<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------
Date of report (Date of earliest event reported):
MAY 22, 1998
GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Maryland 000-22091 33-0724736
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification number)
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)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Golf Trust of America, Inc., a self-administered REIT, reported that the Company
had closed its acquisition of the world class Eagle Ridge Inn and Resort located
in Galena, Illinois. The acquisition includes 63 holes of championship golf,
the 80 room Eagle Ridge hotel, conference center facilities, and other resort
related amenities. The purchase price for the property was approximately $47
million.
The facility is leased to an affiliate of Troon Golf, a premier upscale golf
management Company with over 40 courses under management and development.
Starwood Hotels & Resorts, owner of the Westin and Sheraton brands and more
than 650 hotel facilities worldwide, will oversee the hotel and resort
operations including a rental pool of 350 resort homes. The lease is
structured to permit the Company to participate in increases in all forms of
revenue at the facility, including golf, hotel, food and beverage, and
merchandise revenue.
The Eagle Ridge acquisition represents the third transaction the Company has
closed with Troon and Starwood. Previous transactions included the Westin
Innisbrook Resort, a 72-hole world class golf resort and Innisbrook at Lost Oaks
golf course. Both facilities are located in Florida.
Eagle Ridge Inn & Resort, has been widely recognized as one of the best golf
resorts in the United States, receiving numerous accolades such as "Best New
Resort Course / South Course" from GOLF DIGEST; "Best Golf Resorts in
America" from GOLF MAGAZINE (1990, 1994, 1996); "Top 10 Best New Courses/
The General Course" from GOLF MAGAZINE; and "Top 100 Resorts in the World"
from GOLFER MAGAZINE. The courses were designed by well known architect
Roger Packard with two-time United States Open Champion Andy North consulting
on The General Course.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
The following exhibits are part of this current report on Form 8-K and are
numbered in accordance with Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT NO. Description
- ----------- ------------------------------------------------------------
<S> <C>
10.1 Purchase and Sale Agreement, dated March 12, 1998, between
Eagle Ridge, L.P., a Delaware limited partnership ("Seller")
and Troon Eagle Ridge, L.L.C., a Delaware limited liability
company ("Purchaser").
</TABLE>
2
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<TABLE>
<S> <C>
10.2 Assignment and Assumption of Purchase and Sale Agreement,
dated May 20, 1998, between Troon Eagle Ridge L.L.C., a
Delaware limited liability company ("Assignor") and Golf
Trust of America, L.P., a Delaware limited partnership
("Assignee").
10.3 Lease, dated May 22, 1998, between Golf Trust of America,
L.P., a Delaware limited partnership ("Landlord") and Eagle
Ridge Lease Company L.L.C., a Delaware limited liability
company ("Tenant").
</TABLE>
3
<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)
Date: June 3rd, 1998 By: /s/ W. Bradley Blair, II
-----------------------------------
Name: W. Bradley Blair, II
Title: President and Chief Executive Officer
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- ------------------------------------------------------------
<S> <C>
10.1 Purchase and Sale Agreement, dated March 12, 1998, between
Eagle Ridge, L.P., a Delaware limited partnership ("Seller")
and Troon Eagle Ridge, L.L.C., a Delaware limited liability
company ("Purchaser").
10.2 Assignment and Assumption of Purchase and Sale Agreement,
dated May 20, 1998, between Troon Eagle Ridge L.L.C., a
Delaware limited liability company ("Assignor") and Golf
Trust of America, L.P., a Delaware limited partnership
("Assignee").
10.3 Lease, dated May 22, 1998, between Golf Trust of America,
L.P., a Delaware limited partnership ("Landlord") and Eagle
Ridge Lease Company L.L.C., a Delaware limited liability
company ("Tenant").
</TABLE>
4
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PURCHASE AND SALE AGREEMENT
--------------------------------------------------
Seller: EAGLE RIDGE, L.P.,
A DELAWARE LIMITED PARTNERSHIP ("SELLER")
Purchaser: TROON EAGLE RIDGE, L.L.C., A DELAWARE LIMITED
LIABILITY COMPANY ("PURCHASER")
Property: EAGLE RIDGE INN & RESORT
Purchase Price: $45,000,000
Effective Date: MARCH 12, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C> <C>
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . .10
(a) Purchase and Sale of Assets. . . . . . . . . . . . . . . . . . .10
(b) Assumption of Liabilities. . . . . . . . . . . . . . . . . . . .10
2.2 Due Diligence Period. . . . . . . . . . . . . . . . . . . . . . . . .10
(a) Site Inspection. . . . . . . . . . . . . . . . . . . . . . . . .10
(b) Inspection of Documents. . . . . . . . . . . . . . . . . . . . .11
(c) Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(d) Preliminary Title Report . . . . . . . . . . . . . . . . . . . .11
(e) Employment and Membership Schedule . . . . . . . . . . . . . . .12
(f) UCC Search . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(g) Communication and Work Product . . . . . . . . . . . . . . . . .12
2.3 Closing Mechanics . . . . . . . . . . . . . . . . . . . . . . . . . .12
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . .12
(b) The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . .12
(c) Deliveries at the Closing. . . . . . . . . . . . . . . . . . . .13
(d) Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE III THE SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . .13
3.2 Authorization and Execution . . . . . . . . . . . . . . . . . . . . .13
3.3 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.4 Financial Information.. . . . . . . . . . . . . . . . . . . . . . . .14
(a) Financial Statements . . . . . . . . . . . . . . . . . . . . . .14
(b) Events Subsequent to Most Recent Fiscal Year End . . . . . . . .14
(c) Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . .14
3.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.6 Authorizations. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.7 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.8 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.9 Operating Agreements. . . . . . . . . . . . . . . . . . . . . . . . .15
3.10 Warranties and Guaranties . . . . . . . . . . . . . . . . . . . . . .16
3.11 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.12 Condemnation Proceedings; Roadways. . . . . . . . . . . . . . . . . .16
3.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.14 (a) Labor Disputes and Agreements. . . . . . . . . . . . . . . . . .16
(b) Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . .17
3.15 Organizational Documents. . . . . . . . . . . . . . . . . . . . . . .19
3.16 Operation of Property . . . . . . . . . . . . . . . . . . . . . . . .19
3.17 Notice of Change in Law . . . . . . . . . . . . . . . . . . . . . . .20
3.18 Parties in Possession . . . . . . . . . . . . . . . . . . . . . . . .20
3.19 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
3.20 Environmental, Health, and Safety Matters. . . . . . . . . . . . . .20
3.21 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
</TABLE>
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3.22 Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.23 Rental Home Operations. . . . . . . . . . . . . . . . . . . . . . . .21
3.24 Accuracy of Statements. . . . . . . . . . . . . . . . . . . . . . . .21
3.25 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
3.26 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . .22
3.27 Certain Business Relationships With the Seller. . . . . . . . . . . .22
3.28 Option; Right of First Refusal. . . . . . . . . . . . . . . . . . . .22
ARTICLE IV PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . .22
4.2 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.4 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.5 Authorization and Execution . . . . . . . . . . . . . . . . . . . . .23
4.6 Software Agreements and Mercantile Bank Debt. . . . . . . . . . . . .23
ARTICLE V CONDITIONS AND ADDITIONAL COVENANTS
5.1 As to the Purchaser's Obligations . . . . . . . . . . . . . . . . . .23
(a) The Seller's Deliveries. . . . . . . . . . . . . . . . . . . . .23
(b) Representations, Warranties and Covenants. . . . . . . . . . . .23
(c) Access to Information and Facilities . . . . . . . . . . . . . .24
(d) Title Insurance. . . . . . . . . . . . . . . . . . . . . . . . .24
(e) Title to Property. . . . . . . . . . . . . . . . . . . . . . . .24
(f) Condition of Property. . . . . . . . . . . . . . . . . . . . . .24
(g) Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(h) Authorizations; Liquor License . . . . . . . . . . . . . . . . .24
(i) Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . .24
(j) Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
(k) Plans and Specifications . . . . . . . . . . . . . . . . . . . .25
(l) Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
(m) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
(n) Opinions of the Seller's Counsel . . . . . . . . . . . . . . . .25
(o) Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . .25
(p) Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
(q) Discharge of Liens, etc. . . . . . . . . . . . . . . . . . . . .25
(r) Maintenance of Insurance . . . . . . . . . . . . . . . . . . . .26
(s) Notice and Supplemental Information. . . . . . . . . . . . . . .26
(t) Public Announcements . . . . . . . . . . . . . . . . . . . . . .26
(u) Interim Financial Statements . . . . . . . . . . . . . . . . . .26
(v) No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . .26
(w) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .26
(x) Special Purpose Entity . . . . . . . . . . . . . . . . . . . . .26
5.2 As to the Seller's Obligations. . . . . . . . . . . . . . . . . . . .27
(a) The Purchaser's Deliveries . . . . . . . . . . . . . . . . . . .28
(b) Representations, Warranties and Covenants. . . . . . . . . . . .28
ARTICLE VI CLOSING
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
6.2 The Seller's Deliveries . . . . . . . . . . . . . . . . . . . . . . .28
</TABLE>
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<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C> <C>
(a) The Seller's Certificate . . . . . . . . . . . . . . . . . . . .28
(b) The Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
(c) The Bill of Sale - Personal Property . . . . . . . . . . . . . .28
(d) Assignment of Operating Agreements, Leases and Rents and all
Intangible Personal Property . . . . . . . . . . . . . . . . . .28
(e) Assignment of Rental Home Agreements . . . . . . . . . . . . . .28
(f) Evidence and Conveyance of Title to Vehicles . . . . . . . . . .28
(g) Title Requirements . . . . . . . . . . . . . . . . . . . . . . .28
(h) FIRPTA Affidavit . . . . . . . . . . . . . . . . . . . . . . . .28
(i) Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . .29
(j) Organizational Documents . . . . . . . . . . . . . . . . . . . .29
(k) Board Resolutions. . . . . . . . . . . . . . . . . . . . . . . .29
(l) Certificate of Occupancy . . . . . . . . . . . . . . . . . . . .29
(m) Evidence of Bulk Sales Compliance. . . . . . . . . . . . . . . .29
(n) Insurance Policies . . . . . . . . . . . . . . . . . . . . . . .29
(o) Improvement Plans. . . . . . . . . . . . . . . . . . . . . . . .29
(p) Communication; Addresses . . . . . . . . . . . . . . . . . . . .29
(q) Tax Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
(r) Tournament Schedule. . . . . . . . . . . . . . . . . . . . . . .29
(s) Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . .29
(t) Payoff Statement . . . . . . . . . . . . . . . . . . . . . . . .30
(u) Tenant and Vendee Notices; Rent Roll . . . . . . . . . . . . . .30
(w) Consents, Approvals. . . . . . . . . . . . . . . . . . . . . . .30
(x) Property Documents.. . . . . . . . . . . . . . . . . . . . . . .30
(y) Illinois Responsible Property Transfer Act Certificate.. . . . .30
(z) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .30
6.3 The Purchaser's Deliveries. . . . . . . . . . . . . . . . . . . . . .30
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . .30
(b) The Assumption Agreement . . . . . . . . . . . . . . . . . . . .30
(c) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .30
6.4 Mutual Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . .30
(a) Closing Statements . . . . . . . . . . . . . . . . . . . . . . .30
(b) Liquor License Transfer Documents. . . . . . . . . . . . . . . .30
(c) Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .31
6.5 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
6.6 Income and Expense Allocations. . . . . . . . . . . . . . . . . . . .31
(a) Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . .31
(b) Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
(c) Transferable Authorizations. . . . . . . . . . . . . . . . . . .31
(d) Room Revenues; Other Guest Charges . . . . . . . . . . . . . . .31
(e) Travel Agents' Commissions . . . . . . . . . . . . . . . . . . .31
(f) Prepaid Accounts; Cash Security Deposits . . . . . . . . . . . .31
(g) Vending Machines . . . . . . . . . . . . . . . . . . . . . . . .32
(h) Salaries and Wages . . . . . . . . . . . . . . . . . . . . . . .32
6.7 Property Tax Apportionment. . . . . . . . . . . . . . . . . . . . . .32
6.8 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
6.9 Room Revenue/Other Revenue. . . . . . . . . . . . . . . . . . . . . .32
6.10 Accounts Receivable and Payable, Mutual Indemnities . . . . . . . . .33
(a) Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . .33
</TABLE>
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(b) Collection of Accounts Receivable. . . . . . . . . . . . . . . .33
(c) The Seller's Indemnity . . . . . . . . . . . . . . . . . . . . .33
(d) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
6.11 Apportionment of Reservation Deposits . . . . . . . . . . . . . . . .34
(a) Reservation Deposits . . . . . . . . . . . . . . . . . . . . . .34
(b) Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
(c) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
6.12 Post-Closing Reconciliation; Resolutions of Disputes; Final
Reconciliation. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
(a) Post-Closing Reconciliation. . . . . . . . . . . . . . . . . . .34
(b) Closing Statement; Post-Closing Adjustments. . . . . . . . . . .34
6.13 Safes and Baggage . . . . . . . . . . . . . . . . . . . . . . . . . .35
(a) Safe Deposit Boxes . . . . . . . . . . . . . . . . . . . . . . .35
(b) Inventory of Guest Property. . . . . . . . . . . . . . . . . . .35
6.14 Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . .36
7.1 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
7.2 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
7.3 Real Estate Brokers . . . . . . . . . . . . . . . . . . . . . . . . .36
7.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE VIII TERMINATION
8.1 Termination of Purchaser. . . . . . . . . . . . . . . . . . . . . . .37
8.2 Termination by the Seller . . . . . . . . . . . . . . . . . . . . . .38
8.3 Costs and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE IX SURVIVAL AND REMEDY; INDEMNIFICATION
9.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.2 Indemnification by the Seller . . . . . . . . . . . . . . . . . . . .39
9.3 Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . .39
9.4 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE X MISCELLANEOUS PROVISIONS
10.1 Completeness; Modification. . . . . . . . . . . . . . . . . . . . . .40
10.2 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
10.3 No Third Party Benefits . . . . . . . . . . . . . . . . . . . . . . .41
10.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . .41
10.5 Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
10.6 Governing Law. Applicable Law; Consent to Jurisdiction. . . . . . . .41
10.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
10.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
10.9 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
10.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.11 Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . .42
10.12 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.13 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . .42
10.14 No Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.16 Table of Contents; Captions; Language . . . . . . . . . . . . . . . .42
10.17 Section 1031 Exchange . . . . . . . . . . . . . . . . . . . . . . . .42
</TABLE>
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Schedules
Schedule A - Description of Land
Schedule B - Description of Improvements
Schedule C - Tangible Personal Property
Schedule C-1 - Tangible Personal Property Not Owned or Leased by the
Seller
Schedule D - Intangible Personal Property
Schedule D-1 - Intangible Personal Property Not Owned or Leased by the
Seller
Schedule 1.1(gg) - Excluded Assets
Schedule 1.1(ddd) - Operating Agreements
Schedule 1.1(ppp) - Rental Home Agreements
Schedule 2.2(c) - Survey
Schedule 2.2(d) - Preliminary Title Report
Schedule 3.9 - Operating Agreements
Schedule 3.11 - Insurance
Schedule 3.13 - Litigation
Schedule 3.14(b) - Employee Benefit Plans
Schedule 3.18 - Parties in Possession
Schedule 3.20(a) - Environmental, Health, and Safety Matters
Schedule 3.20(b) - Environmental and Safety Permits
Schedule 3.27 - Certain Business Relationships With the Seller
Schedule 6.6(f) - Prepaid Accounts; Cash Security Deposits
Schedule 6.11(a) - Reservation Deposits
Exhibits:
Exhibit A - Bill of Sale - Personal Property
Exhibit B - Deed
Exhibit C-1 - Form of Assignment of Agreements
Exhibit C-2 - Form of Assignment of Rental Home Agreements
Exhibit D - Purchase Price Allocation
Exhibit E - Financial Statements
Exhibit F - The Seller Closing Certificate
Exhibit G - Escrow Agreement
Exhibit H - Assumption Agreement
Exhibit I - Estoppel Certificate
Exhibit J - Opinion
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<PAGE>
PURCHASE AGREEMENT
SUMMARY SHEET
<TABLE>
<S><C>
Purchaser: TROON EAGLE RIDGE, L.L.C., a Delaware limited liability company
Seller: EAGLE RIDGE, L.P., a Delaware limited partnership
Effective Date: March 12, 1998
Golf Course: The General; Eagle Ridge Inn & Resort
Trade Name: Eagle Ridge Inn & Resort
Purchase Price: Forty-Five Million Dollars ($45,000,000)
Notice Address of
Seller: Mr. Joe Duellman
President
Aerie Hotels & Resorts
2443 Warrenville Road, Suite 600
Lisle, IL 60332
Tel. 630-916-1335
Fax 630-916-4497
with copies to: Bruce Wechsler Thomas J. Kelly
c/o Wexenthaller Realty Management Inc. Pedersen & Houpt P.C.
3170 N. Sheridan Road 161 N. Clark Street
2nd Floor Management Office Suite 3100
Chicago, IL 60657 Chicago, IL 60601
Tel. 773-248-0755 Tel. 312-781-2103
Fax 773-248-1877 Fax 312-641-6895
Notice Address
of Purchaser: Troon Eagle Ridge, L.L.C.
16100 N. Greenway-Hayden Loop, Suite 200
Scottsdale, AZ 35260
Attention: Mr John D. Sauter
Tel. 602-606-1000
Fax 602-606-1010
with copies to: Troon Golf LLC Mayer, Brown & Platt
16100 N. Greenway - Hayden Loop 1675 Broadway
Scottsdale, AZ 35260 New York, NY 10019-5820
Attention: President Attention: Michael Sloyer
Tel. 602-606-1000 Tel. 212-506-2500
Fax 602-606-1010 Fax 212-262-1910
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of March 12,
1998 by and between EAGLE RIDGE, L.P., a Delaware limited partnership, having an
office at 2443 Warrenville Road, Suite 600, Lisle, Illinois 60332 (the
"SELLER"), and TROON EAGLE RIDGE, L.L.C., a Delaware limited liability company,
having an office at 16100 N. Greenway-Hayden Loop, Suite 200, Scottsdale,
Arizona 35260 (the "PURCHASER"). The Seller and the Purchaser are sometimes
collectively referred to herein as the "PARTIES" or individually as a "PARTY".
Each capitalized term not otherwise defined herein shall have the meaning
ascribed to such term in SECTION 1.1 of this Agreement.
RECITALS:
A. The Seller (or the Seller's Affiliate) is the owner in fee title of
that certain Eagle Ridge Inn & Resort and the related improvements located on
the real property legally described in SCHEDULE A attached hereto (such real
property described on SCHEDULE A being referred to herein as the "LAND"); and
B. This Agreement contemplates a transaction in which the Purchaser will
purchase all of the assets (and assume certain of the liabilities) of the Seller
in return for cash.
C. Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as set forth in this
Agreement.
D. Subject to the terms of this Agreement, the Seller hereby agrees to
sell to the Purchaser, and the Purchaser hereby agrees to buy from the Seller,
all of the following:
1. The Land, together with the golf courses, driving range, hotel
facilities, spa, putting greens, clubhouse facilities, the general store,
concession stand, restaurants, pro shop, buildings, structures, parking lots,
improvements, fixtures and other items of real property located on the Land,
including without limitation those items more particularly described in SCHEDULE
B attached hereto (collectively, the "IMPROVEMENTS").
2. All rights, privileges, easements and appurtenances to the Land and the
Improvements, if any, including, without limitation, all mineral and water
rights and all easements, rights-of-way, open or proposed streets, alleys,
strips or gores of land adjacent thereto and other appurtenances used or
connected with the beneficial use or enjoyment of the Land and the Improvements
(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 set forth on
SCHEDULE C hereof and all other tangible personal property and fixtures owned by
the Seller, and the lessee's interest in all of the foregoing leased by the
Seller (it being agreed that all of the following are owned or leased by the
Seller except as set forth on SCHEDULE C-1), if any, located on or used in
connection with the Real Property as of the date hereof (and all replacements
thereof purchased prior to the Closing Date, but excluding any items used or
discarded in the Ordinary Course of Business after the Effective Date),
including, but not limited to:
(i) all office, hotel and other equipment, furniture, fixtures
and furnishings including, without limitation, all carpeting, movable
partitions, desks, chairs, sofas, filing cabinets and systems, tables,
lamps and lighting fixtures, artwork and objects, computers, printers,
typewriters, telexes, facsimile equipment, two-way radio and paging
systems, music systems, stationery, office supplies, brochures and
business records; and
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(ii) all operating machinery and equipment, golf carts, cars,
trucks and other vehicles used in and about the Property for use in
operating and maintaining the Property, whether or not affixed to the
Improvements, including, without limitation, all electrical vaults and
conduits, heating and air conditioning facilities and equipment
(including heat pumps, oil burners, incinerators, furnaces and other
fuel-burning devices), air intake and exhaust systems, electrical
generators, lighting and alarm systems, elevators and compressor
systems, laundry and dry-cleaning facilities, all plumbing and
sanitary disposal systems (including septic or leaching systems, if
any), swimming pool and spa supplies, equipment and materials, all
inventories of replacement and/or spare parts, all maintenance
equipment, tools and machinery, and all manuals and instructional
materials associated therewith; and
(iii) all telephone and telecommunication and wired cable systems
and equipment including, without limitation, all telephones,
television and radio receivers, loud speaker and paging systems,
satellite and microwave communication equipment, movie, videotape,
film, slide and rear-screen projection equipment; and
(iv) all case goods for the Property, rooms, suites, function and
common areas and all furniture, fixtures, furnishings and equipment,
including, without limitation, all beds, bedding, tables, chairs,
sofas, lamps and lighting equipment, desks, artwork and objects,
carpeting, mirrors, armoires, linens, blankets, plants, all other
operational and guest supplies, wherever located in or about the
Property, and all inventories of replacement items; and
(v) all restaurant and kitchen furniture, fixtures, furnishings,
and equipment, affixed to or a part of the Property, including,
without limitation, all tables, chairs, banquettes, stools, bars,
lighting fixtures, bar equipment, china, glassware, linens,
silverware, artwork and objects, kitchen appliances and supplies,
housekeeping supplies, refrigerators, freezers, stoves, grills,
microwave ovens, dishwashing equipment and all kitchen and food
preparation equipment and utensils;
(vi) all inventories and supplies of merchandise, uniforms,
tools, fuel, keys, stationery and printing items and supplies, hotel,
restaurant and bar supplies and materials of all kinds, food and
beverages (including alcoholic beverages to the extent legally
transferable) and all supplies and replacement items arising out of or
in connection with the existence, use, ownership, occupancy, operation
and/or maintenance of the Property, including cleaning and maintenance
equipment of any kind or nature; and
(vii) all reservations, deposits, advance payments, including but
not limited to the Reservation Deposits, security deposits and items
prepaid by customers and other amounts, deposits or credits paid to or
received by the Seller or the Property prior to Closing.
(All of the items described in this PARAGRAPH 3, except for the
Excluded Assets, regardless of whether or not located on or in the Property or
located elsewhere for purposes of storage, fabrication or otherwise and
including all warranties and guaranties associated therewith are sometimes
collectively hereinafter referred to as the "TANGIBLE PERSONAL PROPERTY").
4. All intangible personal property owned by the Seller, and the lessee's
interest in all of the foregoing intangible personal property leased by the
Seller (it being agreed that all of the following are owned or leased by the
Seller except excluded intangible property as set forth on SCHEDULE D-1 which is
not being purchased hereunder) 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 Intellectual
Property (including the names Eagle Ridge Inn & Resort, Woodlands Restaurant &
Lounge and The General but
<PAGE>
specifically excluding Eagle Ridge Realty, Inc. and Eagle Ridge Realty owned by
Seller's Affiliate), guarantees of third parties to Seller or Seller's
Affiliates, Authorizations (as hereinafter defined), general intangibles,
business records (excluding financial records of the Seller), plans and
specifications, surveys and title insurance policies pertaining to the Property,
all promotional and advertising literature, guest, tenant and supplier lists,
and correspondence with guests, tenants and suppliers, all books, records and
files relating to the Property, all employee files relating to employees hired
by the Purchaser, marketing and other analyses, all contracts and reservations
for the use of guest rooms, banquet facilities, meeting rooms and other
facilities, all accounts receivable pertaining to the Property or related
operations after the Closing, all Operating Agreements which the Purchaser has
agreed to assume, Leases which the Purchaser has agreed to assume, Rents (for
periods after the Closing), all rights with respect to the Property for periods
after the Closing, 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 the Purchaser elects not to acquire in
accordance with the terms hereof on or before the Closing Date and (b) the Cash
of the Seller (all of the items described in this PARAGRAPH 4 are sometimes
collectively hereinafter referred to as the "INTANGIBLE PERSONAL PROPERTY"). A
schedule of the Intangible Personal Property is attached to this Agreement as
SCHEDULE D. (The Real Property, Tangible Personal Property and Intangible
Personal Property are sometimes collectively referred to as the "PROPERTY".)
The Purchaser shall retain and make available for review and copying all
Intangible Personal Property constituting books or records or financial or
employee files for a period of four (4) years after Closing and thereafter offer
to the Seller such records before destroying them.
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) "ACCOUNTANT'S CERTIFICATION" shall have the meaning set forth in
SECTION 6.6.
(b) "ACCOUNTS RECEIVABLE" shall have the meaning set forth in SECTION 6.10.
(c) "ACT OF BANKRUPTCY" shall mean if a party to this agreement or any
general partner thereof shall (a) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect) or any bankruptcy statute, (e) be adjudicated bankrupt or
insolvent, (f) be unable to pay its debts as they become due or have
insufficient capital, (g) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, (h) 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 bankruptcy statute, or (i) 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),
<PAGE>
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.
(d) "ADJUSTMENT TIME" shall have the meaning set forth in SECTION 6.6.
(e) "ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, Liens, losses, expenses and
fees, including court costs and reasonable attorneys' fees and expenses.
(f) "AFFILIATE" shall mean, with respect to any specified Person, (a) any
other Person which, directly or indirectly, controls, is under common control
with, or is controlled by, such specified Person, or (b) any director or
executive officer with respect to such Person.
(g) "AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a).
(h) "ASSUMED LIABILITIES" means (a) all obligations of the Seller under any
Operating Agreement which the Purchaser has expressly agreed in writing to
assume on or before the Closing Date either (i) to furnish goods, services, and
other non-Cash benefits to another party after the Closing or (ii) to pay for
goods, services, and other non-Cash benefits that another party will furnish to
it after the Closing, (b) Liabilities of Seller's Affiliate in the maximum
amount of $400,000 payable to Mercantile Bank, 115 Perry Street, Galena,
Illinois in connection with the purchase of golf carts (the "MERCANTILE BANK
DEBT") and (c) all obligations under the Assumption Agreement in the form of
EXHIBIT H attached hereto; PROVIDED, HOWEVER, that the Assumed Liabilities shall
not include, and neither the Purchaser nor any of its Affiliates shall assume,
or shall be deemed to have assumed, any debt, claim, obligation or other
liability of the Seller or any of its Affiliates whatsoever other than as
specifically set forth in the definition of Assumed Liabilities above,
including, but not limited to (i) any Liability for Environmental Claims, (ii)
any of the Seller's liabilities in respect of Taxes except to the extent the
Purchaser received a credit against the Purchase Price for such amounts at
Closing, (iii) any income, transfer, sales, use (other than for vehicles in a
maximum aggregate amount of $5,000) and other Taxes arising in connection with
the consummation of the transactions contemplated hereby (other than as
expressly provided in this Agreement), (iv) any liability of the Seller for
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement or the consummation of the transactions contemplated hereby,
(v) any liability or obligation of the Seller under this Agreement (or under any
other agreement between the Seller on the one hand and the Purchaser on the
other hand entered into on or after the date of this Agreement), (vi) any
Indebtedness, (vii) any liability related to retiree medical and other benefits
and obligations which is accrued or in any way related to employment prior to
Closing, (viii) any obligations or liabilities, including severance, for the
Seller's employees or other employees on or in any way connected to the Property
or the Business which is accrued or in any way related to employment prior to
the Closing, (ix) any liability or obligation of the Seller in respect of
pending or threatened Claims, or (x) any obligation or liability arising as a
result of or whose existence is a breach of the Seller's representations,
warranties, agreements or covenants.
