and delivered, and a
management agreement among Transferor and the Affiliate lessee of the Golf
Course Lease such Transferor continues to manage the food and beverage and bar
operation on the Property for so long as the Affiliate lessee is the lessee
under the Golf Course Lease.
(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,
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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 as of the Closing Date:
(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.
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(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 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
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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
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 the Registered Offering 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.
27
<PAGE>
7.5 LIQUOR LICENSES. Transferor shall continue to maintain 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, and shall enter into a management agreement with the Affiliate lessee
of the Golf Course Lease, the form of which shall be approved by Transferee. To
that end, Transferor and Transferee, shall cooperate each with the other, and
each shall execute such assignment agreements in forms mutually agreeable
between the parties provided that Transferor shall indemnify and hold
Transferee harmless from any liability, damages or claims encountered in
connection with such operations and Transferor shall continue to exercise
management and supervision of such facilities only as long as the Affiliate
lessor, or its assignee approved by Transferee, is the lessee under the Golf
Course Lease or until Transferee chooses to file all necessary alcoholic
beverage and liquor license applications for licenses and permits to manage and
supervise the facilities itself.
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 and Transferee shall be entitled to the return of its
Earnest Money Deposit, 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.
28
<PAGE>
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 and Transferee shall be entitled to the return of its Earnest Money
Deposit, or (b) to waive its right to terminate, and instead, to proceed to
Closing. If, prior to Closing, Transferee materially defaults in performing any
of its obligations under this Agreement (including its obligation to purchase
the Property), and Transferee fails to cure any such material 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 receive from
the Escrow Agent that portion of the Earnest Money Deposit that will reimburse
Transferor for actual reasonable out-of-pocket expenses incurred in connection
with this Agreement, and Transferor waives any additional claims for damages,
actual, consequential or otherwise, that it may possess against Transferee.
Transferee shall receive the remaining portion of the Earnest Money Deposit, if
any.
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
29
<PAGE>
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 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
30
<PAGE>
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 the Registered Offering 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 and the Registered Offering; provided,
Transferor shall have the right to provide such information to its consultants
and advisors.
9.15 ESCROW AGENT. In the event of a dispute between the Transferor and
Transferee, the Escrow Agent shall not disburse the Earnest Money Deposit until
it has received 1) joint written instructions from the Transferor and
Transferee; or 2) an order from a court of competent jurisdiction directing the
Escrow Agent to distribute the escrowed funds. The Escrow Agent shall have no
duties except as stated herein and the parties agree that it shall not
constitute a conflict of interest for the Escrow Agent to represent the
Transferor or Transferee in connection with this Agreement. The Escrow Agent
shall not be liable for anything which it may do or refrain from doing in
connection herewith provided that it acts in good faith, and without gross
negligence, willful neglect or intentional breach of this Agreement. In the
event that the Escrow Agent becomes involved in litigation relating to the
Escrow, the non-prevailing party shall be responsible for the payment of the
Escrow Agent's reasonable fees and expenses and for the reasonable attorneys'
fees and costs of the prevailing party.
9.16 NEW MEXICO LAW REGARDING INDEMNIFICATION. Notwithstanding any other
term or condition of this Agreement, to the extent, if at all, Section 55-7-1
NMSA 1978 is applicable to any indemnification obligation set forth in this
Agreement, the agreement to indemnify, defend and hold harmless set forth herein
shall not extend to liability, claims, damages, losses or expenses, including
31
<PAGE>
attorney's fees, arising out of (a) the preparation or approval of maps,
drawings, opinions, reports, surveys, change orders, designs or specifications
by the indemnitee, or the indemnitee's agents or employees; or (b) the giving or
the failure to give directions or instructions by the indemnitee, or the
indemnitee's agents or employees, or such giving or failure to give directions
or instructions is the primary cause of bodily injury to persons or damage to
property.
IN WITNESS WHEREOF, Transferor and Transferee have hereunder affixed their
signatures to this Contribution and Leaseback Agreement, all as of the 29th day
of May, 1998.
[SIGNATURES APPEAR ON NEXT PAGE]
32
<PAGE>
"TRANSFEREE"
GOLF TRUST OF AMERICA, L.P., a
Delaware limited partnership
By: GTA GP, Inc. a Maryland corporation
Its: General Partner
By: /s/
-----------------------------------------
Name: W. Bradley Blair, III
Title: President and Chief Executive Officer
33
<PAGE>
"TRANSFEROR"
GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability company
By: /s/
-----------------------------------------
Name: Donald R. Mohr
Title: Sole Member
34
<PAGE>
CONSENTED TO BY:
"ESCROW AGENT"
VALENCIA COUNTY TITLE COMPANY
By: /s/
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
35
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
[to be taken from survey]
A-1
<PAGE>
EXHIBIT B
IMPROVEMENTS
The Land, together with the championship golf course (with agreed to
modifications to the 17th hole) driving range, putting greens, clubhouse,
facilities, snack bar, restaurant, pro-shop, buildings, structures, parking
lots, 2 tennis courts, 2 swimming pools, Seller's interest as lessee in the
Water Rights Lease from Terence J. Mulvihill, improvements, fixtures, and other
items of real estate located on the Land.
B-1
<PAGE>
EXHIBIT C
TANGIBLE PERSONAL PROPERTY
[to be provided by Transferor]
C-1
<PAGE>
EXHIBIT D
INTANGIBLE PERSONAL PROPERTY
[to be provided by Transferor]
D-1
<PAGE>
EXHIBIT E
GOLF COURSE LEASE
E-1
<PAGE>
EXHIBIT F
BILL OF SALE - PERSONAL PROPERTY
WHEREAS, by deed of even date herewith, GOLF CLASSIC RESORTS, L.L.C., a
Delaware limited liability company ("Transferor") conveyed to GOLF TRUST OF
AMERICA, LP., a Delaware limited partnership ("Transferee"), whose mailing
address is 14 N. Adger's Wharf, Charleston, South Carolina 29401, that certain
tract of land more particularly described in SCHEDULE 1 attached hereto as a
part hereof, together with all improvements located thereon (the "Property").
WHEREAS, in connection with the above described conveyance Transferor
desires to contribute, transfer and convey to Transferee certain items of
tangible personal property as defined in the Contribution and Leaseback
Agreement dated May 29, 1998 (the "Agreement") including, without limitation,
the items hereinafter described.
NOW, THEREFORE, in consideration of the receipt of TEN AND NO/100 DOLLARS
($10.00) and other good and valuable consideration paid in hand by Transferee to
Transferor, the receipt and sufficiency of which are hereby acknowledged,
Transferor has, without representation or warranty except as set forth in the
Agreement, GRANTED, CONVEYED, CONTRIBUTED, TRANSFERRED, SET OVER and DELIVERED
and by these presents does hereby GRANT, CONTRIBUTE, TRANSFER, SET OVER and
DELIVER to Transferee, its legal representatives, successors and assigns, all
items of tangible personal property and fixtures (if any) owned or leased by
Transferor, 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 carts, 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, and equipment or machinery
of every kind or nature located on or useful in the operation of the Real
Property whether on or off-site, including all warranties and guaranties
associated therewith (the "Tangible Personal Property"), including, without
limitation, the personal property described in SCHEDULE 2 attached hereto and
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) defined in the Agreement), 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 hereof defined in the Agreement
F-1
<PAGE>
(collectively, the "Intangible Personal Property"), and to have and to hold, all
and singular, the Tangible Personal Property and the Intangible Personal
Property unto Transferee forever.
EXECUTED this 29th day of May, 1998.
Transferor:
GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability company
By:
----------------------------------
Name: Donald R. Mohr
Title: Sole Member
F-2
<PAGE>
SCHEDULE 1
DESCRIPTION OF PROPERTY
[to be taken from Survey]
F-3
<PAGE>
SCHEDULE 2
DESCRIPTION OF PERSONAL PROPERTY
[to be provided by Transferor]
F-4
<PAGE>
EXHIBIT G
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
NEXSEN PRUET JACOBS POLLARD & ROBINSON, LLP
200 Meeting Street, Suite 301
Charleston, S.C. 29401
Attention: Matthew J. Norton, Esq.
- --------------------------------------------------------------------------------
GRANT DEED
[to be provided by Transferor]
G-1
<PAGE>
EXHIBIT H
TRANSFEROR'S FIRPTA AFFIDAVIT
Section 1445 of the Internal Revenue Code provides that a transferee of a
United States real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not required
upon the disposition of a United States real property interest by GOLF CLASSIC
RESORTS, L.L.C., a Delaware limited liability company ("Transferor"), the
undersigned hereby certifies the following on behalf of Transferor:
1. Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations); and
2. Transferor's U.S. employer tax identification number is
85-0446451; and
3. Transferor's office address is 1000 Golf Course Road, Belen, New
Mexico 87002.
Transferor understands that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
The undersigned officer of Transferor declares that he/she has examined
this certification and to the best of his/her knowledge and belief it is true,
correct and complete, and he/she further declares that he/she has authority to
sign this document on behalf of Transferor.
Dated: May 29, 1998
GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability company
By:
------------------------------------
Name: Donald R. Mohr
Title: Sole Member
H-1
<PAGE>
STATE OF
-------------------------- )
) ss.
COUNTY OF )
-------------------------
On ____________________, 19____, before me ______________________, a Notary
Public in and for said State, personally appeared Golf Classic Resorts, L.L.C.,
a Delaware limited liability company, by Donald R. Mohr, its Sole Member,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity on behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
----------------------------------
Notary Public, State of
-----------
My Commission expires:
------------
[Notary Seal]
H-2
<PAGE>
EXHIBIT I
CONTRACTS AND OPERATING AGREEMENTS
1. That certain Lease by and between Golf Classic Resorts, L.L.C., d/b/a
Tierra Del Sol Golf Club, Inc., as lessee, and Colonial Pacific Leasing
Corporation dated July 31, 1996 for EZGO Golf Carts; and
2. That certain Equipment Lease Agreement by and between Golf Classic
Resorts, L.L.C., d/b/a Tierra Del Sol Golf Club and NBD Equipment Finance, Inc.
dated October 20, 1997 for trailer and miscellaneous equipment.
I-1
<PAGE>
EXHIBIT J
Partnership Agreement.
J-1
<PAGE>
EXHIBIT K
CONTINGENT PURCHASE PRICE FORMULA
A. DEFINITIONS. For purposes of this EXHIBIT K, the following terms shall
have the following meanings:
(1) "ADJUSTED NET OPERATING INCOME" means the Conversion Date Net
Operating Income, divided by 1.135.
(2) "CAPITALIZATION RATE" shall mean 10.5%.
(3) "COMPANY" means Golf Trust of America, Inc.
(4) "COMPANY'S FIRST CALL FFO" means the consensus FFO per share estimate
for the Company for the calendar year which includes the Conversion Date,
subtracting the Company's capital expenditure reserve per share as estimated for
that year as such estimate is reported by First Call (or, if First Call is no
longer in general use within the securities industry, by such other reporting
service as is then in general use within the securities industry) divided by the
average of the Company's closing share price for the thirty (30) trading days
immediately preceding the Conversion Date.
(5) "CONVERSION DATE" means the fifteenth (15th) day following the date on
which Transferee receives written notice that Transferor has irrevocably elected
to receive the Contingent Purchase Price.
(6) "CONVERSION DATE CAPITALIZATION RATE" shall mean the Company's First
Call FFO, plus 200 basis points (but in no event less than the Capitalization
Rate).
(7) "CONVERSION DATE NET OPERATING INCOME" means the Gross Operating
Revenue for the Property LESS the Gross Operating Expenses for the Conversion
Year.
(8) "CONVERSION YEAR" means the Fiscal Year (as defined in the Lease)
immediately preceding the Conversion Date.
(9) "CONVERSION NOTICE" shall mean a written notice delivered by
Transferor to Transferee whereby Transferor elects to receive the Contingent
Purchase Price. The Conversion Notice may only be given once and must be given
on or before April 15 of a calendar year. If the Conversion Notice is not given
on or before the one hundred fifth (105th) day following the end of the fifth
(5th) full Fiscal Year (as defined in the Lease) of the Initial Term (as defined
in the Lease),
K-1
<PAGE>
Transferor's right to receive the Contingent Purchase Price shall automatically
and irrevocably terminate. The Conversion Notice may not be given prior to the
expiration of the second (2nd) full Fiscal Year of the Initial Term.
(10) "GROSS OPERATING EXPENSES" means the gross operating expenses of the
Property for the Conversion Year, calculated in accordance with generally
accepted accounting principles consistently applied as adjusted in Schedule K-1.
For purposes of calculating Gross Operating Expenses, Transferee may make
discretionary adjustments on a line item basis to reflect stabilized Gross
Operating Expenses, including the following adjustments:
(a) annual capital replacement reserves shall be included, as
reasonably determined by Transferee;
(b) annual cash expenditures (including depreciation) for golf carts
shall be included, as reasonably determined by Transferee;
(c) extraordinary expenditures (such as to repair storm damage) which
are not anticipated to recur in the ordinary course shall be excluded, as
reasonably determined by Transferee;
(d) other adjustments to reflect stabilized Gross Operating Expenses,
as reasonably determined by Transferee shall be made; and
(e) depreciation, amortization and debt service shall be excluded.
For purposes of determining the Contingent Purchase Price, Gross Operating
Expenses will be adjusted upward by Transferee to the extent such expenses (or
any major component thereof) have decreased at a compound annual rate greater
than 2% per annum from the Base Year to the Conversion Year or more than 3% (on
a year-to-year basis) from the year immediately preceding the Conversion Year,
unless, Transferee shall determine that such expense reductions were of a nature
so as to be reasonably expected to be sustained.
(11) "GROSS OPERATING REVENUE" means the gross operating revenue of the
Property, including revenue related to the golf course operations, food and
beverage operations and sale of merchandise, for the Conversion Year, calculated
in accordance with generally accepted accounting principles consistently applied
as adjusted in Schedule K-1. For purposes of determining the Contingent
Purchase Price, Gross Operating Revenue will be adjusted downward to the extent
such revenue has increased by more than 5.0% from the year immediately preceding
the Conversion Year to the Conversion Year, unless Transferee shall have
reasonably determined that such revenue increase can reasonably be expected to
be sustained. Factors to determine sustainability shall include factors such as
the creation of new demand generators (i.e., hotel development or
K-2
<PAGE>
condominium development) and the non-recurring nature of any revenue (i.e., a
one-time tournament fee). Transferee shall further retain the right to make
downward adjustments to Gross Operating Revenue so as to establish reasonable
expectations of future cash flow results.
(12) "NET INCREMENTAL INCOME AVAILABLE FOR CONTINGENT PURCHASE PRICE" means
the Adjusted Net Operating Income for the Conversion Year, taking into account
the increased rental payments due under the Golf Course Lease as a result of
Transferor's election to receive the Contingent Purchase Price. including the
annual capital replacement reserve paid as additional rent.
(13) "NET OPERATING INCOME" means the Gross Operating Revenue of the
Property for the Conversion Year LESS the Gross Operating Expenses for the same
period.
B. CONTINGENT PURCHASE PRICE.
(1) Transferor shall have the right to receive the Contingent Purchase
Price by delivering the Conversion Notice to Transferee; provided that (i) the
tenant under the lease at the Property shall have paid percentage rent on an
annual basis for the prior calendar year, and (ii) at least one-half (1/2) of
the increase in the Adjusted Net Operating Income from the Base Year to the
Conversion Year is attributable to an increase in Gross Operating Revenue (not
including food and beverage operations and sale of merchandise), as reasonably
determined by Transferee. The Contingent Purchase Price shall equal the Net
Incremental Income Available for Contingent Purchase Price divided by the
Conversion Date Capitalization Rate.
(2) Within forty-five (45) days of the Conversion Date, Transferor shall
deliver to Transferee the number of Owner's Units in Transferee that equals the
Contingent Purchase Price divided by the per share common stock price of the
Company on the Conversion Date.
D. EXAMPLE.
The calculation of the Contingent Purchase Price is attached as
SCHEDULE K-1 for purposes of illustration only.
Schedule K: Example of Contingent Purchase Price.
K-3
<PAGE>
SCHEDULE K-1
EXAMPLE OF CONTINGENT PURCHASE PRICE
[to be provided by Transferee]
Sch K-1
<PAGE>
EXHIBIT L
DUE DILIGENCE REQUEST LIST
1. General Property Matters
(a) Preliminary title report.
(b) Phase I environmental site assessment report.
(c) Fuel tank integrity test for any underground storage tanks
located on Property. TRANSFEROR REPRESENTS THAT THIS ITEM IS NOT
APPLICABLE.
(d) Structural engineering report covering the clubhouse and any
other major buildings. TRANSFEROR REPRESENTS THAT THIS ITEM IS
NOT AVAILABLE.
(e) Long-term water quality and quantity reports.
(f) Wetlands delineation or compliance report. TRANSFEROR REPRESENTS
THAT NO WETLANDS EXIST ON THE PROPERTY.
(g) Other plans, specifications, appraisals, market studies, soil and
engineering reports, surveys, and environmental reports and
studies in Transferor's possession.
(h) Any other reports reasonably required by the Transferee.
(i) Leases, concession and occupancy agreements, and service, utility
and supply contracts, together with a schedule indicating term,
payment obligation, parties and options to extend or cancel.
(j) Property tax bills and other assessments paid with respect to the
Property for 1997, copies of all information regarding collected
sales taxes, FICA taxes, gross receipts taxes, income taxes or
any other taxes relating to the Property, any correspondence sent
to or received from the tax assessor or any taxing entity,
including tax appeals.
(k) All permits and licenses that are required to operate the
Property, including, but not limited to, a development agreement,
building and occupancy permit, liquor license, and business
permit, copies of any existing information relating to the
Property's past non-compliance with applicable laws.
L-1
<PAGE>
(l) Copies of organizational documents of Transferor and evidence
that all necessary approvals of Transferor to enter into this
Agreement have been obtained.
(m) Such other documents and information as the Transferee may
reasonably request to determine the operating status of the
Property and credit-worthiness of the Owner.
(n) A description of all litigation, mechanic's liens, administrative
or condemnation proceedings, governmental investigations or
inquiries, pending or threatened, affecting the Property,
including a description of any significant disputes with vendors,
concessionaires or employees relating to the Property.
TRANSFEROR REPRESENTS THAT NONE OF THE ABOVE EXIST.
(o) A description of any known defects in the Property. TRANSFEROR
REPRESENTS THAT THERE ARE NONE KNOWN.
2. General Business Matters
(a) Name of owner.
(b) Form of ownership (i.e. C Corporation, S Corporation, Limited
Liability Co., Partnership, Limited Partnership and
Proprietorship).
(c) Course location.
(d) Number of courses at this location.
(i) Public
(ii) Semi-Private
(iii) Private
Equity
Non-Equity
Hybrid
(e) Audited statements (19___ - 19___ ). TRANSFEROR REPRESENTS THAT
NONE EXIST.
(f) Number of daily fee paid rounds (1994 - present).
(g) Number of member rounds (1994 - present).
L-2
<PAGE>
(h) Number of complimentary rounds (1994 - present).
(i) Total number of rounds (1994 - present).
(j) Description of replay policy. TRANSFEROR REPRESENTS THAT NONE
EXIST.
(k) Annual gross revenues (19___ - 19___).
(i) Green fees
(ii) Dues
(iii) Initiation fees
(iv) Cart fees
(v) Food & Beverage
(vi) Merchandise
(vii) Other
(l) Net operating income.
(m) Operating statements for the Property for 1997.
(n) Owner's projected operating statements for the Property for 1998.
(o) Depreciation (1996).
(p) Amortization (1996).
(q) Balance Sheet (1996).
(i) Total assets
(ii) Total liabilities
(iii) Net worth
(r) Debt.
(i) Secured
Long term
Short term
(ii) Unsecured
Long term
Short term
(s) Carts.
L-3
<PAGE>
(i) Own - TRANSFEROR REPRESENTS THAT NONE ARE OWNED.
(ii) Lease
(t) Maintenance budget per 18 holes.
(u) Average annual capital expenditures.
(v) Equipment list/age.
(w) Mortgage over basis or negative capital account. TRANSFEROR
REPRESENTS THAT THIS ITEM IS NOT APPLICBLE.
(x) A copy of the closing statement for any re-financing of any debt on
the Property within the last two (2) years. TRANSFEROR REPRESENTS
THAT THERE HAVE BEEN NO REFINANCES.
L-4
<PAGE>
EXHIBIT M
SCHEDULE OF MORTGAGES
NONE.
SCHEDULE OF PERMITTED LIENS
NONE.
M-1
<PAGE>
EXHIBIT N
GOLF TRUST OF AMERICA, L.P.
INVESTOR SUITABILITY QUESTIONNAIRE
INDIVIDUAL INVESTORS
- --------------------------------------------------------------------------------
Golf Trust of America, L.P. and Golf Trust of America, Inc. (collectively,
the "Company"), will use the responses to this questionnaire to qualify
prospective investors for purposes of United States federal and state securities
laws. This is not an offer to sell or the solicitation of an offer to buy
securities. Such an offer can be made only by appropriate offering
documentation. Any such offer may be conditioned upon your qualification as an
accredited investor under federal and
state securities laws.
If the answer to the question below is "none" or "not applicable", please
so indicate.
Your answers will be kept confidential at all times. However, by signing
this Questionnaire, you agree that the Company may present this Questionnaire to
such parties as it deems appropriate to establish the availability of exemptions
from registration under state and federal securities laws.