(i) "AUTHORIZATIONS" shall mean all licenses, permits, certificates and
approvals required by any governmental or quasi-Governmental Body for the
ownership, operation and use of the Property or any part thereof as a hotel and
golf course with the existing uses and operations, including clubhouse,
restaurant, shops, bars and other facilities, as applicable.
(j) "BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
(k) "BILL OF SALE - PERSONAL PROPERTY" shall mean a bill of sale conveying
title to the Tangible Personal Property and Intangible Personal
<PAGE>
Property, except leased or licensed Tangible Personal Property and Intangible
Personal Property, from the Seller to the Purchaser, substantially in the form
of EXHIBIT A attached hereto.
(l) "BUSINESS" shall mean the business of owning, operating and managing
the Property, and any similar or incidental business conducted by, or engaged
in, or proposed to be conducted by or engaged in, by the Seller.
(m) "CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
(n) "CLAIM" means any claim, lawsuit, demand, suit, inquiry made, hearing,
investigation, notice of a violation, litigation, proceeding, arbitration, or
other dispute, whether civil, criminal, administrative or otherwise.
(o) "CLOSING" shall mean the time the Deed and each of the deliveries to be
made by the Seller (as provided in SECTION 6.2) and the Purchaser (as provided
in SECTION 6.3) are made and each of the Closing conditions of the Purchaser and
the Seller in SECTION 5.1 and SECTION 5.2, respectively, have been satisfied or
waived.
(p) "CLOSING DATE" shall mean the date on which the Closing occurs.
(q) "CLOSING STATEMENTS" shall have the meaning set forth in SECTION
6.4(a).
(r) "CODE" means the Internal Revenue Code of 1986, as amended.
(s) "CONTROLLED GROUP" has the meaning set forth in Code Section 1563.
(t) "DEED" shall mean a warranty deed or trustee's deed, substantially in
the form of EXHIBIT B attached hereto, conveying the title of the Seller to the
Real Property as is customary in the location 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 SCHEDULE 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.
(u) "DUE DILIGENCE PERIOD" shall mean the period commencing at 9:00 a.m.,
Phoenix, Arizona time, on the Effective Date, and continuing through 6:00 p.m.,
Phoenix, Arizona time, on the date that is sixty (60) days from the Effective
Date or such longer period as the Purchaser and the Seller may mutually agree in
writing.
(v) "EFFECTIVE DATE" means March 12, 1998.
(w) "EMPLOYEE BENEFIT PLAN" means any (a) Employee Pension Benefit Plan,
(b) Employee Welfare Benefit Plan, (c) retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for any current
or former employee, director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not constitute an
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, and (c)
employment agreement or consulting agreement, that Seller or any of its ERISA
Affiliates maintains or to which any of the Seller or any of its ERISA
Affiliates contributes or has an obligation to contribute or with respect to
which the Seller or any of its ERISA Affiliates has any liability or contingent
liability.
(x) "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
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(y) "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
(z) "EMPLOYMENT AGREEMENTS" shall mean all employment agreements, written
or oral, between the Seller, its general partner, Eagle Ridge Operating Company,
Inc., or its managing agent, as applicable, and the persons employed with
respect to the Property in effect as of the Effective Date.
(aa) "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,
Health or Safety Requirements or any permit issued under any Environmental,
Health or Safety Requirements 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, Health or
Safety Requirements, 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.
(bb) "ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS" means all Legal
Requirements derived from or relating to federal, state, local or other laws or
regulations relating to or addressing the environment, health or safety,
including but not limited to any law, regulation, or order relating to the use,
handling, or disposal of any Hazardous Substance, and any law, regulation, or
order relating to workplace or worker safety and health, as such Legal
Requirements are promulgated by the specifically authorized agency responsible
for administering such Legal Requirements.
(cc) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(dd) "ERISA AFFILIATE" means, with respect to any person, any corporation,
trade or business which, together with such person, is a member of a controlled
group of corporations or a group of trades or businesses under common control
within the meaning of sections 414(b) or (c) of the Code.
(ee) "ESCROW AGENT" shall mean Chicago Title & Trust Company.
(ff) "ESCROW AGREEMENT" is attached hereto as EXHIBIT G.
(gg) "EXCLUDED ASSETS" shall mean those assets set forth on SCHEDULE
1.1(gg).
(hh) "EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
(ii) "GOLF CLUB" shall mean any organization, club or group whereby
memberships or other privileges are offered by the Seller for purchase in
connection with golfing privileges at the Property.
(jj) "GAAP" means United States generally accepted accounting principles as
in effect from time to time.
(kk) "GOVERNMENTAL BODY" shall mean any governmental or quasi-governmental
body, department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
(ll) "HAZARDOUS SUBSTANCES" shall mean any substance, material, waste, gas
or particulate matter which is regulated by any local, state or federal
Governmental Body, including but not limited to any material or substance which
is: (i) defined as a "hazardous waste", "hazardous material", or "restricted
hazardous waste", Extremely Hazardous Substance or words of similar import under
any provision of any Environmental, Health or
<PAGE>
Safety Requirements; (ii) petroleum or petroleum products; (iii) asbestos; (iv)
polychlorinated biphenyls, (v) radioactive material; (vi) radon gas; and (vii)
any flammable substances or any toxic materials.
(mm) "IMPROVEMENTS" shall have the meaning set forth in RECITAL D(1).
(nn) "INTELLECTUAL PROPERTY" means the following related to the Property:
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(e) all computer software to the extent transferable (including data and related
documentation in the Seller's (or any of the Seller's Affiliates') possession,
(f) all other proprietary rights, and (g) all copies and tangible embodiments
thereof (in whatever form or medium).
(oo) "INITIAL DEPOSIT" shall mean the initial deposit in the amount of
$1,000,000 deposited by the Purchaser with the Escrow Agent, together with all
interest accrued thereon from time to time.
(pp) "INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
RECITAL D(4).
(qq) "KNOWLEDGE" means, at any time and relative to any matter, the actual
knowledge of Joseph Duellman; Robert Graunke, Director of Grounds; Tracy
Millard, Property Manager; Ikhlas Ahmed, Controller; or John Schlaman, Director
of Golf.
(rr) "LAND" shall have the meaning set forth in RECITAL A.
(ss) "LEASES" shall mean all rights of the Seller in, to and under all
leases, licenses, occupancy agreements, concessions and other arrangements, oral
or written, now existing or hereafter entered into, whereby any Person agrees to
pay money or any other consideration for the use, possession or occupancy of, or
any estate in, the Property or any portion thereof or interest therein.
(tt) "LEGAL REQUIREMENTS" shall mean, as to any Person, the constituent
document or other organizational or governing documents of such Person, and all
laws, including Environmental, Health or Safety Requirements, statutes, codes,
acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions or determinations of an arbitrator
or a court or Governmental Body and requirements of all Governmental Bodies,
courts, authorities, officials and officers, foreseen or unforeseen, ordinary
or extraordinary, which now or at any time hereafter may be binding upon such
Person or any of its property (including, without limitation, the Property
described herein) or any part thereof, or any of the adjoining sidewalks, curbs,
vaults and vault space, if any, streets or ways, or any use or condition of the
Property or any part thereof, including, without limitation, any certificate of
occupancy, zoning ordinance, building or land use requirement or permit or labor
or employment rule or regulation and including any Environmental, Health or
Safety Requirements.
(uu) "LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
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(vv) "LIEN" means any security interest, mortgage, pledge, lien,
encumbrance, charge, deed, assignment, pledge, hypothecation, easement,
restriction or interest of any kind or nature.
(ww) "MATERIAL" means any circumstance or state of facts which results in,
or would reasonably be expected to result in, Adverse Consequences or the
expenditure or commitment of $100,000 or more, or which results in any material
limitation or restriction on the ability of the Purchaser to conduct the
Business.
(xx) "MORTGAGE INDEBTEDNESS" shall mean any indebtedness of the Seller
which is secured by a mortgage on the Property.
(yy) "MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
(zz) "MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 3.4(a).
(aaa) "MOST RECENT FISCAL MONTH END" has the meaning set forth in SECTION
3.4(a).
(bbb) "MOST RECENT FISCAL YEAR END" has the meaning set forth in SECTION
3.4(a).
(ccc) "OBJECTION" shall have the meaning set forth in SECTION 6.12(b).
(ddd) "OPERATING AGREEMENTS" shall mean any management agreements,
maintenance or repair contracts, service contracts, equipment and other personal
property leases, supply contracts and other agreements, if any, in effect with
respect to the construction, ownership, operation, use, occupancy or maintenance
of the Property in force and effect as of the Effective Date, as more
particularly set forth on SCHEDULE 1.1(ddd) attached hereto together with any
Operating Agreements entered into after the Effective Date as permitted under
this Agreement so long as such Operating Agreements are terminable without cause
and without penalty on thirty (30) days notice, or consented to in writing by
the Purchaser.
(eee) "ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality and frequency).
(fff) "OWNER'S TITLE POLICY" shall mean an ALTA Owner's Policy (1992) title
insurance policy, without creditors' right exception, insuring the fee simple
title to the Real Property is vested in the Purchaser subject only to the
Permitted Title Exceptions, together with a comprehensive, survey, location,
zoning, access and extended coverage endorsement. The Owner's Title Policy
shall insure the Purchaser in the amount allocated to interests in real property
at customary premiums, and shall be acceptable in form and substance to the
Purchaser. The Seller shall not be responsible for the costs of any
reinsurance. The Purchaser shall order the Survey and deliver it to the Title
Company, and the Purchaser and the Seller shall each execute such affidavits and
other statements as required by the Title Company.
(ggg) "PERMITTED TITLE EXCEPTIONS" shall mean those exceptions to title to
the Real Property that are permitted under SECTION 2.2(d) of this Agreement.
(hhh) "PERSON" shall mean any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust,
limited liability company or other organization, whether or not a legal entity,
and any governmental authority or body.
(iii) "PRELIMINARY TITLE REPORT" shall have the meaning set forth in
SECTION 2.2(d).
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(jjj) "PREPAID ACCOUNTS" shall mean all gift certificates, trade
agreements, reservations, deposits, advance payments, including but not limited
to the Reservation Deposits, security deposits and items prepaid to the Seller
and other amounts, deposits or credits paid to or received by the Seller or the
Property prior to Closing.
(kkk) "PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section
406 and Code Section 4975.
(lll) "PROPERTY" shall have the meaning set forth in RECITAL D(4).
(mmm) "PROPERTY TAXES" shall mean, collectively, all taxes, assessments,
charges and Liens by any Governmental Body with the power to tax, assess, Lien
or charge against the Property or any portion thereof, or against the Seller,
the default in payment of which may result in a Lien against the Property or any
portion thereof or against the Seller, including, without limitation, water and
sewer taxes and municipal assessments and betterments, taxed, assessed or levied
against all or any portion of the Property, including, without limitation, all
penalties, interest, and additions or supplements to any of the taxes,
assessments, charges, Liens and betterments described in this definition.
(nnn) "PURCHASE PRICE" shall mean Forty-Five Million Dollars ($45,000,000).
(ooo) "REAL PROPERTY" shall have the meaning set forth in RECITAL D(2).
(ppp) "RENTAL HOME AGREEMENTS" shall mean all of the Owner's Rental and
Maintenance Agreements between the Seller and the owners of property in The
Galena Territory which exist as of February 25, 1998, which agreements are
identified on SCHEDULE 1.1(ppp) and all such agreements which are executed and
delivered thereafter in the Ordinary Course of Business.
(qqq) "RENTAL HOME OPERATIONS" shall mean that portion of the Seller's
business consisting of the rental of residences (single-family homes, townhomes
and condominiums) located within The Galena Territory for the account of third
parties, from which the Seller derives income, and incurs costs and expenses
relating thereto.
(rrr) "RENTS" shall mean all rents, issues, profits and other amounts
payable to the Purchaser with respect to any Lease.
(sss) "RESERVATION DEPOSITS" shall mean the aggregate amount of any
deposits received by the Seller (whether paid in cash or by credit card) made
for rooms, banquets, meals or other services to be supplied from and/or after
the Closing Date.
(ttt) "RESERVATIONS" shall have the meaning set forth in SECTION 6.11(a).
(uuu) "SELLER'S ORGANIZATIONAL DOCUMENTS" shall mean the current
organizational documents of the Seller.
(vvv) "STATE" shall mean the state of Illinois.
(www) "SUMMARY SHEET" shall mean the summary page attached to this
Agreement and incorporated herein by reference.
(xxx) "SURVEY" shall mean the survey prepared pursuant to SECTION 2.2(c).
(yyy) "TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
RECITAL D(3).
(zzz) "TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll,
<PAGE>
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
(aaaa) "TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(bbbb) "THE GALENA TERRITORY"shall mean the property depicted as The Galena
Territory on the general concept map of The Galena Territory prepared by
Mid-States Engineering - Plot dated February 16, 1996.
(cccc) "TITLE COMPANY" shall mean Chicago Title Insurance Company.
(dddd) "TITLE OBJECTIONS" shall have the meaning set forth in SECTION
2.2(d).
(eeee) "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.
ARTICLE II
PURCHASE AND SALE; PAYMENT OF PURCHASE PRICE
2.1 PURCHASE AND SALE. The Purchaser has previously deposited the Initial
Deposit with the Escrow Agent.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Purchaser agrees to purchase from the Seller,
and the Seller agrees to sell, transfer, convey, and deliver to the Purchaser,
the Property at the Closing for the consideration specified below in SECTION
2.3.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms and conditions
of this Agreement, the Purchaser agrees to assume and become responsible for all
of the Assumed Liabilities and the obligations assumed under the Assumption
Agreement at the Closing. The Purchaser will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities. The
Seller agrees to terminate, or cause the termination of all, Operating
Agreements which the Purchaser does not agree to assume on or before the Closing
Date.
2.2 DUE DILIGENCE PERIOD.
(a) SITE INSPECTION. The Purchaser shall have the right, during the Due
Diligence Period, and thereafter if the Purchaser notifies the Seller that the
Purchaser has elected to proceed to Closing in the manner described below, to
enter upon the Real Property and to perform, at the Purchaser's expense and with
the Seller's full cooperation, such surveying, engineering, and environmental
studies and other tests as the Purchaser may deem appropriate. In conducting
such studies, tests and reviews, the Purchaser shall be solely responsible for
any fees, costs and expenses relating thereto, and any damages to the Property
which such studies, tests and reviews may cause. The Purchaser further agrees
to restore the Real Property substantially to its condition prior to such
inspection. The Purchaser further agrees to indemnify the Seller and hold the
Seller free and harmless from any damages to the Real Property caused by such
tests or any claims made by third parties retained by the Purchaser, except to
the extent due to the wanton or willful misconduct of the Seller, the Seller's
Affiliates or anyone under their control.
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If such studies, tests and reviews warrant, in the Purchaser's sole,
absolute and unreviewable discretion, the purchase of the Property for the
purposes contemplated by the Purchaser, then the Purchaser may elect to proceed
to Closing. If the Purchaser notifies the Seller and Escrow Agent, in writing,
on or prior to the expiration of the Due Diligence Period that it has determined
(which determination may be made in the Purchaser's sole, absolute and
unreviewable discretion) not to proceed to Closing, this Agreement automatically
shall terminate. If this Agreement is terminated by the Purchaser within the
Due Diligence Period as aforesaid, or if the Purchaser terminates this Agreement
after the Due Diligence Period pursuant to a right granted to the Purchaser in
this Agreement, the Purchaser shall be immediately entitled to a refund of the
Initial Deposit, the Escrow Agent shall be authorized to refund the Initial
Deposit to the Purchaser in accordance with the Escrow Agreement, and the
Purchaser and Escrow Agent shall be released from any further liability or
obligation under this Agreement, except that the indemnity of the Seller by the
Purchaser which is set forth in this SECTION 2.2(a) shall survive for a period
of six (6) months after such termination. The Seller shall obtain for and
deliver to the Purchaser, at the Seller's expense within thirty (30) days of the
Effective Date, a Phase I environmental survey of the Real Property and subsoil
investigation reports on certain portions of the Real Property and, based on the
recommendations thereof, such other environmental surveys and reports as the
Purchaser shall reasonably and promptly request, which surveys and reports must
be completed by the Seller expeditiously. The Seller hereby agrees to exercise
reasonable efforts to cause such other environmental surveys and reports to be
completed and delivered to the Purchaser prior to the expiration of the Due
Diligence Period.
(b) INSPECTION OF DOCUMENTS. During the Due Diligence Period, the Seller
shall make available to the Purchaser, its agents, auditors, engineers,
attorneys and other designees, for inspection and/or copying, and all existing
architectural and engineering studies, surveys, title insurance policies, zoning
and site plan materials, Operating Agreements, Leases, 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 employees, litigation, Rental Home Operations,
insurance, Intellectual Property, reservations, accounts the Property or the
Business which are in, or come into, the Seller's or any Affiliate or vendee of
the Seller's possession or control, or which the Seller or any Affiliate or
vendee of the Seller may attain.
(c) SURVEY. The Purchaser, at the Seller's expense not to exceed $35,000,
shall cause to be prepared, within forty (40) days from the Effective Date, a
survey, as reasonably required by the Purchaser, of the Land and the
Improvements, to be prepared by a surveyor selected by the Purchaser licensed to
practice as such in the State of Illinois, bearing a date not earlier than sixty
(60) days from the date of its delivery and certified to the Seller, the
Purchaser and the Title Company (and any lender or other party designated by the
Purchaser), in the form specified on SCHEDULE 2.2(c) (the "SURVEY"). If the
Purchaser has any objection to Survey matters, the same shall be treated for all
purposes as "TITLE OBJECTIONS" within the provisions of this Agreement.
(d) PRELIMINARY TITLE REPORT. During the Due Diligence Period, the
Purchaser, at the Seller's 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, not later than the earlier of (i) 15 days
after receipt of the completed Survey or (ii) the expiration date of the Due
Diligence Period, shall notify the Seller of any defects in title shown by such
examination or by the Survey that the Purchaser is unwilling to accept by
delivering a written memorandum outlining such defects in title, or a pro forma
copy of the Preliminary Title Report that reflects such unacceptable defects in
title, which shall be designated as the Title Objections. The Purchaser agrees
that UCC financing statements securing only debt in the maximum amount of
$400,000 payable to Mercantile Bank, 115 Perry Street, Galena, Illinois in
connection with the purchase of golf carts shall constitute a Permitted Title
Exception. Within ten (10) days after such notification, the Seller shall
notify the Purchaser whether the Seller is willing to cure such defects. If the
Seller is willing to cure such defects, the Seller shall act promptly and
diligently to cure such defects at its expense. If any defects in title consist
of mortgages, deeds of trust, construction or mechanics Liens, tax Liens or
other Liens, in a liquidated sum or capable of computation as a liquidated sum,
then, to that extent, and notwithstanding the foregoing, the Seller shall be
obligated to pay and discharge such defects at Closing
<PAGE>
whether or not such title defects are referenced in the Purchaser's written
memorandum, and a failure to do so shall constitute a default by the Seller
hereunder. For such purposes, the Seller may use all or a portion of the
Purchase Price. If the Seller is unable to cure any other defects by Closing,
after having attempted to do so diligently and in good faith, the Purchaser
shall elect (1) to waive such defects and proceed to Closing without any
abatement in the Purchase Price, or (2) to terminate this Agreement. The Seller
shall not, after the date of this Agreement, subject the Property or any portion
thereof, or permit the Property or any portion thereof to be subjected, to any
Liens, 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 the Purchaser's prior written consent which
may be withheld in the Purchaser's sole and absolute discretion, except the
transfer of sewer lines and roads as set forth in SCHEDULE 2.2(d) which shall be
subject to the Purchaser's reasonable approval. All title matters revealed by
the Purchaser's title examination during the Due Diligence Period and not
objected to by the Purchaser as provided above shall be deemed Permitted Title
Exceptions. Notwithstanding the foregoing, except as provided in the second
preceding sentence, the Purchaser shall not be required to take title to the
Property subject to any matters which may arise subsequent to its examination of
title to the Property made during the Due Diligence Period.
(e) EMPLOYMENT AND MEMBERSHIP SCHEDULE. The Seller shall deliver to the
Purchaser within fifteen (15) days after the Effective Date a disclosure
schedule that accurately and completely identifies and describes (a) all
Employment Agreements (including name of employee, wage or salary, accrued
vacation benefits, other fringe benefits, etc.), and (b) an updated Golf Club
membership list for 1998 and future years, 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
"EMPLOYMENT AND MEMBERSHIP SCHEDULE").
(f) UCC SEARCH. The Seller shall deliver to the Purchaser within twenty
five (25) days after the Effective Date current searches of all Uniform
Commercial Code financing statements filed with the Secretary of State of
Illinois and Jo Daviess County respecting the Seller, and the appropriate
Affiliates of the Seller, together with searches for pending litigation, tax
Liens and bankruptcy filings.
(g) COMMUNICATION AND WORK PRODUCT. Nothing contained herein shall
preclude the Seller from communicating directly with the Title Company or the
surveyor who prepares the Survey or from using the Title Company's and such
surveyor's work product.
2.3 CLOSING MECHANICS.
(a) PURCHASE PRICE. As consideration for the purchase of the Property, the
Purchaser shall at the Closing pay to the Seller, by wire transfer of
immediately available funds, cash in the amount of $45,000,000 MINUS (x) the
Initial Deposit which the Purchaser and the Seller shall direct the Escrow Agent
to pay to the Seller, and PLUS OR MINUS (y) any adjustments made pursuant to the
terms of this Agreement.
(b) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Pedersen & Houpt
P.C. or, at the election of the Purchaser's lender, at the office of the
Purchaser's lender commencing at 9:00 a.m. local time on a date selected by the
Purchaser upon five (5) Business Days notice to the Seller not earlier than the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Parties may mutually
determine (the "CLOSING DATE"); PROVIDED, HOWEVER, that the Closing Date shall
be no earlier than May 12, 1998 and no later than June 22, 1998, unless
consented to by the Purchaser and the Seller. If the Closing Date falls on a
Saturday, Sunday or other legal holiday, the Closing shall take place on the
first following business day thereafter. Possession of the Property shall be
delivered to the Purchaser at Closing, subject only to Permitted Title
Exceptions.
<PAGE>
(c) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will deliver
to the Purchaser the various certificates, instruments, and documents referred
to in SECTION 6.2 and (ii) the Purchaser will deliver to the Seller the various
certificates, instruments, and documents referred to in SECTION 6.3.
(d) ALLOCATION. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the assets acquired by the Purchaser at Closing
for all purposes (including financial accounting and tax purposes) in accordance
with the allocation schedule attached hereto as EXHIBIT D.
ARTICLE III
THE SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Purchaser to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, the Seller hereby makes the
following representations, warranties and covenants with respect to the
Property, upon each of which the Seller acknowledges and agrees that the
Purchaser is entitled to rely and has relied:
3.1 ORGANIZATION AND POWER. The Seller is duly formed or organized,
validly existing and in good standing under the laws of the jurisdiction 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 the Seller
under this Agreement.
3.2 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of the
agreements and certificates of the Seller to be delivered to the Purchaser at
Closing as provided in this Agreement will be, duly authorized by all necessary
action on the part of the Seller, duly executed and delivered by the Seller,
constitutes the valid and binding agreement of the Seller and is enforceable
against the 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 the 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 prior to or at
Closing will be, taken promptly and in good faith by the Seller and its
representatives and agents.
3.3 NONCONTRAVENTION. The execution and delivery of, and the performance
by the Seller of its obligations under, this Agreement and the transactions
contemplated hereby do not and will not contravene, or constitute a default
under, any provision of applicable law or regulation, the Seller's
Organizational Documents or any agreement, judgment, injunction, order, decree
or other instrument binding upon the Seller, or conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license (other than nontransferable
licenses, software agreements and the Mercantile Bank debt), instrument, or
other arrangement to which the Seller is a party or by which it is bound or to
which any of the Property assets is subject (or result in the imposition of any
Liens upon any of its assets). There are no outstanding agreements (written or
oral) pursuant to which the Seller (or any predecessor to or representative of
the Seller) has agreed to sell or has granted an option or right of first
refusal to purchase the Property or any part thereof. Other than the rights of
tenants, as tenants only, under the Leases, and subject to matters of record,
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
the Seller will have acquired or will have any basis to assert any right, title
or interest in, or right to possession, use, enjoyment or proceeds of, all or
any portion of the Property. There are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase or
to otherwise acquire any interest or profit participation of any kind in the
Property or any part thereof.
<PAGE>
3.4 FINANCIAL INFORMATION.
(a) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT E is a list of the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1994, December 31, 1995, December 31, 1996, and December 31, 1997,
PROVIDED that the statements for 1997 are unaudited in the form used for
management purposes (the "MOST RECENT FISCAL YEAR END") for the Seller; and
(ii) unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow in the form used for
management purposes (the "MOST RECENT FINANCIAL STATEMENTS") as of and for the
month ended January 31, 1998 (the "MOST RECENT FISCAL MONTH END") for the
Seller. The pre-1997 Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly the financial condition of the
Seller as of such dates and the results of operations of the Seller for such
periods, are correct and complete, and are consistent with the books and records
of the Seller (which books and records are correct and complete).
(b) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Seller.
(c) UNDISCLOSED LIABILITIES. The Seller has no Liability, and to the
Seller's Knowledge, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability), except for Liabilities described in
the Assumption Agreement, Liabilities and Taxes which are prorated under this
Agreement as of the date of Closing and Liabilities which have arisen after the
Most Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law, or otherwise constitutes a breach of the terms of this Agreement). The
Seller will give prompt notice to the Purchaser of any material development
affecting the assets, liabilities, business, financial condition, operations or
future prospects of the Seller or the Business.
3.5 TAXES.
(a) The Seller will provide the Purchaser with all releases requested by
the Purchaser with respect to Taxes, including, without limitation, the "stop
orders" set forth in CLAUSE (m) of SECTION 6.2.
(b) The 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 Seller's Knowledge, there is not any contemplated or proposed material
increase in the assessed valuation of the Real Property for tax purposes other
than customary annual increases and increases in connection with the transaction
contemplated by this Agreement.
3.6 AUTHORIZATIONS. The Seller or the Seller's Affiliates possess 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. Neither the Seller nor any Affiliate of the Seller has
misrepresented any relevant fact in obtaining all Authorizations, and neither
the Seller nor any Affiliate of the Seller has knowledge of any change in the
circumstances under which any of those Authorizations were obtained that result
in their termination, suspension, modification or limitation. Neither the
Seller nor any Affiliate of the Seller has taken any action (or failed to take
any action), the act or omission of which would result in the revocation of any
of the Authorizations. The Seller has no knowledge, nor, except as to matters
described in SECTION 3.20 or disclosed in SCHEDULE 3.20(a), has it received
notice within the past three (3) years, of any existing or threatened violation
of any provision of any applicable building, zoning, subdivision, or other
governmental ordinance, resolution,
<PAGE>
statute, rule, order or regulation, including but not limited to those of
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. The Seller shall, and shall cause its Affiliates to, at Closing
deliver to the Purchaser all consents and approvals of any Person which are
necessary or required in connection with the transfer, use, occupancy,
management and ownership of the Property and the Business to the extent legally
assignable and to the extent the Purchaser has not received any such
Authorization in the Purchaser's own name.
3.7 REAL PROPERTY. The Seller warrants that (i) the Seller has not
received notice that any of the material Tangible Personal Property does not
comply in any material respect with any Legal Requirements such that it cannot
be used in the operation of the Property in the manner in which it is currently
used, (ii) all contractors, subcontractors and other parties who have performed
work on or supplied materials to the Property have been fully paid for, and all
materials used at or on the Property have been fully paid for, and (iii) the
Seller has no knowledge of any material defects in the Improvements or the
Tangible Personal Property (including, without limitation, the heating,
ventilating, air conditioning, electrical, plumbing, elevator, telephone,
mechanical and other building systems, exterior walls, roofs, windows and other
structural elements) which individually would cost more than $250,000 to repair
or replace. To the Seller's Knowledge, the Seller has not received any notice
of any violation of a condition or agreement contained in any material easement,
restrictive covenant or any similar instrument or agreement affecting the Real
Property, or any material portion thereof which could have a material adverse
effect on the operation of the Property or the Business.
3.8 PERSONAL PROPERTY. All of the Tangible Personal Property and
Intangible Personal Property being conveyed by the Seller to the Purchaser is
free and clear of all Liens other than Liens to be discharged by the Seller at
Closing and the Lien with respect to the Mercantile Bank Debt, and will be so on
the Closing Date, and the Seller has good, marketable, fee title to the Real
Property, and has good, merchantable title to all other Property and the right
to convey same in accordance with the terms of this Agreement except leased or
licensed Tangible Personal Property and leased or licensed Intangible Personal
Property.