I. GENERAL INFORMATION
1. REGISTRATION OF SECURITIES
Name to appear with respect to the securities:
-----------------------------
- --------------------------------------------------------------------------------
Name of beneficial owner (if different from above):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the beneficial owner differs from the registered holder, describe the
relationship:
--------------------------------------------------------------
- --------------------------------------------------------------------------------
N-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. PROPOSED INVESTMENT
Aggregate amount of your proposed investment in this financing:
U.S. $
-----------
II. INVESTOR INFORMATION
1. PERSONAL
Residence Address:
- --------------------------------------------------------------------------------
Residence Telephone Number:
- --------------------------------------------------------------------------------
Social Security Number:
- --------------------------------------------------------------------------------
Date of Birth:
- --------------------------------------------------------------------------------
2. BUSINESS
Occupation:
- --------------------------------------------------------------------------------
Number of Years:
- --------------------------------------------------------------------------------
Present Employer:
- --------------------------------------------------------------------------------
Position/Title:
- --------------------------------------------------------------------------------
N-2
<PAGE>
Business Address:
- --------------------------------------------------------------------------------
3. INCOME
(a) Do you expect that your annual gross income for calendar year 19
will be more than $200,000?
[ ] Yes [ ] No
(b) Was your annual gross income for calendar year 19 more than
$200,000?
[ ] Yes [ ] No
(c) Was your annual gross income for calendar year 19 more than
$200,000?
[ ] Yes [ ] No
4. NET WORTH
(a) Was your net worth as of December 31, 19 , together with the net
worth* of your spouse, if applicable, in excess of $1,000,000?
[ ] Yes [ ] No
(b) In the event you may propose to purchase U.S.$150,000 or more of
securities of the Company, does your total purchase price exceed 10%
of your net worth, or joint net worth with your spouse, at the time of
purchase?
[ ] Yes [ ] No
If "yes," what percent of net worth does the total purchase price
represent?
---------------------------------------------------------------------
---------------------------------------------------------------------
N-3
<PAGE>
"Net worth" may include principal residence, net of encumbrances, at either cost
or appraised value, and furnishings and automobiles.
5. EDUCATION
Please describe your educational background and degrees obtained, if any.
---------------------------------------------------------------------
---------------------------------------------------------------------
6. INVESTMENT EXPERIENCE
(a) Please describe briefly principal jobs held during the last five
years. Specific employers need not be identified. What is sought is a
sufficient description to permit a determination concerning the extent
of your experience in financial and business matters.
---------------------------------------------------------------------
---------------------------------------------------------------------
(b) Please indicate the frequency of your investment in marketable
securities: ( ) often; ( ) occasionally; ( ) seldom; ( ) never.
(c) Please indicate the frequency of your investment in securities in
which no market is made: ( ) five or more; ( ) 1 or more, but fewer
than five; ( ) none.
7. RELATIONSHIP TO COMPANY
Please briefly describe the nature of any relationship you may already have
with the Company or any of its partners, including the appropriate date
when such relationship began.
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
N-4
<PAGE>
---------------------------------------------------------------------
8. ADVISORS
In evaluating this investment, will you use the services of any advisor?
[ ] No, I will not use the services of any advisor
[ ] Yes, I will use the services of the advisor(s) identified below:
(a) ACCOUNTANT/FINANCIAL ADVISOR
Name
----------------------------------------------------------------------
Address
-------------------------------------------------------------------
City State/Province
--------------------------------- ---------------------
Zip/Postal Code Telephone
------------------------- -----------------------
(b) ATTORNEY
Name
----------------------------------------------------------------------
Address
-------------------------------------------------------------------
City State/Province
--------------------------------- ---------------------
Zip/Postal Code Telephone
------------------------- -----------------------
9. REPRESENTATIONS AND WARRANTIES
The undersigned hereby confirms the accuracy of each of the representations and
warranties attached hereto as Schedule N-1.
III. SIGNATURE
The above information is true and correct in all material respects and the
undersigned recognizes that the Company and its counsel are relying on the truth
and accuracy of such
N-5
<PAGE>
information in relying on an exemption from the registration requirements of the
Securities Act of 1933, as amended, and in determining applicable state
securities laws and relying on exemptions contained therein. The undersigned
agrees to notify the Company promptly of any changes in the foregoing
information which may occur prior to the investment.
Executed at , on , 19 .
---------------------- ------------------ -----
-----------------------------------
(Signature)
-----------------------------------
(Print Name)
N-6
<PAGE>
SCHEDULE N-1
REPRESENTATIONS AND WARRANTIES
(a) You represent that you are an "accredited investor" as such term
is defined in Rule 501 of Regulation D promulgated under the Securities Exchange
Act of 1934, as amended (the "Act"), and that you are able to bear the economic
risk of an investment in the operating partnership units or shares of common
stock of the Company (collectively, the "Shares").
(b) You acknowledge that vou have 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
your behalf.
(c) You hereby represent that (i) the Company has made available to
you the final Prospectus of the Company dated February 6, 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 Act (collectively, the "Offering Documents"), and (iii) you have
carefully reviewed the Offering Documents.
(d) You hereby represent that you have been furnished by the Company
with all information regarding the Company which you have requested or desired
to know; that you have been afforded the opportunity to ask questions of, and
receive answers from, duly authorized officers or other representatives of the
Company concerning the terms and conditions of the private placement offering of
the Shares (the "Offering"), and have received any additional information which
you have requested.
(e) You hereby acknowledge that the offering of Shares has not been
reviewed by, and the fairness of such 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. You represent that
the Shares being acquired by you are being acquired for your own account, for
investment and not for distribution of the Shares to others.
(f) You understand that the 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 Company may rely, and shall be protected in acting upon, any
papers or other documents which may be submitted to it by you in connection with
the Shares and which are believed by it to be genuine and to have been signed or
presented by the proper party or parties, and
N-7
<PAGE>
the Company shall not have any liability or responsibility with respect to the
form, execution or validity thereof.
N-8
<PAGE>
EXHIBIT O
TRANSFEROR'S CERTIFICATE
Pursuant to SECTION 5.1(b) of that certain Contribution and Leaseback
Agreement (the "Agreement") by and between the undersigned ("Transferor") and
GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership (Transferee") dated
as of May 29, 1998, Transferor hereby certifies to Transferee that all of its
representations and warranties set forth in ARTICLE III of the Agreement are
true and correct, subject to the following:
None.
Dated: May 29, 1998
GOLF CLASSIC RESORTS, L.L.C.,
a Delaware limited liability company
By:
------------------------------------
Name: Donald R. Mohr
Title: Sole Member
O-1
<PAGE>
EXHIBIT P
WARRANTY DISCLOSURE SCHEDULE
None.
P-1
<PAGE>
ASSIGNMENT, ASSUMPTION AND MODIFICATION OF
PURCHASE AGREEMENT
(Silverthorn Country Club)
THIS ASSIGNMENT, ASSUMPTION AND MODIFICATION OF PURCHASE AGREEMENT (this
"Assignment Agreement") is made and entered into as of the 18th day of June 1998
(the "Effective Date"), by and between SCARBOROUGH SEMBLER JOINT VENTURE II, a
Florida general partnership, and SILVERTHORN COUNTRY CLUB, INC., a Florida
corporation (collectively, "Seller"); 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 Seller have entered into that certain Purchase
Agreement dated as of May 13, 1998 (the "Purchase Agreement"), a copy of which
is attached hereto as EXHIBIT M, whereby Assignor agreed, subject to certain
terms and conditions set forth therein, to acquire from Seller that certain real
property, improvements and tangible and intangible personal property located
thereon at Silverthorn Country Club, located in Brooksville, Florida, 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 Assignee 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 as modified and on the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller, Assignor, and Assignee hereby agree as
follows:
1. MODIFICATION TO THE PURCHASE AGREEMENT. The Seller, Assignor, and
Assignee agree to the following modifications of the Purchase Agreement:
a. EXHIBITS A, B, C, D, E, F, G, H, I, J, K, AND L, attached to the
Purchase Agreement are hereby deleted in their entirety and replaced with the
amended and restated EXHIBITS A, B, C, D, E, F, G, H, I, J, K, AND L,
respectively, which have been attached hereto and made a part hereof.
b. Seller agrees to complete and pay for all costs associated with
the relocation of the cart path bordering hole 15 on the Property and such
relocation shall be completed within fifty (50) days of Closing.
<PAGE>
c. Seller agrees to complete and pay for all costs associated with
the following repairs and improvements to the rest station facilities near hole
14 of the Property and such repairs shall be completed within fifty (50) days of
Closing :
i. permanent connection to the county potable water supply;
ii. permanent connection to the sanitary sewer system;
iii. replacement of the drinking fountain;
iv. repair the damage to fascia board and support timber.
d. The following is inserted in Section 1.1 after the definition of
"ESCROW AGENT":
"EARNEST MONEY DEPOSIT" means the $150,000 earnest money deposit
delivered by Assignee to Seller on June 5, 1998 as more
particularly set forth in that certain Amended and Restated
Escrow Agreement by and between Seller, Assignee, and Escrow
Agent dated June 5, 1998, a copy of which is attached hereto as
EXHIBIT O.
e. Section 4.7 is hereby deleted in its entirety and the following
is substituted in lieu thereof:
4.7 GOLF COURSE MAINTENANCE STANDARDS. Buyer agrees that, during
such time as Seller is actively selling property within
Silverthorn but no longer than for a period of five (5) years
from the date of Closing, Buyer shall not materially reduce or
eliminate the quality standards established and currently
employed by Seller in maintaining the Property and Improvements
thereon; provided, however, if at the end of five (5) years from
the date of Closing, twenty (20) or more lots remain to be sold
by Seller within Silverthorn, then this provision shall be
extended for one (1) additional year. A copy of the maintenance
standards is attached hereto and incorporated herein as EXHIBIT
J.
f. Section 5.1 "TITLE INSURANCE" is deleted in its entirety and the
following is substituted in lieu thereof:
TITLE INSURANCE. The Title Company shall have delivered or
unconditionally and irrevocably committed to deliver within
thirty (30) days after Closing, the Owner's Title Policy,
subject only to the Permitted Title Exceptions (which shall not
include a survey exception).
g. Section 5.1 LANDSCAPING" is deleted in its entirety and the
following is substituted in lieu thereof:
LANDSCAPING. From time to time Seller may desire to plant trees
and place landscaping on portions of the Property which are
adjacent to
2
<PAGE>
the residential lots in order to enhance the aesthetic appeal of
the lots. Conversely, from time to time, Seller may desire to
remove trees and vegetation from the Property in order to enhance
the view of the golf course from one of the adjacent residential
lots. Prior to planting or removing trees, landscaping, or
vegetation, Seller shall request in writing Buyer's approval, and
Buyer shall respond to such a request within fifteen (15) days of
receipt thereof, such approval not being unreasonably withheld
provided that the request does not interfere with the use of the
Property as a golf course. Seller agrees that it will perform all
related activities at times and in the manner directed by Buyer
and at Seller's sole cost and expense. Seller further agrees
that the portion of the Property so affected shall not result in
any drainage, maintenance, or playability conditions harmful to
the intended use.
h. Section 5.1 "SILVERTHORN TRADENAME" is deleted in its entirety
and the following is substituted in lieu thereof:
"SILVERTHORN TRADENAME". Buyer agrees that Seller shall have the
right to use the "Silverthorn" tradename and trademark in
advertising and promotional materials that are currently being
used to promote the sale of homes and properties within the
Silverthorn community. Seller may assign this right to builders
that are operating within Silverthorn. Silverthorn/Hernando
Homeowner's Association, Inc. ("Homeowners") shall also have a
right to use the "Silverthorn" tradename and trademark in
pursuing those activities for which it is authorized under its
existing organizational documents; provided, however, that
Seller, its assigns, and Homeowners shall not make reference to
the Silverthorn Country Club without requesting Buyer's prior
written consent, and Buyer shall have fifteen (15) days to
respond to such a written request after receipt thereof, with
such approval not being unreasonably withheld. The use of
materials existing and being utilized as of the Effective Date
are conclusively deemed to be approved by Buyer. After current
materials are depleted, all new materials referencing the Golf
Club must be pre-approved in writing by Buyer.
i. The following portion of SECTION 5.1 of the Purchase Agreement is
deleted in its entirety and the following is substituted in lieu thereof:
SELLER'S RETAINED MEMBERSHIP. Provided that Seller is actively
selling property within Silverthorn, but no longer than for a
period of five (5) years from Closing, the Seller shall retain a
membership in the Golf Club that allows for a maximum number of
designees at any time of three (3). Said membership may be held
by any entity which is an affiliate or controlled by either
Seller. Seller shall provide a written
3
<PAGE>
schedule of designees to Buyer from time to time as such
designees change. Seller and/or such designees shall not pay
dues or assessments, but will be subject to all other regular
charges or fees and all rules and regulations of the Golf Club.
j. Section 5.2 "BILLBOARDS"of the Purchase Agreement shall be
deleted in its entirety and the following is substituted in lieu thereof:
BILLBOARDS. Buyer agrees to pay twenty-five percent (25%) of the
rental cost of advertising billboards which jointly promote the
residential properties and the operation of the Golf Club. The
list of such billboards, including the lease term, is included in
EXHIBIT H. Upon termination of the lease for each billboard,
Buyer shall not be responsible for future rental costs unless it
so agrees in writing. Seller may retain the billboard locations
for future community advertising.
k. Section 6.1 is amended such that the first sentence is deleted in
its entirety and the following is substituted in lieu thereof:
Closing shall be held the second (2nd) business day after Buyer
receives an as-built survey of the Property in form and content
reasonably acceptable to Buyer pursuant to the terms of the
letter of May 27, 1998 from Buyer to Mr. Steve Richards and Gary
Strohauer, Esquire, attached hereto as EXHIBIT N and made a part
hereof provided that Seller is not in default under the terms of
the Purchase Agreement, as modified herein.
l. Section 6.2 is amended by inserting a new provision as follows:
TENANT AND VENDOR NOTICES. Tenant shall be responsible for
providing to all tenants and vendors related to the Property
notices of the conveyance of the Property from Seller to Buyer,
and such notices shall be in form and content acceptable to Buyer
and Seller.
m. Section 9.5 is amended such that the following is inserted at the
end of the first sentence: "and the Amended and Restated Escrow Agreement
entered into by and among Assignee, Seller and Escrow Agent as of June 5, 1998."
n. Except as otherwise described herein and modified herein, all
other terms and conditions of the Purchase Agreement shall remain the same and
in full force and effect.
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:
4
<PAGE>
a. The obligation to pay for the cost of studies and investigations
set forth in EXHIBIT I, as more particularly set forth in Section 2.2. "SITE
INSPECTION" of the Purchase Agreement.
b. The obligation to assume, at Closing, those Operating Agreements
described and identified on EXHIBIT H of the Purchase Agreement; provided,
however, that Tenant or Assignee, as Assignee shall determine, shall assume such
Operating Agreements at Closing.
c. The obligation for payment of any brokerage fees due Core Real
Estate and/or Mr. Michael Garsoni, as more particularly set forth in Section 7.3
of the Purchase Agreement; provided, however, that Assignor agrees to pay such
fees.
d. The obligation to purchase Seller's Inventory as defined in the
Purchase Agreement and attached as EXHIBIT C to the Purchase Agreement, all as
more particularly set forth in Section 6.3 of the Purchase Agreement; provided,
however, that Assignor agrees to comply with Buyer's obligations as described in
Section 6.3 of the Purchase Agreement.
e. The obligation to purchase any of Seller's Accounts Receivables
as defined in the Purchase Agreement, all as more particularly set forth in
Section 6.3 of the Purchase Agreement; provided, however, that Assignor agrees
to comply with Buyer's obligations described in Section 6.3 of the Purchase
Agreement.
f. The obligation to pay for any closing costs pursuant to Section
6.5 of the Purchase Agreement, except for the obligation to pay for up to
$23,500 of the closing costs as more particularly set forth in Assignee's Lease
(defined below) with an affiliate of Assignor, Granite Silverthorn, Inc., a
Florida corporation ("Tenant") prepared in connection with this transaction.
3. 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 the modifications
contained in Section 1 and subject to Section 2 of this Assignment Agreement,
Assignee hereby accepts Assignor's assignment and assumes all of Assignor's
duties and obligations and responsibilities arising under the Purchase Agreement
from and after the Effective Date. Nothing contained in this Assignment
Agreement shall release Assignor from any of its obligations under the Purchase
Agreement.
4. CLOSING. Closing shall be held at the offices of Baxter & Strohauer,
P.A. ("Escrow Agent") in Clearwater, Florida on the Closing Date. At Closing,
Buyer shall remit a portion of the Purchase Price equal to $4,700,000 LESS the
Earnest Money Deposit (which is $150,000) to Seller by federal funds wired to an
account designated by Seller. Additionally, the Escrow Agent shall remit the
Earnest Money Deposit to the Seller. The parties will then deliver to each
other, as applicable, all of the documents and instruments,
5
<PAGE>
each of which have been duly executed and, where applicable, acknowledged and/or
sworn on behalf of the signing party as more particularly set forth in Sections
6.2, 6.3 and 6.4 in this Purchase Agreement, as modified herein.
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. LEASE AND PLEDGE AGREEMENT.
a. As a condition to Assignee's performance of its obligations under
the Assignment Agreement, at closing the Tenant shall deliver to Assignee
executed counterparts of a lease in the form attached hereto as EXHIBIT P (the
"Lease"), and a pledge agreement in the form attached to the Lease as Exhibit D
(the "Pledge Agreement").
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 Agreement.
7. 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 our 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, 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 our 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 Agreement.
8. 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 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:
6
<PAGE>
To Seller:
Mr. David Felice
Scarborough Sembler Joint Venture II and
Silverthorn Country Club, Inc.
P.O. Box 7078
Wesley Chapel, Florida 33543
Telephone: (813) 973-7553
Facsimile: (813) 973-7807
with a copy to:
Baxter & Strohauer, P. A.
1150 Cleveland Street, Suite 300
Clearwater, Florida 33755
Attn: Gary N. Strohauer, Esq.
Telephone: (813) 461-6100
Facsimile: (813) 447-6899
To Assignor:
Granite Golf Group, Inc.
15170 N. Hayden Road, Suite 106
Scottsdale, Arizona 85254
Attention: Steve Richards
Telephone: (602) 905-0978
Facsimile: (602) 905-0979
to Assignee:
Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, S.C. 29401
Attn: Scott D. Peters
Telephone: (843) 723-4653
Facsimile: (843) 723-0479
with a copy to:
Nexsen Pruet Jacobs Pollard & Robinson, LLP
200 Meeting Street, Suite 301
Charleston, S.C. 29401
Attn: Matthew J. Norton, Esq.
Telephone: (843) 720-1772
Facsimile: (843) 720-1777
7
<PAGE>
9. GOVERNING LAW. This Assignment Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Florida.
10. 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.