3.9 OPERATING AGREEMENTS. Except as disclosed on SCHEDULE 3.9, 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; the Seller has received no notice of default under any of the material
Operating Agreements, and to the Seller's Knowledge, 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 material Operating Agreements.
The Seller shall not enter into any new Operating Agreement or Lease or other
agreement with respect to the Property, nor shall the Seller enter into any
agreements modifying the Operating Agreements or Leases or other agreements,
unless (a) any such agreement or modification will not bind the Purchaser or the
Property after the Closing Date or is in the Ordinary Course of Business and
cancelable on 30 days prior notice without cause or penalty, or (b) the Seller
has obtained the Purchaser's prior written consent to such agreement or
modification. The Seller acknowledges that the Purchaser will not assume any of
the Operating Agreements except (i) those set forth in SCHEDULE 1.1 (ddd),
except those which the Purchaser has notified the Seller to terminate within
thirty (30) days of the Effective Date, provided the Purchaser may not terminate
those Operating Agreements that are also listed on SCHEDULE 3.9 and (ii) those
Operating Agreements that the Seller enters into between the Effective Date and
the Closing Date and are permitted under this SECTION 3.9.
3.10 WARRANTIES AND GUARANTIES. The Seller shall not before or after
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements or the
Tangible Personal Property or any part thereof, except with the prior written
consent of the Purchaser.
3.11 INSURANCE. The Seller carries insurance (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) as set forth on SCHEDULE 3.11. The Seller shall pay all
premiums on, and shall not cancel or allow to expire, any of the Seller's
insurance policies unless
<PAGE>
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.
3.12 CONDEMNATION PROCEEDINGS; ROADWAYS. The Seller has received no notice
of any condemnation or eminent domain proceeding pending or threatened against
the Property or any part thereof. As of the date of this Agreement, there has
been no 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, PROVIDED
that there has been a proposed change in the location of Route 20. To the
Seller's Knowledge, no fact or condition exists which would result in the
termination or material impairment of any existing access to the Real Property
from adjoining public or private streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other Utilities or services.
3.13 LITIGATION. SCHEDULE 3.13 sets forth each instance in which any of
the Seller or any of its Property (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of the Seller, is threatened or contemplated to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
arbitrator or Government Body, court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any arbitrator.
None of the actions, suits, proceedings, hearings, and investigations set forth
in SCHEDULE 3.13 could result in any adverse change in the business, financial
condition, operations, results of operations, or future prospects of the Seller.
The Seller and the directors and officers (and employees with responsibility for
litigation matters) of the Seller have no reason to believe that any such
action, suit, proceeding, hearing, or investigation may be brought or threatened
against the Seller.
3.14(a) LABOR DISPUTES AND AGREEMENTS. There are no labor disputes
pending or threatened as to the operation or maintenance of the Property or any
part thereof. To the Knowledge of the Seller, no executive, key employee, or
group of employees has any plans to terminate employment with the Seller,
PROVIDED that Joe Duellman, Tracy Millard and Ikhlas Ahmed will not be available
for employment by the Purchaser. The Seller is not a party to any union or
trade association or other collective bargaining agreement with employees
employed in connection with the ownership, operation or maintenance of the
Property. To the Knowledge of the Seller, no union organizing is pending or
threatened. The Seller is not a party to any employment contracts or
agreements, other than the Employment Agreements, and neither the Seller nor its
managing agent will, between the Effective Date and the Closing Date, enter into
any new employment contracts or agreements or amend any existing Employment
Agreement, except with the prior written consent of the Purchaser and except
agreements with Joe Duellman, Tracy Millard, Robert Graunke or Ikhlas Ahmed
which will not be binding on the Purchaser. The Seller acknowledges that the
Purchaser will not assume any of the Employment Agreements or any other
obligation or Liability with respect to any employee of the Seller or any
employee employed on or in connection with the Property, and the Seller has
complied with and shall be responsible for compliance with any applicable
employment-related laws or ordinances. The Seller has complied with the
requirements of all Legal Requirements respecting all employees employed in
connection with the ownership, operation or maintenance of the Property. The
Seller shall be responsible for all severance and other termination and similar
liabilities with respect to all employees. The Seller will, within five days of
the execution of this Agreement, provide the Purchaser with a list of all
employees.
(b) EMPLOYEE BENEFITS.
(i) SCHEDULE 3.14(b) lists each Employee Benefit Plan.
(ii)The Seller shall, during the Due Diligence Period, deliver to the
Purchaser a true and correct copy of each of (i) the Employee Benefit Plans
and all contracts relating thereto, or to the funding thereof, including,
without limitation, all trust agreements, insurance contracts,
administration contracts, investment management agreements, subscription
and participation agreements, and recordkeeping
<PAGE>
agreements, each as in effect on the date hereof, (ii) in the case of
any Employee Benefit Plan which is not in written form, an accurate
description of such Employee Benefit Plan as in effect on the date
hereof, and (iii) a true and correct copy of the most recent annual
report, actuarial report, accountant's opinion of the plan's financial
statements, summary plan description and Internal Revenue Service
determination letter with respect to each Employee Benefit Plan, to the
extent applicable, and a current schedule of assets (and the fair market
value thereof assuming liquidation of any asset which is not readily
tradable) held with respect to any funded Employee Benefit Plan. There
have been no material changes in the financial condition in the
respective plans from the stated in the annual reports and actuarial
reports supplied.
(iii) Each Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies and has been administered in form and in
operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable laws and no event has occurred which
will or could cause any such Employee Benefit Plan to fail to comply with
such requirements and no notice has been issued by any governmental
authority questioning or challenging such compliance.
(iv) All required reports and descriptions (including Form 5500 Annual
Reports, summary annual reports, PBGC-1's, and summary plan descriptions)
have been timely filed and distributed appropriately with respect to each
Employee Benefit Plan.
(v) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each Employee Benefit Plan which is an Employee Pension Benefit Plan and
all contributions for any period ending on or before the Closing Date which
are not yet due have been paid to each Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of the Seller. All
premiums or other payments for all periods ending on or before the Closing
Date have been paid or accrued with respect to each Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(vi) Each Employee Benefit Plan which is an Employee Pension Benefit
Plan which is intended to be a qualified plan meets the requirements of a
"qualified plan" under Code Section 401(a), or will meet such requirements
by the time prescribed by the Internal Revenue Service (the "IRS"), a
favorable determination letter has been issued with respect to each such
Employee Benefit plan by the IRS, there have been no amendments to any such
Employee Benefit Plan which are not the subject of a favorable
determination letter except those adopted in a format issued by the IRS and
which, in accordance with IRS guidelines, do not require a favorable
determination letter, and no event has occurred which will or could give
rise to disqualification of any such Employee Benefit Plan under such
Section 401(a) or Section 501(a) of the Code or to a tax under Section 511
of the Code.
(vii) The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multiemployer
Plan) subject to the provisions of Title IV of ERISA equals or exceeds the
present value of all vested and nonvested Liabilities thereunder determined
in accordance with Pension Benefit Guaranty Corporation ("PBGC") methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(viii) None of the assets of any Employee Benefit Plan are invested in
employer securities or employer real property.
(ix) There have been no Prohibited Transactions with respect to any
such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of
<PAGE>
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of the Seller, threatened.
The Seller does not have any Knowledge of any basis for any such
action, suit, proceeding, hearing, or investigation.
(x) There have been no acts or omissions by the Seller or any of its
ERISA Affiliates which have given rise to or may give rise to fines,
penalties, taxes or related charges under Section 502 of ERISA or Chapters
43, 47, 68 or 100 of the Code for which the Seller or any of its ERISA
Affiliates may be liable.
(xi) None of the payments contemplated by the Employee Benefit Plans
would, in the aggregate, constitute excess parachute payments (as defined
in Section 280G of the Code (without regard to subsection (b)(4) thereof)).
(xii) With respect to any Employee Benefit Plan that is subject to
Title IV of ERISA, (i) there has been no reportable event (as described in
Section 4043 of ERISA), (ii) no steps have been taken to terminate any such
plan, (iii) there has been no withdrawal (within the meaning of Section
4063 of ERISA) of a "substantial employer" (as defined in Section
4001(a)(2) of ERISA), (iv) no event or condition has occurred which might
constitute grounds under Section 4042 of ERISA for the termination of or
the appointment of a trustee to administer any such plan, and (v) if each
such plan were terminated immediately after the Closing, there would be no
unfunded liabilities with respect to any such plan, its participants or
beneficiaries or the PBGC.
(xiii) Each Employee Benefit Plan which constitutes a "group health
plan" (as defined in Section 607(i) of ERISA or Section 4980B(g)(2) of the
Code), including any plans of current and former Affiliates which must be
taken into account under Section 4980B and Section 414(t) of the Code or
Section 601 of ERISA, have been operated in compliance with applicable law,
including continuation coverage requirements of Section 4980B of the code
and Section 601 of ERISA and the portability and nondiscrimination
requirements of Section 9801 and Section 9802 of the Code, to the extent
such requirements are applicable.
(xiv) None of the Seller and the other members of the Controlled Group
that includes the Seller contributes to, ever has contributed to, or ever
has been required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal liability as defined in ERISA Section 4201)
under any Multiemployer Plan.
(xv) The Seller does not maintain or ever has maintained or
contributes, ever has contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code Section 4980B).
(c) WARN ACT LIABILITY.
(i) The Seller warrants that all employees at the Property and one
employee off-site who is a salesperson for the Property are employees of
Eagle Ridge Operating Company, Inc. ("EROC") and EROC has no other
employees.
(ii) On, but not before, the Closing Date, the Seller shall cause EROC
to terminate the employment of all of EROC's employees. In reliance on the
Purchaser's covenants contained in PARAGRAPH (iii) below, neither the
Seller nor EROC shall give notice as provided under the Worker Adjustment
and Retraining Notification Act ("WARN ACT") to such employees related to
their termination. The Purchaser acknowledges that the Seller's agreement
to refrain from giving notice required under the WARN ACT helps ensure that
the Purchaser will have an adequate supply of qualified employees who are
familiar with the Property and its operations.
<PAGE>
(iii) In order to avoid an "Employment Loss," as that term is defined
under the WARN ACT, and any liability to the Seller or EROC resulting from
any "Employment Loss," the Purchaser covenants and agrees that it will
employ a sufficient number of such employees or offer sufficient employment
such that neither the Seller nor EROC will incur any WARN ACT liability
with respect to the employees of EROC terminated by the Seller. The Seller
acknowledges that the Purchaser may elect at Closing to not offer
employment to forty-five (45) or fewer employees as selected by the
Purchaser.
(iv) The Purchaser agrees to indemnify and hold the Seller and EROC
harmless from and against any and all liability, claims, penalties, costs,
expenses and damages which may be incurred by the Seller, EROC, or the
Purchaser (including, without limitation, attorneys' fees and court costs)
as a result of any violations of the notice requirements of the WARN ACT
arising solely from any breach of the covenant by the Purchaser contained
in the preceding paragraph (iii).
3.15 ORGANIZATIONAL DOCUMENTS. The Seller's Organizational Documents are
in full force and effect, 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. The Seller covenants that, between the
Effective Date and the Closing Date, it will (a) operate the Property and the
Business in the Ordinary Course of Business, (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 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, the Seller shall not
voluntarily take any action or fail to take any action the result of which would
have a material adverse effect on the Property or the Business or the
Purchaser'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 or warranties contained in this ARTICLE III to be untrue
as of Closing.
Notwithstanding the foregoing provisions of this SECTION 3.16, from and
after the execution and delivery of this Agreement, the Seller shall not, other
than in the ordinary course of business or as otherwise permitted under this
Agreement, (a) make any agreements which shall be binding upon the Purchaser
with respect to the Property, or (b) reduce or cause to be reduced any room
rates, green fees, membership fees, tournament fees, driving range fees or any
other charges over which the Seller has operational control. Between the
Effective Date and the Closing Date, if and to the extent requested by the
Purchaser, the Seller shall deliver to the Purchaser such periodic information
with respect to the Property and the Business as the Seller customarily keeps
internally for its own use. The 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 NOTICE OF CHANGE IN LAW. The Seller will advise the Purchaser
promptly of any change in any specific laws, regulations, restrictions, rulings,
orders or Legal Requirements of which the Seller obtains Knowledge which might
materially and adversely affect the value or use of the Property to the
Purchaser.
3.18 PARTIES IN POSSESSION. There are no parties in possession of any
portion of the Property as lessees, occupants, tenants at sufferance or
trespassers, except as expressly set forth on SCHEDULE 3.18 and members or
guests (as members or guests only), and parties under utility easements and
documents of record.
3.19 BANKRUPTCY. No Act of Bankruptcy has occurred with respect to the
Seller.
3.20 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. Subject to the matters
disclosed on SCHEDULE 3.20(a):
<PAGE>
(a) to the Knowledge of the Seller, the Seller and its Affiliates have
complied and are in compliance in all material respects with all Environmental,
Health, and Safety Requirements. To the Seller's Knowledge, the Property has
complied at all times in all material respects with all Environmental, Health,
and Safety Requirements.
(b) without limiting the generality of the foregoing, the Seller has
obtained and complied with, and is in compliance with, all applicable permits,
licenses and other authorizations that are required pursuant to Environmental,
Health, and Safety Requirements for the occupation of its facilities and the
operation of the Business; a list of all such permits, licenses and other
authorizations is set forth on SCHEDULE 3.20(b), the "ENVIRONMENTAL AND SAFETY
PERMITS SCHEDULE".
(c) to the Knowledge of the Seller, neither the Seller nor its predecessors
or Affiliates has received any written or oral notice, report or other
information in connection with the Property or the Business regarding any actual
or alleged violation of Environmental, Health, and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations.
(d) to the Knowledge of the Seller, none of the following exists at the
Property: (1) underground storage tanks, (2) asbestos-containing material in
any form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal areas.
(e) neither the Seller nor its Affiliates have treated, stored, disposed
of, arranged for or permitted the disposal of, handled, or released any
Hazardous Substance, on or into the Property, nor has the Seller transported any
Hazardous Substance from or to the Property in a manner that has given or would
give rise to Liabilities, including any Liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Solid Waste
Disposal Act, as amended ("SWDA") or any other Environmental, Health, and Safety
Requirements other than IRPTA.
(f) neither this Agreement nor the consummation of the transactions
contemplated by this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health, and Safety Requirements
other than IRPTA.
(g) to the Seller's Knowledge, no facts, events or conditions relating to
the Property or the Business will prevent, hinder or limit continued compliance
with Environmental, Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health, and Safety Requirements, including without limitation any
relating to onsite or offsite releases or threatened releases of Hazardous
Substances, personal injury, property damage or natural resources damage.
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 perpetual easements or
private perpetual easements.
3.22 LEASED PROPERTY. The Tangible Personal Property identified on
SCHEDULE C is all of the leased property at the Property, and such Schedule
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
valid, binding, enforceable, in good standing and the Seller has
<PAGE>
received no notices of default thereunder, and to the Knowledge of the Seller,
no condition exists and no event has occurred which with the giving of notice or
the passage of time or both could constitute an event of default thereunder.
3.23 RENTAL HOME OPERATIONS. (a) The Rental Home Agreements identified on
SCHEDULE 1.1(ppp) are all of the agreements with owners of the rental homes (the
"HOMEOWNERS") in connection with the Rental Home Operations as of February 25,
1998. All of the Rental Home Agreements are substantially in the form
heretofore delivered to the Purchaser. In the Ordinary Course of Business, the
Seller permits Homeowners to enter and leave the Rental Home Operations program
and takes no affirmative actions to enforce such Rental Home Agreements. The
Seller does from time to time delete Homeowners from the Rental Home Operations
when the Seller determines that the property does not meet the Seller's
standards. At any time, in the Ordinary Course of Business, the Seller will
have accounts payable to individual Homeowners with respect to usage of their
property. From time to time there are claims from Homeowners relating to damage
by guests. Such claims are generally resolved in the Ordinary Course of
Business. At the current time there are no disputes with homeowners which
remain unresolved. The Seller has not been involved in any arbitrations with
respect to the Rental Home Operations. The Seller, prior to Closing, will
continue to operate the Rental Home Program in a manner consistent with Seller's
past practices in the Ordinary Course of Business, and will give the Purchaser
such information relating thereto as the Purchaser may request.
(b) The Seller covenants and agrees to continue to operate the Rental Home
Operations in the Ordinary Course of Business and shall use best efforts to
maintain the Rental Home Operations consistent with the operations during the
past two (2) years. The Seller shall in the Ordinary Course of Business at all
times fully perform and comply with all agreements, covenants, terms and
conditions imposed upon or assumed by it under the Rental Home Agreements prior
to the expiration of any notice and/or cure period provided in the applicable
Rental Home Agreement.
(c) The Seller further covenants and agrees that it shall not, except in
the Ordinary Course of Business, surrender any interest hereinabove described,
nor terminate or cancel any Rental Home Agreement, prior to the expiration of
its term, and that it shall not, except in the Ordinary Course of Business,
without the express written consent of the Purchaser modify, change, supplement,
alter or amend any Rental Home Agreement, either orally or in writing.
(d) The Rental Home Agreements are valid, binding and enforceable.
3.24 ACCURACY OF STATEMENTS. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Seller or any of the Seller's
Affiliates to the Purchaser in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or, to the knowledge of the Seller, omit any statement the
omission of which causes any information provided to the Purchaser to be
materially inaccurate or materially misleading.
3.25 PROJECTIONS. The Seller has furnished to the Purchaser a Business
Plan including certain projected budgets, financial statements and forecasts,
which were prepared by the Seller in good faith based on its best knowledge,
information and belief at the time of preparation thereof for the Seller's
business planning purposes. The Seller does not represent or warrant that any
occurrences, developments or facts (including, without limitation, projections),
which the Business Plan or Business Plans says will occur or eventuate after its
date (or which were otherwise furnished in writing to the Purchaser), will in
fact occur or eventuate after such date or has occurred during the period prior
to Closing.
3.26 INTELLECTUAL PROPERTY. SCHEDULE D is an accurate and complete list of
all of the Intellectual Property, and clearly identifies all of the Intellectual
Property owned or duly licensed for use by the Seller, in
<PAGE>
each case free and clear of all Liens except as disclosed on such Schedule,
which Liens shall be released at Closing. None of the Intellectual Property has
been or is the subject of any pending adverse Claim, or to the Knowledge of the
Seller, any threatened Claim of infringement. Except as disclosed on SCHEDULE
D, the use by the Seller of the Intellectual Property in any manner does not and
could not infringe any intellectual property of another Person, and the Seller
has not received any notice contesting its right to use any now used by it in
connection with the Business or the operation thereof. The Seller has not
granted any license in respect of any Intellectual Property.
3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER. Except as disclosed on
SCHEDULE 3.27, none of the current direct or indirect owners of any interest in
the Seller or their family members have been involved in any business
arrangement or relationship with the Seller within the past twelve months, and
no current direct or indirect owner of any interest in the Seller or their
family members own any property or right, tangible or intangible, which is used
in the Business or on the Property.
3.28 OPTION; RIGHT OF FIRST REFUSAL. The Seller hereby grants the
Purchaser (i) the option to purchase Eagle Ridge Realty, Inc., excluding the
residential lot owned by such company, for a purchase price of $500,000 at
Closing by notifying the Seller of such election in writing during the Due
Diligence and (ii) a right of first refusal to purchase Eagle Ridge Realty,
Inc., excluding the residential lot owned by such company, upon the terms of a
letter of intent or contract between Eagle Ridge Realty, Inc. and a third party
and upon ten (10) Business Days' prior written notice from Eagle Ridge Realty,
Inc. during the period from the Effective Date until two years after Closing
Date.
ARTICLE IV
PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Seller to enter into this Agreement and to sell the Property,
the Purchaser hereby makes the following representations, warranties and
covenants, upon each of which the Purchaser acknowledges and agrees that the
Seller is entitled to rely and has relied:
4.1 ORGANIZATION AND POWER. The Purchaser 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 the Purchaser under this
Agreement.
4.2 NONCONTRAVENTION. The execution and delivery of this Agreement and the
performance by the Purchaser 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 the Purchaser or result in the creation of any Lien or
other encumbrance on any asset of the Purchaser.
4.3 LITIGATION. There is no action, suit or proceeding, pending or known
to be threatened, against or affecting the Purchaser 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 the Purchaser, or (b) could materially and adversely affect the
ability of the Purchaser 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 the
Purchaser.
<PAGE>
4.5 AUTHORIZATION AND EXECUTION. This Agreement has been, and each of the
agreements and certificates of the Purchaser to be delivered to the Seller at
Closing as provided in SECTION 5.2 will be, duly authorized by all necessary
action on the part of the Purchaser, has been duly executed and delivered by the
Purchaser, constitutes the valid and binding agreement of the Purchaser and is
enforceable against the Purchaser 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 the Purchaser and its representatives and agents.
4.6 SOFTWARE AGREEMENTS AND MERCANTILE BANK DEBT. If the Purchaser does
not notify the Seller to cancel the software agreements disclosed to the
Purchaser in writing prior to the end of the Due Diligence Period, the Purchaser
shall pay the cancellation costs, if any, disclosed to the Purchaser in writing.
If Mercantile Bank does not consent to the assumption of the Mercantile Bank
Debt, the Purchaser shall pay the Mercantile Bank Debt at the Closing in
addition to the Purchase Price, PROVIDED that the Purchaser shall be responsible
only for principal and monthly interest payments, and the Seller shall be
responsible for the payment of all other amounts.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
5.1 AS TO THE PURCHASER'S OBLIGATIONS. The Purchaser's obligations under
this Agreement are subject to the satisfaction of the following conditions
precedent and the compliance by the Seller with the following covenants:
(a) THE SELLER'S DELIVERIES. The Seller shall have delivered to or for the
benefit of the Purchaser, as the case may be, on or before the Closing Date, all
of the documents and other information required of the Seller pursuant to this
Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the 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, and there
shall have occurred no material adverse change in the condition, financial
results or the operation of the Property or the Business since the Effective
Date. The Seller shall have performed all of its covenants and other
obligations under this Agreement and the Seller shall have executed and
delivered to the Purchaser on the Closing Date a certificate dated as of the
Closing Date to the foregoing effect in the form of EXHIBIT F attached hereto.
(c) ACCESS TO INFORMATION AND FACILITIES. From the date of this Agreement
to the Closing Date, the Seller shall give the Purchaser and the Purchaser's
representatives reasonable access during normal business hours to the offices,
facilities, books and records of the Seller, and shall make the officers and
employees of the Seller available to the Purchaser and their representatives as
the Purchaser and their representatives shall from time to time reasonably
request, in each case to the extent that such access and disclosure would not
obligate the Seller to take any actions that would disrupt the normal course of
their businesses or violate the terms of any agreement to which the Seller is
bound or any applicable law or regulation.
(d) TITLE INSURANCE. The Title Company shall have delivered the Owner's
Title Policy, or a marked-up title commitment evidencing the binding commitment
of the Title Company to issue the Owner's Title Policy, subject in each case
only to the Permitted Title Exceptions.
(e) TITLE TO PROPERTY. Except with respect to the leased or licensed
Tangible Personal Property, the Seller (or its Affiliate) is the sole owner of
good and marketable fee simple title to the Tangible Personal Property, free and
clear of all Liens, restrictions, conditions and agreements except for Permitted
Title Exceptions and those Liens to be discharged at Closing. With respect to
the leased or licensed Tangible Personal Property,
<PAGE>
the Seller is the sole holder of a legal, valid and enforceable leasehold estate
or license, as the case may be, in the leased or licensed Tangible Personal
Property, free and clear of all Liens, restrictions, conditions and agreements
except for Permitted Title Exceptions. The Seller is the sole owner of good and
marketable title to the Rental Home Agreements, free and clear of all Liens,
restrictions, conditions, agreements and encumbrances. The 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, the Tangible Personal
Property or the Rental Home Agreements except as expressly permitted hereby.
(f) CONDITION OF PROPERTY. The Real Property and the Tangible Personal
Property (including but not limited to hotel and related facilities, spa, golf
courses, 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. From the Effective Date
until the Closing Date, the Seller shall operate the Property in the Ordinary
Course of Business and shall use commercially reasonable efforts to (i) preserve
intact the present business organization and personnel of the Seller, except as
permitted hereby, (ii) preserve the business relationships of the Seller with
other Persons material to the operation of the Seller, and (iii) to the extent
within the Seller's control, not permit any action or omission which would cause
any of the representations or warranties of the Seller contained herein to
become inaccurate or any of the covenants of the Seller to be breached.
(g) UTILITIES. Between the Effective Date and the Closing Date, the 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.
(h) AUTHORIZATIONS; LIQUOR LICENSE. The Purchaser, or the Purchaser's
nominee, shall have obtained all Authorizations, liquor licenses, alcoholic
beverage licenses and other permits necessary or appropriate to operate the
hotel, spa, restaurant, bars, shops, lounges and other businesses presently
located at the Property. To that end, the Seller, or the Seller's Affiliates,
and the Purchaser, or the Purchaser's nominee, shall have cooperated with each
other in a timely fashion, 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.
(i) ESTOPPEL CERTIFICATES. The Seller shall have caused each of the
tenants under each Lease to deliver to the Purchaser an estoppel certificate,
dated a date not earlier than 30 days prior to the Closing Date, in the form of
EXHIBIT I and shall have delivered to the Purchaser originals (or, to the extent
that such originals are not in the possession of the Seller or any of its
Affiliates, accurate and complete copies) of each of the Leases and each other
instrument, document or item of correspondence relating to any of the Leases.
(j) SEARCHES. The Seller shall within twenty five (25) days after
execution of this Agreement deliver to the Purchaser current judgment, tax Lien
and other appropriate financing statement searches, with respect to the Seller,
the appropriate Affiliates of the Seller, and the Property of the records of the
appropriate governmental offices in the State, showing no Liens other than
Permitted Title Exceptions.
(k) PLANS AND SPECIFICATIONS. To the extent in the possession of the
Seller or its Affiliates, the Seller shall have furnished the Purchaser with a
complete set of all final working drawings, plans and specifications together
with all shop drawings, change orders and other documents and papers relating
thereto (collectively, the "PLANS"), together with any soil tests and other
engineering reports relating to the Property.
(l) PERMITS. To the extent transferable, (i) the Seller shall have
furnished or caused the Seller's Affiliates to furnish, the Purchaser with all
Authorizations necessary or appropriate for the ownership, use, operation and
occupancy of the Property, and (ii) the Seller shall have transferred or
assigned to the Purchaser or into the
<PAGE>
Purchaser's name all permits referred to in this SECTION 5.1(l).
(m) NOTICES. The Seller shall have executed and delivered to the Purchaser
appropriate notices to each tenant under a Lease and each employee under an
Employment Agreement or obligors under Operating Agreement of the assignments of
the Leases, the Employment Agreements and the Operating Agreements (except any
Employment Agreements or Operating Agreements canceled at the Purchaser's
request) or employees retained by the Seller or the Seller's Affiliates.
(n) OPINIONS OF THE SELLER'S COUNSEL. The Purchaser shall have received an
opinion, dated the Closing Date, in the form attached as EXHIBIT J.
(o) EXCLUSIVITY. The Seller shall not, and shall cause its Affiliates'
advisers, representatives and agents not to, solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to any (i)
liquidation, dissolution, or recapitalization, (ii) merger or consolidation,
(iii) acquisition or purchase of all, substantially all or a material amount of
stock, securities or assets, or (iv) similar transaction or business combination
involving the Seller or the Property; PROVIDED, HOWEVER, that the directors and
officers of the Seller will remain free to participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing to the extent their fiduciary duties
may require. The Seller shall notify the Purchaser immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
(p) EFFORTS. (i) Subject to the terms and conditions hereof, each Party
hereto shall use all reasonable efforts to consummate the transactions
contemplated hereby as promptly as practicable. An undertaking of a Person
under this Agreement to use such Person's reasonable efforts shall not require
such Person to incur unreasonable expenses or obligations in order to satisfy
such undertaking.
(ii) The Seller and the Purchaser will, as promptly as practicable
(i) make the required filings with, and use their respective best efforts to
obtain all required authorizations, approvals, consents and other actions of,
governmental authorities and (ii) use their respective reasonable efforts to
obtain all other required consents of other Persons with respect to the
transactions contemplated hereby.