11. 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.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as
of the day and year first above written:
[Signature Pages Attached]
8
<PAGE>
SELLER:
SCARBOROUGH SEMBLER JOINT
VENTURE II, a Florida general
partnership (SEAL)
BY: SCARBOROUGH CONSTRUCTORS,
INC., its general partner
__________________________ By: __/S/______________________________
Name:__________________________________
__________________________ Title:_________________________________
SILVERTHORN COUNTRY CLUB, INC.,
a Florida corporation
__________________________ By:___/S/______________________________
Name:__________________________________
__________________________ Title:_________________________________
ASSIGNOR:
GRANITE GOLF GROUP, INC.,
a Nevada corporation
__________________________ By:___/S/______________________________
Name:__________________________________
__________________________ Title:_________________________________
ASSIGNEE:
GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., its general partner
_________________________ By:___/S/______________________________
Name: W. Bradley Blair, II
_________________________ Title: President and Chief Executive Officer
9
<PAGE>
LIST OF EXHIBITS
SILVERTHORN COUNTRY CLUB
Exhibit A Legal Description
Exhibit B Improvements
Exhibit C Tangible Personal Property
Exhibit D Intangible Personal Property
Exhibit E Bill of Sale - Personal Property
Exhibit F Warranty Deed
Exhibit G FIRPTA Certificate
Exhibit H Operating Agreements
Exhibit I Due Diligence Request
Exhibit J Maintenance Standards
Exhibit K Comparable Facilities
Exhibit L Seller's Warranty Certificate
Exhibit M Purchase Agreement dated May 13, 1998
Exhibit N Letter Regarding Survey Standards
Exhibit O Amended and Restated Escrow Agreement
Exhibit P Lease
10
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
IMPROVEMENTS
<PAGE>
EXHIBIT C
TANGIBLE PERSONAL PROPERTY
<PAGE>
EXHIBIT D
INTANGIBLE PERSONAL PROPERTY
<PAGE>
EXHIBIT E
BILL OF SALE - PERSONAL PROPERTY
<PAGE>
EXHIBIT F
WARRANTY DEED
<PAGE>
EXHIBIT G
FIRPTA CERTIFICATE
<PAGE>
EXHIBIT H
OPERATING AGREEMENTS
<PAGE>
EXHIBIT I
DUE DILIGENCE REQUEST
<PAGE>
EXHIBIT J
MAINTENANCE STANDARDS
<PAGE>
EXHIBIT K
COMPARABLE FACILITIES
<PAGE>
EXHIBIT L
SELLER'S WARRANTY CERTIFICATE
<PAGE>
EXHIBIT M
PURCHASE AGREEMENT DATED MAY 13, 1998
<PAGE>
EXHIBIT N
LETTER REGARDING SURVEY STANDARDS
<PAGE>
EXHIBIT O
AMENDED AND RESTATED ESCROW AGREEMENT
<PAGE>
EXHIBIT P
LEASE
<PAGE>
EXHIBIT 10.2.19
________________________________
PURCHASE AND SALE AGREEMENT
________________________________
Seller: POLO TRACE MANAGEMENT, INC.,
a Florida corporation
Buyer: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
Property: The Links at Polo Trace
Delray Beach, Florida
Purchase
Price: $12,300,000
Effective
Date: May 28, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Act of Bankruptcy . . . . . . . . . . . . . . . . . . . . . 2
(b) Additional Purchase Price . . . . . . . . . . . . . . . . . 3
(c) Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Assignment and Assumption Agreement . . . . . . . . . . . . 3
(e) Authorizations . . . . . . . . . . . . . . . . . . . . . . 3
(f) Bill of Sale - Personal Property. . . . . . . . . . . . . . 3
(g) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) Closing Date. . . . . . . . . . . . . . . . . . . . . . . . 3
(i) Closing Statements. . . . . . . . . . . . . . . . . . . . . 3
(j) Country Club. . . . . . . . . . . . . . . . . . . . . . . . 4
(k) Current Assets. . . . . . . . . . . . . . . . . . . . . . . 4
(l) Deed. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(m) Developer . . . . . . . . . . . . . . . . . . . . . . . . . 4
(n) Development Agreement Estoppel Certificates . . . . . . . . 4
(o) Disclosure Schedule . . . . . . . . . . . . . . . . . . . . 4
(p) Due Diligence Period. . . . . . . . . . . . . . . . . . . . 4
(q) Effective Date. . . . . . . . . . . . . . . . . . . . . . . 4
(r) Employment Agreements . . . . . . . . . . . . . . . . . . . 4
(s) Environmental Claim . . . . . . . . . . . . . . . . . . . . 4
(t) Environmental Laws. . . . . . . . . . . . . . . . . . . . . 5
(u) Equipment Leases. . . . . . . . . . . . . . . . . . . . . . 5
(v) Escrow Agent. . . . . . . . . . . . . . . . . . . . . . . . 5
(w) FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . 5
(x) First Mortgage. . . . . . . . . . . . . . . . . . . . . . . 5
(y) First Mortgagee . . . . . . . . . . . . . . . . . . . . . . 5
(z) Golf Club . . . . . . . . . . . . . . . . . . . . . . . . . 5
(aa) Golf Course Lease . . . . . . . . . . . . . . . . . . . . . 5
(ab) Governmental Body . . . . . . . . . . . . . . . . . . . . . 6
(ac) Hazardous Substances. . . . . . . . . . . . . . . . . . . . 6
(ad) Improvements. . . . . . . . . . . . . . . . . . . . . . . . 6
(ae) Intangible Personal Property. . . . . . . . . . . . . . . . 6
(af) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ag) Joint Development Agreement . . . . . . . . . . . . . . . . 6
(ah) Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ai) Lender's Estoppel Certificate . . . . . . . . . . . . . . . 6
(aj) Loan Documents. . . . . . . . . . . . . . . . . . . . . . . 6
(ak) Mortgage Indebtedness . . . . . . . . . . . . . . . . . . . 6
(al) Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(am) Operating Agreements. . . . . . . . . . . . . . . . . . . . 7
(an) Owner's Title Policy. . . . . . . . . . . . . . . . . . . . 7
(ao) Permitted Title Exceptions. . . . . . . . . . . . . . . . . 7
(ap) Person. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(aq) Preliminary Title Report. . . . . . . . . . . . . . . . . . 7
(ar) Property. . . . . . . . . . . . . . . . . . . . . . . . . . 7
(as) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 7
(at) Real Property . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
(au) Restaurant Supplies . . . . . . . . . . . . . . . . . . . . 7
(av) SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(aw) State . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(ax) Summary Sheet . . . . . . . . . . . . . . . . . . . . . . . 8
(ay) Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(az) Tangible Personal Property. . . . . . . . . . . . . . . . . 8
(ba) Title Company . . . . . . . . . . . . . . . . . . . . . . . 8
(bb) Title Objections. . . . . . . . . . . . . . . . . . . . . . 8
(bc) Seller's Organizational Documents . . . . . . . . . . . . . 8
(bd) Utilities . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.2 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 8
(a) Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Section References. . . . . . . . . . . . . . . . . . . . . 8
(c) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Construction. . . . . . . . . . . . . . . . . . . . . . . . 8
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) Financial Statements. . . . . . . . . . . . . . . . . . . . 12
(h) Liquor License. . . . . . . . . . . . . . . . . . . . . . . 12
(i) Consent to Assumption . . . . . . . . . . . . . . . . . . . 12
(j) Development Agreement Estoppel Certificate. . . . . . . . . 12
2.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . 14
3.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . 15
3.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . 15
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 No Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . 16
3.5 Compliance with Existing Laws. . . . . . . . . . . . . . . . . . 16
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . 17
3.9 Warranties and Guaranties. . . . . . . . . . . . . . . . . . . . 17
3.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Condemnation Proceedings; Roadways . . . . . . . . . . . . . . . 17
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Labor Disputes and Agreements. . . . . . . . . . . . . . . . . . 18
3.14 Financial Information. . . . . . . . . . . . . . . . . . . . . . 18
3.15 Organizational Documents . . . . . . . . . . . . . . . . . . . . 19
3.16 Operation of Property. . . . . . . . . . . . . . . . . . . . . . 19
3.17 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . 20
3.20 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
3.21 Curb Cuts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.22 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . 20
3.23 Sufficiency of Certain Items . . . . . . . . . . . . . . . . . . 21
3.24 No Fixed Rate Election . . . . . . . . . . . . . . . . . . . . . 21
3.25 No Defaults Under Loan Documents . . . . . . . . . . . . . . . . 21
3.26 Survival of Representations. . . . . . . . . . . . . . . . . . . 21
ARTICLE 4
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . 21
4.1 Organization and Power.. . . . . . . . . . . . . . . . . . . . . 22
4.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Authorization and Execution. . . . . . . . . . . . . . . . . . . 22
ARTICLE 5
CONDITIONS AND ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . 22
5.1 As to Buyer's Obligations. . . . . . . . . . . . . . . . . . . . 22
(a) Seller's Deliveries.. . . . . . . . . . . . . . . . . . . . 22
(b) Representations, Warranties and Covenants.. . . . . . . . . 23
(c) Title Insurance.. . . . . . . . . . . . . . . . . . . . . . 23
(d) Title to Property.. . . . . . . . . . . . . . . . . . . . . 23
(e) Condition of Property.. . . . . . . . . . . . . . . . . . . 23
(f) Utilities.. . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 As to Seller's Obligations . . . . . . . . . . . . . . . . . . . 23
(a) Buyer's Deliveries. . . . . . . . . . . . . . . . . . . . . 24
(b) Representations, Warranties and Covenants.. . . . . . . . . 24
(c) No Default Under Loan Documents.. . . . . . . . . . . . . . 24
ARTICLE 6
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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. . . . . . . . . . . . . . . . . . . 25
(g) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Organizational Documents. . . . . . . . . . . . . . . . . . 25
(i) Board Resolutions.. . . . . . . . . . . . . . . . . . . . . 25
(j) Certificate of Occupancy. . . . . . . . . . . . . . . . . . 25
(k) Improvement Plans.. . . . . . . . . . . . . . . . . . . . . 25
(l) Communication; Addresses. . . . . . . . . . . . . . . . . . 25
(m) Tax Bills.. . . . . . . . . . . . . . . . . . . . . . . . . 25
(n) Surveys.. . . . . . . . . . . . . . . . . . . . . . . . . . 25
(o) Tournament Schedule.. . . . . . . . . . . . . . . . . . . . 26
(p) Accounts Receivable.. . . . . . . . . . . . . . . . . . . . 26
(q) Lender's Estoppel Certificate . . . . . . . . . . . . . . . 26
(r) Development Agreement Estoppel Certificate. . . . . . . . . 26
(s) Tenant Notices. . . . . . . . . . . . . . . . . . . . . . . 26
(t) Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
6.3 Buyer's Deliveries . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Cash Portion of Purchase Price. . . . . . . . . . . . . . . 26
(b) Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Mutual Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Closing Statements. . . . . . . . . . . . . . . . . . . . . 26
(b) Assignment and Assumption Agreement . . . . . . . . . . . . 26
(c) Liquor License Transfer Documents . . . . . . . . . . . . . 26
(d) Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Income and Expense Allocations . . . . . . . . . . . . . . . . . 27
(a) Rents and Fees. . . . . . . . . . . . . . . . . . . . . . . 27
(b) Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Utilities.. . . . . . . . . . . . . . . . . . . . . . . . . 27
(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.. . . . . . . . . . . . . . . . . . . 28
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Representations and Warranties. . . . . . . . . . . . . . . 29
(b) Indemnities.. . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Liability of Buyer . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . 31
8.3 Termination by Buyer . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Buyer's Indemnification. . . . . . . . . . . . . . . . . . . . . 32
8.5 Termination by Seller. . . . . . . . . . . . . . . . . . . . . . 33
8.6 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 33
ARTICLE 9
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Seller's Membership Rights . . . . . . . . . . . . . . . . . . . 33
9.3 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Completeness; Modification . . . . . . . . . . . . . . . . . . . 34
9.5 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 34
9.7 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . 34
9.8 Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
9.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.12 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.13 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.14 Incorporation by Reference . . . . . . . . . . . . . . . . . . . 35
9.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 35
9.16 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 35
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 - Special Warranty Deed
Exhibit G - Seller's FIRPTA Affidavit
Exhibit H - Contracts and Operating Agreements
Exhibit I - Due Diligence Request List
Exhibit J - Warranty Disclosure Schedule
Exhibit K - Seller's Certificate
Exhibit L - Assignment and Assumption Agreement
Exhibit M1- Development Agreement Estoppel Certificate (Seller)
Exhibit M2- Development Agreement Estoppel Certificate (Developer)
Exhibit M3- Development Agreement Estoppel Certificate (Country Club)
Exhibit N - Lender's Estoppel Certificate
<PAGE>
PURCHASE AGREEMENT
SUMMARY SHEET
Buyer: GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
Seller: POLO TRACE MANAGEMENT, INC.,
a Florida corporation
Effective
Date: May 28, 1998
Golf Course: The Links at Polo Trace
Delray Beach, Florida
Trade Name: The Links at Polo Trace
Purchase
Price: Twelve Million Three Hundred Thousand Dollars
($12,300,000)
Notice Address
of Seller: Polo Trace Management, Inc.
13481 Polo Trace Drive
Delray Beach, Florida
Attention: Joseph Graffeo
with a
copy to: Lloyd Granet, Esq.
5200 Town Center Circle
Suite 302
Boca Raton, Florida 33486
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.
David G. Estes, Esq.
i
<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 the 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:
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 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, excluding Restaurant Supplies and Inventory, both as
hereafter defined (collectively 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.
<PAGE>
3. 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
Links at Polo Trace, Polo Trace Golf and Country Club and Polo Trace),
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 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
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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) "ADDITIONAL PURCHASE PRICE" shall have the meaning set forth in
Section 2.1.
(c) "AFFILIATE" shall mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person.
(d) "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an agreement
pursuant to which Seller assigns all of its right, title and interest in, to and
under the Operating Agreements and Equipment Leases to Buyer, or Buyer's
designee, and Buyer, or Buyer's designee, assumes the obligations of Seller
under the Operating Agreements and Equipment Leases, substantially in the form
of EXHIBIT L attached hereto.
(e) "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.
(f) "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.
(g) "CLOSING" shall mean the time the Deed is delivered to Buyer and
the Title Company is irrevocably bound to issue the Owner's Title Policy to
Buyer.
(h) "CLOSING DATE" shall mean the date on which the Closing occurs.
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(i) "CLOSING STATEMENTS" shall have the meaning set forth in Section
6.4(a).
(j) "COUNTRY CLUB" shall mean Polo Trace Country Club, Inc., a
Florida corporation.
(k) "CURRENT ASSETS" shall mean cash, accounts receivable (including
amounts due from credit card charges) applicable to the period prior to the
Closing Date and Inventory (as hereinafter defined) held by Seller prior to the
Closing Date.
(l) "DEED" shall mean a 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.
(m) "DEVELOPER" shall mean K. Hovnanian at Polo Trace, Inc., a
Florida corporation.
(n) "DEVELOPMENT AGREEMENT ESTOPPEL CERTIFICATES" shall mean
certificates relating to the Joint Development Agreement and related documents
executed by Seller, Developer and Country Club, substantially in the form of
EXHIBITS M-1, M-2 and M-3 attached hereto.
(o) "DISCLOSURE SCHEDULE" shall have the meaning set forth in Section
2.2(e).
(p) "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 the date that is twenty-eight (28) days from the Effective
Date.
(q) "EFFECTIVE DATE" shall mean the date set forth on the Summary
Sheet of this Agreement.
(r) "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.
(s) "ENVIRONMENTAL CLAIM" shall mean any administrative, regulatory
or judicial action, suit, demand, letter, claim, lien, notice of non-compliance
or violation,
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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.
(t) "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.
(u) "EQUIPMENT LEASES" shall mean all leases of Tangible Personal
Property in force and effect as of the Effective Date, as more particularly set
forth on EXHIBIT H attached hereto.
(v) "ESCROW AGENT" shall mean Gold Coast Title Company, 75 SE 3rd
Street, Boca Raton, Florida 33432, Attn: Herman Dance.
(w) "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.
(x) "FIRST MORTGAGE" shall have the meaning set forth in Section
2.3(c).
(y) "FIRST MORTGAGEE" shall have the meaning set forth in Section
2.3(c).
(z) "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.
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(aa) "GOLF COURSE LEASE" shall have the meaning set forth in Recital
C.
(bb) "GOVERNMENTAL BODY" shall mean any federal state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(cc) "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).
(dd) "IMPROVEMENTS" shall have the meaning set forth in Recital B(1).
(ee) "INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth
in Recital B(4).
(ff) "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;
provided Inventory shall not include any obsolete or other equipment which
cannot be sold in the ordinary course of Seller's business.
(gg) "JOINT DEVELOPMENT AGREEMENT" shall mean that certain Joint
Development Agreement dated as of March 28, 1994 by and between Developer and
Country Club, as amended from time to time.
(hh) "LAND" shall have the meaning set forth in Recital A.
(ii) "LENDER'S ESTOPPEL CERTIFICATE" shall mean a certificate relating
to the Loan Documents executed by First Mortgagee, substantially in the from of
EXHIBIT N attached hereto.
(jj) "LOAN DOCUMENTS" shall have the meaning set forth in Section
3.25.
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(kk) "MORTGAGE INDEBTEDNESS" shall mean any indebtedness of Seller
which is secured by a mortgage or deed of trust on the Property.
(ll) "NOTE" shall have the meaning set forth in Section 3.24.
(mm) "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. Operating Agreements shall not include any Equipment Leases.
(nn) "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.
(oo) "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.
(pp)"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.
(qq) "PRELIMINARY TITLE REPORT" shall have the meaning set forth in
Section 2.2(d).
(rr) "PROPERTY" shall have the meaning set forth in Recital B(4).
(ss) "PURCHASE PRICE" shall mean Twelve Million Three Hundred Thousand
Dollars ($12,300,000).
(tt) "REAL PROPERTY" shall have the meaning set forth in Recital B(2).
(uu) "RESTAURANT SUPPLIES" shall mean all unopened, bulk-style (i.e.,
stored in boxes, cans, bottles, jars or other air-tight containers or packaging)
consumable goods and supplies
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(including beverages) located in any restaurant, bar, lounge or snack shop
located upon or within the Improvements as of the Closing Date.
(vv) "SEC" shall mean the United States Securities and Exchange
Commission.
(ww) "STATE" shall mean the state or commonwealth in which the
Property is located.
(xx) "SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
(yy) "SURVEY" shall mean the survey prepared pursuant to Section
2.2(c).
(zz) "TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Recital B(3).
(aaa) "TITLE COMPANY" shall mean Escrow Agent, as agent for either
Lawyers Title Insurance Corporation or First American Title Insurance Company.
(bbb) "TITLE OBJECTIONS" shall have the meaning set forth in
Section 2.2(d).
(ccc) "SELLER'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of Seller.
(ddd) "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.
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
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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. In addition, at Closing, Buyer
shall purchase the Restaurant Supplies and the Inventory. The purchase price
for the Restaurant Supplies and the Inventory (the "Additional Purchase Price")
shall be based on Seller's cost, as reasonably evidenced to Buyer. Hereinafter,
references to the Purchase Price shall be deemed to include the Additional
Purchase Price.
2.2 DUE DILIGENCE PERIOD.
(a) SITE INSPECTION. Upon twenty-four (24) hours notice to Seller,
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. Buyer shall conduct such tests,
studies and investigations in a manner designed to minimize disruption to the
operations on the Property, to the extent reasonably possible. 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 to Seller all third-party
reports and materials prepared on behalf of Buyer in connection with its due
diligence of the Property (along with evidence of payment for such reports),
provided such deliveries shall be without representation or warranty by Buyer,
and Seller shall indemnify and hold Buyer harmless from any and all liability
with respect to any subsequent use of such reports. Buyer shall indemnify and
hold Seller harmless from and against any and all liability, loss, cost, damage
and expense caused or incurred by Seller in connection with such inspection;
provided, however, Buyer shall have no liability in connection with pre-existing
conditions on the Property which Buyer may discover during the course of its
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due diligence investigations. Buyer's indemnity obligations under this
Section 2.2(a) shall survive Closing for a period of one (1) year.
(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, Operating Agreements, Equipment Leases and any and all other material
or information relating to the ownership and operation of the Property which are
in, or come into, Seller's possession or control. 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. The Phase I Environmental Report
referenced in EXHIBIT I shall be an update of the Phase I Environmental Report
for the Property dated December 23, 1996, and prepared by Dames & Moore, which
update shall be dated no earlier than March 1, 1998.
(c) SURVEY. Within twenty-one (21) days from the Effective Date,
Seller shall use its good faith efforts to 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 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. Within
seven (7) days after receipt of the Survey, Buyer shall notify Seller of any
survey matters that Buyer is unwilling to accept, and the same shall be treated
for all purposes as Title Objections within the provisions of this Agreement.
Notwithstanding the foregoing,
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if the Survey is received by Buyer after June 19, 1998, the Closing Date, if
not already extended pursuant to Section 6.1, shall automatically extend
seven (7) days from receipt of the Survey. This Section 2.2(c) shall not be
used to extend the Closing beyond July 9, 1998 unless the Survey is received
after July 2, 1998 in which case the final Closing Date shall be extended
seven (7) days from receipt of 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, within fifteen (15) days after the Effective Date, 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. Seller shall have
no obligation to cure any non-monetary 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 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. Buyer acknowledges that
Developer has certain rights under the Joint Development Agreement to re-plat
and re-
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zone the Property. To the extent that Seller has any approval rights over
such re-platting or re-zoning after the Effective Date, Seller shall not
grant any such approval without first obtaining Buyer's prior written
consent, which consent shall not be unreasonably withheld.
(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) 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.
(g) FINANCIAL STATEMENTS. Seller shall deliver to Buyer certified
compiled financial statements for the Property for the twelve (12) months ended
December 31, 1997 and the three (3) months ended March 31, 1997 and 1998, within
fifteen (15) days after the Effective Date.
(h) LIQUOR LICENSE. During the Due Diligence Period, Buyer shall
determine whether it will be able to obtain 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, Seller and Buyer, or Buyer's nominee, shall cooperate with each other,
and each shall execute 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 necessary Authorizations.
(i) CONSENT TO ASSUMPTION. During the Due Diligence Period, Buyer
shall have received written consent to Buyer's assumption of the First Mortgage
from First Mortgagee. If Buyer has not received such written consent, Buyer
shall have the option at Closing to prepay all amounts outstanding under the
Note and acquire the Property, and Buyer shall receive a credit against the
Purchase Price in an amount equal the sum of (i) two percent (2%) of the amount
outstanding under the Note at the time of prepayment, and (ii) the amount of the
Assumption Fees Seller would have paid had Buyer assumed the First Mortgage.
(j) DEVELOPMENT AGREEMENT ESTOPPEL CERTIFICATES. During the Due
Diligence Period, Seller shall in good faith endeavor to obtain a commitment
from each of Developer and
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Country Club that each will execute and deliver its respective Development
Agreement Estoppel Certificate to Buyer at Closing. If despite its good
faith efforts, Seller cannot obtain such a commitment from either Developer
or Country Club, Seller shall provide Buyer with written notice stating that
either, or both, of Developer and Country Club have failed to provide such
commitment. Such notice must be delivered to Buyer no later than five (5)
days prior to the expiration of the Due Diligence Period. Upon delivery of
such notice by Seller, the Closing delivery required pursuant to Section
6.2(r) shall be deemed to only require delivery of a Development Agreement
Estoppel Certificate executed by Seller and the party, if any, not named in
the notice delivered pursuant to the preceding sentence.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to
Seller in the following manner.
(a) Buyer has previously deposited in escrow with Escrow Agent an
initial earnest money deposit in the amount of Twenty-Five Thousand Dollars
($25,000) (the "Initial Deposit).
(b) Within three (3) business days after the Effective Date, Buyer
shall deposit in escrow with Escrow Agent an additional earnest money deposit in
immediately available funds in the amount of Seventy-Five Thousand Dollars
($75,000) (the "Additional Deposit"). The Initial Deposit and the Additional
Deposit are sometimes collectively referred to in this Agreement as the
"Deposit". The Deposit shall be held by Escrow Agent in an interest bearing
account insured by the federal government in an institution as directed by Buyer
and reasonably acceptable to Seller. If the purchase and sale of the Property
is consummated as contemplated hereunder, the Deposit shall be paid to Seller
and credited against the Purchase Price. If the purchase and sale of the
Property is not consummated because of the failure of any condition precedent
described in Section 5.1 below or any other reason except for a default under
this Agreement on the part of Buyer, the Deposit shall be immediately refunded
to Buyer. If the purchase and sale of the Property is not consummated because
of a default under this Agreement on the part of Buyer, the Deposit plus all
interest accrued thereon shall be paid to and retained by Seller pursuant to
Section 9.1 below. References to the "Deposit" shall include all interest
earned thereon. For state and federal income tax purposes, Buyer shall be
deemed to be the depositor of the Deposit prior to its distribution in
accordance with this Agreement and all tax reporting obligations and tax
liability associated with any interest thereon shall be the obligation or
liability, as applicable, of Buyer.
(c) At Closing, Buyer shall assume that certain Mortgage and Security
Agreement (as amended from time to time, the "First Mortgage") dated as of
December 23, 1996, made by Seller, as mortgagor, for the benefit of
NationsCredit Commercial Corporation ("First Mortgagee"), as mortgagee. Buyer
shall receive a credit against the Purchase Price for all outstanding
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amounts due and owing to First Mortgagee as of the Closing. At Closing,
Seller shall pay to First Mortgagee all costs and expenses associated with
the assumption of the First Mortgage, including without limitation any
assumption or similar fee due First Mortgagee as a result of Buyer's
assumption of the First Mortgage (collectively, the "Assumption Fees").
Buyer agrees to use commercially reasonable efforts to obtain consent from
First Mortgagee to Buyer's assumption of the First Mortgage. Seller agrees
to reasonably cooperate with Buyer in these efforts.
(d) The balance of the Purchase Price over and above the amounts paid
by or credited to Buyer pursuant to SECTIONS 2.3(A), (B) and (C) above, less Two
Hundred Fifty Thousand Dollars ($250,000), shall be paid to Seller at the
Closing by wire transfer of immediately available funds, net of all prorations
as provided herein.
(e) Buyer shall pay Seller Two Hundred Fifty Thousand Dollars
($250,000) in immediately available funds on January 4, 1999 (the "Prepayment
Date"). Of such amount, Buyer will deposit in Escrow One Hundred
Twenty-Three Thousand Dollars ($123,000) (the "Net Worth Holdback") to be
released pursuant to Section 2.3(f).
(f) The Net Worth Holdback should be placed in Escrow in an
interest-bearing account for the benefit of Seller until expiration of the
survivability period referenced in Section 3.26 or, if later, until any claim
by Buyer in any court of competent jurisdiction for any breach of any
representations, warranties and covenants contained herein is finally
resolved (the "Holdback Period"). After the expiration of the Holdback
Period, unless Escrow Agent receives notice from Buyer that there is a claim
by Buyer pending against Seller, Escrow Agent shall release the Net Worth
Holdback together with any interest thereon to Seller. The Net Worth
Holdback shall be the sole extent of Seller's liability for monetary damages
under this Agreement and all closing documents executed pursuant to this
Agreement.
(g) On the Prepayment Date, and as a condition to Buyer's payment
obligation contained in Section 2.3(e), Seller shall pay to Buyer an amount
equal to two percent (2%) of the indebtedness then outstanding under the First
Mortgage.
(h) If Buyer does not pay all outstanding principal amounts under the
First Mortgage to the Lender on or before June 26, 1999, Buyer shall within five
(5) days repay to Seller all fees paid by Seller to Buyer under Section 2.3(g).
ARTICLE 3
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
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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 of Seller 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. Except
for the Joint Development Agreement, 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
(i) 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) and (ii)
the Joint Development Agreement, 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
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to purchase or to otherwise acquire any interest or profit participation of
any kind in the Property or any part thereof. Notwithstanding the foregoing,
Buyer shall have the right to accept back-up offers for the Property that are
expressly contingent upon the termination of this Agreement.
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, to
Seller's actual knowledge, no provision, condition or limitation of any of the
Authorizations has been breached or violated. Seller has not intentionally
misrepresented or failed to disclose any relevant fact in obtaining all
Authorizations, and Seller has no actual 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
actual 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. Seller has no actual 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 Seller's actual 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 and (v) all
equipment reasonably necessary 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
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easement, restrictive covenant or any similar instrument or agreement
effecting the Real Property, or any portion thereof.
3.7 PERSONAL PROPERTY. Except for the Tangible Personal Property
subject to the Equipment Leases, 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. Except as specifically set forth on
EXHIBIT H attached hereto, 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 Equipment Leases 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 or Equipment Leases. Seller shall not enter into any new
Operating Agreements, Equipment Leases, supply contracts, vending or service
contracts or other agreements with respect to the Property, nor shall Seller
enter into any agreements modifying the Operating Agreements or Equipment
Leases, unless (a) any such agreement or modification will not bind Buyer or the
Property after the Closing Date, (b) Seller has obtained Buyer's prior written
consent to such agreement or modification or (c) with respect to Operating
Agreements only, such Operating Agreements are entered into in the ordinary
course of business and 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.
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) required to
keep the Property insured until the Closing Date 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
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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 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 Seller's actual 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 any 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.
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3.14 FINANCIAL INFORMATION. To Seller's actual 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 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 (which shall include
entering into off-season "charity cards" and booking tournaments), (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. Notwithstanding the foregoing, Buyer
acknowledges that it is Seller's customary practice to annually reduce green
fees during the "shoulder season" beginning on April 15. 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.
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3.18 LAND USE. To Seller's actual knowledge, 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 actual 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 Seller's actual
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 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. Seller has advised Buyer that federal legislation may
require removal of any underground storage tanks located on the Property in
the future. Buyer agrees that the costs of such removal shall be borne by
Buyer and not Seller.
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
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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.
3.24 NO FIXED RATE ELECTION. Pursuant to Section 2.11 of that
certain Promissory Note (Secured) dated as of December 23, 1996, made by
Seller in favor of First Mortgagee in the original principal amount of Five
Million Two Hundred Thousand Dollars ($5,200,000) (the "Note"), Seller has
not elected to convert the Base Rate (as defined in the Note) to the Fixed
Rate (as defined in the Note).
3.25 NO DEFAULTS UNDER LOAN DOCUMENTS. Seller has performed all of
its obligations under each of the First Mortgage and the Note and all other
documents in connection with the loan evidenced thereby (collectively, the
"Loan Documents") 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 Loan Documents. Seller shall not enter into any
agreements modifying the Loan Documents.
3.26 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 not merge into the Deed or any other document or instrument executed
and delivered in connection herewith, and 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 4
BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
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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 5.2 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:
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(a) SELLER'S DELIVERIES. Seller shall have delivered to or for
the benefit of Buyer, as the case may be, on or before the scheduled Closing
Date, all of the documents listed in 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. 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. 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 Section 7.2 of this
Agreement, 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.
(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.
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5.2 AS TO SELLER'S OBLIGATIONS. Seller's obligations under this
Agreement 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 scheduled Closing Date, all of the
documents and payments listed in Section 6.3 of 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.
(c) NO DEFAULT UNDER LOAN DOCUMENTS. From and after the Closing
Date, Buyer shall not default in the performance of any of its obligations
under the Loan Documents nor shall Buyer elect to convert the Base Rate to
the Fixed Rate.
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 9:00 a.m., New York time,
at the offices of Escrow Agent on June 26, 1998; provided however, that Buyer
shall have the right to extend the Closing Date to July 9, 1998, at its sole
discretion by providing written notice to Seller at least three (3) business
days prior to the scheduled Closing Date. 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 and
those items specified in Section 3.3 of this Agreement.
6.2 SELLER'S DELIVERIES. At Closing, Seller shall deliver to
Buyer, to the extent not previously delivered, 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.
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(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, 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.
(j) 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.
(k) IMPROVEMENT PLANS. To the extent available, a set or copies
of the plans and specifications for the Improvements.
(l) 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.
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(m) TAX BILLS. All current real estate and personal property tax
bills in Seller's possession or under its control.
(n) SURVEYS. All surveys and plot plans of the Real Property in
possession of or in the control of Seller.
(o) TOURNAMENT SCHEDULE. A complete list of all scheduled
tournaments, functions and the like, in reasonable detail.
(p) 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.
(q) LENDER'S ESTOPPEL CERTIFICATE.
(r) DEVELOPMENT AGREEMENT ESTOPPEL CERTIFICATES (subject to
Section 2.2(j)).
(s) 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.
(t) MISCELLANEOUS. Any other document or instrument reasonably
necessary to facilitate the Closing; provided, however, that such document or
instrument does not materially increase Seller's economic obligations under
this Agreement.
6.3 BUYER'S DELIVERIES. At Closing, Buyer shall pay or deliver to
Seller the following:
(a) CASH PORTION OF PURCHASE PRICE. The cash portion of the
Purchase Price by federal funds wired to an account designated by Seller.
(b) MISCELLANEOUS. Any other document or instrument reasonably
necessary to facilitate the Closing; provided, however, that such document or
instrument does not materially increase Buyer's economic obligations under
this Agreement.
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) ASSIGNMENT AND ASSUMPTION AGREEMENT.
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<PAGE>
(c) 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.
(d) MISCELLANEOUS. Such other and further documents, papers and
instruments as may be reasonably required by the parties hereto or their
respective counsel in order to facilitate the Closing; provided, however,
that such documents, papers or instruments do not materially increase either
party's economic obligations under this Agreement.
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 with respect to the transfer of title
and all charges for title insurance premiums shall be paid by Seller. 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 respect to the Property. All other
closing costs shall be split between Buyer and Seller as is customary in the
sale of commercial property located in Palm Beach County, Florida.
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 reconciliation shall occur within forty-five
(45) days of the Closing Date and each of the parties hereto shall furnish
the other with such supporting documentation as it shall reasonably require.
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.
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<PAGE>
(b) TAXES. Real estate and personal property taxes.
(c) UTILITIES. To the extent Buyer and Seller cannot obtain final
meter readings as of the Closing Date despite commercially reasonable
efforts, utility charges (including but not limited to charges for water,
sewer and electricity). Seller shall be entitled to a credit for any
deposits with applicable utility companies to the extent such utility
companies acknowledge in writing that such deposits shall be credited to
Buyer. If Seller has made deposits with utility companies and such companies
do not agree to credit such deposits to Buyer's account at Closing, Seller
shall be entitled to seek a refund of such deposits and Buyer shall be
responsible for arranging utility service from such companies, including the
payment of any required security deposits.
(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 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.
Seller shall have the right after Closing to collect those accounts
receivable relating to the period prior to Closing as specified in a schedule
delivered to Buyer at Closing.
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(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 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, 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. If any such loss or
damage which is reasonably anticipated by Buyer to cost more than Two Hundred
Fifty Thousand Dollars ($250,000) to repair or restore 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 or if the cost
to repair or restore the Property is reasonably anticipated by Buyer to be
less than Two Hundred Fifty Thousand Dollars ($250,000), Buyer shall purchase
the Property in accordance with the terms of 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 and Buyer shall receive
a credit against the Purchase Price in the amount of Seller's insurance
deductible or for the amount of any uninsured casualty, as applicable.
7.3 REAL ESTATE BROKER.
(a) REPRESENTATIONS AND WARRANTIES. Seller and Buyer each
represent and warrant that they have not engaged or dealt with any broker,
finder or other person in connection with the transactions contemplated by
this Agreement which could result in any obligation of Buyer or Seller to pay
a fee or a commission,
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except for First Tee Capital Advisors, Ltd. (dba Clubhouse Capital)
("Seller's Broker"). Seller shall be solely responsible for paying a
commission in the amount of Two Hundred Forty-Six Thousand Dollars ($246,000)
to Seller's Broker pursuant to a separate agreement between Seller and
Seller's Broker. Seller agrees that it shall pay Seller's Broker such
commission at Closing out of proceeds of the sale of the Property. Seller
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.
(b) INDEMNITIES. Buyer and Seller hereby agree to indemnify,
defend and hold the other harmless from and against all claims and losses,
whether or not taxable and whether or not any action is prosecuted to
judgment, incurred by the indemnified party in connection with any broker's,
finder's or other commission or fee payable in connection with the
transactions contemplated hereby claimed by any person or entity through the
indemnifying party. The foregoing obligations to indemnify shall survive the
Closing of any termination of this Agreement.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and
after the execution of this Agreement through the Closing Date, 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 on or after the Closing
Date 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. In addition, Seller shall have
the right to disclose the existence of this Agreement (but not the identity
of Buyer) and the scheduled and actual Closing Date under this Agreement to
its service providers, Developer and Country Club. 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
30
<PAGE>
Lease), if such nominee is Raymon R. Finch, Jr. or Raymon R. Finch, III or an
entity created by either, or a nominee of Buyer reasonably approved by
Seller, 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. Buyer shall be responsible for the cost
of all transfer or application fees in connection with the transfer of the
liquor license. 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 (i) 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, and (ii) Seller obligations under this
sentence shall terminate as of six (6) months after the Closing Date.
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION;
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
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<PAGE>
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 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; provided, however that Buyer shall retain all remedies
accruing as a result of Seller's breach or default, including, without
limitation, specific performance. Except in the case of Seller's willful
failure to close the transaction contemplated by this Agreement, in an action
for damages against Seller, Buyer's recovery, exclusive of costs recoverable
pursuant to Section 8.6, shall be limited to One Hundred Thousand Dollars
($100,000).
8.4 BUYER'S INDEMNIFICATION. 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 be incurred by Seller relating to the period from and after
the Closing Date that arise under (i) the Operating Agreements or Equipment
Leases assumed by Buyer or Buyer's designee pursuant to the Assignment and
Assumption Agreement, (ii) the Note or First Mortgage or (iii) the Joint
Development Agreement.
[Remainder of this page intentionally left blank.]
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8.5 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 (excluding its obligation to purchase the
Property, the remedy for which is set forth in Section 9.1), and Buyer fails
to cure any such default within ten (10) business days after notice thereof
from Seller, then Seller's remedy for such default shall be to terminate this
Agreement, provided, however, Seller shall retain all remedies accruing as a
result of Buyer's breach or default except for specific performance.
Notwithstanding the foregoing, in no event shall a default by Buyer extend
the Closing Date beyond the scheduled Closing Date.
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 LIQUIDATED DAMAGES. If Buyer defaults in its obligations to
close the purchase of the Property for any reason other than Seller's default
or a failure of a condition precedent described in Section 5.1, the Deposit
will be paid to and retained by Seller as full, agreed and liquidated
damages. The parties hereto expressly agree and acknowledge that Seller's
actual damages in the event of a default by Buyer would be extremely
difficult or impracticable to ascertain and that the amount of the deposit
represents the parties' reasonable estimate of such damages. Seller shall
have no other remedy whether at law or in equity for any default by Buyer.
Seller's initials: ____ Buyer's initials: _____
9.2 SELLER'S MEMBERSHIP RIGHTS. Joseph Graffeo, Harriet Rostoff,
Ira Smolev, Joseph Galante and Andrew Inelli (collectively, the "Players")
shall, free of charge, be afforded all rights of members of the Golf Course,
as the same may change from time to time, through the end of calendar year
2002. The Players shall be responsible for any additional charges incurred
by them in connection with their use of the Golf Course, including, without
limitation, cart fees, guest green fees, range fees and food and beverage
expenses.
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9.3 BULK SALES. Seller and Buyer hereby waive compliance with any
bulk sales laws or similar laws (the "Bulk Sales Laws") applicable to the
transaction contemplated by this Agreement, if any. 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 or in connection with
non-compliance with the Bulk Sales Laws.
9.4 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.
9.5 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.
9.6 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns.
9.7 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement and the escrow provided herein.
9.8 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.
9.9 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.
9.10 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
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counterparts hereof shall collectively constitute a single agreement.
9.11 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.
9.12 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.
9.13 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.
9.14 INCORPORATION BY REFERENCE. All of the exhibits attached
hereto are by this reference incorporated herein and made a part hereof.
9.15 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; provided, however, that such
agreements, instruments, papers, deeds, acts or things do not materially
increase either party's economic obligations under this Agreement.
9.16 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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IN WITNESS WHEREOF, Seller and Buyer have hereunder affixed their
signatures to this Purchase and Sale Agreement, all as of the 28th day of
May, 1998.
"BUYER"
GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By:
--------------------------------------------
Its:
-------------------------------------------
"SELLER"
POLO TRACE MANAGEMENT, INC.,
a Florida corporation
By:
--------------------------------------------
Its:
-------------------------------------------
S-1
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
See Attached
<PAGE>
EXHIBIT B
DESCRIPTION OF IMPROVEMENTS
[to be agreed upon]
<PAGE>
EXHIBIT C
TANGIBLE PERSONAL PROPERTY
See Attached
<PAGE>
EXHIBIT D
INTANGIBLE PERSONAL PROPERTY
See Attached
<PAGE>
EXHIBIT E
BILL OF SALE - PERSONAL PROPERTY
WHEREAS, by deed of even date herewith, POLO TRACE MANAGEMENT, INC., a
Florida corporation ("Seller") conveyed to GOLF TRUST OF AMERICA, L.P., a
Delaware limited partnership ("Buyer"), whose mailing address is 14 N. Adger's
Wharf, Charleston, South Carolina 29401, that certain tract of land more
particularly described in SCHEDULE 1 attached hereto as a part hereof, together
with all improvements located thereon (the "Property").
WHEREAS, in connection with the above described conveyance Seller desires
to transfer and convey to Buyer certain items of tangible personal property as
defined in the Purchase and Sale Agreement dated May 28, 1998, (the "Agreement")
including, without limitation, the items hereinafter described.
NOW, THEREFORE, in consideration of the receipt of TEN AND NO/100 DOLLARS
($10.00) and other good and valuable consideration paid in hand by Buyer to
Seller, the receipt and sufficiency of which are hereby acknowledged, Seller
has, without any representation or warranty whatsoever, except as set forth in
the last sentence of this Bill of Sale, GRANTED, CONVEYED, CONTRIBUTED,
TRANSFERRED, SET OVER and DELIVERED and by these presents does hereby GRANT,
CONTRIBUTE, TRANSFER, SET OVER and DELIVER to Buyer, its legal representatives,
successors and assigns, all items of tangible personal property and fixtures (if
any) owned or leased by Seller, 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 carts, 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, and
equipment or machinery of every kind or nature located on or useful in the
operation of the Real Property whether on or off-site, including all warranties
and guaranties associated therewith (the "Tangible Personal Property"),
including, without limitation, the personal property described in SCHEDULE 2
attached hereto and 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,
guarantees, Authorizations (as defined in the Agreement), general intangibles,
business records relating to the operation of the Property, 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
<PAGE>
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 the Current Assets,
as defined in the Agreement (collectively, the "Intangible Personal Property"),
and to have and to hold, all and singular, the Tangible Personal Property and
the Intangible Personal Property unto Buyer forever. Except for the Tangible
Personal Property subject to the Equipment Leases (as defined in the Agreement),
all of the Tangible Personal Property and Intangible Personal Property being
conveyed by Seller to Buyer pursuant to this Bill of Sale is free and clear of
all liens and encumbrances and Seller has good, merchantable title thereto and
the right to convey the same.
EXECUTED this ____ day of ____________________, 19____.
Seller:
POLO TRACE MANAGEMENT, INC.,
a Florida corporation
By:__________________________
Its:______________________
<PAGE>
SCHEDULE 1
DESCRIPTION OF PROPERTY
See Attached
<PAGE>
SCHEDULE 2
DESCRIPTION OF PERSONAL PROPERTY
See Attached
<PAGE>
EXHIBIT F
SPECIAL WARRANTY DEED
This Instrument Prepared By
and Return to:
O'MELVENY & MYERS LLP
275 Battery Street, 26th Floor
San Francisco, California 94111
Attn: Peter T. Healy, Esq.
THIS SPECIAL WARRANTY DEED made this _____ day of ____, 1998, by POLO
TRACE MANAGEMENT, INC., a Florida corporation ("Grantor"), whose office address
is: 13481 Polo Trace Drive, Delray Beach, Florida ________, Attn: Mr. Joseph
Graffeo, to GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership, whose
office address is: 14 North Adger's Wharf, Charleston, South Carolina 29401
("Grantee").
WITNESSETH: That Grantor for and in consideration of the sum of Ten
Dollars ($10.00) and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, hereby grants, bargains, sells, aliens,
remises, conveys and confirms unto the Grantee all that certain real property
situated in Palm Beach County, Florida, more particularly described on SCHEDULE
A attached hereto and made a part hereof (the "Property").
TOGETHER with all the tenements, hereditaments and appurtenances
thereto belonging or in anywise appertaining.
AND Grantor hereby covenants with Grantee that Grantor is lawfully
seized of the Property in fee simple; that Grantor has good right and lawful
authority to sell and convey the Property; that Grantor hereby fully warrants
the title to the Property and will defend the same against the lawful claims of
all persons claiming by, through or under Grantor; and that the Property is free
of all encumbrances, except those matters listed on SCHEDULE B attached hereto
and made a part hereof.
[SIGNATURES ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, Grantor has caused these presents to be signed and
sealed the day and year first above written.