(q) DISCHARGE OF LIENS, ETC. Prior to or as of the Closing Date, the
Seller shall cause all Liens other than Permitted Liens to be discharged and
extinguished.
(r) MAINTENANCE OF INSURANCE. The Seller will continue to carry its
existing insurance through the Closing Date, and shall not allow any material
breach, default or cancellation (other than expiration and replacement of
policies in the ordinary cause of business) of such insurance policies or
agreements to occur or exist.
(s) NOTICE AND SUPPLEMENTAL INFORMATION. The Seller and the Purchaser
shall each give prompt notice to the other parties of any material adverse
development causing a breach of any of its own representations and warranties in
ARTICLES III and IV respectively. In addition, the Seller will, from time to
time, as necessary, prior to or at the Closing, by notice in accordance with the
terms of this Agreement, supplement or amend the Schedules, including one or
more supplements or amendments to correct any matter which would constitute a
breach of any representation, warranty, agreement or covenant contained herein.
No information provided to a Party pursuant to this Section shall be deemed to
cure any breach of any representation or covenant made in this Agreement unless
such information has been accepted in writing by the other Party.
(t) PUBLIC ANNOUNCEMENTS. The Seller and the Purchaser will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
no Party shall, without the prior written consent of the other Party, issue any
such press release or
<PAGE>
make any such public statement, except as may be required by any Legal
Requirement.
(u) INTERIM FINANCIAL STATEMENTS. The Seller agrees to provide to the
Purchaser as soon as practicable after the end of each calendar month after the
Effective Date and prior to Closing financial statements of the Seller,
consisting of a balance sheet as of the end of such month, and a cash basis
income statement and statement of cash flows for that month and for the portion
of the year then ended in the form used by the Seller for management purposes.
(v) NO PROHIBITION. No law or injunction shall have been adopted,
promulgated or entered by any governmental authority which prohibits the
consummation of the transactions contemplated hereby.
(w) LITIGATION. No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the
Purchaser to own the Property or operate the Business, or (iv) affect adversely
the right of the Seller to own the Property or operate the Business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect).
(x) SPECIAL PURPOSE ENTITY. The Seller agrees to provide to the Purchaser
prior to Closing evidence of the formation of a special purpose entity (the
"SPE") which as of the Closing shall have at least $2,000,000 of liquid assets
(net of any payments of Adverse Consequences) and no liabilities or obligations
whatsoever (other than those under the guaranty described below) beginning on
such date and continuing through the date which is the nine-month anniversary of
the Closing Date, and which entity shall remain in existence for at least
eighteen months following the Closing Date. On the date which is nine months
following the Closing Date, the Seller shall have the right, subject to the
limitations described below, to reduce the amount of the liquid assets of the
SPE to $1,000,000 (net of any prior payments of Adverse Consequences in excess
of $1,000,000) and the SPE shall continue to have no liabilities or obligations
whatsoever (other than those under the guaranty described below) and thereafter
to maintain $1,000,000 of liquid assets (net of any prior payments of Adverse
Consequences in excess of $1,000,000, and net of any subsequent payments of
Adverse Consequences) through and including the date which is the eighteen-month
anniversary of the Closing Date, and on the date which is eighteen months
following the Closing Date, the Seller shall have the right to reduce the liquid
assets of the SPE to zero; PROVIDED, HOWEVER, in the event that there are any
Adverse Consequences which arise in connection with a breach of a
representation, warranty, covenant, agreement or obligation of the Seller
arising from, or in connection with, any investigation, action, suit, proceeding
or other claim incident to any Liabilities, Claims, Taxes or remediation,
clean-up or similar obligations or costs under Environmental, Health or Safety
Requirements or relating to the Business, the Property, any Operating Agreement
or the ownership, use, maintenance, possession, operation or lease of the
Property or the Business on or prior to either of the dates set forth above for
the reduction in the liquid assets of the SPE, the liquid assets shall be
reduced only to the extent of the difference between (i) the amount which the
liquid assets were permitted to be reduced under this CLAUSE (x) and (ii) the
amount equal to the amount of such Adverse Consequences claimed by the Purchaser
in writing to the Seller. Notwithstanding anything contained herein to the
contrary, the liquid assets of the SPE may be reduced to zero only upon the
occurrence of the later of (i) eighteen months following the Closing Date and
(ii) such Adverse Consequences shall have been fully satisfied and paid in full
or the aggregate of the amounts required to be retained has been disbursed in
full or partial payment of such Adverse Consequences. The provisions of this
PARAGRAPH (x) shall survive the Closing Date. For purposes of this clause (x)
the term "liquid assets" shall mean: cash, treasury bills, certificates of
deposit maturing within one year, and securities issued or guaranteed by the
United States government and maturing within one year.
In furtherance of the foregoing, the Seller agrees to deliver to the
Purchaser at Closing a guaranty, in form and substance acceptable to the
Purchaser, executed by the SPE and by Joe Duellman and Peer Pedersen who
<PAGE>
shall provide evidence reasonably satisfactory to the Purchaser of a net worth
of liquid assets (as defined above) and/or other publicly traded securities in
excess of $45 million, which guaranty shall obligate the SPE and said principals
to be personally liable for (i) disbursing any funds except in full or partial
payment of such Adverse Consequences or as permitted by this Agreement, and (ii)
the failure of the SPE to maintain its assets as liquid assets (net of any
payments of Adverse Consequences) in the amounts required by this Agreement.
The SPE shall deliver to the Purchaser a guaranty of all of the Seller's
obligations under this Agreement and in addition agree that if the payment for
such Adverse Consequences is not paid (to the extent of liquid assets required
to be retained by this Agreement) within 20 days after either written agreement
by the Purchaser and the Seller or the SPE, or a final non-appeable
determination of a court of competent jurisdiction, the SPE shall pay interest
thereafter on the amount so agreed or determined at the prime rate publicly
announced by Citibank, N.A. plus 4% per annum and shall pay all of the
Purchaser's costs of collection incurred thereafter, including reasonable
attorneys' fees and expenses.
Nothing contained in this SECTION 5.1(x) or in any other provision of this
Agreement shall be construed to limit the liability of the Seller with respect
to any such Adverse Consequence, it being agreed that the Seller shall be fully
liable for all such Adverse Consequences (except as expressly limited by SECTION
8.1 and ARTICLE 9).
The SPE may disburse from time to time funds in excess of the minimum
amounts of liquid assets required above, notwithstanding any of its obligations
under its guaranty.
The SPE may be dissolved upon the latest to occur of (i) the settlement of
all such Adverse Consequences, (ii) 18 months after Closing and (iii) the
disbursement of all funds required to be retained from time to time hereunder in
payment of such Adverse Consequences.
Each of the conditions and additional covenants contained in this Section
5.1 are intended for the benefit of the Purchaser and may be waived in whole or
in part by the Purchaser but only by an instrument in writing signed by the
Purchaser or as expressly provided herein.
5.2 AS TO THE SELLER'S OBLIGATIONS. The Seller's obligations under this
Agreement are subject to the satisfaction of the following conditions precedent
and the compliance by the Purchaser with the following covenants:
(a) THE PURCHASER'S DELIVERIES. The Purchaser shall have delivered to or
for the benefit of the Seller, on or before the Closing Date, all of the
documents and payments required of the Purchaser pursuant to this Agreement.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the Purchaser'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 the
Purchaser shall have performed all of its covenants and other obligations under
this Agreement.
Each of the conditions and additional covenants contained in this SECTION 5.2
are intended for the benefit of the Seller and may be waived in whole or in
part, by the Seller, but only by an instrument in writing signed by the Seller
or as expressly provided herein.
ARTICLE VI
CLOSING
6.1 CLOSING. The Closing shall be held at the time and place and in the
manner specified in SECTION 2.3(b) of this Agreement.
<PAGE>
6.2 THE SELLER'S DELIVERIES. At Closing, the Seller shall deliver to the
Purchaser all of the following instruments, each of which shall have been duly
executed and, where applicable, acknowledged and/or sworn on behalf of the
Seller and shall be dated as of the Closing Date:
(a) THE SELLER'S CERTIFICATE. The certificate required by SECTION 5.1(b).
(b) THE DEED.
(c) THE BILL OF SALE - PERSONAL PROPERTY.
(d) ASSIGNMENT OF OPERATING AGREEMENTS, LEASES AND RENTS AND ALL INTANGIBLE
PERSONAL PROPERTY. An assignment of all Operating Agreements, Leases, equipment
leases, Rents and all assignable Intangible Personal Property and accounts,
substantially in the form of EXHIBIT C-1.
(e) ASSIGNMENT OF RENTAL HOME AGREEMENTS. An assignment of all Rental Home
Agreements, substantially in the form of EXHIBIT C-2.
(f) EVIDENCE AND CONVEYANCE OF TITLE TO VEHICLES. Evidence of title
acceptable to the Purchaser for any vehicle owned by the Seller and used in
connection with the Property, and a conveyance of ownership of each such vehicle
to the Purchaser or its designee.
(g) 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 the Purchaser, 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) FIRPTA AFFIDAVIT. A non-foreign status affidavit executed by the
Seller, in form reasonably satisfactory to the Purchaser, as required by Section
1445 of the Code.
(i) WARRANTIES. To the extent available, true, correct and complete copies
of all warranties, if any, of manufacturers, suppliers and installers possessed
by the Seller and relating to the Property, or any part thereof.
(j) ORGANIZATIONAL DOCUMENTS. Certified copies of the Seller's
Organizational Documents.
(k) BOARD RESOLUTIONS. Appropriate resolutions of the board of directors
or partners, as the case may be, of the Seller, certified by the secretary or an
assistant secretary of the Seller or a general partner, as the case may be,
together with all other necessary approvals and consents of the Seller
authorizing (i) the execution on behalf of the Seller of this Agreement and the
documents to be executed and delivered by the Seller prior to, at or otherwise
in connection with Closing, and (ii) the performance by the Seller of its
obligations under this Agreement and under such documents, or appropriate
resolutions of the partners of the Seller, as the case may be.
(l) CERTIFICATE OF OCCUPANCY. A valid, final and unconditional certificate
of occupancy or comparable certificate, if available, for the Real Property and
Improvements, issued by the appropriate Governmental Body allowing for the use
of the Real Property as a hotel, spa and golf course and permitting the
continued operation of the Property as presently operated.
(m) EVIDENCE OF BULK SALES COMPLIANCE. With respect to the Seller's and
the Seller's appropriate Affiliates, a "stop order" (i) issued by the Illinois
Department of Revenue pursuant to 35 ILCS 5/902(d) of the Illinois Income Tax
Act ("ACT"), (ii) issued by the Illinois Department of Revenue pursuant to 35
ILCS 120/5j
<PAGE>
and (iii) issued by the Director of the Department of Employment Security
pursuant to 820 ILCS 405/2600. In addition, the Seller shall cause Eagle Ridge
Operating Company, Inc. to deliver to the Purchaser a "stop order" issued by the
Illinois Department of Employment Security pursuant to Section 820 ILCS 405/2600
of the Act. In connection with the foregoing, the Seller shall provide to the
Illinois Department of Revenue the notification required under the applicable
Legal Requirements and shall request the Illinois Department of Revenue to make
a determination as to whether the Seller owes any tax, penalty or interest under
the Act, and shall provide the Seller with evidence that such notification has
been filed.
(n) INSURANCE POLICIES. A copy of each and every existing insurance policy
covering the Property and certificates evidencing such coverage if assigned and
subject to proration pursuant to this Agreement.
(o) IMPROVEMENT PLANS. To the extent available, a set or copies of the
plans and specifications for the Improvements.
(p) COMMUNICATION; ADDRESSES. A written instrument executed by the Seller,
conveying and transferring to the Purchaser all of the 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 the Seller
maintains a post office box solely with respect to the Property, conveying to
the Purchaser all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.
(q) TAX BILLS. All current real estate and personal property tax bills in
the Seller's possession or under its control.
(r) TOURNAMENT SCHEDULE. A complete list of all scheduled tournaments,
reservations, functions, bookings and the like, in reasonable detail.
(s) ACCOUNTS RECEIVABLE. A list of the Seller's outstanding accounts
receivable as of the Adjustment Time, specifying the name of each account and
the amount due the Seller.
(t) 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.
(u) TENANT AND VENDEE NOTICES; RENT ROLL. Written notice executed by the
Seller notifying all interested parties, including all tenants under any leases
of the Property and all vendees under any Operating Agreements, that the
Property has been conveyed to the Purchaser and directing that all payments,
inquiries and the like be forwarded to the Purchaser at the address to be
provided by the Purchaser. A current rent roll of the Property, identifying
each tenant, the unit occupied by such tenant, the amount of space leased by
such tenant, the date through which rent has been paid by such tenant and the
rent payable by such tenant.
(v) KEYS. All keys and master keys to all locks located on the Real
Property, including, but not limited to, all safes, all of which may be
transferred at the Property.
(w) CONSENTS, APPROVALS. All consents and approvals of any Person, and all
notices to any Person, which are necessary or, in the discretion of the
Purchaser, appropriate in connection with the transfer, use, occupancy,
management and ownership of the Property and the Business, other than for
non-transferable licenses, software agreements and the Mercantile Bank Debt.
(x) PROPERTY DOCUMENTS. The original, or if unavailable a copy, of all
Operating Agreements and all other agreements, contracts, documents and
instruments, and all books and records, with respect to the Property and the
Business.
<PAGE>
(y) ILLINOIS RESPONSIBLE PROPERTY TRANSFER ACT CERTIFICATE. An Illinois
IRPTA Certificate disclosing environmental conditions on the Property executed
by the Seller, or a certification by the Seller that the provisions of such act
are not applicable to the Property.
(z) MISCELLANEOUS. Any other document or instrument reasonably requested
by the Purchaser required to accomplish the transaction contemplated by this
Agreement
6.3 THE PURCHASER'S DELIVERIES. At Closing, the Purchaser shall pay or
deliver to the Seller the following:
(a) PURCHASE PRICE. The Purchase Price, plus or minus any adjustments made
pursuant to this Agreement, by federal funds wire to an account designated by
the Seller.
(b) THE ASSUMPTION AGREEMENT. A fully executed original counterpart of the
Assumption Agreement in the form of EXHIBIT H hereto.
(c) MISCELLANEOUS. Any other document or instrument reasonably requested
by the Seller required to accomplish the transaction contemplated by this
Agreement
6.4 MUTUAL DELIVERIES. At Closing, the Purchaser and the Seller shall
mutually execute and deliver each to the other:
(a) CLOSING STATEMENTS. A closing statement for the Seller and a closing
statement for the Purchaser (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. To the extent assignable, such
other documents, instruments and undertakings as may be required by the liquor
authorities of the State or of any county or municipality or Governmental Body
having jurisdiction with respect to the transfer or issue of any liquor licenses
or alcoholic beverage licenses or permits for the Property, to the extent not
theretofore executed and delivered.
(c) MISCELLANEOUS. Such other and further documents, papers and
instruments as may be reasonably required by the parties hereto or their
respective counsel.
6.5 CLOSING COSTS. Each party hereto shall pay its own legal fees and
expenses. The Seller shall pay all premiums and charges of the Owner's Title
Policy (but not reinsurance charges) and the costs of any endorsements thereto,
the cost of the Survey not to exceed $35,000, all recording and filing charges
in connection with the instruments by which the Seller conveys the Property, and
all transfer taxes, fees and charges payable in connection with such instruments
or such transfer. The Seller shall pay for preparation of the documents to be
delivered by the 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.
6.6 INCOME AND EXPENSE ALLOCATIONS. Under the Seller's standard accounting
procedures, the accounting for the business day is commenced at approximately
11:00 p.m. and is completed before 4:00 a.m. of the following day (the time of
completion of such accounting on the Closing Date (I.E., the accounting shall
be with respect to the day immediately prior to the Closing Date and the period
up to the Adjustment Time) shall be referred to herein as the "ADJUSTMENT
TIME"). All transactions for such period prior to the Adjustment Time,
including the revenues from rooms and the Rental Home Operations (collectively,
"ROOM REVENUES") for the night commencing on such day and ending on the
following day, and all expenses incurred prior to such Adjustment Time are
included in the expenses for such day. Accordingly, except as provided below,
all apportionments between the Seller and the Purchaser shall be performed as of
the Adjustment Time. All items
<PAGE>
customarily prorated and adjusted in the sale of hotels and golf courses shall
be computed and certified to the Parties by Joe Duellman and an individual
selected by the Purchaser (the "ACCOUNTANT'S CERTIFICATION").
(a) PROPERTY TAXES. Property taxes and any tax savings or tax refunds, on
the basis of the respective periods for which each is assessed or imposed, to be
apportioned in accordance with SECTION 6.7 hereof.
(b) UTILITIES. Charges for electricity, telephone, television, cable
television, steam, gas and any other Utilities made by the utility companies
servicing the Property to be apportioned in accordance with SECTION 6.8 hereof,
and transferable utility deposits, if any, for which the Seller shall be
reimbursed if same are assigned, but all amounts refundable under unassigned or
unassignable utility arrangements shall remain the property of the Seller.
(c) TRANSFERABLE AUTHORIZATIONS. Prepaid fees or other charges for
transferable licenses, permits, and other Authorizations, if any, shall be
apportioned so that the Seller shall be responsible for such fees or charges for
the period prior to the Adjustment Time and the Purchaser shall be responsible
for such fees or charges for the period following the Adjustment Time, but all
amounts refundable under unassigned or unassignable licenses and permits shall
remain the property of the Seller.
(d) ROOM REVENUES; OTHER GUEST CHARGES. Room Revenues, guest charges and
revenue incurred on or before the Adjustment Time, and Rents collected under the
Leases, to be apportioned and collected in accordance with SECTION 6.9 hereof.
(e) TRAVEL AGENTS' COMMISSIONS. Travel agents' commissions, if any, to be
apportioned consistent with the allocation of Room Revenues commissionable to
each such travel agent.
(f) PREPAID ACCOUNTS; CASH SECURITY DEPOSITS. Prepaid Accounts (including
all advance deposits that shall have been received by or credited to the Seller
prior to the closing on account of reservations for use or occupancy of the
Property after the Closing, and advance payments in the form of gift
certificates that have not been redeemed prior to the Closing) for use of the
Property's facilities after the Closing shall be the property of the Purchaser
and credited to the Purchaser at Closing. No adjustments shall be made for the
items listed on SCHEDULE 6.6(f) and the Purchaser must honor such items. At
Closing, the Seller shall give the Purchaser a credit against the Purchase Price
in the aggregate amount of any cash security deposits and other similar amounts
then held or required to be held by the Seller under the Leases and any interest
thereon.
(g) VENDING MACHINES. Charges and vending machine contracts shall be
adjusted as of the midnight prior to the Closing Date. Vending machines owned
or leased by the Seller shall have their coins removed for the account of the
Seller at midnight prior to the Closing.
(h) SALARIES AND WAGES. Salaries and wages of any employees of the Seller
who will remain as employees of the Purchaser after Closing shall be apportioned
so that salaries and wages accrued prior to the Adjustment Time shall be paid by
the Seller and thereafter by the Purchaser.
6.7 PROPERTY TAX APPORTIONMENT. Property Taxes shall be apportioned on the
basis of the fiscal period for which assessed. Property Taxes shall be
apportioned between the Seller and the Purchaser according to the respective
amounts owed before and after Closing. If the Closing Date shall occur either
before an assessment is made or a tax rate is fixed for the tax period in which
the Closing occurs or the year prior thereto, the apportionment of Property
Taxes shall be calculated on the basis of the prior year's Property Taxes, but
after the assessment and tax rate for the current year or the year prior thereto
are fixed, the apportionment thereof shall be recalculated and the Seller or the
Purchaser, as the case may be, shall make an appropriate payment to the other
based on such recalculation. If on the Closing Date the Real Property or any
part thereof shall be or shall have been affected by a betterment or special
assessment for local or regional improvements which were levied or
<PAGE>
became a Lien prior to the Closing and which are payable in installments, all
unpaid installments of any such assessments which are to become due and payable
after the Closing Date shall be assumed by and paid by the Purchaser when due.
In the event that the Seller receives any tax savings or a tax refund which
relates to the period after the Closing Date, such amounts shall be for the
account of the Purchaser which shall be held in trust by the Seller for the
Purchaser and the Seller shall promptly deliver to the Purchaser the amount due
to the Purchaser including any interest accrued thereon. In the event that the
Purchaser receives any tax savings or a tax refund which relates to the period
before the Closing Date, such amounts shall be for the account of the Seller
which shall be held in trust by the Purchaser for the Seller and the Purchaser
shall promptly deliver to the Seller the amount due to the Seller including any
interest accrued thereon. The Seller shall be responsible for all real estate
and personal property taxes relating to the period prior to the Closing Date,
including any so-called "escape assessment" or "roll-back taxes".
6.8 UTILITIES. The Utilities shall be apportioned (i) by having the
utility company make a final meter reading on the day prior to Closing, the
payment of which shall be the Seller's responsibility and for which the
Purchaser shall receive a credit at the Closing, or (ii) if such readings cannot
be obtained, on the basis of the most recent bills that are available. If the
apportionment is not based on actual current readings, then, upon the taking of
a subsequent actual reading, such apportionment shall be readjusted and the
Seller or the Purchaser, as the case may be, promptly shall deliver to the other
the amount determined to be due upon such readjustment. All unpaid Utility
bills in the Seller's possession shall be turned over to the Purchaser at the
Closing and shall be paid by the Purchaser for which the Purchaser shall receive
a credit at the Closing equal to the amount of any such bill plus any interest
or penalties due thereon as of the Closing Date. Any Utility bills received by
the Seller after the Closing shall be promptly forwarded to the Purchaser
together with the amount, if any, owed by the Seller therefor pursuant to the
provisions hereof.
6.9 ROOM REVENUE/OTHER REVENUE. Room Revenue and all Rents collected prior
to the Closing shall belong to the Seller to the extent attributable to any
period through the Adjustment Time. Room Revenue for the night immediately
prior to the Closing Date and ending on the morning of the Closing Date shall
belong to the Seller. Income from food and beverage and other sales or services
prior to the Adjustment Time shall belong to the Seller. Income from food and
beverage and other sales or services after the Adjustment Time shall belong to
the Purchaser. No cash adjustment shall be made at the Closing on account of
such income. Any such income belonging to the Seller shall be collected as
provided in SECTION 6.14 herein. Rents due the Seller under the Leases and not
collected as of the Closing Date shall not be prorated at the time of Closing,
but the Purchaser shall make a good faith effort to collect the same on behalf
of the Seller and to tender the same to the Seller, net of all reasonable
out-of-pocket costs and expenses incurred in their collection; PROVIDED,
HOWEVER, that all Rents collected by the Purchaser after the Closing Date shall
first be applied to all amounts due to the Purchaser with respect to the Leases
with the balance to be applied to amounts due to the Seller. The Seller shall
not have the right to make any claims against any third-parties with respect to
Rents after the Closing. Revenues from conferences, receptions, meetings and
other functions occurring in any conference, banquet or meeting rooms at the
Property shall be allocated based on revenues and expenses accrued as of the
Adjustment Time. Income and expenses under any reciprocal easement, shared use
or Operating Agreement which is expressly assumed by the Purchaser pursuant to
the terms of this Agreement shall be allocated between the Seller and the
Purchaser according to the respective amounts accrued before and after the
Adjustment Time.
6.10 ACCOUNTS RECEIVABLE AND PAYABLE, MUTUAL INDEMNITIES.
(a) ACCOUNTS RECEIVABLE. The Seller shall have no interest in any and all
accounts receivable for room, food and beverage and other guest charges incurred
at the Property for the period following the Adjustment Time (except as provided
in SECTION 6.9) (the "ACCOUNTS RECEIVABLE"). The Purchaser shall have the sole
right to receive, collect, discharge and compromise all Accounts Receivable.
(b) COLLECTION OF ACCOUNTS RECEIVABLE. The Seller covenants and agrees
that any moneys received by the
<PAGE>
Seller after the Closing from any party owing any portion of the Accounts
Receivable (including credit card sales when payment thereon is received by the
Seller), net of any reasonable out-of-pocket collection costs, credit card
service fees or travel agent's commissions which may be owed in connection
therewith, shall be held in trust for the Purchaser on account and for payment
of such Accounts Receivable.
(c) THE SELLER'S INDEMNITY. The Seller agrees to indemnify the Purchaser,
its successors and assigns from and against any and all loss, damage, cost,
charge, liability or expense (including court costs and reasonable attorneys'
fees) for any accounts payable for goods supplied or services performed prior to
the Adjustment Time to or for either the Seller or the Property, and for any
sales taxes and/or hotel/motel occupancy taxes, if any, due in connection with
the rental of rooms, the sale of goods or the performance of services prior to
the Adjustment Time, including but not limited to interest and penalties.
Except as expressly provided in this Agreement, the Purchaser shall not and does
not assume or undertake any responsibility for any liability or obligation of
the Seller, fixed or contingent, disclosed or undisclosed, and assumes no
liability for any claims, debts, defaults, duties, taxes, obligations or
liabilities of the Seller of any kind or nature, whether known or unknown,
contingent or fixed, all of which shall be retained by the Seller. The
Purchaser shall be responsible for accounts payable for goods supplied and
services performed after the Adjustment Time so long as such goods and services
were incurred in compliance with the terms of this Agreement. The Purchaser
shall not be liable for any claim arising out of any act, event or transaction
occurring prior to the Adjustment Time in connection with the ownership or
operation of the Property or any other property, and the Seller shall and hereby
agrees to defend, indemnify and hold the Purchaser harmless from and against any
and all costs, expenses, losses or liabilities, including court costs and
reasonable attorneys' fees, suffered or incurred by the Purchaser arising out of
any such liability or obligation, including, without limitation, any transferee
liability.
(d) SURVIVAL. Subject to SECTION 9.1, the provisions of this SECTION 6.10
shall survive the Closing Date.
6.11 APPORTIONMENT OF RESERVATION DEPOSITS.
(a) RESERVATION DEPOSITS. On the Closing Date, the aggregate amount of any
deposits ("RESERVATION DEPOSITS") received by the Seller (whether paid in cash
or by credit card) as a down payment for reservations ("RESERVATIONS"), as set
forth on SCHEDULE 6.11(a) hereto, made for rooms, banquets, meals or other
services to be supplied from and/or after the respective proration time shall be
credited against the Purchase Price due at the Closing.
(b) INDEMNITY. The Seller hereby agrees to indemnify and hold the
Purchaser harmless from and against all claims by and liabilities to any Person
resulting from the Seller's failure to pay over or credit to the Purchaser any
Reservation Deposits paid to the Seller for the period from and after the
Closing Date. The Purchaser hereby agrees to indemnify and hold the Seller
harmless from and against all claims by and liabilities to any Person resulting
from the Purchaser's failure to honor or return any Reservation Deposit,
membership or other Assumed Liability paid or credited to the Purchaser.
(c) SURVIVAL. Subject to SECTION 9.1, the provisions of this SECTION 6.11
shall survive the Closing Date.
6.12 POST-CLOSING RECONCILIATION; RESOLUTIONS OF DISPUTES; FINAL
RECONCILIATION.
(a) POST-CLOSING RECONCILIATION. The Parties hereby covenant and agree to
correct any errors or omissions committed in computing apportionments at the
Closing. Such corrections shall be made promptly after the Party which
discovers such error or omission notifies the other Party that such error or
omission occurred.
(b) CLOSING STATEMENT; POST-CLOSING ADJUSTMENTS. The accounting staff of
the Seller (the "SELLER'S ACCOUNTANTS") and the accounting staff of the
Purchaser (the "PURCHASER'S ACCOUNTANTS") shall jointly make such inventories,
examinations and audits of the Property, and of the books and records pertaining
to the Property, as
<PAGE>
the Seller's Accountants and the Purchaser's Accountants may deem necessary to
make the adjustments and prorations required under this ARTICLE 6, or under any
other provisions of this Agreement. All such adjustments and prorations except
as otherwise provided herein shall be made in accordance with the provisions of
this Agreement and otherwise in accordance with generally accepted accounting
principles ("GAAP"). Based upon the results thereof, the Seller's Accountants
and the Purchaser's Accountants will jointly prepare and deliver to the parties,
no later than two (2) days prior to the Closing, a closing statement (the
"CLOSING STATEMENT") which shall (a) contain the best estimate of the Seller's
Accountants and the Purchaser's Accountants of the amounts of the items
requiring the prorations and adjustments in accordance with this Agreement and
(b) be the basis upon which the prorations and adjustments provided for herein
shall be made at the Closing. If at the time of Closing there shall be any item
or items on the Closing Statement that remain in dispute, the Closing Statement
shall reflect only the items agreed upon by the Seller's Accountants and the
Purchaser's Accountants, and if such dispute is not resolved within ninety (90)
days after Closing, such dispute shall be resolved in the manner provided in
this Section. The Closing Statement shall be binding and conclusive on all
parties hereto to the extent of the items covered by the Closing Statement,
except (i) as provided in the preceding sentence, (ii) where this Agreement
expressly provides for further adjustment of such amounts after Closing, and
(iii) as otherwise provided below.