"Grantor"
POLO TRACE MANAGEMENT, INC.,
a Florida corporation
By: ______________________________
Its: ______________________________
By: ______________________________
Its: ______________________________
<PAGE>
SCHEDULE A
PROPERTY
See Attached
<PAGE>
SCHEDULE B
EXCEPTIONS TO TITLE
(to be attached by Title Company)
<PAGE>
STATE OF __________________ )
) ss.
COUNTY OF _________________ )
On ________________, 19___, before me ___________________________, a
Notary Public in and for said State, personally appeared
____________________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity on
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________
Notary Public, State of __________
<PAGE>
EXHIBIT G
SELLER'S FIRPTA AFFIDAVIT
Section 1445 of the Internal Revenue Code provides that a transferee of a
United States real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not
required upon the disposition of a United States real property interest by POLO
TRACE MANAGEMENT, INC., a Florida corporation ("Seller"), the undersigned hereby
certifies the following on behalf of Seller:
1. Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations); and
2. Seller's U.S. employer tax identification number is
______________________; and
3. Seller's office address is ______________________,
_______________________________________.
Seller understands that this certification may be disclosed to the Internal
Revenue Service by transferee and that any false statement contained herein
could be punished by fine, imprisonment, or both.
The undersigned officer of Seller declares that he/she has examined this
certification and to the best of his/her knowledge and belief it is true,
correct and complete, and he/she further declares that he/she has authority to
sign this document on behalf of Seller.
Dated: _____________, 1998
POLO TRACE MANAGEMENT, INC.,
a Florida corporation
By:__________________________
Its:______________________
<PAGE>
EXHIBIT H
CONTRACTS AND OPERATING AGREEMENTS
See Attached
<PAGE>
EXHIBIT I
DUE DILIGENCE REQUEST LIST
1. General Property Matters
(a) Preliminary title report.
(b) Phase I environmental site assessment report.
(c) Fuel tank integrity test for any underground storage tanks located on
Property.
(d) Structural engineering report covering the clubhouse and any other
major buildings.
(e) Long-term water quality and quantity reports.
(f) Wetlands delineation or compliance report.
(g) Other plans, specifications, appraisals, market studies, soil and
engineering reports, surveys, and environmental reports and studies in
Seller's possession.
(h) Any other reports reasonably required by the Buyer.
(i) Leases, concession and occupancy agreements, and service, utility and
supply contracts, together with a schedule indicating term, payment
obligation, parties and options to extend or cancel.
(j) Property tax bills and other assessments paid with respect to the
Property for the past five years, copies of all information regarding
collected sales taxes, FICA taxes, gross receipts taxes, income taxes
or any other taxes relating to the Property, any correspondence sent
to or received from the tax assessor or any taxing entity, including
tax appeals.
(k) All permits and licenses that are required to operate the Property,
including, but not limited to, a development agreement, building and
occupancy permit, liquor license, and business permit, copies of any
existing information relating to the Property's past non-compliance
with applicable laws.
(l) Copies of organizational documents of Seller and evidence that all
necessary approvals of Seller to enter into this Agreement have been
obtained.
(m) Such other documents and information as the Buyer may reasonably
request to determine the operating status of the Property and
credit-worthiness of the Owner.
<PAGE>
(n) A description of all litigation, mechanic's liens, administrative or
condemnation proceedings, governmental investigations or inquiries,
pending or threatened, affecting the Property, including a description
of any significant disputes with vendors, concessionaires or employees
relating to the Property.
(o) A description of any known defects in the Property.
2. General Business Matters
(a) Name of owner.
(b) Form of ownership (i.e. C Corporation, S Corporation, Limited
Liability Co., Partnership, Limited Partnership and Proprietorship).
(c) Course location.
(d) Number of courses at this location.
(i) Public
(ii) Semi-Private
(iii) Private
Equity
Non-Equity
Hybrid
(e) Certified compiled statements (19___-19___).
(f) Number of daily fee paid rounds (19___-19___).
(g) Number of member rounds (19___-19___).
(h) Number of complimentary rounds (19___-19___).
(i) Total number of rounds (19___-19___).
(j) Description of replay policy.
(k) Annual gross revenues (19___-19___).
(i) Green fees
(ii) Dues
(iii) Initiation fees
(iv) Cart fees
(v) Food & Beverage
(vi) Merchandise
(vii) Other
<PAGE>
(l) Net operating income.
(m) Operating statements for the Property for the past 5 years.
(n) Owner's projected operating statements for the Property for 19___ and
19___.
(o) Depreciation.
(p) Amortization.
(q) Balance Sheet.
(i) Total assets
(ii) Total liabilities
(iii) Net worth
(r) Debt.
(i) Secured
Long term
Short term
(ii) Unsecured
Long term
Short term
(s) Carts.
(i) Own
(ii) Lease
(t) Maintenance budget per 18 holes.
(u) Average annual capital expenditures.
(v) Equipment list/age.
(w) Mortgage over basis or negative capital account.
(x) A copy of the closing statement for any re-financing of any debt on
the Property within the last two (2) years.
<PAGE>
EXHIBIT J
WARRANTY DISCLOSURE SCHEDULE
See Attached
<PAGE>
EXHIBIT K
SELLER'S CERTIFICATE
Pursuant to SECTION 5.1(B) of that certain Purchase and Sale Agreement
(the "Agreement") by and between the undersigned ("Seller") and GOLF TRUST OF
AMERICA, L.P., a Delaware limited partnership ("Buyer") dated as of May 28, 1998
Seller hereby certifies to Buyer that all of its representations and warranties
set forth in ARTICLE 3 of the Agreement are true and correct, subject to the
following: ________________________________________________.
Dated: _________________, 1998
POLO TRACE MANAGEMENT, INC.,
a Florida corporation
By:__________________________
Its:______________________
<PAGE>
EXHIBIT L
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT OF OPERATING AGREEMENTS
AND EQUIPMENT LEASES
(The Links at Polo Trace)
THIS ASSIGNMENT OF OPERATING AGREEMENTS AND EQUIPMENT LEASES (this
"Assignment") is entered as of this ____ day of _______, 1998 (the "Effective
Date"), by and between POLO TRACE MANAGEMENT, INC., a Florida corporation
("Assignor") and _______________________________, a ___________________
("Assignee").
a. Assignor has conveyed to Golf Trust of America, L.P., a Delaware
limited partnership ("Golf Trust") that certain real property more particularly
described in SCHEDULE A, attached hereto and incorporated herein (the
"Property") pursuant to that certain Purchase And Sale Agreement dated as of May
28, 1998 (the "Purchase and Sale Agreement") by and between Assignor, as seller,
and Golf Trust, as buyer.
b. Assignee has leased the Property from Golf Trust pursuant to that
certain Lease dated as of _________, 1998, by and between Golf Trust, as lessor,
and Assignee, as lessee.
c. Assignor now desires to assign and transfer to Assignee all of
Assignor's right, title and interest in, to and under the Warranties and
Guaranties, as hereinafter defined, and the Agreements, as hereinafter defined.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, Assignor hereby transfers, bargains and conveys
unto Assignee:
(A) the 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 A attached hereto (the "Operating Agreements"); and
(B) the leases of Tangible Personal Property (as defined in the
Purchase and Sale Agreement) in force and effect as of the Effective Date, as
more particularly set forth on EXHIBIT B attached hereto (the "Equipment
Leases").
ASSIGNOR AND ASSIGNEE FURTHER HEREBY AGREE AND COVENANT AS FOLLOWS:
<PAGE>
1. ASSUMPTION. Assignee hereby assumes and agrees to perform the
obligations and duties of Assignor arising under and in connection with the
Operating Agreements and Equipment Leases on and after the Effective Date.
2. WARRANTIES. Assignor does hereby covenant with Assignee that
Assignor has the right to transfer and bargain the Operating Agreements and
Equipment Lease to Assignee (to the extent transferable). In the event that
consent to the assignment of any of the Operating Agreements or Equipment Leases
is a condition precedent to the effectiveness of any such assignment, Assignor
shall utilize its best efforts to obtain such consent.
3. INDEMNIFY, DEFEND AND HOLD HARMLESS.
(x) ASSIGNOR'S COVENANT. Assignor hereby agrees to indemnify,
defend and hold Assignee harmless from and against any and all claims, demands,
liabilities and/or obligations arising out of or resulting from any failure by
Assignor to perform its obligations pursuant to the Operating Agreements and
Equipment Leases prior to the Effective Date.
(y) ASSIGNEE'S COVENANT. Assignee hereby agrees to indemnify,
defend and hold Assignor harmless from and against any and all claims, demands,
liabilities and/or obligations arising out of or resulting from any failure by
Assignee to perform its obligations pursuant to the Operating Agreements and
Equipment Leases on and after the Effective Date.
4. ATTORNEYS' FEES. In the event of any litigation between Assignor
and Assignee arising out of the obligations of Assignor or Assignee under this
Assignment or concerning the meaning or interpretation of any provision
contained herein, the losing party shall pay the prevailing party's costs and
expenses of such litigation, including, without limitation, reasonable
attorneys' fees.
5. LIABILITY. Any liability which may arise as a consequence of the
execution of this Assignment by or on behalf of Assignee or Assignor shall be a
liability of the corporate entity only and not the personal liability of any
director or employee of Assignee or Assignor.
6. SUCCESSORS AND ASSIGNS. This Assignment and all of the terms
hereof shall survive the Effective Date and shall be binding on and inure to the
benefit of the parties hereto, their heirs, executors, administrators,
successors in interest and assigns.
7. COUNTERPARTS. This Assignment may be executed in counterparts,
each of which so executed shall, irrespective of the date of its execution and
delivery, be deemed an original, and the counterparts together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment as of the Effective Date.
"ASSIGNOR"
POLO TRACE MANAGEMENT, INC.,
a Florida corporation
By: ______________________________
Its: ______________________________
"ASSIGNEE"
______________________________,
a__________________________
By:___________________________
Its:__________________________
<PAGE>
SCHEDULE A
THE PROPERTY
See Attached
<PAGE>
SCHEDULE B
OPERATING AGREEMENTS
None
<PAGE>
SCHEDULE C
EQUIPMENT LEASES
See Attached
<PAGE>
EXHIBIT M-1
DEVELOPMENT AGREEMENT ESTOPPEL CERTIFICATE
(SELLER)
[to be agreed upon]
<PAGE>
EXHIBIT M-2
DEVELOPMENT AGREEMENT ESTOPPEL CERTIFICATE
(DEVELOPER)
[to be agreed upon]
<PAGE>
EXHIBIT M-3
DEVELOPMENT AGREEMENT ESTOPPEL CERTIFICATE
(COUNTRY CLUB)
[to be agreed upon]
<PAGE>
EXHIBIT N
LENDER'S ESTOPPEL CERTIFICATE
[to be agreed upon]
<PAGE>
- --------------------------------------------------------------------------------
Ohio Prestwick Country Club
Green
Summit County
Ohio
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
PRESTWICK GOLF CLUB, INC.
TENANT
DATED AS OF JULY 17, 1998
- --------------------------------------------------------------------------------
<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 . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Initial Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Extension Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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 FB&M Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Annual Reconciliation of Percentage Rent and FB&M Rent. . . . . . . . . 19
4.6 Increase in Base Rent Following Conversion Date . . . . . . . . . . . . 19
4.7 Record-keeping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Additional Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Late Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.10 Net Lease; Capital Replacement Reserve . . . . . . . . . . . . . . . . 21
4.11 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Pledge of Owner's Shares. . . . . . . . . . . . . . . . . . . . . . . . 21
5 2 Obligation to Withhold Distributions. . . . . . . . . . . . . . . . . . 21
5 3 Cross-Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Landlord's Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Termination Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Payment of Impositions. . . . . . . . . . . . . . . . . . . . . . . . . 22
ii
<PAGE>
6.2 Information and Reporting . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Assessment Districts. . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 7
TENANT WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 No Termination, Abatement, Etc .. . . . . . . . . . . . . . . . . . . . 24
7.2 Condition of the Property . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . 27
8.1 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Tenant's Personal Property. . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Tenant's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Landlord's Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Specific Prohibited Uses. . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Membership Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Landlord to Grant Easements, Etc. . . . . . . . . . . . . . . . . . . . 29
9.5 Tenant's Additional Covenants . . . . . . . . . . . . . . . . . . . . . 29
9.6 Valuation of Remainder Interest in Lease. . . . . . . . . . . . . . . . 30
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Violations; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.7 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . . . 31
10.8 Survival of Indemnification Obligations. . . . . . . . . . . . . . . . 32
10.9 Environmental Violations at Expiration
or Termination of Lease. . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . . . . 34
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . . . . 34
iii
<PAGE>
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS;
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . . . . 34
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . . . . 36
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . . . . 36
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . . . . 37
12.6 Landlord's Right to Audit Calculation
of Gross Golf Revenue and FB&M 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
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . 45
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 47
15.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . . . . 47
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 49
15.10 Excess Proceeds, Deficiency of Proceeds . . . . . . . . . . . . . . . 50
15.11 Reconstruction Covered by Insurance . . . . . . . . . . . . . . . . . 51
15.12 Reconstruction Not Covered by Insurance . . . . . . . . . . . . . . . 52
15.13 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . . . . 52
15.14 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.15 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
iv
<PAGE>
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 53
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 58
17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . . . . 58
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . 58
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . . . 59
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . . . 61
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . . . . 62
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . . . . 62
22.4 Survival of Indemnification Obligations. . . . . . . . . . . . . . . . 63
Available Insurance Proceeds . . . . . . . . . . . . . . . . . . . . .
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . . . . 63
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
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23.5 Right of First Offer of Landlord to Acquire Leasehold. . . . . . . . . 66
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . . . . 66
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . . . 68
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . 68
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . 69
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . . . . 70
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 . . . . . . . . . . . . . . . . . . . . . . . . 71
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. . . . . . . . . . . . . . . . 73
28.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
28.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . 73
28.6 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . . . . 73
28.7 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . 73
28.8 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
28.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
28.10 Survival of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . 74
28.11 Invalidity of Terms or Provisions . . . . . . . . . . . . . . . . . . 75
28.12 Prohibition Against Usury . . . . . . . . . . . . . . . . . . . . . . 75
28.13 Amendments to Lease . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.14 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . 75
28.15 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.17 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . 75
28.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
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28.19 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . 76
28.20 Non-Recourse as to Landlord . . . . . . . . . . . . . . . . . . . . . 76
28.21 No Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.22 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.23 Year 2000 Problem . . . . . . . . . . . . . . . . . . . . . . . . . . 76
28.24 Landlord's Right to Golf Rounds . . . . . . . . . . . . . . . . . . . 77
</TABLE>
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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 - Example of Monthly Operating Statement
Exhibit K - Contingent Purchase Price Formula
Exhibit K-1 - Example of Contingent Purchase Price
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Ohio Prestwick Country Club
Green
Summit County
Ohio
LEASE
THIS LEASE (this "Lease"), dated as of July 17, 1998, is entered into by
and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and PRESTWICK GOLF 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 Purchase and Sale Agreement (the "Agreement")
dated as of July 17, 1998 by and between Landlord and JOHN J. RAINIERI, SR. and
BETTY RAINIERI, husband and wife ("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;
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(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.
"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.
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"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 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 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 3.48% 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) Fifty
Thousand Dollars ($50,000.00).
"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
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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 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).
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"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.
"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, between the current year's FB&M
Revenue and the FB&M Revenue for the Base Year, pro rated for any partial
periods.
5
<PAGE>
"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.
"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)
6
<PAGE>
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 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.
7
<PAGE>
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
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(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 $640,000 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 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 (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 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,
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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 Prestwick Golf Club, Inc., an Ohio 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.
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"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.
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
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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 (or any permitted assignee) 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 remain 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
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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 October 1, 1999 increase
shall be pro rated for the number of days in the Lease Term in the third 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.
4.3 PERCENTAGE RENT. In addition to Base Rent and FB&M Rent, Tenant
shall pay Percentage Rent as provided herein. Beginning in
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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.
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 1998, 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.
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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
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 provide 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 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 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.
4.7 RECORD-KEEPING. Tenant shall utilize an accounting system for the
Property in accordance with its usual and customary practices and in accordance
with GAAP 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.
4.8 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
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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 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. 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.
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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, 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 by Landlord to perfect the lien and security
interests herein granted.
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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 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 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
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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
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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) DURABILITY, (xiv) OPERATION, (xv) THE EXISTENCE OF ANY
MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY LAW (INCLUDING
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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
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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
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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 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
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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.
ARTICLE 10
HAZARDOUS MATERIALS
Except as specifically set forth in that certain Phase I Environmental
Site Assessment dated July 31, 1997, as amended, prepared by Ameican Analytical
Laboratories, Inc., Tenant hereby represents, warrants, and covenants to
Landlord as follows:
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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, 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
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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 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
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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.
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,
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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,
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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. If any amount remains in the Capital Replacement Fund at the expiration
or termination of the Lease, Landlord shall retain all funds remaining in the
Capital Replacement Fund. 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) Amounts credited to the Capital Replacement Fund shall be
allocated for use by Tenant as follows: (i) sixty percent (60%) of such
amounts to be used by Tenant for long-term Capital Expenditures; and (ii)
forty percent (40%) of such amounts to be used by Tenant for short-term
Capital Expenditures, and Landlord shall determine what constitutes
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long-term Capital Expenditures and short-term Capital Expenditures, in its
reasonable discretion.
(e) 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 AND FB&M
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 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
Revenuefor 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 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
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.
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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, allocated among long and
short-term 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 seventy-five (75) 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 seventy-five (75) 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
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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, and a computer system 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
either at the Property or at Tenant's offices in Green, Summit County, Ohio.
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 ten (10) days of each month
unaudited operating statements in a form more particularly described in Exhibit
G attached hereto, which shall include the following: Gross Golf Revenues, Other
Revenue, FB&M Revenue, Operating Expenses, Other Expenses, actual results of
monthly rounds of golf played, and revenues per player.
(c) Tenant shall furnish to Landlord within twenty (20) 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
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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
and FB&M Rent payable for the following Fiscal Quarter.
(d) 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.
(e) 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;
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(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 Improvements for the Primary
Intended Use substantially in the manner and to the extent
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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;
(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
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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, with any Facility Mortgagee(s). The
policies on the Property, including the Improvements, Fixtures, Tangible and
Intangible
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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
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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 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
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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
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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
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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 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
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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.
ARTICLE 17
EVENTS OF DEFAULT
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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;
(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
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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.
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
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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 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)
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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 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
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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.
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
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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);
(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.
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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.
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
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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 of 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) management agreement to operate food and beverage and bar services
at the Property by and between Pre Club, Inc., the predecessor in interest to
Transferor, and Tenant;
(vi) sublease or license to operate spa or health clubs; and
(vii) 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
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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 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
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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.
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.
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(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
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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);
(b) the dates to which the Rent has been paid;
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(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 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,
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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.
Landlord and Tenant agree to execute subordination, non-disturbance and
attornment agreements, estoppel agreements, and other similar documents
requested by mortgagees of Landlord or Tenant, which are in form and content
reasonably acceptable to Landlord and Tenant.
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
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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
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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.
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
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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:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II
With a Copy to: Nexsen Pruet Jacobs Pollard &
Robinson, LLP
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200 Meeting Street
Suite 301
Charleston, South Carolina 29401
Attention: Neil C. Robinson, Jr. Esq.
Matthew J. Norton, Esq.
If to Tenant: Prestwick Golf Club, Inc.
c/o Mr. John J. Rainieri, Sr.
4350 Mayfair Road
Uniontown, Ohio 44683
With a copy to: Thomas J. Sicuro, Esq.
Kane, Sicuro & Simon
101 East Main Street
Ravenna, Ohio 44266
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 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
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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.
28.23 YEAR 2000 PROBLEM. Tenant either has or shall take action necessary
to assure that Tenant's computer based systems are able to operate and
effectively recognize and perform date-sensitive functions involving certain
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). Tenant
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to the operation of the Property will
on a timely basis be able to perform properly date-sensitive functions related
to the Year 2000 Problem (that is, be "Year 2000 compliant"). Tenant shall
indemnify and hold Landlord harmless from any and all claims, losses, damages
and liabilities incurred as a result of Tenant's failure to be Year 2000
complaint.
28.24 LANDLORD'S RIGHT TO GOLF ROUNDS. Tenant agrees that Landlord or
Landlord's designee shall have the right to play without charge up to eight (8)
rounds of golf per month on the golf course Property. Landlord may assign the
rounds for use to any designee, and may make reservations with Tenant for any
open tee times.
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/
-----------------
Name: W. Bradley Blair, II
Title: President and Chief
Executive Officer
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TENANT: PRESTWICK GOLF CLUB, INC.,
an Ohio corporation
By: /s/
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
A-1
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EXHIBIT B
SCHEDULE OF IMPROVEMENTS
1 18 hole golf course;
2 2-story wood and stone frame clubhouse building;
3 two (2) 10'x10' wood bathrooms;
4 two (2) 1-story metal buildings (equipment storage buildings);
5 pool;
6 two (2) concrete blocks;
7 elevated walkway;
8 various tree planting and fencing;
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EXHIBIT C
OTHER LEASED PROPERTIES
1. Raintree Country Club, Uniontown, Ohio.
C-1
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EXHIBIT D
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is entered into as of this 17th
day of July, 1998, by and between (i) GOLF TRUST OF AMERICA, L.P., a Delaware
limited partnership, ("Secured Party"), and (ii) JOHN J. RAINIERI, SR. AND BETTY
RAINIERI, husband and wife, and RAINTREE COUNTRY CLUB, INC., an Ohio corporation
(collectively, "Pledgor").