If at any time following the Closing Date, the amount of an item listed in
any section of this ARTICLE 6 shall be subject to adjustment as provided above
or shall otherwise prove to be incorrect (whether as a result of an error in
calculation or a lack of complete and accurate information as of the Closing),
the Party in whose favor the original incorrect adjustment or error was made
shall promptly pay to the other Party the sum necessary to correct such prior
incorrect adjustment or error upon receipt of reasonable proof of such prior
incorrect adjustment or error, provided that such proof is delivered to the
party from whom payment is requested on or before 6 months after the relevant
information is received by the party entitled to receive a payment adjustment
with respect to Taxes, and 12 months after Closing with respect to all other
matters. Any adjustments or errors shall be determined and made relative to the
adjustment and prorations determined as of the Closing. It is expressly agreed
that the provisions of this ARTICLE 6 shall survive the Closing and shall not be
merged therein. Within ten (10) business days after receipt of written notice
of any such adjustment from one Party hereunder to the other, the Party having
received any excess credit based on the adjustments made at Closing shall either
(i) pay to the other Party the amount of such excess credit, or (ii) notify the
other Party in writing that it disputes the adjustment being claimed. Failure
to respond to any such notice of adjustment shall (if the same shall continue
for an additional five (5) business days after receipt of a second notice, which
second notice shall state that the party has failed to respond within the period
required under this Section and that continued failure to respond shall be
deemed an approval) constitute an approval of the claimed adjustment. In the
case of a dispute, the parties shall attempt to resolve such dispute, but if for
any reason such dispute is not resolved within forty-five (45) days after
delivery of the original notice of the claimed adjustment by the Purchaser or
the Seller, then the parties shall submit such dispute to Arthur Andersen or
such other "nationally" recognized accounting firm agreed to by the parties
("OUTSIDE ACCOUNTANTS"), and the determination of the Outside Accountants, which
shall be made within a period of fifteen (15) days after such submittal by the
parties, shall be conclusive. The fees and expenses of the Outside Accountants
shall be paid by the Purchaser and the Seller proportionately to their
respective favorable adjustments. At such time as the amount of any adjustment
or dispute shall be determined (either by agreement or by determination of the
Outside Accountants), any amount that shall be payable by one Party to the other
as a result of such adjustment or determination shall be paid within ten (10)
business days after the date on which such agreement or determination shall have
been made. Any amounts not paid within such period shall bear interest
thereafter at a rate equal to the sum of (A) the "Prime Rate" on the day such
ten (10) business day period expires, as such rate is reported in the "Money
Rates" section of THE WALL STREET JOURNAL, as published and distributed in New
York, New York, in effect from time to time and (B) two percent (2%) per annum,
until all such amounts and the interest thereon shall have been paid in full.
6.13 SAFES AND BAGGAGE.
<PAGE>
(a) SAFE DEPOSIT BOXES. On the Closing Date the Seller shall cause the
delivery to the Purchaser of all of the Seller's keys (and combinations, where
applicable) to all safes and safe deposit boxes (collectively, the "SAFES") at
the Property. On or prior to the Closing Date, the Seller shall give written
notice to those Persons who have deposited items in such Safes, advising them of
the sale of the Property to the Purchaser and requesting the removal or
verification of their contents in the Safes on the Closing Date. All such
removals or verifications on the Closing Date shall be under the supervision of
the Seller's and the Purchaser's respective representatives. All contents which
are to remain in the Safes shall be recorded. Safes containing items belonging
to guests who have not responded to such written notice by so removing or
verifying their Safe contents by the end of the day and which cannot be opened
without the key in the possession of such guest shall be sealed until such time
as the guest appears, at which time the Safe shall be opened and the contents
recorded in the presence of the respective representatives. Until that time,
the Purchaser shall indemnify, defend and hold the Seller harmless from and
against any liability subject to the limits under applicable law for loss or
theft of such contents and the Seller shall assign to the Purchaser its rights
to any insurance proceeds covering such Safes. Any such contents so verified or
recorded and thereafter remaining in the hands of the Purchaser shall be the
responsibility of the Purchaser and the Purchaser hereby agrees to indemnify,
defend and hold the Seller harmless from any liability subject to the limits
under applicable law therefor.
(b) INVENTORY OF GUEST PROPERTY. On the Closing Date, representatives of
the Purchaser and the Seller shall take an inventory of all baggage, valises and
trunks checked or left in the care of the Seller at the Property. From and
after the Closing Date, the Purchaser shall be responsible for all baggage
listed in said inventory, and the Purchaser hereby agrees to indemnify and to
hold the Seller harmless from any liability therefor subject to the limits under
applicable law. The Seller shall remain liable for any negligence or
malfeasance with respect to such baggage which occurred prior to the Closing
Date as well as for claimed omissions from said inventory, and the Seller hereby
agrees to indemnify and to hold the Purchaser harmless from any liability
therefor subject to the limits under applicable law.
(c) Subject to SECTION 9.1, the provisions of this SECTION 6.13 shall
survive the Closing Date.
6.14 COLLECTION PERIOD. The Seller shall cooperate with the Purchaser, at
no additional cost or expense to the Purchaser, in collecting any amounts due
the Seller. With respect to Accounts Receivable attributable to sums to which
the Seller shall be entitled hereunder, the Purchaser agrees that it will not
waive, settle nor compromise any claim with respect to such receivables without
the prior written consent of the Seller. The Purchaser covenants and agrees
that any moneys received by the Purchaser after the Closing from any party owing
any portion of the accounts receivable for periods prior to the Closing
(including credit card sales when payment thereon is received by the Purchaser),
net of reasonable out-of-pocket collection costs, credit card service fees or
travel agent's commissions which may be owed in connection therewith, shall be
held in trust for the Seller on account and for payment of such accounts
receivable. The Purchaser shall bill monthly for the Seller's Receivables for
180 days, and shall turn over all proceeds less the amounts specified above to
the Seller within 10 days after receipt thereof.
ARTICLE VII
GENERAL PROVISIONS
7.1 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of (i) all or any portion of the Real
Property with a value in excess of $500,000 or (ii) any portion of the Real
Property the taking of which will adversely affect the use or enjoyment of the
Real Property or a material portion thereof, or the financial performance or
prospects of the Business, or any access thereto, or any proposed sale in lieu
thereof, the Seller shall give written notice thereof to the Purchaser promptly
after the Seller learns or receives notice thereof. If (i) all or any part of
the Real Property with a value in excess of $500,000 or (ii) any
<PAGE>
material portion of the Real Property which will adversely affect the use or
enjoyment of the Real Property or any portion thereof, or the financial
performance or prospects of the Business, or any access thereto, or is, or is to
be, so condemned or sold, the Purchaser shall have the right to terminate this
Agreement pursuant to SECTION 8.1, whereupon the Purchaser shall immediately be
entitled to a refund of the Initial Deposit, and the Escrow Agent shall
immediately deliver the Initial Deposit to the Purchaser. If the Purchaser
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 the Purchaser at Closing. The Seller will not
settle or compromise any such proceeding without the Purchaser'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 the Seller. If any such loss or damage with
a cost of repair in excess of $250,000 occurs prior to Closing, the Purchaser
shall have the right to terminate this Agreement pursuant to SECTION 8.1,
whereupon the Purchaser shall immediately be entitled to a refund of the Initial
Deposit, and the Escrow Agent shall immediately deliver the Initial Deposit to
the Purchaser. If the Purchaser 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 the Purchaser at Closing.
7.3 REAL ESTATE BROKERS. Except for a broker or finder who may have been
engaged by the Seller and for whom the Seller accepts sole financial
responsibility, and except for any broker or finder who may have been engaged by
the Purchaser and for whom the Purchaser accepts sole financial responsibility,
there is no real estate broker involved in this transaction. The Purchaser
warrants and represents to the Seller that the Purchaser has not dealt with any
other real estate broker in connection with this transaction, nor has the
Purchaser been introduced to the Property or to the Seller by any other real
estate broker, and the Purchaser shall indemnify the Seller and save and hold
the 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 the Purchaser, or as a result of having introduced
the Purchaser to the Seller or to the Property. In like manner, the Seller
warrants and represents to the Purchaser that the Seller has not dealt with any
real estate broker in connection with this transaction, nor has the Seller been
introduced to the Purchaser by any real estate broker, and the Seller shall
indemnify the Purchaser and save and hold the Purchaser harmless from and
against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation to
a real estate brokerage commission or a finder's fee as a result of having dealt
with the Seller in connection with this transaction.
7.4 CONFIDENTIALITY. Except as hereinafter provided, from and after the
execution of this Agreement, the Purchaser and the Seller shall keep the
transactions contemplated by this Agreement and 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 or provisions hereof, except to
their respective partners, shareholders, attorneys, accountants, engineers,
surveyors, financiers or bankers and except as required by any Legal
Requirement. Subject to SECTION 9.1, the obligations of this SECTION 7.4 shall
survive any termination of this Agreement.
ARTICLE VIII
TERMINATION
8.1 TERMINATION OF PURCHASER. Subject to the Seller's right to cure any of
such matters within ten (10) days, and the Seller's right to agree to cure such
matters within a reasonable period of time (not to exceed 180 days) if the cure
will take more than ten (10) days and the Seller is diligently proceeding with
such cure, in the event of a failure of a condition which is not within the
reasonable control of the Seller and is not caused by any
<PAGE>
voluntary act or omission of the Seller, as its sole remedy, at the Purchaser's
option, the Purchaser may elect (a) to terminate this Agreement, in which case,
the Purchaser shall immediately be entitled to a refund of the Initial Deposit
and the Seller shall direct the Escrow Agent to immediately return the Initial
Deposit to the Purchaser and thereupon this Agreement shall terminate and
neither Seller nor Purchaser shall have further obligations hereunder or (b) to
waive such condition and proceed to Closing.
Subject to the Seller's right to cure any of such matters within ten (10)
days, and the Seller's right to agree to cure such matters within a reasonable
period of time (not to exceed 180 days) if the cure will take more than ten (10)
days and the Seller is diligently proceeding with such cure, in the event of (i)
any breaches of any covenant to be performed by the Seller hereunder, which are
discovered by either party prior to Closing, have a material adverse effect on
the Property or its operation, were not caused by any voluntary act or omission
of the Seller and were not within the reasonable control of the Seller or (ii)
any breaches by the Seller of any warranty, discovered by either party prior to
Closing and which has a material adverse effect on the Property or its
operation, of which the Seller did not have Knowledge that any such warranty is
false as of the Effective Date, is not caused by the voluntary act or omission
of Seller and is not in the reasonable control of Seller, as its sole remedy, at
the Purchaser's option, the Purchaser may elect either (a) to close the
transaction and (1) if such breaches may be cured for $500,000 or less, the
Seller shall pay up to an aggregate $500,000 in order to cure such breaches
within a reasonable time, provided the Purchaser agrees to Close upon completion
of such cure or (2) if such breaches cannot be cured for $500,000, the Purchaser
shall agree to Close, waive such breaches and obtain a $500,000 credit against
the Purchase Price at Closing or (b) to terminate this Agreement in which case
the Seller shall direct the Escrow Agent to return the Initial Deposit and
thereupon, this Agreement shall terminate and neither the Seller nor the
Purchaser shall have further obligations hereunder. The party discovering any
such breach shall within five (5) days and in any event prior to Closing notify
the other party in writing of each such breach.
Except as provided above, if any condition set forth herein for the benefit
of the Purchaser cannot or will not be satisfied prior to Closing, or if any
representation or warranty of the Seller shall be false, or if the Seller shall
fail to perform any covenant, agreement or any other obligation under this
Agreement, and the Seller fails to cure any such matter within ten (10) days, or
fails to agree to cure and cure such matter within a reasonable time (not to
exceed 180 days) if the cure will take more than ten (10) days and the Seller is
diligently proceeding with such cure, at the Purchaser's option, the Purchaser
may elect either (a) to terminate this Agreement whereupon (1) the Purchaser
shall immediately be entitled to a refund of the Initial Deposit, and the Seller
shall direct the Escrow Agent to immediately deliver the Initial Deposit to the
Purchaser, and (2) all other rights and obligations of the Seller and the
Purchaser under this Agreement shall terminate immediately, (b) to waive its
right to terminate (but without waiving any breach or default on the part of the
Seller) and, instead, to proceed to Closing, or (c) to pursue all legal and
equitable remedies accruing as a result thereof, including, without limitation,
specific performance and any other rights or remedies available hereunder or at
law or in equity.
Purchaser shall give notice of its elections under this SECTION 8.1, within
twenty (20) days after Seller's notice requesting such election.
8.2 TERMINATION BY THE SELLER. If any condition set forth herein for the
benefit of the Seller (other than a default by the Purchaser) cannot or will not
be satisfied prior to Closing, and the Purchaser fails to cure any such matter
within ten (10) days after notice thereof from the Seller, the Seller may, at
its option, elect either (a) to terminate this Agreement, in which event the
rights and obligations of the Seller and the Purchaser hereunder shall terminate
immediately, or (b) to waive its right to terminate, and instead, to proceed to
Closing. If, prior to Closing, the Purchaser defaults in performing any of its
obligations under this Agreement (including its obligation to purchase the
Property), and the Purchaser fails to cure any such default within ten (10) days
after notice thereof from the Seller, then the Seller's sole and exclusive
remedy for such default shall be to terminate this Agreement and to retain the
Initial Deposit as liquidated damages, it being agreed by the Parties that the
Seller's damages in the event of such default are difficult to predict and the
Initial Deposit represents a reasonable estimate by the
<PAGE>
Parties of such damages, and the Seller waives any claims for damages, actual,
consequential or otherwise, that it may possess against the Purchaser and all
other rights and claims.
8.3 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,
then the prevailing party in such litigation shall be entitled to recover its
costs of prosecuting or defending same, including, without limitation,
reasonable attorneys' fees at trial and all appellate levels.
ARTICLE IX
SURVIVAL AND REMEDY; INDEMNIFICATION
9.1 SURVIVAL. Notwithstanding anything to the contrary contained in this
Agreement, all of the terms and conditions of this Agreement, together with the
warranties, representations, agreements and covenants contained herein or in any
instrument or document delivered or to be delivered pursuant to this Agreement,
shall survive the execution of this Agreement and the Closing Date,
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; PROVIDED, FURTHER, that unless otherwise stated, the
agreements and covenants set forth in this Agreement shall survive and continue
until all obligations set forth therein shall have been performed and satisfied.
Notwithstanding the foregoing, (a) the representations, covenants and warranties
of the Seller and the Purchaser shall survive the Closing and continue in full
force and effect until 18 months after Closing, except for the representations,
covenants and warranties of the Seller and the Purchaser with respect to Taxes
(other than real estate taxes) which shall survive until the expiration of the
applicable statute of limitations; and (b) all representations and warranties,
and the related agreements of the Seller and the Purchaser to indemnify each
other as set forth in this ARTICLE 9, shall survive and continue for, and all
indemnification claims with respect thereto shall be made prior to the end of 18
months from the Closing Date, except for representations, warranties and related
indemnities for which an indemnification claim shall be pending as of the end of
the applicable period referred to above, in which event such indemnities shall
survive with respect to such indemnification claim until the final disposition
thereof and obligations with respect to Taxes (other than real estate taxes)
which shall survive until the expiration of the applicable statute of
limitations, and obligations under the Assumption Agreement, which shall survive
until the earlier to occur of (i) the eight year anniversary of the Closing and
(ii) the sale of the Property to a purchaser who agrees to assume the remaining
obligations under the Assumption Agreement (the "INDEMNIFICATION PERIOD").
9.2 INDEMNIFICATION BY THE SELLER. In the event that there is (i) a breach
(or an alleged breach) of any of the representations or warranties made by the
Seller which have not been waived, (ii) any breach of or failure to perform any
covenant, agreement or obligation of, the Seller, its directors, officers,
employees or their respective Affiliates in this Agreement or any other document
contemplated hereby, or in any document relating hereto or thereto or contained
in any exhibit or schedule to this Agreement which has not been waived, (iii)
any of the following resulting from third-party Claims: Liabilities, Claims,
Adverse Consequences or Taxes relating to the Business, the Property, any
Operating Agreement or the ownership, use, maintenance, possession, operation or
lease of the Property or the Business in respect of any periods prior to the
Closing (except any such matter relating to Environmental, Health or Safety
Requirements with respect to which the Seller shall only be liable to the extent
such matter constitutes a breach of a representation, warranty, covenant or
agreement of the Seller contained in this Agreement), and (iv) any demands,
assessments, judgments, costs and reasonable legal and other expenses or other
Adverse Consequences arising from, or in connection with, any investigation,
action, suit, proceeding or other claim incident to any of the foregoing and,
if there is an applicable survival period pursuant to SECTION 9.1, then, in each
case, provided that the Purchaser makes a written claim for indemnification
against the Seller pursuant to SECTION 9.3 below within such indemnification
period, the Seller (the "SELLER INDEMNIFYING PARTIES") agrees (subject to the
limitations set forth in this SECTION 9.2) to indemnify the Purchaser and its
Affiliates, directors, officers, employees, stockholders, representatives and
agents (collectively the "PURCHASER
<PAGE>
INDEMNIFIED PARTIES") from and against the entirety of any Adverse Consequences
the Purchaser Indemnified Parties may suffer through and after the date of the
claim for indemnification resulting from, arising out of, relating to, in the
nature of, or caused by any breach (or alleged breach) of the foregoing, or
otherwise arising out of or related to any of the foregoing matters.
9.3 THIRD-PARTY CLAIMS. (a) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other party (the
"INDEMNIFYING PARTY") under ARTICLE 9, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; PROVIDED, HOWEVER, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within fifteen (15) days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any adverse effects the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedental custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (v) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with SECTION 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party, not to be withheld unreasonably, and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party, not to be withheld unreasonably.
(d) In the event any of the conditions in SECTION 9.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
cause the Escrow Agent to reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Parties
will remain responsible for any adverse effects the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this SECTION 9.3.
9.4 CLAIMS. In the event that any Indemnified Party believes that it is
entitled to claim indemnification from an Indemnifying Party under this ARTICLE
9, the Indemnified Party shall notify the Indemnifying Party of such claim, the
amount or estimated amount thereof and the basis for such claim (which will be
described in reasonable detail). The Indemnifying Party and Indemnified Party
will proceed, in good faith, and using reasonable efforts, to agree on the
amount of such indemnification claim. If they are unable to agree on the amount
of such indemnification claim within thirty (30) days after such notice, then
Indemnifying Party and Indemnified Party may proceed to exercise their
respective rights and remedies under this Agreement, at law and
<PAGE>
in equity.
9.5 INDEMNITY FOR ASSUMPTION AGREEMENT. The Purchaser shall indemnify the
Seller, in accordance with the terms of the Assumption Agreement, for the
matters described in the Assumption Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 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,
letters of intent, agreements and negotiations between the parties hereto. This
Agreement may be modified only by a written instrument duly executed by the
parties hereto.
10.2 ASSIGNMENTS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that (a) the Purchaser may assign their rights hereunder to
any Person. The Seller may not assign any of its rights pursuant to this
Agreement without the prior written consent of the Purchaser, which may be
withheld in the Purchaser's sole and absolute discretion, PROVIDED that, subject
to the terms and conditions of SECTION 10.17, the Seller or the Seller's
Affiliates may transfer some or all of the Property to a land trust (the "LAND
TRUST") prior to Closing. In the event of such transfer, the Land Trust shall
agree to cause the conveyances of such Property as required hereunder. The Land
Trust may lease all or some of the Property to the Seller. Such lease shall
terminate on Closing. The Seller or some or all of the beneficiaries of the
Land Trust may exchange, for other property of like kind and qualifying use
within the meaning of Section 1031 of the Internal Revenue Code of 1986, as
amended, and the Regulations promulgated thereunder, fee title in the property
which is the subject of this contract of the beneficial interests in the Land
Trust. The Seller, the Land Trust and/or some or all of the beneficiaries of
the Land Trust expressly reserve the right to assign their respective rights,
but not their obligations, hereunder to a Qualified Intermediary as provided in
IRC Ref. 1.1031 (k)-1(g)(4) on or before the Closing Date.
10.3 NO THIRD PARTY BENEFITS. Except as set forth in the immediately
preceding sections, this Agreement is made for the sole benefit of the Purchaser
and the Seller and their respective successors and assigns, and no other Person
shall have any right or remedy or other legal interest of any kind under or by
reason of this Agreement.
10.4 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
10.5 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.
10.6 GOVERNING LAW. APPLICABLE LAW; CONSENT TO JURISDICTION. This
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Illinois. The parties hereto consent to the
non-exclusive jurisdiction of the Illinois courts sitting in Chicago, Illinois
and the Federal courts sitting in Chicago, Illinois. Any action must be
commenced in a court located in Illinois so long as each party against whom such
action is brought is subject to jurisdiction in such court. With respect to any
action or proceeding to enforce (or arising out of) this Agreement, the parties
hereto agree that venue will be proper in such
<PAGE>
courts and hereby waive any objections based upon FORUM NON CONVENIENS. The
choice of forum set forth in this SECTION 10.6 shall not be deemed to preclude
the enforcement of any judgment obtained in such forum or the taking of any
action under this Agreement to enforce same or any other jurisdiction.
10.7 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.
10.8 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.
10.9 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.
10.10 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 10.10. 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.
10.11 INCORPORATION BY REFERENCE. All of the schedules and exhibits
attached hereto are by this reference incorporated herein and made a part
hereof.
10.12 SURVIVAL. Except as expressly provided in this Agreement, all of the
representations, warranties, covenants and agreements of the Seller and the
Purchaser made in, or pursuant to, this Agreement shall survive Closing and
shall not merge into the Deed or any other document or instrument executed and
delivered in connection herewith.
10.13 FURTHER ASSURANCES. The Seller and the Purchaser 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.
10.14 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 the Seller and the Purchaser
specifically established hereby.
10.15 CONFIDENTIALITY. Any confidential information delivered by the
Seller to the Purchaser under this Agreement shall be used solely for the
purpose of acquiring the Property and the Purchaser will keep such information
confidential; PROVIDED, that the Purchaser shall have the right to provide such
information to its consultants and advisors and to disclose such information as
the Purchaser determines is necessary or appropriate
<PAGE>
in connection with any Legal Requirement. If the Purchaser does not acquire the
Property, it shall deliver to the Seller copies of all proprietary information
delivered to the Purchaser by the Seller.
10.16 TABLE OF CONTENTS; CAPTIONS; LANGUAGE. The table of contents and
section headings in this Agreement are provided for convenience of reference
only and shall not be used in construing this Agreement. The use of the
masculine, feminine or neuter gender herein shall not limit any provision of
this Agreement. The use of the terms "including" or "include" shall in all
cases herein mean "including, without limitation" or "include, without
limitation," respectively. Underscored references to Articles, Sections,
Subsections, Exhibits or Schedules shall refer to those portions of this
Agreement. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against any party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise.
10.17 SECTION 1031 EXCHANGE. The Seller or the Seller's Affiliates may
exchange, for other property of like kind and qualifying use within the meaning
of Section 1031 of the Internal Revenue Code of 1986, as amended ("IRC" or the
"CODE") and the regulations promulgated thereunder (the "EXCHANGE"), fee title
in the property which is the subject of this contract. The Seller expressly
reserves the right to assign its rights, but not its obligations, hereunder to a
Qualified Intermediary as provided in IRC Reg. 1.1031(k)-1(g)(4) on or before
the closing date. At Closing, the Purchaser agrees to cooperate with the Seller
to enable the Seller to effectuate the Exchange; PROVIDED, HOWEVER, (i) the
Closing shall not be delayed or affected by reason of the Exchange nor shall the
consummation or accomplishment of the Exchange be a condition precedent or
condition subsequent to the Purchaser's obligations under this Agreement; (ii)
the Purchaser shall not be required to take an assignment of the purchase
agreement for the replacement property or be required to acquire or hold title
to any real property for purposes of consummating the Exchange or be required to
advance any of its own funds as earnest money for any exchange of property(ies),
or execute any note or security deed in connection with the Exchange; (iii) the
Seller shall pay any additional costs that would not otherwise have been
incurred by the Purchaser or the Seller had the Seller not consummated its sale
through the Exchange. The Purchaser shall not by this agreement or acquiescence
to the Exchange (1) have its rights under this Agreement affected or diminished
in any manner or (2) be responsible for compliance with or be deemed to have
warranted to the Seller that the Exchange in fact complies with Section 1031 of
the Code. The provisions of this paragraph shall survive the Closing and
delivery of the Deed.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have hereunder affixed
their signatures to this Purchase and Sale Agreement, all as of the ___ day
March, 1998.
PURCHASER
TROON EAGLE RIDGE, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
By: Troon Eagle Ridge, Inc., its member
By:
Name: -----------------------------
Its:
------------------------------
Witnessed by:
-----------------------------------
Name:
-----------------------------
SELLER
EAGLE RIDGE, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: Inn Ventures, Inc., its General Partner
By:
-------------------------------
Name:
Title:
Witnessed by:
-----------------------------------
Name:
-----------------------------
The undersigned hereby agrees to convey to the
Purchaser at Closing, in accordance with the terms
of this Agreement, the portions of the Land
described in the Agreement which are owned by the
undersigned, and to perform all of the covenants,
obligations and agreements contained in this
Agreement pertaining to the Land and pertaining to
Eagle Ridge Realty, Inc. from the Effective Date
until the Closing.
EAGLE RIDGE REALTY, INC.
AN ILLINOIS CORPORATION
By:----------------------------------,
its General Partner
By:
-------------------------------
Name:
Title:
Witnessed by:
-----------------------------------
Name:
-----------------------------
<PAGE>
THOMAS J. KELLY, ESQ.
PEDERSEN & HOUPT P.C.
161 NORTH CLARK STREET
SUITE 3100
CHICAGO, IL 60601
<PAGE>
ASSIGNMENT AND ASSUMPTION OF
PURCHASE AND SALE AGREEMENT
(EAGLE RIDGE)
THIS ASSIGNMENT AND ASSUMPTION OF PURCHASE AND SALE AGREEMENT (this
"Assignment Agreement") is made and entered into as of the 20th day of May, 1998
(the "Effective Date"), by and between TROON EAGLE RIDGE LLC, a Delaware limited
liability company ("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 Eagle Ridge, L.P., a Delaware limited partnership
("Seller"), have entered into that certain Purchase and Sale Agreement dated as
of March 12, 1998 (the "Purchase Agreement"), whereby Assignor agreed, subject
to certain terms and conditions set forth therein, to acquire from Seller that
certain real property, and improvements located thereon, as more particularly
described in the Purchase Agreement (the "Property"). Capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the
Purchase Agreement.
B. Assignor desires to assign to Assignee, and Assignor desires to
assume from Assignor, Assignor's right and obligation to acquire the Property,
together with Assignor's right, title and interest in, to and under the Purchase
Agreement on the terms and conditions set forth herein.
C. At Closing, and in partial consideration of the terms and
conditions of this Assignment Agreement, including, without limitation, the
obligation of Assignor to deliver the Lease (defined below) to Assignee at
Closing, Assignee will convey ________ units of limited partnership interests in
Assignee [$1,198,750 divided by the average closing price of common stock of
Golf Trust of America, Inc. for the five days prior to Closing] (the "Owner's
Shares"), in a private placement offering (the "Offering").
D. The rights and preferences of holders of the Owner's Shares are
summarized in the final Prospectus of Golf Trust of America, Inc. (the
"Company") dated November 4, 1997, and the documents incorporated therein, and
all documents filed by the Company with the United States Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934 (the "Act") (collectively, the "Offering Documents").
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable
<PAGE>
considerations, the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee hereby agree as follows:
1. ASSIGNMENT AND ASSUMPTION. As of the Effective Date, Assignor
hereby assigns and transfers to Assignee, all of Assignor's right, title and
interest in, to and under the Purchase Agreement, and, subject to Section 2 of
this Assignment Agreement, Assignee hereby accepts Assignor's assignment and
assumes all of Assignor's duties, obligations and responsibilities arising under
the Purchase Agreement arising from and after the Effective Date. Nothing
contained in this Assignment Agreement shall release Assignor from any of its
obligations under the Purchase Agreement.
2. OBLIGATIONS NOT ASSUMED BY ASSIGNEE. Notwithstanding anything to
the contrary contained in this Assignment Agreement, Assignee shall not assume
the following obligations of Assignor under the Purchase Agreement:
(i) to purchase certain vehicles (including jet skis and paddle
boats) as listed on Exhibit A attached hereto and incorporated
herein by reference;
(ii) to assume Seller's rights and obligations under the Rental Home
Agreements (as defined in the Purchase Agreement).
The foregoing obligations shall specifically be retained by Assignor. The
parties agree that the vehicles (as described in subsection (i)) and the rights
and obligations under the Rental Home Agreements (as described in subsection
(ii)) shall be pledged to Assignee.
3. DELIVERIES AT CLOSING. At Closing, Assignor and Assignee shall
make the following payments and deliveries:
a. ASSIGNOR PAYMENTS. Assignor shall pay or deliver into the
Escrow Fund the balance of the closing costs, escrow and investment fees
required to be paid by Purchaser (as defined in the Escrow Agreement) pursuant
to the Escrow Agreement (after giving effect to Assignee's payment pursuant to
Section 3(b)(ii)), and shall pay or deliver to Assignee the Secondary Collateral
(as defined in the Lease).
b. ASSIGNEE PAYMENTS. Assignee shall pay or deliver (i) to
Seller through escrow $44,000,000 in same day funds, and wired to an account
designated by Escrow Holder, (ii)
2
<PAGE>
an amount equal to Two Hundred Twenty Six Thousand Two Hundred Fifty Dollars
($226,250) in closing costs, escrow and investment fees required to be paid by
Purchaser pursuant to the Escrow Agreement and (ii) to Assignor the Owner's
Shares.
c. MUTUAL DELIVERY. Assignee shall deliver to Assignor an
executed counterpart of that certain amended and restated limited partnership
agreement relating to Assignee.
4. REPRESENTATIONS AND WARRANTIES REGARDING THE PURCHASE AGREEMENT.
Assignor hereby represents and warrants to Assignee that: (i) there has been no
prior assignment by Assignor 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.
5. REPRESENTATIONS AND WARRANTIES REGARDING ACQUISITION OF THE
OWNER'S SHARES. In connection with the acquisition of the Owner's Shares by
Assignor, Assignor makes the following representations and warranties for the
benefit of Assignee and the Company:
a. Assignor represents that it is an "accredited investor" as
such term is defined in Rule 501 ("Rule 501") of Regulation D promulgated under
the Act and that it is able to bear the economic risk of an investment in the
Owner's Shares.
b. Assignor acknowledges that it has prior investment
experience, including investment in non-listed and non-registered securities,
and the ability and expertise to evaluate the merits and risks of such an
investment on its behalf.
c. Assignor hereby represents that it has (i) received the
Offering Documents and (ii) carefully reviewed the Offering Documents.
d. Assignor hereby represents that it has been furnished by
Assignee during the course of this transaction with all information regarding
the Company which it has requested or desired to know; that it has been afforded
the opportunity to ask questions of, and receive answers from, duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, and has received any additional information which it
has requested.
e. Assignor hereby acknowledges that the offering of Owner's
Shares has not been reviewed by, and the fairness of such Owner's Shares has not
been determined by, the Commission or any state regulatory authority, since the
Offering
3
<PAGE>
is intended to be a nonpublic offering pursuant to Section 4(2) of the Act.
Assignor represents that the Owner's Shares being acquired by it are being
acquired for its own account, for investment and not for distribution of the
Owner's Shares to others.
f. Assignor understands that the Owner's Shares have not been
registered under the Act or any state securities or "blue sky" laws and are
being sold in reliance on exemptions from the registration requirements of the
Act and such laws.
g. The undersigned, if acting in a representative or fiduciary
capacity, has full power and authority to execute and deliver this Assignment
Agreement, to make the representations and warranties specified herein, and to
consummate the transactions contemplated herein on behalf of the subscribing
partnership, trust, corporation or other entity for which the undersigned is
acting and such partnership, trust, corporation, or other entity has full right
and power to subscribe for Shares and perform its obligations pursuant to this
Assignment Agreement.
h. The Company may rely, and shall be protected in acting upon,
any papers or other documents which may be submitted to it by the Assignor in
connection with the Owner's Shares and which are believed by it to be genuine
and to have been signed or presented by the proper party or parties, and the
Company shall not have any liability or responsibility with respect to the form,
execution or validity thereof.
i. Assignor hereby represents that the address set forth on
Page 1 of the Purchase Agreement is Assignor's principal business address.
j. The foregoing representations, warranties and agreements,
together with all other representations and warranties made or given by the
undersigned to Assignee or the Company in any other written statement or
document delivered in connection with the transactions contemplated hereby,
shall be true and correct in all respects on and as of the date of this
Assignment Agreement as if made on and as of such date and shall survive such
date and if there should be any material change in such information prior to the
Closing, the undersigned will immediately furnish such revised or corrected
information to Assignee. Assignor understands that Assignee and the Company
will rely upon the accuracy and truth of the foregoing representations,
warranties and agreements, and Assignor hereby consents to such reliance.
4
<PAGE>
6. LEASE, PLEDGE AGREEMENTS AND DEVELOPMENT AGREEMENT.
a. As a condition to Assignee's performance of its obligations
under this Assignment Agreement, at Closing Assignor shall deliver to Assignee
executed counterparts of a lease in the form attached hereto as EXHIBIT B (the
"Lease"), pledge agreements in the forms attached to the Lease as EXHIBITS D and
E (the "Pledge Agreements"), (iii) a pledge agreement in a form agreed by the
parties with respect to the items listed in Section 2(i) and (ii) above, (iv) a
recordable development agreement with respect to the Additional Parcels
substantially in the form attached hereto as EXHIBIT C (the "Development
Agreement"), and (v) a Mortgage with respect to the Additional Parcels in the
form attached to the Lease as EXHIBIT K (the items listed in subsections (i)
through (v) above being, the "Security Agreements").
b. As a condition to Assignor's performance of its obligations
under this Assignment Agreement, at Closing, Assignee shall deliver to Assignor
executed counterparts of the Security Agreements.
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 out of or in connection with Assignor's failure to observe,
perform and discharge each and every one of the covenants, obligations and
liabilities of "Purchaser" under the Purchase Agreement to be observed,
performed or discharged on, or relating to, or accruing with respect to the
period prior to the date of this Assignment Agreement. Assignee shall indemnify
and hold Assignor harmless from and against all claims, demands, losses,
damages, expenses and costs including, but not limited to, reasonable attorneys'
fees and expenses actually incurred, arising out of or in connection with
Assignee's failure, from and after the date of this Assignment Agreement, to
observe, perform and discharge each and every one of the covenants, obligations
and liabilities assumed by Assignee with respect to the Purchase Agreement and
relating to the period from and after the date of this Assignment Agreement.
8. FAILURE TO CONSUMMATE PURCHASE AGREEMENT.
The following subsections (a)-(d) shall be in effect from and after May 22,
1998 until Closing:
(a) If Assignee and Assignor decide to terminate the Purchase Agreement
prior to Closing for a failure of condition or occurrence of any other event
permitting Assignee and Assignor to terminate the Purchase Agreement and recover
the Initial Deposit without penalty (a "Permitted Termination Condition"),
Assignee
5
<PAGE>
shall receive a seventy-five percent (75%) share of the Initial Deposit, and
Assignor shall receive a twenty-five percent (25%) share of the Initial Deposit.
(b) If Assignee decides not to consummate the Purchase Agreement for any
reason other than a Permitted Termination Condition, Assignor shall have the
right to consummate the transaction with a third party. If Assignor consummates
the transaction with a third party and gets a credit in the amount of at least
One Million Dollars ($1,000,000) for the Initial Deposit, Assignor shall pay
$750,000 to Assignee upon the closing of such transaction. If Assignor is
unable to so consummate the transaction with a third party, Assignee shall pay
$250,000 to Assignor.
(c) If Assignor decides not to consummate the Purchase Agreement for any
reason other than a Permitted Termination Condition, Assignee shall have the
right, pursuant to this Assignment, to consummate the transaction with a third
party. If Assignee consummates the transaction with a third party and gets a
credit in the amount of at least One Million Dollars ($1,000,000.00) for the
Initial Deposit, Assignee shall pay $250,000 to Assignor upon the closing of
such transaction. If Assignee notifies Assignor of its intention to proceed
with the transaction, Assignor shall have no obligation to pay $750,000 to
Assignee. If Assignee does not so notify Assignor, Assignor shall pay $750,000
to Assignee.
(d) If there occurs a material Permitted Termination Condition, and one of
Assignee or Assignor desires to waive such Permitted Termination Condition and
proceed with the Closing (the "Waiving Party"), and the other desires to
terminate the Purchase Agreement (the "Terminating Party"), the Waiving Party
shall have the right to consummate the transaction with a third party, and shall
be obligated to pay to the Terminating Party, whether any such transaction is
consummated or not, the amount of Terminating Party's share of the Initial
Deposit (as set forth in subsection (a) above).
9. NOTICES. All notices, consents, approvals, waivers, and
elections which any party shall be required or shall desire to make or give
under this Assignment Agreement shall be in writing and shall be sufficiently
made or given only when sent by (a) certified mail, return receipt requested,
(b) prepaid overnight delivery service with proof of delivery, or (c) electronic
transmission with hard copy to follow as confirmation of receipt, addressed:
6
<PAGE>
to Assignor: Troon Eagle Ridge LLC
16100 N. Greenway-Hayden Loop
Scottsdale, Arizona 85260
Attention: John Sauter
Telephone: (602) 606-1000
Facsimile: (602) 606-1010
with a copy to: Michael Sloyer, Esq.
Mayer Brown & Platt
1675 Broadway, Suite 1900
New York, NY 10019
Telephone: (212) 506-2515
Facsimile: (212) 262-1910
to Assignee: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Attn: W. Bradley Blair, II
Telephone: (803) 723-4653
Facsimile: (803) 723-0479
with a copy to: O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attn: Peter T. Healy, Esq.
Telephone: (415) 984-8700
Facsimile: (415) 984-8701
10. GOVERNING LAW. This Assignment Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Illinois.
11. BINDING EFFECT. This Assignment Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal representatives, successors and assigns.
12. COUNTERPARTS. This Assignment Agreement may be executed in any
number of counterparts, which counterparts, when considered together, shall
constitute a single, binding, valid and enforceable agreement.
7
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment Agreement as of the day and year first above written.
ASSIGNEE:
GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc.,
a Maryland corporation
Its: General Partner
By:
------------------------
W. Bradley Blair, II
President and CEO
ASSIGNOR:
TROON EAGLE RIDGE LLC,
a Delaware limited liability company
By: TROON EAGLE RIDGE, INC.
Its: Member
By:
------------------
Its:
------------------
8
<PAGE>
EXHIBIT A
VEHICLES
All those certain vehicles to be transferred to Purchaser under the Purchase
Agreement, including without limitation, jet skis and paddleboats but excluding
golf carts.
9
<PAGE>
EXHIBIT B
LEASE
B-1
<PAGE>
EXHIBIT C
DEVELOPMENT AGREEMENT
B-2
<PAGE>
- --------------------------------------------------------------------------------
L E A S E
GOLF TRUST OF AMERICA, L.P.
LANDLORD
AND
EAGLE RIDGE LEASE COMPANY LLC, A DELAWARE LIMITED LIABILITY COMPANY
TENANT
DATED AS OF MAY 22, 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. . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Extension Options. . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 4
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Increase in Initial Base Rent. . . . . . . . . . . . . . . . . . . 18
4.3 Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 Annual Reconciliation of Percentage Rent . . . . . . . . . . . . . 20
4.5 Record-keeping . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Late Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9 Allocation of Revenues . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 5
SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Pledge of Owners Shares and Mortgage of Additional Parcels . . . . 22
5.2 Landlord's Lien. . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Partial Release. . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Termination Payment. . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Termination of Rights of Use.. . . . . . . . . . . . . . . . . . . 23
ARTICLE 6
IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Information and Reporting. . . . . . . . . . . . . . . . . . . . . 23
6.3 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Assessment Districts . . . . . . . . . . . . . . . . . . . . . . . 24
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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. . . . . . . . . . . . . . . . . . . . 26
8.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Tenant's Personal Property . . . . . . . . . . . . . . . . . . . . 26
8.3 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . 26
8.4 Landlord's Waivers . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 9
USE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Specific Prohibited Uses . . . . . . . . . . . . . . . . . . . . . 27
9.3 Membership Sales . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Landlord to Grant Easements, Etc.. . . . . . . . . . . . . . . . . 28
9.5 Tenant's Additional Covenants. . . . . . . . . . . . . . . . . . . 28
9.6 Valuation of Remainder Interest in Lease . . . . . . . . . . . . . 29
ARTICLE 10
HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . 29
10.3 Survival of Indemnification Obligations. . . . . . . . . . . . . . 30
10.4 Environmental Violations at Expiration or Termination of
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 Environmental Statements . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 11
MAINTENANCE AND REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 Waiver of Statutory Obligations. . . . . . . . . . . . . . . . . . 32
11.3 Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.4 Surrender of Property. . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 12
TENANT IMPROVEMENTS; SUBMITTAL OF BUDGETS; FINANCIAL STATEMENTS. . . . . . . . 32
12.1 Tenant's Right to Construct. . . . . . . . . . . . . . . . . . . . 32
12.2 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.3 Cooperation of Landlord. . . . . . . . . . . . . . . . . . . . . . 34
12.4 Capital Replacement Fund . . . . . . . . . . . . . . . . . . . . . 35
12.5 Rights in Tenant Improvements. . . . . . . . . . . . . . . . . . . 36
12.6 Landlord's Right to Audit Calculation of Gross Revenue . . . . . . 36
12.7 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(ii)
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12.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 38
12.9 Landlord Improvements. . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 13
LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS . . . . . . . . . . . . . . . . . 40
13.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.2 Encroachments and Other Title Matters. . . . . . . . . . . . . . . 41
ARTICLE 14
PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.2 Indemnification of Landlord. . . . . . . . . . . . . . . . . . . . 42
ARTICLE 15
INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . 43
15.2 Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.3 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.4 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . 44
15.5 Form Satisfactory, Etc.. . . . . . . . . . . . . . . . . . . . . . 44
15.6 Change in Limits . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.7 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.8 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 46
15.9 Disbursement of Proceeds . . . . . . . . . . . . . . . . . . . . . 46
15.10 Excess Proceeds, Deficiency of Proceeds. . . . . . . . . . . . . . 47
15.11 Reconstruction Covered by Insurance. . . . . . . . . . . . . . . . 47
15.12 Reconstruction Not Covered by Insurance. . . . . . . . . . . . . . 48
15.13 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . 48
15.14 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.15 Damage Near End of Term. . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 16
CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.1 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.3 Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.4 Award-Distribution . . . . . . . . . . . . . . . . . . . . . . . . 49
16.5 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 17
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
17.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 50
17.2 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.3 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.5 Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . 53
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17.6 Appointment of Receiver. . . . . . . . . . . . . . . . . . . . . . 53
17.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.8 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . 54
17.9 Impounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . . 54
ARTICLE 19
LEGAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 20
HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 21
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 22
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
22.1 Tenant's Indemnification of Landlord . . . . . . . . . . . . . . . 56
22.2 Landlord's Indemnification of Tenant . . . . . . . . . . . . . . . 56
22.3 Mechanics of Indemnification . . . . . . . . . . . . . . . . . . . 57
22.4 Survival of Indemnification Obligations; Available
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 23
SUBLETTING AND ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
23.1 Prohibition Against Assignment . . . . . . . . . . . . . . . . . . 58
23.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
23.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
23.4 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 60
23.5 Right of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
23.6 Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . . . . 61
23.7 Management Agreement . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS. . . . . . . . . . . . . . . . . . 63
24.1 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . 63
24.2 Environmental Statements . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 25
LANDLORD MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
25.1 Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . 64
25.2 Tenant's Non-Disturbance Rights. . . . . . . . . . . . . . . . . . 64
25.3 Facility Mortgage Protection . . . . . . . . . . . . . . . . . . . 65
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ARTICLE 26
SALE OF FEE INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
26.1 Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 27
ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
27.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
27.2 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 28
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
28.1 Landlord's Right to Inspect. . . . . . . . . . . . . . . . . . . . 66
28.2 Landlord's Golfing and Hotel Privileges. . . . . . . . . . . . . . 66
28.3 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . . 66
28.4 Competition Between Landlord and Tenant. . . . . . . . . . . . . . 67
28.5 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
28.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 67
28.7 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . . 67
28.8 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . 67
28.9 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . 68
28.10 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
28.11 Survival of Claims . . . . . . . . . . . . . . . . . . . . . . . . 68
28.12 Invalidity of Terms or Provisions. . . . . . . . . . . . . . . . . 69
28.13 Prohibition Against Usury. . . . . . . . . . . . . . . . . . . . . 69
28.14 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . . . 69
28.15 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 69
28.16 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
28.17 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
28.18 Memorandum of Lease. . . . . . . . . . . . . . . . . . . . . . . . 69
28.19 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 69
28.20 Non-Recourse as to Landlord and Tenant . . . . . . . . . . . . . . 70
28.21 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . 71
28.22 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
28.23 Landlord's Determination of Facts. . . . . . . . . . . . . . . . . 71
28.24 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . 71
</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 - Intentionally Omitted
Exhibit F-1 - Calculation of Base Year Gross Revenue by Quarter
Exhibit F-2 - Calculation of Percentage Rent
Exhibit G - [Intentionally Omitted]
Exhibit H - Disbursement Procedures
Exhibit I - Additional Pledge Agreement
Exhibit J - Eagle Ridge Capital Improvement Budget
Exhibit K - Mortgage
(vi)
<PAGE>
LEASE
THIS LEASE (this "Lease"), dated as of May 22, 1998, is entered
into by and between GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership
("Landlord"), and EAGLE RIDGE LEASE COMPANY LLC, a Delaware limited liability
company ("Tenant").
THE PARTIES ENTER THIS LEASE on the basis of the following facts,
understandings and intentions:
A. Pursuant to that certain Purchase and Sale Agreement
(the "Agreement") dated as of March 12, 1998 by and between Tenant and Eagle
Ridge, L.P., a Delaware limited partnership ("Eagle Ridge"), the right, title
and interest of Tenant thereunder being transferred to Landlord pursuant to
that certain Assignment and Assumption of Purchase and Sale Agreement dated
as of May 20, 1998, Eagle Ridge transferred to Landlord all of its right,
title and interest in and to the Property (as hereafter defined); and
B. Tenant desires to lease the Property from Landlord, and
Landlord desires to lease the Property to Tenant, on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and the covenants
and agreements to be performed by Tenant and Landlord hereunder, and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
LEASED PROPERTY
Upon and subject to the terms and conditions set forth in this
Lease, Landlord leases to Tenant and Tenant leases from Landlord the following
real property, improvements, personal property and related rights (collectively
the "Property"):
(a) the Land;
(b) the Improvements;
(c) all rights, privileges, easements and appurtenances to the
Land and the Improvements, if any, including, without limitation, all of
Landlord's right, title and interest, if any, in and to all mineral and water
rights and all easements, rights-of-way and other appurtenances used or
connected with the beneficial use or enjoyment of the Land and the Improvements;
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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 4.6.
"ADDITIONAL PARCELS" means those certain parcels adjacent to the
Property which may be developed by Tenant and Landlord pursuant to the
Development Agreement and which are mortgaged to Landlord pursuant to the
Mortgage.
"ADVISORY ASSOCIATION" means that certain association of lessees
operating golf courses under a lease with Landlord or any Affiliate of Landlord.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
"AGREEMENT" has the meaning provided in Recital A.
"ANNUAL BASE RENT" means the Initial Base Rent, as it may be
adjusted annually as provided in Section 4.2.
"ANNUAL BUDGET" has the meaning provided in Section 12.7.
"AUTHORIZATIONS" means all material licenses, permits and
approvals required by any governmental or quasi-governmental agency, body or
officer for the ownership, operation and use of the Property or any part
thereof.
"AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
"BANKRUPTCY CODE" has the meaning provided in Section 23.6.
"BANKRUPTCY EVENT OF DEFAULT" means any Event of Default described
in Section 17.1(c), (d) or (e).
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"BASE RENT" means one-twelfth of the Annual Base Rent.
"BASE RENT ESCALATOR" has the meaning provided in Section 4.2.
"BASE YEAR" means the twelve (12) month period from June 1, 1998
through May 31, 1999.
"BASE GROSS REVENUE" is set forth, calculated on a quarter by
quarter basis, on Exhibit F attached hereto.
"BASE YEAR RENT" means an amount equal to Four Million Two Hundred
Twenty Four Thousand Two Hundred Seventy Dollars ($4,224,270).
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York, are authorized, or obligated, by law or executive order, to close.
"CAPITAL BUDGET" has the meaning provided in Section 12.7.
"CAPITAL EXPENDITURES" means expenditures that are properly
capitalized under GAAP.
"CAPITAL REPLACEMENT FUND" means the amount of the Capital
Replacement Reserve, together with interest thereon as provided in Section 12.4,
less amounts withdrawn from the Capital Replacement Fund as provided in Section
12.4.
"CAPITAL REPLACEMENT RESERVE" means an amount equal to (i) $41,666
during calendar year 1998; (ii) $62,500 during calendar year 1999; (ii) $83,333
during calendar year 2000; (iv) for each calendar year thereafter, the amount
paid in the previous year increased by three percent (3%), to be accrued monthly
by Landlord commencing on May 29, 1998 as part of the Capital Replacement Fund,
as provided in Section 12.4 hereof.
"CATEGORY PERCENTAGE RENT" has the meaning set forth in Exhibit
F-2.
"CHANGE OF CONTROL" means:
(a) the issuance and/or sale by Tenant or the sale by any
stockholder or partner of Tenant of a Controlling interest in Tenant to a Person
other than to a Person that is an Affiliate of Tenant as of the date hereof
which shall include spouses and lineal descendants of any stockholder of Tenant
as well as any trusts created for estate planning purposes when such stockholder
and/or spouses and lineal descendants are beneficiaries;
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(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or otherwise) other
than to a Person who is an Affiliate of Tenant;
(c) any other transaction, or series of transactions, which
results in the shareholders, 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), 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 GTA, Inc. and any subsidiaries thereof, including,
without limitation, GTA LP and GTA GP.
"CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
"CONTROL" means (including, with correlative meanings, the terms
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100).
"DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.
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"DEBT SERVICE" means all Rent payable under this Lease and all
payments under the loan pursuant to Section 12.3(b).
"DEVELOPMENT AGREEMENT" means that certain Development Agreement
dated of even date herewith between Tenant and Landlord regarding development of
the Additional Parcels.
"EAGLE RIDGE" shall have the meaning set forth in Recital A.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq.; the Superfund Amendments and Reauthorization Act of 1986, Pub. L.
99-499 and 99-563; the Occupational Safety and Health Act of 1970, as amended,
29 U.S.C. Section 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 201,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251, et seq.; and all federal, state and local environmental, health and safety
statutes, ordinance, codes, rules, regulations, orders and decrees regulating,
relating to or imposing liability or standards concerning or in connection with
Hazardous Materials.
"EVENT OF DEFAULT" has the meaning provided in Section 17.1.
"EXPIRATION DATE" means December 31, 2002, 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.
"FIRST BREAKPOINT" means the amount for a particular Revenue
Category for the relevant period as shown on Exhibit F-1.
"FIRST PERCENTAGE" means the percentage for a particular Revenue
Category as shown on Exhibit F-1.
"FISCAL QUARTER" means the three-month periods (or applicable
portions thereof) in any Fiscal Year from January 1
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through March 31, April 1 through June 30, July 1 through September 30 and
October 1 through December 31.
"FISCAL YEAR" means the twelve (12) month period from January 1 to
December 31 of each year; provided that for purposes of the Lease Term and the
Primary Collateral Pledge Agreement, the first Fiscal Year shall be deemed to
include the period from the Commencement Date to December 31, 1998.
"FIXTURES" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property and any Tenant Improvements.
"FOOD AND BEVERAGE REVENUE" means all revenue received (whether by
Tenant or any subtenants, assignees, concessionaires or licensees) from or by
reason of the Property (including, without limitation, the Hotel and golf
courses) relating to the operation of snack bars, restaurants, bars, catering
functions, and banquet operations provided, however, that Food and Beverage
Revenue shall not include General Revenue Exceptions.
"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.
"GENERAL REVENUE EXCEPTIONS" means the following, as applicable to
each Revenue Category:
(a) The amount of all taxes, assessments, Impositions and
other governmental charges and assessments of every kind and
nature, including, without limitation, the amount of any city,
county, state or federal sales, admissions, usage, or excise tax
on the item included in the relevant Revenue Category, which is
added to or incorporated in the selling price or paid to the
taxing authority by Tenant or any other Person on behalf of
Tenant;
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(b) Sales receipts from any vending machine or other coin
or token operated device, such as public telephones, stamp
machines, mechanical entertainment machines; soft drink and candy
dispensers; and other receipts and deposits which Tenant and its
subtenants are not entitled to receive, but are collected and
payable to an independent third party;
(c) Cash or credit allowances given to customers in good
faith;
(d) Service charges on credit cards, and credit accounts;
(e) Bad checks and uncollectible credit card accounts
(unless the same results from Tenant's failure to engage in
prudent business regarding the extension of credit or the
acceptance of checks);
(f) The net amount of any discount allowed to Tenant's
employees when sales are made to such employees at prices below
the retail selling prices then offered by Tenant on the Property,
and the net amount of any discounts allowed to any charitable
institution or organization;
(g) Amounts paid to merchandise vendors, entertainers and
professionals who are not employees of Tenant;
(h) Money-off coupons and vendor coupons;
(i) 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;
(j) Interest or other income derived from the investment
of surplus funds or reserves; and
(k) Any amounts recovered in any litigation against third
parties except for amounts awarded to compensate for lost revenues
otherwise includable in the relevant Revenue Category;
(l) Any condemnation or taking proceeds, whether or not
such proceeds are characterized as compensation for lost rent;
(m) Insurance proceeds, unless (and except to the extent
that) such proceeds are characterized as business interruption
and/or loss of "rental value" insurance proceeds (except for such
proceeds
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attributable to a Lease if (and for so long as) the tenant
thereunder has the right to terminate such Lease as a result of
the casualty in question);
(n) Any proceeds resulting from the sale, exchange,
transfer, financing or refinancing or all or any part of the Land;
(o) Any capital or equity contributions or other infusions
of capital or equity to the Tenant or the sale of any Property,
collateral or Landlord's Shares;
(p) Any proceeds of any other indebtedness of the Tenant;
(q) Forfeited security deposits and other security
deposits received or surrender or termination payment made or
other amounts received from tenants or guests to compensate for
damage to or loss of all or portions of the Land or Tangible
Personal Property, to the extent necessary to repair, restore or
make whole any such damage or loss;
(r) Gratuities to employees if separately itemized on
customers' bills or checks;
(s) Cash register "over rings";
(t) Sales canceled to the extent the purchase price is not
retained by Tenant;
(u) Merchandise returned to suppliers;
(v) Cash and credits received by Tenant in settlement of
claims for loss or damage of merchandise;
(w) Sales in bulk to a successor tenant of all or
substantially all of the merchandise in connection with a sale of
all or part of Tenant's business; and
(x) Advertising rebates, discounts, and allowances, and
other rebates, credits, and dividends received from suppliers.