RECITALS:
This Agreement is entered into based on the following understandings:
A. Pursuant to that certain Purchase and Sale Agreement (the "Purchase
Agreement") dated as of July 17, 1998, by and between Secured Party and John J.
Rainieri, Sr. and Betty Rainieri, husband and wife (collectively, "Transferor"),
Transferor transferred to Secured Party all of its right, title and interest in
and to certain real and personal property as described in the Purchase Agreement
(collectively, the "Property").
B. Pursuant to that certain lease dated as of July 17, 1998,(the
"Lease") Secured Party leased its interest in the Property to Prestwick Golf
Club, Inc., an Ohio corporation, an affiliate of Pledgor ("Tenant").
C. As a condition to (i) Secured Party entering into the Lease with
Tenant; and (ii) Secured Party entering into the Purchase Agreement with
Transferor, Secured Party has required that Pledgor pledge the Pledged Owner's
Shares (as hereinafter defined) as security for the Obligations (as hereinafter
defined).
D. Raintree Country Club, Inc. Is an affiliated entity of Tenant and is
owned in whole or in part by Transferor and Raintree Country Club, Inc. Does
hereby acknowledge the direct and indirect benefits it is receiving by providing
this Pledge Agreement to Secured Party.
D-1
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1. DEFINITIONS
(a) Capitalized terms not otherwise defined herein shall have the
meaning given to them in the Lease.
(b) The following terms shall have the indicated meanings:
"AGREEMENT" has the meaning set forth in the introductory Paragraph of
this Agreement.
"EVENT OF DEFAULT" has the meaning set forth in Section 14(a) of this
Agreement.
"INDEMNITY EVENT" has the meaning set forth in Section 2(a) of this
Agreement.
"LEASE" has the meaning set forth in Recital B of this Agreement.
"OBLIGATIONS" has the meaning set forth in Section 2(a) of this Agreement.
"PLEDGED OWNER'S SHARES" has the meaning set forth in Section 2(a) of this
Agreement.
"PLEDGOR" has the meaning set forth in the introductory Paragraph of this
Agreement.
"PLEDGOR'S GUARANTY" has the meaning set forth in Section 3(a) of this
Agreement.
"PROPERTY" has the meaning set forth in Recital A of this Agreement.
"PURCHASE AGREEMENT" has the meaning set forth in Recital A of this
Agreement.
"SECURED PARTY" has the meaning set forth in the introductory Paragraph of
this Agreement.
"SECURITY FUND" has the meaning set forth in Section 2(a) of this
Agreement.
"TENANT" has the meaning set forth in Recital B of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Secured Party and Pledgor hereby agree as
follows:
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2. GRANT OF SECURITY INTEREST.
(a) As security for the payment and performance of all obligations and
liabilities (including, without limitation, indemnities, fees and interest
thereon) of Pledgor, Tenant or any of Pledgor's direct or indirect subsidiaries
arising under: (i) Pledgor's obligation to indemnify Secured Party for breaches
of the representations and warranties made by Pledgor pursuant to Article 3 of
the Purchase Agreement (which obligations shall expire one (1) year from the
date of the Purchase Agreement); (ii) the Lease; (iii) the Pledgor's Guaranty
pursuant to Section 3 of this Agreement and all other provisions of this
Agreement; or (iv) in connection with any agreement, instrument or extension
contemplated by the foregoing documents (collectively, the "Obligations"),
Pledgor hereby pledges, hypothecates and grants to Secured Party a first and
prior security interest in 45,845 Owner's Shares (the "Pledged Owner's Shares")
which reflects a value of $1,600,000.00 which was priced at the closing trading
average for the previous five (5) business days prior to July 17, 1998 (which
shall include any increase or decrease in the Pledged Owner's Shares, in
accordance with the formula set forth on Exhibit D-1 attached hereto), together
with, after an occurrence and during the continuance of an Event of Default
hereunder or if any representation or warranty in Article 3 of the Purchase
Agreement is breached by Pledgor or proves to be false, as applicable (an
"Indemnity Event"), any and all proceeds thereof, including without limitation,
any and all dividends, income, interest and distributions earned from or
attributable to the investment or deposit of the Pledged Owner's Shares (the
Pledged Owner's Shares, together with all of the foregoing being collectively
referred to herein as the "Security Fund"). Pledgor shall have the right to
pledge, as substitute collateral, cash or other security that is acceptable to
Secured Party in its sole and absolute discretion. Prior to (x) any Event of
Default under the Lease (and after the cure or satisfaction thereof by Tenant or
Pledgor, at its sole election), (y) an Indemnity Event, or (z) an Event of
Default (defined below) all dividends, income, interest and/or distributions
earned from or attributable to the investment or deposit of the Security Fund
shall be payable to Pledgor; following an Event of Default under the Lease such
amounts shall be added to and become a part of the Security Fund and shall only
be disbursed in accordance with the terms of this Agreement. By its execution of
this Agreement, Pledgor acknowledges that it has delivered the Pledged Owner's
Shares to Secured Party as required by this Agreement. The word "Obligations" is
used herein in its most comprehensive sense and includes without limitation any
and all debts, obligations and liabilities of Pledgor, Tenant or any of
Pledgor's direct or indirect subsidiaries, arising as a result of a breach of
any of the representations and warranties made by Pledgor pursuant to Article 3
of the Purchase Agreement, the Lease or this Agreement, now or hereafter made,
incurred or created,
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whether voluntary or involuntary and however arising, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether Pledgor, Tenant or any of Pledgor's direct or indirect subsidiaries
may be liable individually or jointly, or whether recovery upon such Obligations
may be or hereafter become unenforceable. The Pledged Owner's Shares shall be
released in accordance with the provisions of Exhibit D-1 attached hereto (so
long as no Event of Default exists) or upon expiration of the Lease and
fulfillment of the Obligations.
(b) If the Pledgor shall become entitled to receive or shall receive, in
connection with any of the Security Fund, any:
(i) Stock certificate, including, without limitation, any certificate
representing a stock dividend or in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spin-off or split-off;
(ii) Option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Security Fund, or otherwise;
(iii) Dividend or distribution payable in property, including securities
issued by a person other than the issuer of any of the Pledged Owner's Shares;
or
(iv) Dividends or distributions of any sort, then, except for dividends
received by Pledgor at such time as there does not exist an uncured Event of
Default with respect to Pledgor, Pledgor shall accept the same as the agent of
Secured Party, in trust for Secured Party, and shall deliver them forthwith to
Secured Party, in the exact form received, with, as applicable, the Pledgor's
endorsement when necessary, or appropriate stock powers duly executed in blank
by Pledgor, to be held by Secured Party, subject to the terms hereof, as part of
the Security Fund.
(c) Pledgor shall execute and deliver to Secured Party such financing
and continuation statements covering the Security Fund and take such other
actions as Secured Party may from time to time require to perfect and continue
the perfection of Secured Party's security interest in the Security Fund.
3. GUARANTY OF OBLIGATIONS
(a) Pledgor irrevocably and unconditionally guarantees the full and
prompt payment when due of the Obligations and the due performance and
compliance with any of the terms of the Lease ("Pledgor's Guaranty").
D-4
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(b) Pledgor hereby waives notice of acceptance of this Agreement and
notice of any liability to which it may apply, and waives presentment, demand of
payment, protest, notice of dishonor or nonpayment of any such liability, suit
or taking of other action by Secured Party against Pledgor or Tenant.
(c) Pledgor's Guaranty shall not be released, modified, impaired or
otherwise affected by the following (whether or not Pledgor shall have had
notice or knowledge of the same): (i) any extension or indulgence by Secured
Party in respect to the performance of or compliance with the Obligations; (ii)
any failure, omission or inability of Secured Party to enforce any right, power
or remedy in respect to the Lease, the Purchase Agreement or this Agreement;
(iii) any amendment of the Lease or the Purchase Agreement; (iv) any receipt of
security including, without limitation, the Security Fund, or any sale,
exchange, release or subordination of security held by Secured Party with
respect to the Obligations; (v) any release from any liability of any person
liable under the terms of the Lease, the Purchase Agreement or this Agreement or
any other guarantor; (vi) any limitation or impairment of Secured Party's
remedies against Tenant or any other party liable under the terms of the Lease,
the Purchase Agreement or this Agreement; (vii) any action or inaction of
Secured Party with respect to the Lease, the Purchase Agreement or this
Agreement; (viii) any change in the name or identity of Tenant or any other
person or entity referred to in this Agreement; (ix) the invalidity or
unenforceability of the Lease or the Purchase Agreement; or (x) the death or
incapacity of Tenant or any other person or entity referred to in this
Agreement.
(d) If all or any portion of the Obligations of Pledgor as described in
Section 3(a) of this Agreement are paid or performed, the responsibilities of
Pledgor pursuant to Pledgor's Guaranty shall continue and remain in full force
and effect in the event that all or any part of such payment(s) or
performance(s) is avoided or recovered directly or indirectly from Secured Party
as a preference, fraudulent transfer or otherwise, irrespective of payment in
full of all sums due pursuant to such obligations.
(e) The liability of Pledgor pursuant to Pledgor's Guaranty is not
conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Lease or the Purchase Agreement or the pursuit by Secured
Party of any remedies which it now has or may hereafter have with respect
thereto, at law, in equity or otherwise, and Pledgor hereby waives any and all
benefits and defenses that it may have to the contrary and agrees that by doing
so Pledgor shall be liable even if Tenant had no liability at the time of the
execution of the Lease or thereafter ceases to be liable. Pledgor further agrees
that by doing so Pledgor's liability may be larger in amount and more burdensome
than that of Tenant, notwithstanding any benefits or defenses that Pledgor may
have to
D-5
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the contrary. Pledgor agrees that its liability hereunder shall continue and
shall not be limited or affected in any way by an impairment or any diminution
in loss of value in any security or collateral for the ease (including, but not
limited to the Security Fund, the leased premises or any personal property or
fixtures thereon), whether caused by hazardous substance or otherwise, or
Secured Party's failure to perfect a security interest in the Security Fund.
(f) Pledgor hereby waives: (i) all notices to Pledgor, to Tenant, or to
any other person, including, but not limited to, the creation, renewal,
extension, assignment, modification or accrual of any of the Obligations and
enforcement of any right or remedy with respect thereto, and notice of any other
matters relating thereto; (ii) demand of payment, presentation and protest;
(iii) any right to require Secured Party to apply to any default the Security
Fund or other security it may hold under the Lease; (v) notice of any sale of
personal property security of Tenant held by Secured Party; (vi) any and all
statutes of limitations affecting Pledgor's and/or Tenant's liability under this
Agreement or the Lease, as applicable, and/or the enforcement of this Agreement
or the Lease, as applicable; and (vii) all principles or provisions of law which
conflict with the terms of this Agreement. Pledgor further agrees that Landlord
may enforce Pledgor's Guaranty upon the occurrence of a default under the Lease,
notwithstanding any dispute between Secured Party and Tenant or Pledgor with
respect to the existence of said default or the payment or performance of the
Obligations or any counterclaim, set-off or other claim which Tenant or Pledgor
may allege against Secured Party with respect thereto. Pledgor also agrees that
upon the abandonment of the Property by Tenant, even if accepted by Secured
Party, or the eviction of Tenant, Pledgor shall remain liable for future
payments of rent, subject to Secured Party's reasonable efforts to mitigate
damages.
(g) Pledgor hereby waives any and all benefits and defenses it may have
with respect to the right to require Landlord to: (i) proceed against Tenant or
any other guarantor of the Obligations; (ii) proceed against or exhaust any
security or collateral Secured Party may hold, including without limitation, the
Security Fund; or (iii) pursue any other right or remedy for Pledgor's benefit;
and Pledgor agrees that Secured Party may proceed against Pledgor for the
Obligations without taking any action against Tenant or any other guarantor and
without proceeding against or exhausting any security or collateral Secured
Party holds, including, without limitation, the Security Fund. Pledgor agrees
that Secured Party may unqualifiedly exercise in its sole discretion any or all
rights and remedies available to it against Tenant or any other guarantor
without impairing Secured Party's rights and remedies in enforcing Pledgor's
Guaranty, under which Pledgor's liabilities shall remain independent and
unconditional. Pledgor agrees that Secured Party's
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exercise of certain of such rights or remedies may affect or eliminate Pledgor's
right of subrogation or recovery against Tenant and that, as a result thereof,
Pledgor may incur a partially or totally nonreimbursable liability under
Pledgor's Guaranty.
(h) Pledgor hereby agrees that Pledgor shall have no right of
subrogation or reimbursement against Tenant or any right of contribution against
any other guarantor unless and until all rentals and all other sums due under
the Lease have been paid in full and all of the Obligations have been satisfied
and waives any benefits or defenses that Pledgor may have to the contrary.
Pledgor further agrees that, to the extent of the waiver of Pledgor's rights of
subrogation, reimbursement and contribution as set forth herein is found by a
court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation or reimbursement Pledgor may have against Tenant shall be
junior and subordinate to any rights Secured Party may have against Tenant, and
any rights of contribution Pledgor may have against any other guarantor shall be
junior and subordinate to any rights Secured Party may have against such other
guarantor. Pledgor also agrees that Pledgor's Guaranty is in addition to the
guaranty of any other guarantor and any and all of Pledgor's other guarantees of
Tenant's obligations or liabilities to Secured Party and that this Guaranty
shall in no way limit or lessen any other liability, however arising, that
Pledgor may have for the payment of any other indebtedness of Tenant to Secured
Party.
(i) To the extent any dispute exists at any time (whether or not this
Agreement or the Lease shall have previously terminated) between or among Tenant
and/or any other guarantor as to any rights to subrogation, reimbursement,
contribution or otherwise, Pledgor agrees to indemnify, defend and hold Secured
Party harmless from and against any loss, damage, claim, demand, cost or any
other liability (including, without limitation, reasonable attorneys' fees and
costs) Secured Party may suffer as a result of such dispute.
(j) The obligations of Pledgor under Pledgor's Guaranty shall not be
altered, limited or affected by any case, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Tenant or by any defense which Tenant may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such case. Secured Party shall have the sole right to accept or reject any plan
on behalf of Pledgor proposed in such case and to take any other action which
Pledgor would be entitled to take, including, without limitation, the decision
to file or not file a claim. Pledgor acknowledges and agrees that any payment
which accrues with respect to Tenant's obligations under the Lease (including,
without limitation, the payment of rent) after the commencement of any such
proceeding (or, if any such payment ceases
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to accrue by operation of law by reason of the commencement of said proceeding,
such payment as would have accrued if said proceedings had not been commenced)
shall be included in the Obligations because it is the intention of the parties
that said Obligations be determined without regard to any rule or law or order
which may relieve Tenant of any of its obligations under the Lease. Pledgor
hereby permits any trustee in bankruptcy, receiver, debtor-in-possession,
assignee for the benefit of creditors or similar person to pay Secured Party, or
allow the claim of Secured Party in respect of, any such payment accruing after
the date on which such proceeding is commenced. Pledgor assigns to Secured Party
Pledgor's right to receive any payments from any trustee in bankruptcy,
receiver, debtor-in- possession, assignee for the benefit of creditors or
similar person by way of dividend, adequate protection payment or otherwise.
4. CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS.
This is a continuing agreement and all rights, powers and remedies hereunder
shall apply to all past, present and future obligations of Tenant or Pledgor to
Secured Party under the Lease or the Purchase Agreement. This Agreement shall
not terminate except in accordance with its terms or Secured Party's written
release of Pledgor from its Obligations under this Agreement.
5. OBLIGATIONS INDEPENDENT: SEPARATE ACTIONS; WAIVER OF STATUTE OF
LIMITATIONS: REINSTATEMENT OF LIABILITY. The Obligations hereunder are
independent of the obligations of Tenant and Pledgor (including, without
limitation, those obligations made pursuant to the Purchase Agreement), and a
separate action or actions may be brought and prosecuted against Pledgor
hereunder whether action is brought against Tenant, Pledgor (under the Purchase
Agreement), or any other person, or whether Tenant or any other person is joined
in any such action or actions. Pledgor acknowledges that there are no conditions
precedent to the effectiveness of this Agreement, and that this Agreement is in
full force and effect and is binding on Pledgor as of the date written below,
regardless of whether Secured Party obtains additional collateral or any
guaranties from others or takes any other action contemplated by Pledgor.
Pledgor waives the benefit of any statute of limitations affecting Pledgor's
liability hereunder or the enforcement thereof, and Pledgor agrees that any
payment of any Obligations or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute of
limitations applicable to Pledgor's liability under this Agreement. The
liability of Pledgor under this Agreement shall be reinstated and revived and
the rights of Secured Party shall continue if and to the extent for any reason
any amount at any time paid on account of the Obligations is rescinded or must
be otherwise restored by Secured Party, whether as a result of any proceedings
in bankruptcy, insolvency, reorganization or otherwise, all as though such
amount had not been paid. The determination as to whether any amount so paid
must be rescinded or restored shall
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be made by Secured Party in its sole discretion; provided, however, that if
Secured Party chooses to contest any such matter at the request of Pledgor,
Pledgor agrees to indemnify and hold Secured Party harmless from and against all
costs and expenses, including reasonable attorneys' fees, expended or incurred
by Secured Party in connection therewith, including without limitation, in any
litigation with respect thereto.
6. REPRESENTATIONS AND WARRANTIES.
(a) Pledgor represents and warrants to Secured Party that: (i) Pledgor
is the owner, directly or indirectly, and has possession or control of the
Pledged Owner's Shares; (ii) Pledgor has the right to pledge the Pledged Owner's
Shares; (iii) the Pledged Owner's Shares are genuine, free from liens, adverse
claims, setoffs, default, prepayment, defenses and conditions precedent of any
kind or character, except as previously disclosed to Secured Party in writing by
Pledgor; (iv) specifically with respect to Pledged Owner's Shares consisting of
investment securities, instruments, chattel paper, documents, contracts,
insurance policies or any like property, all persons appearing to be obligated
thereon have authority and capacity to contract and are bound as they appear to
be, and the same comply with applicable laws concerning form, content and manner
of preparation and execution) (v) all statements contained herein and, where
applicable, in the Pledged Owner's Shares are true and complete; and (vi) no
financing statement covering any of the Pledged Owner's Shares and naming any
secured party other than Secured Party, is on file in any public office.
(b) Pledgor further represents and warrants to Secured Party that with
respect to the Pledged Owner's Shares securing Tenant's obligations under the
Lease pursuant to this Agreement: (i) such Pledged Owner's Shares are so pledged
at Tenant's request; (ii) Secured Party has made no representation to Pledgor as
to the creditworthiness of Tenant; and (iii) Pledgor has established adequate
means of obtaining from Tenant on a continuing basis financial and other
information pertaining to Tenant's financial condition. Pledgor agrees to keep
adequately informed by such means of any facts, events or circumstances which
might in any way affect Pledgor's risks hereunder, and Pledgor further agrees
that Secured Party shall have no obligation to disclose to Pledgor any
information or material about Tenant which is acquired by Secured Party in any
manner. Pledgor further warrants and represents that it has reviewed and
approved copies of the Lease and is fully informed of the remedies that Secured
Party may pursue under the Lease or at law or in equity, with or without notice
to Pledgor, in the event of a default under the Lease.
(c) Pledgor understands that but for Pledgor's pledge of the Pledged
Owner's Shares and the other agreements contained herein, Secured Party would
not enter into the Lease with Tenant or the
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Purchase Agreement and that the Security Fund pledged pursuant to this Agreement
will serve as collateral for the Lease and the Purchase Agreement on the terms
and conditions of this Agreement.
7. COVENANTS OF PLEDGOR.
(a) Pledgor agrees in general: (i) to indemnify Secured Party against
all losses, claims, demands, liabilities and expenses of every kind caused by
property subject hereto; (ii) to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Secured Party any time after the
occurrence of an Event of Default under the Lease or as such costs and expenses
relate to a breach by Pledgor of any representation or warranty contained in
Article 3 of the Purchase Agreement, in the realization, enforcement and
exercise of its rights, powers and remedies hereunder; (iii) to permit Secured
Party to exercise its powers; (iv) to execute and deliver such documents as
Secured Party deems necessary to create, perfect and continue the security
interests contemplated hereby; and (v) not to change its chief place of business
or the place where Pledgor keeps any records concerning the Pledged Owner's
Shares without first giving Secured Party written notice of the address to which
Pledgor is moving same.
(b) Pledgor agrees with regard to the Security Fund: (i) not to permit
any lien on the Security Fund except in favor of Secured Party; (ii) not to
withdraw any funds from any deposit account pledged to Secured Party hereunder
without Secured Party's prior written consent; (iii) not to sell, hypothecate or
otherwise dispose of any of the Pledged Owner's Shares or any interest therein,
without the prior written consent of Secured Party; (iv) to keep, in accordance
with generally accepted accounting principles, complete and accurate records
regarding all Pledged Owner's Shares and to permit Secured Party to inspect the
same at any reasonable time; (v) if requested by Secured Party following an
Event of Default under the Lease or an Indemnity Event, to receive and use
reasonable diligence to collect proceeds from the Pledged Owner's Shares, in
trust and as part of the Security Fund to be held in accordance with Section
2(a) above; (vi) not to commingle Pledged Owner's Shares with other property;
(vii) to provide any service and do any other acts or things necessary to keep
the Pledged Owner's Shares free and clear of all defenses, rights of offset and
counterclaims; and (viii) if the Pledged Owner's Shares consists of securities
and so long as no Event of Default or Indemnity Event exists, to vote said
securities and to give consents, waivers and ratifications with respect thereto,
provided that no vote shall be cast or consent, waiver or ratification given or
action taken which would impair Secured Party's interest in the Security Fund or
be inconsistent with or violate any provisions of this Agreement.
8. POWERS OF SECURED PARTY. Pledgor appoints Secured Party its true
attorney in fact to perform any of the following powers, which
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are coupled with an interest and are irrevocable until this Agreement has been
terminated pursuant to its terms and may be exercised from time to time by
Secured Party's officers and employees: (a) to perform any obligation of Pledgor
hereunder in Pledgor's name or otherwise; (b) to notify any person obligated on
any security, instrument or other document subject to this Agreement of Secured
Party's rights hereunder; (c) to collect by legal proceedings or otherwise all
dividends, interest, principal or other sums now or hereafter payable upon or on
account of the Security Fund; (d) to enter into any extension, reorganization,
deposit, merger or consolidation agreement, or any other agreement relating to
or affecting the Security Fund and in connection therewith to deposit or
surrender control of the Security Fund to accept other property in exchange for
the Security Fund, and to do and perform such acts and things as Secured Party
may deem proper, with any money or property received in exchange for the
Security Fund at Secured Party's option, to be applied to the Obligations or
held by Secured Party under this Agreement; (e) to make any compromise or
settlement Secured Party deems desirable or proper in respect of the Security
Fund; (f) to insure, process and preserve the Security Fund; (g) to exercise all
rights, powers and remedies which Pledgor would have, but for this Agreement,
under all the Pledged Owner's Shares subject to this Agreement; (h) to do all
acts and things and execute all documents in the name of Pledgor or otherwise
that are deemed by Secured Party as necessary, proper or convenient in
connection with the preservation, perfection or enforcement of its rights
hereunder; and (i) to execute and file in Pledgor's name any financing
statements and amendments thereto required to perfect Secured Party's security
interest hereunder; provided, however, that until the occurrence and only during
the continuation of an Event of Default or an Indemnity Event shall Secured
Party have the right to exercise the power of attorney for the purposes
described in paragraphs (a), (c), (d), (e), (f), (g), or (h). If an Event of
Default or Indemnity Event has occurred and is continuing, any or all of the
Security Fund consisting of securities may be registered, without notice, in the
name of Secured Party or its nominee, and thereafter Secured Party or its
nominee may exercise, without notice, all voting and partnership rights at any
meeting of the partners of the issuer thereof, any and all rights of conversion,
exchange or subscription, or any other rights, privileges or options pertaining
to any Pledged Owner's Shares all as if it were the absolute owner thereof. The
foregoing shall include, without limitation, the right of Secured Party or its
nominee to exchange, at its discretion, any and all Pledged Owner's Shares upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof, or upon the exercise by the issuer thereof
or Secured Party of any right, privilege or option pertaining to any Pledged
Owner's Shares and in connection therewith, the right to deposit and deliver any
and all of the Pledged Owner's Shares with any committee, depository, transfer
agent, registrar or other
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designated agent upon such terms and conditions as Secured Party may determine.
All of the foregoing rights, privileges or options may be exercised without
liability except to account for property actually received by Secured Party.
Secured Party shall have no duty to exercise any of the foregoing, or any other
rights, privileges or options with respect to the Pledged Owner's Shares and
shall not be responsible for any failure to do so or delay in so doing.
9. CASH COLLATERAL ACCOUNT. Any money received by Secured Party in
respect of the Security Fund will be retained in an interest bearing cash
collateral account and the same shall, for all purposes, be deemed part of the
Security Fund hereunder.
10. SECURED PARTY'S CARE AND DELIVERY OF PLEDGED OWNER'S SHARES. Secured
Party's obligation with respect to the Security Fund in its possession shall be
strictly limited to the duty to exercise reasonable care in the custody and
preservation of the Security Fund, and such duty shall not include any
obligation to ascertain or to initiate any action with respect to or to inform
Pledgor of maturity dates, conversion, call or exchange rights, or offers to
purchase the Pledged Owner's Shares or any similar matters, notwithstanding
Secured Party's knowledge of the same. Secured Party shall have no duty to take
any steps necessary to preserve the rights of Pledgor against prior parties, or
to initiate any action to protect against the possibility of a decline in the
market value of the Pledged Owner's Shares. Secured Party shall not be obligated
to take any actions with respect to the Pledged Owner's Shares requested by
Pledgor unless such request is made in writing and Secured Party determines, in
its sole discretion, that the requested action would not unreasonably jeopardize
the value of the Pledged Owner's Shares as security for the Obligations. Secured
Party may at any time deliver the Security Fund, or any part thereof, to
Pledgor, and the receipt thereof by Pledgor shall be a complete and full
acquittance for the Security Fund so delivered, and Secured Party shall
thereafter be discharged from any liability or responsibility therefor.
11. PLEDGOR'S WAIVERS.
(a) Pledgor waives any right to require Secured Party to: (i) proceed
against any person, including Tenant or Pledgor under the Purchase Agreement;
(ii) proceed against or exhaust any security held from Tenant; (iii) give notice
of the terms, time and place of any public or private sale of personal property
security held from Tenant or any other person or otherwise comply with any other
provisions of Section 9-504 Uniform Commercial Code; (iv) pursue any other
remedy in Secured Party's power; or (v) make any presentments or demands for
performance, or give any notices of nonperformance, protests, notices of protest
or notices of dishonor in connection with any obligations or evidences of
indebtedness
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held by Secured Party as security or which constitute in whole or in part the
Obligations secured hereunder, or in connection with the creation of new or
additional Obligations.
(b) Pledgor waives any defense arising by reason of: (i) any disability
or other defense of Tenant, Pledgor or any other person; (ii) the cessation or
limitation from any cause whatsoever, other than payment in full, of the
Obligations of Tenant, Pledgor or any other person; (iii) any lack of authority
of any officer, director, partner, agent or any other person acting or
purporting to act on behalf of Tenant or Pledgor which is a corporation,
partnership or other type of entity, or any defect in the formation of Tenant or
Pledgor; (iv) any act or omission by Secured Party which directly or indirectly
results in or aids the discharge of Tenant or Pledgor or any Obligations by
operation of law or otherwise; or (v) any modification of the Obligations, in
any form whatsoever, including any modification made after revocation hereof to
any Obligations incurred prior to such revocation, and including, without
limitation, the renewal, extension, acceleration or other change in time for
payment of the Obligations, or other change in the terms of the Obligations, or
any part thereof. Until all Obligations shall have been paid in full, Pledgor
shall have no right of subrogation, and Pledgor waives any defense Pledgor may
have based upon an election of remedies by Secured Party which destroys
Pledgor's subrogation rights or Pledgor's rights to proceed against Tenant for
reimbursement, including without limitation, any loss of rights Pledgor may
suffer by reason of any rights, powers or remedies of Tenant in connection with
any anti-deficiency laws or any other laws limiting, qualifying or discharging
Tenant's Obligations. Until all Obligations of Tenant to Secured Party shall
have been paid in full, Pledgor further waives any right to enforce any remedy
which Secured Party now has or may hereafter have against Tenant or any other
person, and waives any benefit of, or any right to participate in, any security
whatsoever now or hereafter held by Secured Party.
12. AUTHORIZATIONS TO SECURED PARTY. Pledgor authorizes Secured Party
either before or after revocation hereof, without notice or demand and without
affecting Pledgor's liability hereunder, from time to time to: (a) alter,
compromise, renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the Obligations or any part thereof; (b)
take and hold security, other than the Pledged Owner's Shares, for the payment
of the Obligations or any part thereof and exchange, enforce, waive and release
the Pledged Owner's Shares, or any part thereof, or any such other security; (c)
apply the Pledged Owner's Shares or any other security and direct the order or
manner of sale thereof, including without limitation, a non-judicial sale
permitted by the terms of this Agreement, as Secured Party in its discretion may
determine; (d) release or substitute any one or more of the endorsers or
guarantors of the Obligations, or any part
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thereof, or any other parties thereto; and (e) apply payments received by
Secured Party from Tenant or Pledgor to any Obligations of Tenant or Pledgor to
Secured Party, in such order as Secured Party shall determine in its sole
discretion, whether or not any such Obligations is covered by this Agreement,
and Pledgor hereby waives any provision of law regarding application of payments
which specifies otherwise.
13. PAYMENT OF TAXES, CHARGES, LIENS AND ASSESSMENTS. Pledgor agrees to
pay, prior to delinquency, all taxes, charges, liens and assessments against the
Security Fund, and upon the failure of Pledgor to do so, Secured Party at its
option may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same. Any such
payments made by Secured Party shall be obligations of Pledgor to Secured Party,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 17 of this Agreement,
and shall be secured by the Security Fund, subject to all terms and conditions
of this Agreement.
14. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, after
any applicable cure or grace period under the Lease which has not been cured by
pledgor within ten (10) days of the date such cure period of Tenant expired; or
(b) any representation or warranty made by Pledgor herein shall prove to be
incorrect in any material respect when made; or (c) an Indemnity Event; or (d)
Pledgor shall fail to observe or perform any obligation or agreement contained
herein after Secured Party has provided written notice describing such failure
and Pledgor has failed within thirty (30) days of receipt of such notice to cure
such failure, provided if such cure cannot be completed within such thirty (30)
day period, then such cure period shall be extended for so long as Pledgor is
diligently prosecuting such cure to completion up to a maximum of ninety (90)
days.
15. REMEDIES. Upon the occurrence of any Event of Default, Secured Party
shall have and may exercise without demand any and all rights, powers,
privileges and remedies granted to a secured party upon default under the
Uniform Commercial Code or otherwise provided to Secured Party by law. All
rights, powers, privileges and remedies of Secured Party shall be cumulative.
Secured Party may exercise its right of set off with respect to the Obligations
in the same manner as if the Obligations were unsecured. No delay, failure or
discontinuance of Secured Party in exercising any right, power, privilege or
remedy hereunder shall affect or operate as a waiver of such right, power,
privilege or remedy; nor shall any single or partial exercise of any such right,
power, privilege or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power,
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privilege or remedy. Any waiver, permit, consent or approval of any kind by
Secured Party of any default hereunder, or any such waiver of any provisions or
conditions hereof, must be in writing and shall be effective only to the extent
set forth in writing. While an Event of Default exists: (a) Secured Party may,
at any time and at Secured Party's sole option, liquidate any time deposits
pledged to Secured Party hereunder, whether or not said time deposits have
matured and notwithstanding the fact that such liquidation may give rise to
penalties for early withdrawal of funds; (b) Secured Party may appropriate the
Security Fund and apply all proceeds toward repayment of the Obligations in such
order as Secured Party may from time to time elect or, at Secured Party's sole
option, place any proceeds in a cash collateral account; and (c) at Secured
Party's request, Pledgor will assemble and deliver all Pledged Owner's Shares
not already in the possession of Secured Party, and books and records pertaining
thereto, to Secured Party at a reasonably convenient place designated by Secured
Party. It is agreed that public or private sales, for cash or on credit, to a
wholesaler or retailer or investor, or user of property of the types subject to
this Agreement, or public auction, are all commercially reasonable since
differences in the sales prices generally realized in the different kinds of
sales are ordinarily offset by the differences in the costs and credit risks of
such sales. For any part of the Security Fund consisting of securities, Secured
Party shall be under no obligation to delay a sale of any portion thereof for
the period of time necessary to permit the issuer thereof to register such
securities for public sale under any applicable state or federal law, even if
the issuer thereof would agree to do so.
16. DISPOSITION OF PLEDGED OWNER'S SHARES. Secured Party shall not
transfer all or any part of the Pledged Owner's Shares or Security Fund except
in connection with the exercise of remedies as provided in Section 15 above. Any
proceeds of any disposition of any of the Pledged Owner's Shares or any part
thereof, shall be applied by Secured Party to the payment of expenses incurred
by Secured Party in connection with the foregoing, including reasonable
attorneys' fees, and the balance of such proceeds shall be applied by Secured
Party toward the payment of the Obligations in such order of application as
Secured Party may from time to time elect.
17. COSTS. EXPENSES AND ATTORNEYS' FEES. Pledgor shall pay to Secured
Party immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys' fees incurred by
Secured Party after the occurrence and during the continuance of any Event of
Default in exercising any right, power, privilege or remedy conferred by this
Agreement or in the enforcement thereof, including any of the foregoing incurred
in connection with any bankruptcy proceeding relating to Pledgor or the
valuation of the Pledged Owner's Shares
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including without limitation, the seeking of relief from or modification of the
automatic stay or the negotiation and drafting of a cash collateral order. All
of the foregoing shall be paid to Secured Party by Pledgor with interest at a
rate per annum equal to the lesser of ten percent (10%) or the maximum rate
permitted by law.
18. GOVERNING LAW; SUCCESSORS. ASSIGNS. This Agreement shall be governed
by and construed in accordance with the laws of the state in which the Property
is located, and shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties.
19. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall
be held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
20. NON-RECOURSE. The obligations of Pledgor hereunder with respect to
the Lease and the obligations of Tenant thereunder are specifically non-recourse
to Pledgor except to the extent of the Pledged Owner's Shares. In no event shall
Pledgor or any assets of Pledgor or any officer or director or affiliate of
Pledgor, (except for Tenant) be liable for a default by Tenant under the Lease
except to the extent of the Pledged Owner's Shares then pledged to Secured
Party.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
PLEDGOR
_________________________ _______________________________
John J. Rainieri, Sr.
_________________________
_________________________ _______________________________
Betty Rainieri
_________________________
RAINTREE COUNTRY CLUB, INC.,
an Ohio corporation
_________________________ By: ___________________________
Name: _________________________
_________________________ Title: ________________________
SECURED PARTY
GOLF TRUST OF AMERICA, L.P.
a Delaware limited partnership
GTA GP, Inc.
a Maryland corporation
Its: General Partner
_________________________ By:_____________________________
Name: W. Bradley Blair, II
_________________________ Title: President and Chief
Executive Officer
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EXHIBIT D-1
Schedule of Adjustments in the Number of Pledged Owner's Shares
The Pledged Owner's Shares shall be adjusted as follows:
1. Increase of Pledged Owner's Shares. If Pledgor elects to receive
additional Owner's Shares as described in the Purchase Agreement, then the
Pledged Owner's Shares shall be increased such that the value of the Pledged
Owner's Shares held by Secured Party in the Security Fund shall equal the sum of
(i) the value of the initial Pledged Owner's Shares (valued as the date of the
Pledge Agreement), and (ii) fifteen percent (15%) of the Contingent Purchase
Price (such shares valued as of the date of the pledge). This adjustment to the
number of Pledged Owner's Shares shall occur simultaneously with the
circumstances triggering such an adjustment as described above, without the
necessity for any further action on the part of Pledgor or Secured Party.
Pledgor shall deliver to Secured Party certificates evidencing such additional
Pledged Owner's Shares immediately upon the occurrence of such triggering
circumstances.
2. Release of Pledged Owner's Shares. The Pledged Owner's Shares shall be
released and subtracted from the Security Fund in accordance with the following
schedule:
(a). Pledged Owner's Shares valued at $650,000 at such time as the Net
Operating Income with respect to the Property, shall have been, for a Fiscal
Year, at least one hundred twenty percent (120%) of all rent payable by Tenant
under the Lease for each such Fiscal Year (based on the rent adjusted in
accordance with the terms of the Lease, if applicable.
(b). One-third (1/3) of the remaining Pledged Owner's Shares (or an
equivalent dollar amount if held in cash or other securities) at such time as
the Net Operating Income with respect to the Property shall have been, for each
of the two (2) prior calendar years (tested annually commencing January 1,
1998), at least one hundred twenty percent (120%) of all rent payable by Tenant
under the Lease for each such calendar year (based on the rent adjusted in
accordance with the terms of the Lease, if applicable).
(c). An aggregate of two-thirds (2/3) of the remaining Pledged Owner's
Shares (or an equivalent dollar amount if held in cash or other securities) at
such time as the Net Operating Income with respect to the Property shall have
been, for each of the two (2) prior calendar years (tested annually commencing
January 1, 1998), at least one hundred and thirty percent (130%) of all rent
payable
D-1-1
<PAGE>
by Tenant under the Lease for each such calendar year (based on the rent
adjusted in accordance with the terms of the Lease, if applicable).
(d). All of the Pledged Owner's Shares (or an equivalent dollar amount if
held in cash or other securities) provided that the Net Operating Income with
respect to the Property shall have been, for each of the two (2) prior calendar
years (tested annually commencing January 1, 1998), one hundred and forty
percent (140%) of all rent payable by Tenant under the Lease for each such
calendar year (based on the rent adjusted in accordance with the terms of the
Lease, if applicable).
(e). Subject to Section 5.5 of the Lease, promptly after the Expiration
Date (as defined in the Lease) and payment by Pledgor to Secured Party of all
amounts due under the Lease, Secured Party shall release all remaining Pledged
Owner's Shares, if any, to Pledgor.
This adjustment to the number of Pledged Owner's Shares shall occur
simultaneously with the circumstances triggering such an adjustment as described
above, without the necessity for any further action on the part of Pledgor or
Secured Party.
D-1-2
<PAGE>
EXHIBIT E
ADJUSTMENTS TO CALCULATION OF GROSS GOLF REVENUE
FOR PRIVATE CLUBS
Not Applicable.
E-1
<PAGE>
EXHIBIT F
CALCULATION
Calculation of Gross Golf Revenue and FB&M Revenuefor the Base Year on a
Quarter-by-Quarter Basis
GROSS GOLF REVENUE
1st Quarter 1997 $ 287,278
2nd Quarter 1997 $ 430,917
3rd Quarter 1997 $ 430,917
4th Quarter 1997 $ 287,277
----------
Total $1,436,389
FB&M REVENUE
1st Quarter 1997 $ 139,356
2nd Quarter 1997 $ 174,196
3rd Quarter 1997 $ 243,873
4th Quarter 1997 $ 130,356
----------
Total $ 696,781
F-1
<PAGE>
EXHIBIT G
EXAMPLE OF MONTHLY OPERATING STATEMENT
F-2
<PAGE>
EXHIBIT K
CONTINGENT PURCHASE PRICE FORMULA
A. DEFINITIONS. For purposes of this EXHIBIT K, the following terms shall
have the following meanings:
(1) "ADJUSTED NET OPERATING INCOME" means the Conversion Date Net
Operating Income, divided by 1.135.
(2) "CAPITALIZATION RATE" shall mean 10.50%.
(3) "COMPANY" means Golf Trust of America, Inc.
(4) "COMPANY'S FIRST CALL FFO" means the consensus FFO per share
estimate for the Company for the calendar year which includes the Conversion
Date, subtracting the Company's capital expenditure reserve per share as
estimated for that year as such estimate is reported by First Call (or, if First
Call is no longer in general use within the securities industry, by such other
reporting service as is then in general use within the securities industry)
divided by the average of the Company's closing share price for the thirty (30)
trading days immediately preceding the Conversion Date.
(5) "CONVERSION DATE" means a date after the second (2nd) full Fiscal
Year of the Initial Term and prior to the termination of the Initial Term that
is the fifteenth (15th) day following the date on which Company receives written
notice that Tenant has irrevocably elected to receive the Contingent Purchase
Price.
(6) "CONVERSION DATE CAPITALIZATION RATE" shall mean the Company's first
Call FFO, plus 200 basis points (but in no event less than the Capitalization
Rate).
(7) "CONVERSION DATE NET OPERATING INCOME" means the Gross Operating
Revenue for the Property LESS the Gross Operating Expenses for the Conversion
Year.
(8) "CONVERSION YEAR" means the Fiscal Year (as defined in the Lease)
immediately preceding the Conversion Date.
(9) "CONVERSION NOTICES" shall mean a written notice delivered by Tenant
to Company whereby Company elects to receive the Contingent Purchase Price. The
Conversion Notice may only be given once and must be given on or before April
15 of a calendar year. If the Conversion Notice is not given on or before the
end of the Initial Term, Tenant's right to receive the Contingent Purchase
Price shall automatically and irrevocably terminate. The Conversion Notice may
not be given prior to the expiration of the second (2nd) full Fiscal Year of the
Initial Term.
K1
<PAGE>
(10) "GROSS OPERATING EXPENSES" means the gross operating expenses of the
Property for the Conversion Year, calculated in accordance with generally
accepted accounting principles consistently applied as adjusted in Schedule K-1.
For purposes of calculating Gross Operating Expenses, Company may make
discretionary adjustments on a line item basis to reflect stabilized Gross
Operating Expenses, including the following adjustments:
(a) annual capital replacement reserves shall be included, as
reasonably determined by Company;
(b) annual cash expenditures (including depreciation) for golf
carts shall be included, as reasonably determined by Company;
(c) extraordinary expenditures (such as to repair storm damage)
which are not anticipated to recur in the ordinary course shall be
excluded, as reasonably determined by Company;
(d) other adjustments to reflect stabilized Gross Operating
Expenses, as reasonably determined by Company shall be made; and
(e) depreciation, amortization and debt service shall be excluded.
For purposes of determining the Contingent Purchase Price, Gross Operating
Expenses will be adjusted upward by Company to the extent such expenses (or any
major component thereof) have decreased at a compound annual rate greater than
2% per annum from the Base Year to the Conversion Year or more than 3% (on a
year-to-year basis) from the year immediately preceding the Conversion year,
unless, Company shall determine that such expense reductions were of a nature so
as to be reasonably expected to be sustained.