"GOLF REVENUE" means all revenues received (whether by Tenant or
any subtenants, assignees, concessionaires or licensees) from or by reason of
the operation of the golf operations at the Property calculated in accordance
with GAAP (but excluding reasonable reserves for refunds, allowances and bad
debts applicable to such operations), including, without limitation, (i)
revenues from membership initiation fees, (ii) periodic membership dues, (iii)
greens fees, (iv) fees to reserve a tee time, (v) guest fees, (vi) golf cart
rentals, (vii) parking
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lot fees, (viii) locker rentals, (ix) fees for golf club storage, (x) charges
for range balls, range fees or other fees for golf practice facilities, (xi)
fees or other charges paid for golf lessons (except where retained by or paid to
a USGA or PGA professional in accordance with historical practice at the
Property), (xii) forfeited deposits with respect to any membership application,
(xiii) transfer fees imposed on any member in connection with the transfer of
any membership interest, (xiv) fees or other charges paid to Tenant by sponsors
of golf tournaments at the Property, (xv) advertising or placement fees paid by
vendors in exchange for exclusive use or name rights at the Property, and (xvi)
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 Golf Revenue shall not
include General Revenue Exceptions.
"GOLF MERCHANDISE REVENUE" means all revenue received (whether by
Tenant or any subtenants, assignees, concessionaires or licensees) from or by
reason of the Property relating to the sale of merchandise and inventory on the
Property; provided, however that Golf Merchandise Revenue shall not include
General Revenue Exceptions.
"GROSS OPERATING EXPENSES" means the gross operating expenses
(except Management Fees which are payable solely as a percentage of Net
Operating Income) of the Property for the relevant period, calculated in
accordance with generally accepted accounting principles consistently applied.
Landlord and Tenant jointly may make discretionary adjustments on a line item
basis to reflect stabilized Gross Operating Expenses, including the following
adjustments:
(i) annual capital replacement reserves shall be included,
as reasonably determined jointly by Landlord and Tenant;
(ii) annual cash expenditures (including depreciation) for
golf carts shall be included, as reasonably determined jointly by Landlord and
Tenant;
(iii) extraordinary expenditures (such as to repair storm
damage) which are not anticipated to recur in the ordinary course shall be
excluded, as reasonably determined jointly by Landlord and Tenant;
(iv) other adjustments to reflect stabilized Gross
Operating Expenses, as reasonably determined jointly by Landlord and Tenant
shall be made; and
(v) depreciation, amortization and debt service (including
without limitation relating to the loan pursuant to Section 12.3(b) but not
including Rent) shall be excluded.
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"GROSS REVENUE" means the gross operating revenue of the Property,
being the aggregate of Golf Revenue, Golf Merchandise Revenue, Hotel Revenue,
Food and Beverage Revenue, Rental Pool Revenue, and Other Revenue for the
relevant period, calculated in accordance with generally accepted accounting
principles consistently applied.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA, INC." means Golf Trust of America, Inc., a Maryland
corporation, an affiliate of Landlord.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"HAZARDOUS MATERIAL" means any substance, material, waste, gas or
particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); or (ix)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq. (42 U.S.C. Section 9601).
"HOTEL" means the Eagle Ridge Inn located on the Property and all
conference and other facilities associated therewith.
"HOTEL REVENUE" means all revenue received by Tenant or Tenant's
Affiliates relating to the Hotel and its operation (including, without
limitation, telephone and telecommunications charges), provided, however that
Hotel Revenue shall not include General Revenue Exceptions.
"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, Illinois State Sales/Lease Tax, 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.
"INCREMENTAL REVENUE" means, with respect to any Revenue Category
or period, the Gross Revenue for such Revenue Category for such period less the
Base Gross Revenue for the corresponding period for such category.
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"INITIAL BASE RENT" means Four Million Four Hundred Thirty-Five
Thousand Four Hundred Eighty-Four Dollars ($4,435,484) per year.
"INITIAL TERM" means the period of time from the Commencement Date
through December 31, 2002.
"INSURANCE REQUIREMENTS" mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
"INTANGIBLE PERSONAL PROPERTY" means all intangible personal
property owned by Landlord and used solely in connection with the ownership,
operation, leasing or maintenance of the Real Property or the Tangible Personal
Property, and any and all trademarks and copyrights, guarantees, Authorizations,
general intangibles, business records, plans and specifications, surveys, all
licenses, permits and approvals solely with respect to the construction,
ownership, operation or maintenance of the Property.
"LAND" means the land described in EXHIBIT A attached hereto.
"LANDLORD" means Golf Trust of America, L.P., and any successor or
assignee permitted in accordance with the terms of the Lease.
"LANDLORD'S ENCUMBRANCE" means any lien, encumbrance or title
retention agreement upon the Property, or any portion thereof or interest
therein, whether to secure borrowing or other means of financing or refinancing.
"LANDLORD'S RIGHT TO PURCHASE LEASE" shall have the meaning set
forth in Section 23.5.
"LANDLORD IMPROVEMENTS" shall have the meaning set forth in
Section 12.9.
"LEASE" means this Lease, as the same may be amended from time to
time.
"LEASE TERM" means the period from the Commencement Date through
and including the Expiration Date (or the termination date, if earlier
terminated pursuant to the provisions hereof).
"LEGAL REQUIREMENTS" means all material federal, state, county,
municipal and other governmental statutes, laws (including the Americans with
Disabilities Act and any Environmental Laws), rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting either the Property or
the construction, use or alteration thereof, whether now or
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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.
"LOAN AMOUNT" shall have the meaning set forth in Section 12.3(b).
"MORTGAGE" means that certain Mortgage, Security Agreement,
Assignment of Rents and Leases and Fixture Filing dated as of even date herewith
by Tenant in favor of Landlord and recorded in the official Records of Jo
Daviess County, Illinois, in the form attached hereto as EXHIBIT K.
"NET CASH FLOW" means, for a relevant period, Net Operating Income
for such period less Debt Service for such period and any amounts accrued into
the Capital Replacement Reserve Fund.
"NET OPERATING INCOME" means the Gross Revenue of the Property for
the relevant period LESS the Gross Operating Expenses of the Property for the
same period.
"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 conference sales, photography services; from or by
reason of the operation of the Peddler's Gift Shop and General Store on the
Property; from or by reason of the non-golf recreational facilities on the
Property, including without limitation,
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swimming pools and tennis courts; and any such revenue not included in the other
Revenue Categories, provided, however that Other Revenue shall not include
General Revenue Exceptions.
"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, the amount as calculated in Exhibit F-2
and payable in accordance with SECTION 4.3 below.
"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
Tenant or an Affiliate of Tenant its resort and related operations located at or
adjacent to the Property, and provided such entity (i) is not generally
recognized in the community as being of ill-repute or as being in any other
manner a Person with whom or with which a prudent business person would not wish
to associate in a commercial venture and (ii) shall have the financial resources
sufficient to enable it to satisfy the obligations of Tenant under this Lease
(provided for purposes of this subsection (ii) such entity shall not be required
to have financial resources in excess of those of Tenant at the time of such
transfer); and
(c) a list of pre-approved assignees prepared by Landlord
from time to time in consultation with the Advisory Association.
"PERSON" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trusts
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"PLEDGE AND SECURITY AGREEMENT" means that certain pledge and
security agreement by and between Tenant and Landlord relating to the pledge of
Tenant's interest in the Rental Home
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Agreements and of certain vehicles, in a form as agreed by the parties.
"PLEDGED OWNER'S SHARES" means the Owner's Shares pledged pursuant
to the Primary Collateral Pledge Agreement, and the stock pledged pursuant to
the Secondary Collateral Pledge Agreement.
"PRIMARY COLLATERAL" means the collateral pledged to Landlord
pursuant to the Primary Collateral Pledge Agreement.
"PRIMARY COLLATERAL PLEDGE AGREEMENT" means that certain pledge
agreement, by and between Tenant and Landlord, in the form attached hereto as
EXHIBIT D.
"PRIMARY INTENDED USE" means the operation of golf courses and a
hotel, and the operation of the related resort and conference facilities and
other uses and activities incidental to the operation thereof, including
development and sale of condominium units.
"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.
"RENTAL HOME AGREEMENTS" means those certain lease agreements
between Tenant and the owners of condominium units associated with the Property.
"RENTAL POOL REVENUE" means all revenue received by Tenant from
the condominium units associated with the Property, provided however that Rental
Pool Revenue shall not include:
(a) General Revenue Exceptions; or
(b) payments by Tenant to the owners of such condominium units
pursuant to the leases thereof.
"REVENUE CATEGORIES" means, together, Golf Revenue, Golf
Merchandise Revenue, Food and Beverage Revenue, Hotel Revenue, Rental Pool
Revenue, or Other Revenue and "Revenue Category" means any of them.
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"SECOND BREAKPOINT" means the amount for a particular Revenue
Category for the relevant period as shown on EXHIBIT F-1.
"SECOND PERCENTAGE" means the percentage for a particular Revenue
Category as shown on EXHIBIT F-1.
"SECONDARY COLLATERAL" means the collateral pledged to Landlord
pursuant to the Secondary Collateral Pledge Agreement and the Mortgage.
"SECONDARY COLLATERAL PLEDGE AGREEMENT" means that certain pledge
agreement, by and between Tenant and Landlord, in the form attached hereto as
EXHIBIT I.
"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 Eagle Ridge Lease Company LLC 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.
"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 at the Expiration
Date equal to the positive difference, if any, between one hundred thirty
percent (130%) of Debt Service for the Fiscal Year 1998 and the Net Operating
Income for the prior Fiscal Year, after funding the Capital Replacement Reserve
Fund, divided by ten percent (10%).
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"THIRD BREAKPOINT" means the amount for a particular Revenue
Category for the relevant period as shown on EXHIBIT F-1.
"THIRD PERCENTAGE" means the percentage for a particular Revenue
Category as shown on EXHIBIT F-1, as may be adjusted pursuant to Section 4.3.
"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 reasonable control of the
party responsible for performing an obligation hereunder, PROVIDED THAT lack of
funds shall not be deemed a cause beyond the control of either party hereto
unless such lack of funds is caused by the failure of the other party hereto to
perform any obligations of such party under this Lease.
"UNSUITABLE FOR ITS PRIMARY INTENDED USE" means a state of
condition of the Property such that in the good faith judgment of Landlord,
reasonably exercised, the Property cannot be operated on a commercially
practicable basis for its Primary Intended Use.
2.2 RULES OF CONSTRUCTION. The following rules shall apply to
the construction and interpretation of this Lease:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Lease.
(c) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Lease nor
shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Lease and have participated in the preparation
of this Lease, and therefore any usual rules of construction requiring that
ambiguities are to be
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resolved against a particular party shall not be applicable in the construction
and interpretation of this Lease or any exhibits hereto.
ARTICLE 3
TERM
3.1 INITIAL TERM. The Initial Term shall commence on the
Commencement Date and shall terminate on December 31, 2002.
3.2 EXTENSION OPTIONS. Landlord grants Tenant the right to
extend the Initial Term of this Lease four (4) consecutive times for a period of
five (5) years each (each such extension, an "Extended Term"). Tenant's option
for an Extended Term shall be deemed to have been exercised, unless Tenant gives
written notice to Landlord at least one hundred eighty (180) days prior to the
termination of the then-current term that Tenant elects not to extend the
current term. Tenant shall be entitled to exercise these options only if at the
time of the commencement of the applicable Term or Extended Term no Event of
Default shall then exist. During the Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect, as the same
may be amended, supplemented or modified.
ARTICLE 4
RENT
4.1 RENT. Tenant will pay to Landlord, in lawful money of the
United States of America, Rent during the Initial Term or any Extended Term.
Payments of Base Rent shall be paid monthly, on the first day of each month in
arrears, at Landlord's address set forth in Section 28.10 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. No payment
in addition to the payment of Rent shall be required in order to require
Landlord to accrue the Capital Replacement Fund as provided in Section 12.4.
Tenant shall receive a credit against Rent (or be paid directly, at Landlord's
option) for any operating expense credits or operating revenues credited to
Landlord pursuant to the Agreement which are applicable to any period in the
Lease Term (E.G., credit for real property taxes, membership dues, sublease
rents, etc.) and conversely Tenant shall reimburse Landlord for any operating
expenses paid for by Landlord pursuant to the Agreement which are the
responsibility of Tenant hereunder.
4.2 INCREASE IN INITIAL BASE RENT. Beginning on January 1,
1999 and on each January 1 thereafter until this Lease is terminated, the Annual
Base Rent will increase by five percent
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(5%) (the "Base Rent Escalator") of the Annual Base Rent payable for the
immediately preceding year, provided the January 1, 1999 increase shall be pro
rated for the number of days in the Lease Term in 1998 divided by 365 and
multiplied by the applicable Base Rent Escalator. In addition to the foregoing,
on the first day of each month following any disbursement by Landlord pursuant
to Section 12.9, the Annual Base Rent will increase further for the remainder of
the Initial Term and any Extended Term, by (i) 9% times (ii) the sum the
Landlord delivered to the Tenant as reimbursement of Landlord Improvements and
Additional Improvements pursuant to Section 12.9 in the prior month.
4.3 PERCENTAGE RENT.
(a) 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 Percentage Rent in accordance with Exhibit F-2 attached hereto and
incorporated herein by reference 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 Percentage Rent for that
Fiscal Quarter (or shorter period, if applicable) is greater than the Base
Rent for the same Fiscal Quarter (or shorter period, if applicable) (and,
following the Fiscal Quarter ending March 31, on a year-to-date basis), on a
pro-rata basis then Tenant shall pay to Landlord the Percentage Rent upon
submittal of the Officer's Certificate. 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). 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.
(b) In the event Net Cash Flow exceeds One Million Dollars
($1,000,000) in the Fiscal Year prior to the commencement of an Extended Term,
at the commencement of such Extended Term, and Landlord and Tenant jointly
determine that Net Cash Flow is expected to exceed One Million Dollars
($1,000,000) in the succeeding Fiscal Year (a "Material Cash Flow Excess"),
either (i) the Third Percentages shown on Exhibit F-1 for certain Revenue
Categories shall be adjusted upwards on a prorata basis (based on the
Incremental Revenue for such Revenue Category relative to the total Incremental
Revenue), and/or (ii) if and to the extent such Material Net Cash Flow Excess is
attributable (in whole or in part) to factors other than increases in Gross
Revenue, the First and/or Second Percentages may be adjusted upwards and/or
Percentage Rent Breakpoints may be adjusted downwards such that, if the
increased Percentages or adjusted Percentage Rent Breakpoints were applied to
the succeeding Fiscal Year's Gross Revenue, Net Cash Flow (stabilized to reflect
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historical and projected Net Cash Flow for the succeeding Fiscal Year) for the
succeeding Fiscal Year would not exceed One Million Dollars ($1,000,000).
(c) At the request of Tenant, following the expiration of the ninety
(90) day period after each of the first and second Fiscal Years, Landlord shall
review the quarterly Percentage Rent Breakpoints for one or more Revenue
Categories for the then current Fiscal Year (as shown on Exhibit F-1 attached
hereto) to adjust such quarterly amounts to reflect material differences in the
actual amounts earned for such Revenue Category for such quarter in the
preceding Fiscal Year. In no event shall such adjustments change the total
annual Percentage Rent Breakpoints for such Fiscal Year for such Revenue
Category as shown on Exhibit F-1.
(d) Notwithstanding anything to the contrary herein, items of Gross
Revenue allocated to or items noted as General Revenue Exceptions deducted from
one Revenue Category shall not be allocated to or deducted from any other
Revenue Category. The parties agree to reasonably allocate each item of Gross
Revenue to a Revenue Category based on the definition of such Revenue Category.
The items listed as General Revenue Exceptions shall be deducted from a Revenue
Category only to the extent such item was included in Gross Revenue for such
Revenue Category.
4.4 ANNUAL RECONCILIATION OF PERCENTAGE RENT. Within sixty
(60) days after the end of each Fiscal Year, or after the expiration or
termination of this Lease, Tenant shall deliver to Landlord an Officer's
Certificate setting forth (i) the Gross Revenue for each Revenue Category for
the Fiscal Year just ended, and (ii) a comparison of the amount of the
Percentage Rent actually paid during such Fiscal Year versus the amount of
Percentage Rent actually owing on the basis of the annual calculation of the
Gross Revenue for each Revenue Category. 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 RECORD-KEEPING. Tenant shall utilize an accounting system
for the Property in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Revenue for each
Revenue Category. Tenant shall retain all accounting records for each Fiscal
Year
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conforming to such accounting system until at least five (5) years after the
expiration of such Fiscal Year.
4.6 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.
4.7 LATE PAYMENT OF RENT. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Percentage Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Accordingly, if any installment of Base Rent,
Percentage Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after the date such payment is due, Tenant will pay Landlord on demand, as
Additional Charges, a late charge equal to the lesser of five percent (5%) of
such installment or $1,000. The parties agree that this late charge represents
a fair and reasonable estimate of the costs that Landlord will incur by reason
of late payment by Tenant and is not a penalty. In addition, if any installment
of Base Rent, Percentage Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within five (5) days after the due date with respect to Base Rent or Percentage
Rent or delivery of an invoice to Tenant with respect to the Additional Charge,
the amount unpaid shall bear interest, from such due date to the date of payment
thereof, computed at the Overdue Rate on the amount of such installment, and
Tenant will pay such interest to Landlord as Additional Charges. The acceptance
of any late charge or interest shall not constitute a waiver of, nor excuse or
cure, any default under this Lease, nor prevent Landlord from exercising any
other rights and remedies available to Landlord.
4.8 NET LEASE. This Lease shall be a triple net lease and
Rent shall be payable to Landlord without notice or demand and without set-off,
counterclaim, recoupment, abatement, suspension, deferment, deduction or
defense, except as expressly provided herein, so that this Lease shall yield to
Landlord the
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full amount of the installments of Base Rent, Percentage Rent and Additional
Charges throughout the Term.
4.9 ALLOCATION OF REVENUES. In the event that individuals or
groups purchase for a single price items which are both included and excluded
from Gross Revenue for a Revenue Category (e.g., green fees and dinner), then
Tenant agrees that revenues shall be allocated to the appropriate Revenue
Category (based on the definition thereof) in a reasonable manner consistent
with the historical allocation of such revenues.
ARTICLE 5
SECURITY DEPOSIT
5.1 PLEDGE OF OWNERS SHARES AND MORTGAGE OF ADDITIONAL PARCELS.
On or prior to the Commencement Date, Tenant shall cause the Primary Collateral
Pledge Agreement, the Secondary Collateral Pledge Agreement, the Pledge and
Security Agreement, the Mortgage and UCC-1 financing statements in connection
therewith to be executed and, in the case of the Mortgage, recorded in the
Official Records of Jo Daviess County, Illinois.
5.2 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.
5.3 PARTIAL RELEASE. The Secondary Collateral shall be
released and shall no longer secure Tenant's or Tenant's Affiliates' obligations
under this Lease, on the date that the audited financial statements delivered
pursuant to Section 12.8(c) demonstrate that the ratio of the Net Operating
Income of the Property during such year (after required funding of the Capital
Replacement Reserve Fund) to an amount equal to Four Million Three Hundred
Fifteen Thousand Dollars ($4,315,000), is equal to or greater than 1.20 to 1.00
on a trailing twelve (12) months basis, and Tenant has provided an Officer's
Certificate to Landlord certifying to that effect (such date, the "RELEASE
DATE."
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5.4 TERMINATION PAYMENT. On the Expiration Date, unless each
option for an Extended Term has been exercised, Tenant shall pay to Landlord the
Termination Payment, if any.
5.5 TERMINATION OF RIGHTS OF USE. Tenant agrees and
acknowledges that, from and after the termination or expiration of the Lease,
Tenant shall have no further rights to use the Eagle Ridge Inn and the golf
courses and other facilities on the Property.
ARTICLE 6
IMPOSITIONS
6.1 PAYMENT OF IMPOSITIONS. Subject to Section 6.3 and Section
17.9, Tenant will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Section 6.3 or Article 14. Upon request, Tenant shall promptly furnish to
Landlord copies of official receipts, if available, or other satisfactory proof
evidencing such payments, such as cancelled checks.
6.2 INFORMATION AND REPORTING. Landlord shall give prompt
notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has actual knowledge, but Landlord's failure to give any
such notice shall in no way diminish Tenant's obligations hereunder to pay such
Impositions. Landlord and Tenant shall, upon reasonable request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Property as may be necessary to prepare any required returns and
reports. In the event any applicable governmental authorities classify any
property covered by this Lease as personal property, Tenant shall file all
personal property tax returns in such jurisdictions where it must legally so
file. Each party, to the extent it possesses the same, will provide the other
party, upon reasonable request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property.
6.3 REFUNDS. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article 17.
6.4 UTILITY CHARGES. Tenant shall pay or cause to be paid
prior to delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash
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disposal, gas, oil, water, sewer, communication and all other utilities used in
the Property during the Term.
6.5 ASSESSMENT DISTRICTS. Landlord shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the Property into a special assessment
district or other taxing jurisdiction unless Tenant shall have consented
thereto, which consent shall not be unreasonably withheld or delayed or unless
Landlord agrees to pay the cost thereof.
ARTICLE 7
TENANT WAIVERS
7.1 NO TERMINATION, ABATEMENT, ETC. Subject to Article 21 and
except as otherwise specifically provided in this Lease, and except for those
causes resulting from the willful misconduct or gross negligence of Landlord or
any person whose claim arose under Landlord, (i) Tenant, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Property or any
portion thereof from whatever cause or any taking of the Property or any
portion thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Property, or any 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
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conferred upon it by law (i) to modify, surrender or terminate this Lease or
quit or surrender the Property or any portion thereof, or (ii) to entitle Tenant
to any abatement, reduction, suspension or deferment of the Rent or other sums
payable by Tenant hereunder, except as otherwise specifically provided in this
Lease. The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason of
an Event of Default.
7.2 CONDITION OF THE PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Property and that Tenant has examined and
otherwise has knowledge of the condition of the Property prior to the execution
and delivery of this Lease and has found the same to be in good order and repair
and satisfactory for its purposes hereunder. Regardless, however of any
inspection made by Tenant of the Property and whether or not any patent or
latent defect or condition was revealed or discovered thereby, Tenant is leasing
the Property "as is" in its present condition. Tenant waives and releases any
claim or cause of action against Landlord with respect to the condition of the
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR
PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE
EXISTENCE OF ANY HAZARDOUS MATERIAL OR (xvi) COMPLIANCE OF THE PROPERTY WITH ANY
LAW (INCLUDING ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES
THAT THE PROPERTY IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT
OF ANY DEFECT OR DEFICIENCY IN THE PROPERTY OF ANY NATURE, WHETHER LATENT OR
PATENT, AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF
THIS SECTION 7.2 HAVE BEEN NEGOTIATED AND REVIEWED BY TENANT'S LEGAL COUNSEL,
AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY
LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, ARISING PURSUANT TO
THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
ARISING OTHERWISE.
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Tenant represents to Landlord that Tenant has examined the title
to the Property prior to the execution and delivery of this Lease and has found
the same to be satisfactory for the purposes contemplated hereby. Tenant
acknowledges that (A) to Tenant's knowledge, fee simple title, except where the
Property is held under a ground lease, (both legal and equitable) is in
Landlord, (B) Tenant has only the leasehold right of possession and use of the
Property as provided herein, (C) to Tenant's knowledge, the Improvements conform
to all material Legal Requirements and all material Insurance Requirements, (D)
to Tenant's knowledge all easements necessary or appropriate for the use or
operation of the Property have been obtained, (E) all contractors and
subcontractors retained by Tenant who have performed work on or supplied
materials to the Property have been fully paid, and all materials to the
Property have been fully paid for, (F) the Improvements constructed by Tenant or
any Affiliate of Tenant have been completed in all material respects in a
workmanlike manner of first class quality, and (G) to Tenant's knowledge all
equipment necessary or appropriate for the use or operation of the Property has
been installed and is presently operative in all material respects.
ARTICLE 8
OWNERSHIP OF TANGIBLE PERSONAL PROPERTY
8.1 PROPERTY. Tenant acknowledges that (i) the Property has
been transferred to Landlord and leased to Tenant, (ii) the Property is the
property of Landlord and (iii) that Tenant has only the right to the use of such
Property during the Term of and upon the terms and conditions of this Lease.
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
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as merchandise for sale to the public, and food and beverage, as shall be
necessary in order to operate the Property in compliance with (a) all applicable
Legal Requirements, (b) customary practices in the golf industry, and (c) such
other reasonable requirements imposed by Landlord from time to time.
8.4 LANDLORD'S WAIVERS. Any lessor of Tenant's Personal
Property may, upon notice to Landlord and during reasonable hours, enter the
Property and take possession of any of Tenant's Personal Property without
liability for trespass or conversion upon a default by Tenant, provided that
such lessor provide Landlord with the opportunity to cure the defaults of Tenant
on terms and conditions satisfactory to such lessor and Landlord.
ARTICLE 9
USE OF PROPERTY
9.1 USE. After the Commencement Date and during the Term,
Tenant shall use or cause to be used the Property and the improvements thereon
for its Primary Intended Use and shall operate the Property to maximize its long
term value. Tenant shall not use the Property or any portion thereof for any
other use without the prior written consent of Landlord, in Landlord's absolute
discretion. No use shall be made or permitted to be made of the Property, and
no acts shall be done, which will cause the cancellation of any insurance policy
covering the Property or any part thereof, nor shall Tenant sell or otherwise
provide to patrons, or permit to be kept, used or sold in or about the Property
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance 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
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Tenant's Personal Property, to be used in such a manner as (i) might reasonably
tend to impair Landlord's title thereto or to any portion thereof, or (ii) may
reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Property or
any portion thereof, or (iii) is in material violation of any applicable
Environmental Law.
9.3 MEMBERSHIP SALES. Tenant shall not sell and/or classify or
reclassify memberships, or set initiation fees or other charges which results in
a reduction in the individual membership dues payable by members at the Property
without the consent of the Landlord, which consent shall not be unreasonably
withheld or delayed. In addition, Tenant shall not materially increase the
number of golfing memberships in any calendar year at the Property if such sales
would diminish the long-term value of the Property.
9.4 LANDLORD TO GRANT EASEMENTS, ETC. Landlord shall, from
time to time so long as no Event of Default has occurred and is continuing, at
the request of Tenant and at Tenant's cost and expense: (i) grant easements and
other rights in the nature of easements; (ii) release existing easements or
other rights in the nature of easements which are for the benefit of the
Property; (iii) dedicate or transfer unimproved portions of the Property for
road, highway or other public purposes; (iv) execute petitions to have the
Property annexed to any municipal corporation or utility district; (v) execute
amendments to any covenants and restrictions affecting the Property; and (vi)
execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interest in the Property), but only upon delivery to Landlord of an Officer's
Certificate (which Officer's Certificate, if contested by Landlord, shall not be
binding on Landlord) stating that such grant, release, dedication, transfer,
petition or amendment is not detrimental to the proper conduct of the business
of Tenant on the Property and does not materially reduce its value or usefulness
for the Primary Intended Use. Landlord shall not grant, release, dedicate or
execute any of the foregoing items in this Section 9.4 without obtaining
Tenant's approval, which approval shall not be unreasonably withheld or delayed;
provided no such approvals shall be required by Landlord for Landlord to grant
at Tenant's request easements in the normal course of operations which do not
materially adversely affect the value of the Property.
9.5 TENANT'S ADDITIONAL COVENANTS. Tenant shall (a) join the
Advisory Association and cooperate in the reasonable activities of such
association; (b) at its election, engage in reasonable cross-marketing endeavors
with the members of the Advisory Association.
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9.6 VALUATION OF REMAINDER INTEREST IN LEASE. Tenant hereby
represents that, at the end of the Term, including all Extended Terms, it
expects that the Land and each of the Improvements will have a fair market value
(determined without regard to any increase or decrease for inflation or
deflation during the Term) equal to at least twenty percent (20%) of the fair
market value of the Land and each of the Improvements at the Commencement Date.
Tenant further represents that, at the end of the Term, including all Extended
Terms, it expects that the Land and each of the Improvements will have a
remaining useful life equal to at least twenty percent (20%) of its expected
useful life at the Commencement Date.
ARTICLE 10
HAZARDOUS MATERIALS
With respect to the Property and solely for purposes of this
Article 10, with respect to the Additional Parcels (as defined in the
Development Agreement), Tenant hereby represents, warrants, and covenants to
Landlord as follows:
10.1 REMEDIATION. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Property or if Tenant, Landlord,
or the Property becomes subject to any order of any federal, state or local
agency to investigate, remove, remediate, repair, close, detoxify, decontaminate
or otherwise clean up the Property, Tenant shall, at its sole expense, but
subject to the last sentence of Section 10.2, carry out and complete any
required investigation, removal, remediation, repair, closure, detoxification,
decontamination or other cleanup of the Property. If Tenant fails to implement
and diligently pursue any such repair, closure, detoxification, decontamination
or other cleanup of the Property in a timely manner, Landlord shall have the
right, but not the obligation, to carry out such action and to recover its costs
and expenses therefor from Tenant as Additional Charges.