(11) "GROSS OPERATING REVENUE" means the gross operating revenue of the
Property; including revenue related to the golf course operating, food and
beverage operations and sale of merchandise, for the Conversion Year, calculated
in accordance with general accepted account principles consistently applied as
adjusted in Schedule K-1. For purposes of determining the Contingent Purchase
Price, Gross Operating Revenue will be adjusted downward to the extent such
revenue has increased by more than 5.0% from the year immediately preceding the
Conversion Year to the Conversion Year, unless Company shall have reasonably
determined that such revenue increase can reasonably be expected to be
sustained. Factors to determine sustainability shall include factors such as
the creation of new demand generators (i.e., hotel development or condominium
development) and the non-recurring nature of any revenue (i.e., a one-time
tournament fee). Company
K2
<PAGE>
shall further retain the right to make downward adjustments to Gross Operating
Revenue so as to establish reasonable expectations of future cash flow results.
(12) "NET INCREMENTAL INCOME AVAILABLE FOR CONTINGENT PURCHASE PRICE"
means the Adjusted Net Operating Income for the Conversion Year, taking into
account the increased rental payments due under the Lease as a result of
Company's election to receive the Contingent Purchase Price, including the
annual capital replacement reserve paid as additional rent.
(13) "NET OPERATING INCOME" means the Gross Operating Revenue of the
Property for the Conversion Year LESS the Gross Operating Expenses for the same
period.
B. CONTINGENT PURCHASE PRICE.
(1) Tenant shall have the right to receive the Contingent Purchase Price
by delivering the Conversion Notice to Company; provided that (i) the Tenant
under the Lease at the Property shall have paid Percentage Rent on an annual
basis for the prior calendar year, and (ii) at least one-half (1/2) of the
increase in the Adjusted Net Operating Income from the Base Year to the
Conversion year is attributable to an increase in Gross Operating Revenue (not
including food and beverage operations and sale of merchandise), as reasonably
determined by Company. The Contingent Purchase Price shall equal the Net
Incremental Income Available for Contingent Purchase Price divided by the
Conversion Date Capitalization Rate.
(2) Within forty-five (45) days of the Conversion Date, Company shall
deliver to Tenant the number of Owner's Units in Company that equals the
Contingent Purchase Price divided by the per share common stock price of the
Company on the Conversion Date.
C. EXAMPLE.
The calculation of the Contingent Purchase Price is attached as SCHEDULE
K-1 for purposes of illustration only.
Schedule K-1: Example of Contingent Purchase Price.
LANDLORD: GOLF TRUST OF AMERICA, L.P.
A Delaware limited Partnership
By: GTA GP, Inc., a Maryland
corporation
Its: General Partner
By:___________________________
K3
<PAGE>
Name: W. Bradley Blair, II
Title: President and Chief
Executive Officer
TENANT: PRESTWICK GOLF CLUB, INC.
By:_____________________________
Name:___________________________
Title:__________________________
K4
<PAGE>
SCHEDULE K-1
EXAMPLE OF CONTINGENT PURCHASE PRICE
K-1-1
<PAGE>
_______________________________
PURCHASE AND SALE AGREEMENT
_______________________________
Seller: JOHN J. RAINIERI, SR. AND BETTY RAINIERI,
husband and wife
Buyer: GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
Property: Ohio Prestwick Country Club
Green, Summit County, Ohio
Purchase
Price: $6,400,000.00
Effective
Dated: July 17, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
<S> <C>
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Act of Bankruptcy. . . . . . . . . . . . . . . . . . . . . . 3
(b) Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Authorizations . . . . . . . . . . . . . . . . . . . . . . . 4
(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 . . . . . . . . . . . . . . . . . . . . 5
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(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 . . . . . . . . . . . . . . . . . . . . . . . 8
(ag) Real Property. . . . . . . . . . . . . . . . . . . . . . . . 8
(ah) Restaurant Supplies. . . . . . . . . . . . . . . . . . . . . 8
(ai) SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(aj) State. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(ak) Summary Sheet. . . . . . . . . . . . . . . . . . . . . . . . 8
(al) Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
i
<PAGE>
(am) Tangible Personal Property . . . . . . . . . . . . . . . . . 8
(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 . . . . . . . . . . . . . . . . . . . . . . . 9
(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
(h) Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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
ii
<PAGE>
3.17 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18 Land Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Hazardous Substances. . . . . . . . . . . . . . . . . . . . . . . . 18
3.20 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.21 Curb 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. . . . . . . . . . . . . . . . . . . . . . . . . . 20
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. . . . . . . . . . 21
(c) Title Insurance. . . . . . . . . . . . . . . . . . . . . . . 22
(d) Title to Property. . . . . . . . . . . . . . . . . . . . . . 22
(e) Condition of Property. . . . . . . . . . . . . . . . . . . . 22
(f) Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(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
iii
<PAGE>
(i) Board Resolutions. . . . . . . . . . . . . . . . . . . . . . 24
(j) Certificate of Occupancy . . . . . . . . . . . . . . . . . . 25
(k) Evidence of Bulk Sales Compliance. . . . . . . . . . . . . . 25
(l) Insurance Policies . . . . . . . . . . . . . . . . . . . . . 25
(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. . . . . . . . . . . . . . 26
(c) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Income and Expense Allocations. . . . . . . . . . . . . . . . . . . 27
(a) Rents and Fees . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(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. . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Real Estate Broker. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Liquor Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 30
iv
<PAGE>
ARTICLE 8
LIABILITY OF BUYER; INDEMNIFICATION BY SELLER;
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Liability of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . 31
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. . . . . . . . . . . . . . . . . . . . . . . . . 35
9.13 No Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
v
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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
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PURCHASE AGREEMENT
Summary Sheet
Buyer: GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
Seller: John J. Rainieri, Sr. and Betty Rainieri, husband and wife
Effective
Date: July 17, 1998
Golf Course: Ohio Prestwick Country Club
Green, Summit County, Ohio
Trade Name:
Purchase Six Million Four Hundred Thousand
Price: and no/100 Dollars ($6,400,000.00)
Notice Address John J. Rainieri, Sr. and Betty Rainieri
of Seller: 4350 Mayfair Road
Uniontown, Ohio 44683
with a Thomas J. Sicuro, Esq.
copy to: Kane, Sicuro & Simon
101 East Main Street
Ravenna, Ohio 44266
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: Nexsen Pruet Jacobs Pollard & Robinson, LLP
200 Meeting Street, Suite 301
Charleston, South Carolina 29401
Attention: Neil C. Robinson, Jr., Esq.
Matthew J. Norton, 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 Ohio Prestwick Country Club 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, but
specifically excluding any and all golf carts owned or leased by Seller (the
"Tangible Personal
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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, leasing or maintenance of the
Real Property or the Tangible Personal Property, and any and all trademarks and
copyrights, trade names (including "Prestwick", "Ohio Prestwick Country Club",
and "Ohio Prestwick") 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, but
specifically excluding all goodwill attributable to the Property (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
2
<PAGE>
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.
(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.
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<PAGE>
(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 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.
(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, July 17, 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.
4
<PAGE>
(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.
(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, 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
5
<PAGE>
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.
(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.
(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,
6
<PAGE>
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 Six Million Three Hundred
Twenty-Five Thousand and No/100 Dollars ($6,400,000.00).
(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.
(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.
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<PAGE>
(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.
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 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 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
8
<PAGE>
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, the Earnest Money Deposit will be
returned to Buyer, 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 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
9
<PAGE>
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 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
10
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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) 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.
(g) AUDIT. Seller shall deliver to Buyer audited financial
statements for the Golf Course within fifteen (15) days after the Effective
Date. Such audit shall be performed by nationally-recognized certified public
accountants licensed to practice in front of the SEC and shall comply with the
filing requirements of GTA, Inc. with the SEC.
(h) LEASE. Prior to the end of the Due Diligence Period, Buyer
shall have entered into a lease agreement for the Property with a tenant
satisfactory to Buyer.
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 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.
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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 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 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 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
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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 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 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
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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.
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 threatened against or
affecting Seller or any of its properties in any court, before any arbitrator or
before or by any Governmental
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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
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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
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 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
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
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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 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, 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 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
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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 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 5.2 will be,
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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 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 course, driving range,
putting greens, mechanical systems,
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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. 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. 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.
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 6
CLOSING
6.1 CLOSING. Closing shall be held at the offices of Escrow Agent on
or before July 17, 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.
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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. 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.
(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.
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(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.
(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. The Purchase Price equal to $6,400,000.00
shall be remitted by Buyer to Seller by federal funds wire to an account
designated by Seller.
(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.
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(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 with respect to the transfer of title and all charges for
title insurance premiums shall be paid by Seller. 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 respect to the Property.
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
24
<PAGE>
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 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 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.
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, Seller shall give written notice
thereof to Buyer promptly after Seller learns or receives notice thereof. If
all or any part of
25
<PAGE>
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. 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 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 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
26
<PAGE>
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, 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. 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 Gold 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, 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
27
<PAGE>
period 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, 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 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 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, and instead, to proceed to Closing, If, prior to
Closing, Buyer materially defaults in performing any of its obligations under
this Agreement (including its obligation to purchase the Property), and Buyer
fails to cure any such material
28
<PAGE>
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 additional claims for damages, actual, consequential or
otherwise, that it may possess against Buyer.
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. 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.
29
<PAGE>
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.
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
30
<PAGE>
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.
IN WITNESS WHEREOF, Seller and Buyer have hereunder affixed their
signatures to this Purchase and Sale Agreement, all as of the 17th day of July,
1998.
[SIGNATURES APPEAR ON NEXT PAGE]
31
<PAGE>
"Buyer"
GOLF TRUST OF AMERICA,L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: GTA, Inc., a Maryland
a Maryland corporation
Its: General Partner
By: /S/
-------------------------------
Name: W. Bradley Blair, II
Title: President and Chief
Executive Officer
32
<PAGE>
"Seller"
/s/
----------------------------------
John J. Rainieri, Sr.
/s/
----------------------------------
Betty Rainieri
33
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
<PAGE>
EXHIBIT B
DESCRIPTION OF IMPROVEMENTS
1. 18 hole golf course;
2. 2-story wood and stone frame clubhouse building;
3. two (2) 10'x10' wood bathrooms;
4. two (2) 1-story metal buildings (equipment storage buildings);
5. pool;
6. two (2) concrete blocks;
7. elevated walkway;
8. various tree planting and fencing;
<PAGE>
EXHIBIT C
TANGIBLE PERSONAL PROPERTY
<PAGE>
EXHIBIT D
INTANGIBLE PERSONAL PROPERTY
1. Any and all rights related to the use of fictitious name "Prestwick
Country Club" issued by the Secretary of State of Ohio.
2. Any and all rights in Ohio EPA Licenses to operate or maintain a
Public Water System.
<PAGE>
EXHIBIT E
BILL OF SALE - PERSONAL PROPERTY
WHEREAS, by deed of even date herewith, JOHN J. RANIERI, SR. AND BETTY
RAINIERI, husband and wife (collectively,"Seller") conveyed to GOLF TRUST OF
AMERICA, L.P., a Delaware limited partnership ("Buyer"), whose mailing address
is 14 North Adger's Wharf, Charleston, South Carolina 29401, that certain tract
of land more particularly described in SCHEDULE 1 attached hereto as a part
hereof, together with all improvements located thereon (the "Property").
WHEREAS, in connection with the above described conveyance Seller desires
to transfer and convey to Buyer certain items of tangible personal property as
defined in the Purchase and Sale Agreement dated July 17, 1998, (the
"Agreement") including, without limitation, the items hereinafter described.
NOW THEREFORE, in consideration of the receipt of TEN AND No/100 DOLLARS
($10.00) and other good and valuable consideration paid in hand by Buyer to
Seller, the receipt and sufficiency of which are hereby acknowledged, Seller
has, without representation or warranty except as set forth in the Agreement,
GRANTED, CONVEYED, CONTRIBUTED, TRANSFERRED, SET OVER and DELIVERED and by these
presents does hereby GRANT, CONTRIBUTE, TRANSFER, SET OVER and DELIVER to Buyer,
its legal representatives, successors and assigns, all items of tangible
personal property and fixtures (if any) owned or leased by Seller, including,
but no 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, antiques or other decorations,
and equipment or machinery of every kind or nature located on or useful in the
operation of the Real Property whether on or off-site, including all warranties
and guaranties associated therewith, but specifically excluding any and all golf
carts owned or leased by Seller (the "Tangible Personal Property"), including,
without limitation, the personal property described in SCHEDULE 2 attached
hereto and all intangible personal property owned or possessed by Seller and use
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 (as defined in the Agreement), 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
34
<PAGE>
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 defined in the Agreement, but
specifically excluding all goodwill attributable to the Property (collectively,
the "Intangible Personal Property"), and to have and to hold, all and singular,
the Tangible Personal Property and the Intangible Personal Property unto Buyer
forever.
EXECUTED this ____ day of ___________________, 1998.
Seller:
________________________________
John J. Rainieri, Sr.
________________________________
Betty Rainieri
<PAGE>
SCHEDULE 1
DESCRIPTION OF PROPERTY
<PAGE>
SCHEDULE 2
DESCRIPTION OF PERSONAL PROPERTY
<PAGE>
EXHIBIT F
(Deed)
<PAGE>
SCHEDULE 1
THE PROPERTY
[to be taken from survey]
<PAGE>
EXHIBIT G
SELLER'S FIRPTA AFFIDAVIT
Section 1455 of the Internal Revenue Code provides that a transferee of a
United States real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not
required upon the disposition of a United States real property interest by John
J. Rainieri, Sr. and Betty Rainieri, husband and wife (collectively,"Sellers"),
the undersigned hereby certifies the following on behalf of Sellers:
1. Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations); and
Seller understands that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
The undersigned declare that they have examined this certification and to
the best of their knowledge and belief it is true, correct and complete.
Dated: July 17, 1998
_____________________________
John J. Rainieri, Sr.
___________________________
Betty Rainieri
<PAGE>
STATE OF OHIO )
COUNTY OF _______________ )
On July ______, 1998, before me _________________, a Notary Pubic in and
for said State, personally appeared John J. Rainieri, Sr. and Betty Rainieri,
husband and wife, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(is), and that by his/her/their signature(s)
on the instrument the person(s), or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________
Notary Public, State of Ohio
<PAGE>
EXHIBIT H
CONTRACTS AND OPERATING AGREEMENTS
1. Lease Agreement by and between Preclub, Inc. as lessee and McKinley
Development Co. as lessor dated June 10, 1992.
2. Easement for Sign Purposes from McKinley Development Company to
Preclub, Inc. d/b/a Ohio Prestwick Country Club dated June 17, 1993
and recorded in Book OR1356, Page 404, Summit County, Ohio records.
3. License Agreement by and between C.C.T.N. Unit Owners Association,
d/b/a Country Club Village, and Ohio Prestwick Country Club dated
December 3, 1993.
4. Oil and Gas Lease from Kettering Properties Ltd. To BoCor
Producing, dated August 7, 1985 and recorded in Volume 7068, page
604, Summit County, Ohio records.
<PAGE>
EXHIBIT I
DUE DILIGENCE REQUEST LIST
1. General Property Matters
(a) Preliminary title report.
(b) Phase I environmental site assessment report.
(c) Fuel tank integrity test for any underground storage tanks located
on Property.
(d) Structural engineering report covering the clubhouse and any other
major buildings.
(e) Long-term water quality and quantity reports.
(f) Wetlands delineation or compliance report.
(g) Other plans, specifications, appraisals, market studies, soil and
engineering reports, surveys, and environmental reports and studies
in Seller's possession.
(h) Any other reports reasonably required by the Buyer.
(i) Leases, concession and occupancy agreements, and service, utility
and supply contracts, together with a schedule indicating term,
payment obligation, parties and options to extend or cancel.
(j) Property tax bills and other assessments paid with respect to the
Property for the past five years, copies of all information
regarding collected sales taxes, FICA taxes, gross receipts taxes,
income taxes or any other taxes relating to the Property, any
correspondence sent to or received from the tax assessor or any
taxing entity, including tax appeals.
(k) All permits and licenses that are required to operate the Property,
including, but not limited to, a development agreement, building and
occupancy permit, liquor license, and business permit, copies of any
existing information relating to the Property's past non-compliance
with applicable laws.
(l) Copies of organizational documents of Seller and evidence that all
necessary approvals of Seller to enter into this Agreement have been
obtained.
<PAGE>
(m) Such other documents and information as the Buyer may reasonably
request to determine the operating status of the Property and
credit-worthiness of the Owner.
(n) A description of all litigation, mechanic's liens, administrative or
condemnation proceedings, governmental investigations or inquiries,
pending or threatened, affecting the Property, including a
description of any significant disputes with vendors,
concessionaires or employees relating to the Property.
(o) A description of any known defects in the Property.
2. General Business Matters
(a) Name of owner.
(b) Form of ownership (i.e. C. Corporation, S Corporation, Limited
Liability Co., Partnership, Limited Partnership and Proprietorship).
(c) Course location.
(d) Number of courses at this location.
(i) Public
(ii) Semi-Private
(iii) Private
Equity
Non-Equity
Hybrid
(e) Audited statements (19____-19____).
(f) Number of daily fee paid rounds (19____-19____).
(g) Number of member rounds (19____-19____).
(h) Number of complimentary rounds (19____-19____).
(i) Total number of rounds (19____-19____).
(j) Description of replay policy.
(k) Annual gross revenues (19____-19_____).
(i) Green fees
(ii) Dues
(iii) Initiation fees
(iv) Cart fees
(v) Food & Beverage
<PAGE>
(vi) Merchandise
(vii) Other
(l) Net operating income.
(m) Operating statements for the Property for the past 5 years.
(n) Owner's projected operating statements for the Property for 19____
and 19____.
(o) Depreciation.
(p) Amortization.
(q) Balance Sheet.
(i) Total assets
(ii) Total liabilities
(iii) Net worth
(r) Debt.
(i) Secured
Long term
Short term
(ii) Unsecured
Long term
Short term
(s) Carts.
(i) Own
(ii) Lease
(t) Maintenance budget per 18 holes.
(u) Average annual capital expenditures.
(v) Equipment list/age.
(w) Mortgage over basis or negative capital account.
(x) A copy of the closing statement for any re-financing of any debt on
the Property within the last two (2) years.
<PAGE>
EXHIBIT J
WARRANTY DISCLOSURE SCHEDULE
None.
<PAGE>
EXHIBIT K
SELLER'S CERTIFICATE
Pursuant to SECTION 5.1.(b) of the certain Purchase and Sale Agreement
(the "Agreement") by and between the undersigned, as husband and wife ("Seller")
and GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership ("Buyer") dated
as of July 17, 1998, Seller hereby certifies to Buyer that all of its
representations and warranties set forth in ARTICLE 3 of the Agreement are true
and correct, subject to the following:
_________________________________________________________________________.
Dated: July 17, 1998
_______________________________
John J. Rainieri, Sr.
_______________________________
Betty Rainieri
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFO. EXTRACTED FROM CONSOL. BALANCE SHEET OF
GOLF TRUST OF AMERICA, INC. AND SUBS. AS OF 6/30/98, AND THE CONSOL. STMTS. OF
INCOME FOR THE 3 MOS ENDED 6/30/98 AND 6/30/97 AND FOR THE 6 MOS ENDED 6/30/98,
THE RESULTS FROM 2/12/97 (INCEPT.) TO 6/30/97 AND PROFORMA 6 MOS ENDED 6/30/97
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STMTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS OTHER
6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1998 DEC-31-1997
DEC-31-1997
<PERIOD-START> MAR-31-1998 MAR-31-1997 DEC-31-1997 FEB-12-1997
MAR-31-1996
<PERIOD-END> JUN-30-1998 JUN-30-1997 JUN-30-1998 JUN-30-1997
JUN-30-1997
<CASH> 1,325 0 0 0
0
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 2,575 0 0 0
0
<ALLOWANCES> 0 0 0 0
0
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 0 0 0 0
0
<PP&E> 277,635 0 0 0
0
<DEPRECIATION> 18,266 0 0 0
0
<TOTAL-ASSETS> 342,223 0 0 0
0
<CURRENT-LIABILITIES> 11,153 0 0 0
0
<BONDS> 142,834 0 0 0
0
0 0 0 0
0
0 0 0 0
0
<COMMON> 76 0 0 0
0
<OTHER-SE> 124,178 0 0 0
0
<TOTAL-LIABILITY-AND-EQUITY> 342,223 0 0 0
0
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 10,448 3,998 19,368 6,040
<F1> 7,794<F2>
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 3,756 1,400 6,733 2,059
<F1> 3,190<F2>
<OTHER-EXPENSES> 279<F3> (317)<F3> 207<F3>
(448)<F1><F3> (448)<F2><F3>
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 2,006 250 2,922 290
<F1> 290<F2>
<INCOME-PRETAX> 4,407 2,665 9,506 4,139
<F1> 4,762<F2>
<INCOME-TAX> 0 0 0 0
0
<INCOME-CONTINUING> 4,407 2,665 9,506 4,139
<F1> 4,762<F2>
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 2,639 1,292 5,720 2,010
<F1> 2,378<F2>
<EPS-PRIMARY> .35 .33 .75 .51
<F1> .61<F2>
<EPS-DILUTED> .33 .32 .73 .50
<F1> .59<F2>
<FN>
<F1>Period from Feb 12, 1997 (inception) to June 30, 1997
<F2>Proforma six months ended June 30, 1997
<F3>Interest income and loss on sale of assets
</FN>
</TABLE>