10.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall pay,
protect, indemnify, save, hold harmless and defend Landlord, the Company,
Affiliates of the Company and Landlord (including, without limitation, their
respective officers, directors and controlling persons), and any Facility
Mortgagee from and against all liabilities, obligations, claims, damages
(including punitive or consequential damages), penalties, causes of action,
demands, judgments, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord or the Property by reason of any Environmental Law
(irrespective of whether there has occurred any violation of any Environmental
Law) in respect of the Property howsoever arising, without regard to fault on
the part of Tenant, including (a) liability for response costs and for costs of
removal and remedial action
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incurred by the United States Government, any state or local governmental unit
to any other Person, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory, including
damages assessed for the maintenance of a public or private nuisance or for
carrying on of a dangerous activity, or (d) by reason of a breach of a
representation or warranty in Sections 10.1 through 10.5 of this Lease.
Notwithstanding the foregoing or any other provision of this Lease (including,
without limitation, Section 7.2, Section 10.4 and Article 23), Tenant shall not
be liable, or otherwise be required to indemnify Landlord or the Company or any
Affiliates of the Company 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.
10.3 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Tenant's
obligations and/or liability under this Article 10 arising during the Term
hereof shall survive any termination of this Lease.
10.4 ENVIRONMENTAL VIOLATIONS AT EXPIRATION OR TERMINATION OF
LEASE. Notwithstanding any other provision of this Lease (except the last
sentence of Section 10.2), if, at a time when the Term would otherwise terminate
or expire, a violation of any Environmental Law has been asserted by Landlord
and has not been resolved in a manner reasonably satisfactory to Landlord, or
has been acknowledged by Tenant to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Tenant's failure
to have completed all action required to correct, abate or remediate such a
violation of any Environmental Law materially impairs the leasability of the
Property upon the expiration of the Term, then, at the option of Landlord, the
Term shall be automatically extended with respect to the Property beyond the
date of termination or expiration and this Lease shall remain in full force and
effect under the same terms and conditions beyond such date with respect to the
Property until the earlier to occur of (i) the completion of all remedial action
in accordance with applicable Environmental Laws or (ii) 12 months beyond such
expiration or termination date; PROVIDED, that Tenant may, upon any such
extension of the Term, terminate the Term by paying to Landlord such amount as
is necessary in the reasonable judgment of Landlord to complete or perform such
remedial action.
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10.5 ENVIRONMENTAL STATEMENTS. Promptly upon Tenant's learning,
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Property or any adjacent property, Tenant shall notify
Landlord in writing of (a) the existence of any such Hazardous Material; (b) any
enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed or threatened; (c) any claim made or threatened by any
Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 11
MAINTENANCE AND REPAIR
11.1 TENANT'S OBLIGATIONS. Tenant, at its expense, will operate
and maintain the Property in good order, repair and appearance (whether or not
the need for such repairs occurs as a result of Tenant's use, any prior use, the
elements or the age of the Property or any portion thereof) and in accordance
with any applicable Legal Requirements, and, except as otherwise provided in
Article 15, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date
(concealed or otherwise). Tenant shall operate and maintain the Property in
accordance with the maintenance practices of the Property at the Commencement
Date and otherwise in a manner comparable to other comparable golf courses
(including the related resort and conference facilities) in the vicinity of the
Property. Landlord may consult with the Advisory Association from time to time
with respect to Tenant's compliance with its maintenance and operation
obligations under this Section 11.1, and Landlord and representatives of
Advisory Association shall have the right from time to time to enter the
Property for the purpose of inspecting the Property. If Landlord, in
consultation with the Advisory Association, determines that Tenant has failed to
comply with its maintenance and operation obligations under this Section 11.1,
Landlord shall provide written notice to Tenant setting forth a list of remedial
work and/or steps to be performed by Tenant. Tenant shall promptly and
diligently perform such remedial work and/or steps as recommended by Landlord,
provided if Tenant objects to one or more of the remedial obligations proposed
by Landlord, then the matter shall be submitted to the dispute resolution
procedure set forth in Section 12.7. Tenant will not take or omit to take any
action the taking or omission of which could reasonably be expected to impair
the value or the
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usefulness of the Property or any part thereof for its Primary Intended Use. In
no event shall Tenant be deemed to be in violation of this Section 11.1 if
Tenant has requested that Landlord disburse available funds from the Capital
Replacement Reserve to cure such default by making capital repairs, improvements
or replacements and Landlord has not consented to such disbursement.
11.2 WAIVER OF STATUTORY OBLIGATIONS. Landlord shall not under
any circumstances be required to build or rebuild any improvements on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto, in connection with this Lease,
or to maintain the Property in any way. Tenant hereby waives, to the extent
permitted by law, the right to make repairs at the expense of Landlord pursuant
to any law in effect at the time of the execution of this Lease or hereafter
enacted.
11.3 MECHANIC'S LIENS. Nothing contained in this Lease and no
action or inaction by Landlord shall be construed as (i) constituting the
consent or request of Landlord expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Landlord in respect thereof or
to make any agreement that may create, or in any way be the basis for, any
right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in the Property, or any portion thereof.
11.4 SURRENDER OF PROPERTY. Unless the Lease shall have been
terminated pursuant to the provisions of Article 15, Tenant shall, upon the
expiration or prior termination of the Term, vacate and surrender the Property
to Landlord in good condition (including without limitation a fully-stocked food
and beverage inventory)(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
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and/or improvements to the Property (individually, a "Tenant Improvement," and
collectively, "Tenant Improvements"), provided any Tenant Improvements costing
$250,000 or less shall not require approval of Landlord. Except as set forth in
Section 12.9 below, any such Tenant Improvement shall be made at Tenant's sole
expense and shall become the property of Landlord upon termination of this
Lease. Unless made on an emergency basis to prevent injury to Person or
property, Tenant will submit plans and specifications for any Tenant
Improvements, in the form necessary for any required building permits, to
Landlord for Landlord's prior written approval, such approval not to be
unreasonably withheld or delayed and withheld or delayed and shall not be
withheld so long as such alterations, additions, changes and/or improvements do
not have a material adverse affect on the value of the Property.
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
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate at any
one time to exist against the Property (and with respect to such liens
will cause them to be removed of record or bonded over not less than
thirty (30) days prior to scheduled foreclosure pursuant to any such
liens) or suffer or permit any other claims or demands arising from the
work of construction of any Tenant Improvement to be enforced against the
Property or any part thereof, and Tenant agrees to hold Landlord and the
Property free and harmless from all liability from any such liens, claims
or demands, together with all costs and expenses in connection therewith;
and
(d) all work shall be performed in a good and workmanlike
manner.
12.2 SCOPE OF RIGHT. Subject to Section 12.1, at Tenant's cost
and expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building
permits, licenses, conditional use permits and any
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certificates of need that Tenant requires to construct any Tenant
Improvement;
(b) erect upon the Property such Tenant Improvements as Tenant
deems desirable; and
(c) engage in any other lawful activities that Tenant
determines are necessary or desirable for the development of the Property
in accordance with its Primary Intended Use.
12.3 COOPERATION OF LANDLORD.
(a) Landlord shall cooperate with Tenant and take such actions,
including the execution and delivery to Tenant of any applications or
other documents, reasonably requested by Tenant in order to obtain any
governmental approvals sought by Tenant to construct any Tenant
Improvement approved by Landlord in accordance with Section 12.1 of this
Lease within ten (10) Business Days following the later of (a) the date
Landlord receives Tenant's request, or (b) the date of delivery of any
such application or document to Landlord, so long as the taking of such
action, including the execution of said applications or documents, shall
be without cost to Landlord (or if there is a cost to Landlord, such cost
shall be reimbursed by Tenant), and will not cause Landlord to be in
violation of any law, ordinance or regulation.
Landlord shall have the right at any time and from time to time to
post and maintain upon the Property such notices as may be necessary to
protect Landlord's interest from mechanics' liens, materialmen's liens or
liens of a similar nature.
(b) In addition Landlord shall also make available to Tenant a
loan, on a non-recourse basis, to be evidenced by a promissory note, up
to an additional One Million Dollars ($1,000,000) (the "Loan Amount").
Upon written notice to Landlord which details the use to which such funds
shall be applied and the unavailability of operating cash flow sufficient
to make such payments, Tenant may apply all or any part of the Loan
Amount to satisfy Tenant's obligations under this Lease and to fund
operating expenses and additional capital improvements. Tenant shall
provide Landlord with monthly and annual operating budgets for the
Property (in addition to the annual budgets prepared pursuant to Section
12.7) which shall include, without limitation, payroll expenses,
management fees, maintenance expenses and working capital requirements
for the Property. The Loan Amount will be applied in the following
priority: (i) first, to fund any portion of the Annual Base Rent or
Percentage Rent; (ii) second, to fund the Capital Replacement Reserve
Fund; and (iii) third, operating expenses for the Property (including,
without limitation,
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payroll expenses, maintenance fees, management fees and working capital
requirements. Notwithstanding the foregoing, with the consent of
Landlord, Tenant may apply the Loan Amount to current or future capital
improvements at the Property. No more than Five Hundred Thousand Dollars
($500,000) per year of the Loan Amount may be allocated to distributions
or management fees to Tenant or any Affiliate of Tenant or any manager of
the resort or the golf facilities on the Property. Interest on the Loan
Amount shall accrue at ten percent (10%) per annum, shall be payable
monthly in arrears from the date of disbursement and all principal shall
be due and payable at the expiration of the Lease. Interest accrued on
the Loan Amount shall be increased for each Fiscal Year by the Base
Escalator if and to the same extent that Base Rent for such Fiscal Years
is subject to increase by the Base Escalator.
12.4 CAPITAL REPLACEMENT FUND. Tenant shall be obligated to pay
to Landlord, and Tenant shall be obligated to accrue, the Capital Replacement
Reserve. Amounts in the Capital Replacement Fund shall be and remain the
property of Tenant, shall be subject to the rights of Landlord as herein
provided, and shall be additional security for Tenant's obligations hereunder.
The Capital Replacement Reserve shall be paid to Landlord by Tenant on the last
day of each month. 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. Tenant shall have no rights with respect to any amounts in the
Capital Replacement Fund except as provided herein. Subject to Landlord's
approval of the Capital Expenditures (which approval shall not be unreasonably
withheld and which shall be granted provided such improvements are reasonably
expected to increase the long-term value of the Property), Landlord shall make
available to Tenant amounts from the Capital Replacement Fund under the
following conditions:
(a) No Event of Default exists and is continuing;
(b) Tenant presents paid qualifying receipts or
invoices;
(c) Such expenditures are included in the Capital
Budget submitted to and approved by Landlord in accordance with
Section 12.7 or will enhance the long-term value of the Property;
and
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(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
for a period of five (5) years from receipt of such Officer's Certificate and in
connection with such audits to examine Tenant's book and records with respect
thereto (including supporting data, sales tax returns and Tenant's work papers).
If any such audit discloses a deficiency in the payment of Percentage Rent,
Tenant shall forthwith pay to Landlord the amount of the deficiency as finally
agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof;
PROVIDED, HOWEVER, that as to any audit that is commenced more than twelve (12)
months after the date Gross Revenue for any Fiscal Year is reported by Tenant to
Landlord in the Officer's Certificate, the deficiency, if any, with respect to
such Gross Revenue shall bear interest as permitted herein only from the date
such determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Tenant. If any such audit
discloses that the Gross Revenue actually received by Tenant for any Fiscal Year
exceeds the Gross Revenue reported by Tenant in the Officer's Certificate by
more than two percent (2%), then Tenant shall pay all reasonable costs of such
audit and examination; provided Tenant shall have the right to submit the audit
determination to arbitration in accordance with the procedures set forth in
Article 27. Landlord shall also have the right to review and audit from time to
time Tenant's business operations including all books, records and financial
statements of Tenant. Tenant shall promptly provide to Landlord copies of all
such books, records, financial statements or any other documentation of Tenant's
business operations reasonably requested by Landlord. Landlord shall keep
confidential the contents of such books, records, financial statements and other
documentations, provided Landlord shall be permitted to disclose the foregoing
to its attorneys, accountants and advisors who
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agree to maintain the confidentiality of such information, and shall also be
permitted to disclose the foregoing as may be necessary or appropriate in any
public filings of the Company or GTA, Inc. or in any litigation proceedings.
12.7 ANNUAL BUDGET. Not later than forty-five (45) days prior
to the commencement of each Fiscal Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
12.7. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in a form approved by Landlord for use throughout the
Lease Term and show by quarter and for the year as a whole the following:
(a) Tenant's reasonable estimate of Gross Revenue and Gross
Operating Expenses itemized on schedules on a quarterly basis as approved by
Landlord and Tenant, together with assumptions, in narrative form, forming the
basis of such schedules.
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the next two Fiscal Years, subject to
the limitations set forth in Section 12.4.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant
events, including, if requested by Landlord, a narrative description of any
category of operating expenses that decrease or increase by five percent (5%) or
more from the prior year's expenses.
(e) Tenant's reasonable estimate for each Fiscal Quarter of the
Percentage Rent to be paid for such quarter.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve or disapprove the Annual Budget,
which approval shall not be withheld so long as such Annual Budget is reasonably
designed to enhance the long-term value of the Property. If the parties are not
able to reach agreement on the Annual Budget for any Fiscal Year during
Landlord's thirty (30) day review period, the parties shall attempt in good
faith during the subsequent thirty (30) day period to resolve any disputes,
which attempts shall include, if requested by either party, at least one (1)
meeting of executive-level officers of Landlord and Tenant and one (1) meeting
with the directors of the Advisory Association. In the event the parties are
still not able to reach agreement on the Annual Budget for any particular Fiscal
Year after complying with the foregoing requirements of this Section 12.7, the
parties shall adopt such portions of the Operating Budget and the Capital
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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. In resolving such
dispute the committee shall base its determination on whether the Annual Budget
is reasonably designed to enhance the long-term value of the Property. Pending
the results of such resolution or the earlier agreement of the parties, (i) if
the Operating Budget has not been agreed upon, the Property will be operated in
a manner consistent with the 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 Scottsdale, Arizona. Such books and records shall be
available to Landlord and its representatives for examination, audit, inspection
and transcription.
(b) Tenant shall furnish to Landlord within thirty (30) days of
the end of each Fiscal Quarter unaudited financial statements for the Fiscal
Quarter and year to date, together with the same information for the comparable
prior Fiscal Quarter and year to date, including the following: results of
operations, a balance sheet, statements of cash flows and statement of changes
in owner's equity. If Landlord requests, Tenant shall provide reviewed
financial statements for such Fiscal Quarter; provided, however, such review
shall be at Landlord's expense. Each quarterly report shall also include a
narrative explaining any deviation in any major revenue or expense category or
operating expenses (by category) of more than ten percent (10%) from the amounts
set forth on the Annual Budget, together with, if appropriate a revised Annual
Budget, which budget shall be subject to Landlord's review and approval as
provided in Section
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12.7. Each quarterly report shall also forecast any projected Percentage Rent
payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Tenant shall deliver to Landlord
within seventy five (75) days of the end of such Fiscal Year financial
statements prepared in accordance with GAAP and audited by any nationally
recognized independent accounting firm licensed to practice before the
Securities and Exchange Commission.
(d) If requested by Landlord, Tenant will make available to
Landlord and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Tenant and the Property as Landlord may reasonably request
without any additional cost to Tenant, and Tenant agrees to reasonably cooperate
with Landlord and the Company in effecting public or private debt or equity
financings by the Landlord or the Company, without any additional cost to
Tenant, modifications to this Lease or the requirement of additional collateral
from Tenant.
12.9 LANDLORD IMPROVEMENTS.
(a) Landlord agrees to make those certain Tenant Improvements for each
category as described in the "Preliminary" column on Exhibit J hereto in an
amount not to exceed One Million One Hundred Twenty-Five Thousand Dollars
($1,125,000) (the "Landlord Improvements") in accordance with the time periods
set forth on Exhibit J, but in no event to exceed one (1) year from the Closing
Date (the "Improvement Period"). On a monthly basis during the Improvement
Period, upon Tenant's completion of all or any portion of the Landlord
Improvements, upon Tenant's written request with the support documentation
described in Exhibit H hereto, Landlord will reimburse Tenant for the cost of
such portion of Landlord Improvements.
(b) Landlord further agrees to make additional life safety
improvements and other improvements as may enhance the value of the Property
which may include those improvements described in the "Revised" column on
Exhibit J and in excess of the amount shown in the "Preliminary" column for such
category (as determined by Landlord in its reasonable discretion) (the
"Additional Improvements") in an amount not to exceed One Million Five Hundred
Seventy-Five Thousand Dollars ($1,575,000) on the terms and conditions set forth
herein. From and after such time as the Net Operating Income for the Property
(after funding the Capital Replacement Reserve Fund) reaches, for any trailing
twelve (12) month period, 110% of the Debt Service payable by Tenant in the
immediately preceding twelve (12) month period, Tenant may obtain Landlord's
approval of any such proposed Additional Improvements and may, on a monthly
basis, upon completion of all or any portion of the Additional Improvements,
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upon Tenant's written request with the support documentation described in
Exhibit H hereto, obtain reimbursement from Landlord for the cost of such
portion of the Additional Improvements.
(c) Landlord appoints Tenant as its agent to make the Landlord
Improvements and Additional Improvements, and Tenant indemnifies and holds
Landlord harmless from and against all costs, damages and liabilities (including
legal fees) arising from the making of the Landlord Improvements and Additional
Improvements by 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 and any liens permitted by this Lease;
(b) the matters, if any, that existed as of the Commencement
Date, as set forth on the title policy received by Landlord;
(c) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, or any easements granted pursuant to
the provisions of Section 9.4 of this Lease;
(d) liens for those taxes of Landlord which Tenant is not
required to pay hereunder;
(e) subleases or licenses permitted by Article 23;
(f) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as such liens are in the
process of being contested as permitted by Article 14;
(g) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed (PROVIDED THAT such liens are in the
process of being contested as permitted by Article 14) or not yet due;
and
(h) any liens which are the responsibility of Landlord pursuant
to the provisions of Article 25 or any other liens arising through or
under Landlord.
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13.2 ENCROACHMENTS AND OTHER TITLE MATTERS. Subject to Article
21 and excepting any matters granted or created by Landlord after the
Commencement Date, if any of the Improvements shall, at any time, encroach upon
any property, street or right-of-way adjacent to the Property, or shall violate
the agreements or conditions contained in any lawful restrictive covenant or
other agreement affecting the Property, or any part thereof, or shall impair the
rights of others under any easement or right-of-way to which the Property is
subject, or the use of the Property is impaired, limited or interfered with by
reason of the exercise of the right of surface entry or any other rights under a
lease or reservation of any oil, gas, water or other minerals, then promptly
upon request of Landlord or at the behest of any person affected by any such
encroachment, violation or impairment, Tenant, at its sole cost and expense
(subject to its right to contest the existence of any such encroachment,
violation or impairment), shall protect, indemnify, save harmless and defend
Landlord, the Company and Affiliates of the Company from and against all losses,
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including reasonable attorneys' fees and expenses) based on or
arising by reason of any such encroachment, violation or impairment and in such
case, in the event of an adverse final determination, either (i) obtain valid
and effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Landlord or Tenant; or (ii) make such changes in the Improvements,
and take such other actions, as Tenant in the good faith exercise of its
judgment deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or encroachment. Tenant's
obligation under this Section 13.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and Tenant shall be entitled to a credit for any sums recovered
by Landlord under any such policy of title or other insurance.
ARTICLE 14
PERMITTED CONTESTS
14.1 AUTHORIZATION. Tenant, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 13.1; provided, however, that nothing
in this Section 14.1 shall limit the right of Landlord to contest the amount,
validity or application, in
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whole or in part, of any Imposition, Legal Requirement, Insurance Requirement,
or any lien, attachment, levy, encumbrance, charge or claim with respect to the
Property (and Tenant shall reasonably cooperate with Landlord with respect to
such contest), and, FURTHER PROVIDED THAT:
(a) in the case of an unpaid Imposition, lien, attachment,
levy, encumbrance, charge or claim, the commencement and continuation of
such proceedings shall suspend the collection thereof from Landlord and
from the Property, and neither the Property nor any Rent therefrom nor
any part thereof or interest therein would be in any danger of being
sold, forfeited, attached or lost pending the outcome of such
proceedings;
(b) in the case of a Legal Requirement, Landlord would not be
subject to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this
Section 14.1(b), however, shall permit Tenant to delay compliance with
any requirement of an Environmental Law to the extent such non-compliance
poses an immediate threat of injury to any Person or to the public health
or safety or of material damage to any real or personal property;
(c) in the case of a Legal Requirement and/or an Imposition,
lien, encumbrance or charge, Tenant shall give such reasonable security,
if any, as may be demanded by Landlord to insure ultimate payment of the
same and to prevent any sale or forfeiture of the affected Property or
the Rent by reason of such non-payment or noncompliance, PROVIDED,
HOWEVER, the provisions of this Article 14 shall not be construed to
permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any
Imposition or the basis for the assertion of any other claim) or any
other sums payable by Tenant to Landlord hereunder;
(d) no such contest shall interfere in any material respect
with the use or occupancy of the Property;
(e) in the case of an Insurance Requirement, the coverage
required by Article 15 shall be maintained; and
(f) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay
the amount required to be paid, together with all interest and penalties
accrued thereon, or 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
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authorizations and other documents as may reasonably be required in any such
contest, and, if reasonably requested by Tenant or if Landlord so desires,
Landlord shall join as a party therein. Tenant shall indemnify and save
Landlord harmless against any liability, cost or expense of any kind that may be
imposed upon Landlord in connection with any such contest and any loss resulting
therefrom.
ARTICLE 15
INSURANCE
15.1 GENERAL INSURANCE REQUIREMENTS. During the Lease Term,
Tenant shall at all times keep the Property, and all property located in or on
the Property, including all Tenant's Personal Property and any Tenant
Improvements, insured with the kinds and amounts of insurance described below.
This insurance shall be written by companies authorized to do insurance business
in the State, and shall otherwise meet the requirements set forth in Section
15.5 of this Lease. The policies must name Landlord as an additional insured or
loss payee, as applicable. Losses shall be payable to Landlord and/or Tenant as
provided in this Article 15. In addition, the policies shall name as a loss
payee any Facility Mortgagee by way of a standard form of mortgagee's loss
payable endorsement. Any loss adjustment in excess of $250,000 shall require
the written consent of Landlord, Tenant, and each Facility Mortgagee, if any.
Evidence of insurance shall be deposited with Landlord and, if requested, with
any Facility Mortgagee(s). The policies on the Property, including the
Improvements, Fixtures, Tangible and Intangible Personal Property and any Tenant
Improvements, shall insure against the following risks:
(a) ALL RISK. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including sprinkler leakage, in an amount not less than 100%
of the then Full Replacement Cost thereof covering all structures built
on the Property and all Tangible Personal Property; and further provided
the Tangible Personal Property may be insured at its fair market value.
(b) LIABILITY. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with
amounts (including an applicable umbrella policy) not less than five
million dollars ($5,000,000) per occurrence and in the aggregate.
(c) FLOOD. Flood insurance (when the Property is located in
whole or in material part a designated flood plain area) in an amount
similar to the amount insured by comparable golf course properties in the
area. Notwithstanding the foregoing, Tenant shall not be required to
participate in the National Flood Insurance Program or
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otherwise obtain flood insurance to the extent not available at
commercially reasonable rates; provided Tenant shall give Landlord
written notice thereof prior to cancelling or not obtaining any flood
insurance. Tenant may opt to insure the structures only, and not the
Land, subject to the approval of Landlord, in Landlord's reasonable
discretion.
(d) WORKER'S COMPENSATION. Adequate worker's compensation
insurance coverage for all Persons employed by Tenant on the Property in
accordance with the requirements of applicable federal, state and local
laws. Tenant shall have the option to self-insure up to five thousand
dollars ($5,000) of the amount of insurance required in the event State
law permits such self-insurance, subject to the approval of Landlord, in
Landlord's sole and absolute discretion.
15.2 OTHER INSURANCE. Such other insurance on or in connection
with any of the Property as Landlord or any Facility Mortgagee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
15.3 REPLACEMENT COST. In the event either party believes that
the Full Replacement Cost of the insured property has increased or decreased at
any time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the Impartial Appraiser. The party desiring to
have the Full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such Impartial Appraiser, give written notice thereof to
the other party hereto. The determination of such Impartial Appraiser shall be
final and binding on the parties hereto, and Tenant shall forthwith increase, or
may decrease, the amount of the insurance carried pursuant to this Section 15.3,
as the case may be, to the amount so determined by the Impartial Appraiser.
Each party shall pay one-half of the fee, if any, of the Impartial Appraiser.
15.4 WAIVER OF SUBROGATION. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree 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
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companies rated not less than B+, XI by A.M. Best's Insurance Guide. Tenant
shall pay all premiums for the policies of insurance referred to in Sections
15.1 and 15.2 and shall deliver certificates thereof to Landlord prior to their
effective date (and with respect to any renewal policy, at least ten (10) days
prior to the expiration of the existing policy). In the event Tenant fails to
satisfy its obligations under this Article 15, Landlord shall be entitled, but
shall have no obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be repayable to Landlord upon written demand as
Additional Charges. Each insurer issuing policies pursuant to this Article 15
shall agree, by endorsement on the policy or policies issued by it, or by
independent instrument furnished to Landlord, that it will give to Landlord
thirty (30) days' written notice before the policy or policies in question shall
be altered, allowed to expire or cancelled. Each such policy shall also provide
that any loss otherwise payable thereunder shall be payable notwithstanding (i)
any act or omission of Landlord or Tenant which might, absent such provision,
result in a forfeiture of all or a part of such insurance payment, (ii) the
occupation or use of the Property for purposes more hazardous than those
permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by any Facility Mortgagee pursuant to any provision
of a mortgage, note, assignment or other document evidencing or securing a loan
upon the happening of an event of default therein or (iv) any change in title to
or ownership of the Property.
15.6 CHANGE IN LIMITS. In the event that Landlord shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Sections 15.1 and 15.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article 15; PROVIDED,
HOWEVER, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Tenant shall be as reasonably determined by Tenant so
long as 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
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allocated to each of the Other Leased Properties, which amount shall be not less
than the amounts required pursuant to Sections 15.1 and 15.2, shall be specified
either (i) in each such "blanket" or umbrella policy or (ii) in a written
statement, which Tenant shall deliver to Landlord and Facility Mortgagee, from
the insurer thereunder. A certificate of each such "blanket" or umbrella policy
shall promptly be delivered to Landlord and Facility Mortgagee.
15.8 INSURANCE PROCEEDS. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article 15 shall (i) if
greater than $250,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust deposited in an interest bearing account and shall be made
available together with any interest for reconstruction or repair, as the case
may be, of any damage to or destruction of the Property, or any portion thereof.
15.9 DISBURSEMENT OF PROCEEDS. Any proceeds held by Landlord or
Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; PROVIDED, HOWEVER, that
Landlord shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration
shall have been approved by Landlord, which approval shall not be
unreasonably withheld or delayed and (ii) appropriate waivers of
mechanics' and materialmen's liens shall have been filed;
(b) Tenant shall have obtained and delivered to Landlord copies
of all necessary governmental and private approvals necessary to complete
the reconstruction or repair, including building permits, licenses,
conditional use permits and certificates of need;
(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
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(iv) other evidence of cost and payment so that Landlord and Facility
Mortgagee can verify that the amounts disbursed from time to time are
represented by work that is completed, in place and free and clear of
mechanics' and materialmen's lien claims;
(e) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by a senior member or officer of Tenant,
describing the work for which payment is requested, stating the cost
incurred in connection therewith, stating that Tenant has not previously
received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the
applicable requirements of this Lease;
(f) to the extent actually held by Landlord and not a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and shall
not be commingled with Landlord's other funds, and (2) interest shall
accrue on funds so held at the money market rate of interest and such
interest shall constitute part of the proceeds.
15.10 EXCESS PROCEEDS, DEFICIENCY OF PROCEEDS. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction of the Property (or in the event neither Landlord nor Tenant is
required to or elects to repair and restore) shall be paid to Tenant. All
salvage resulting from any risk covered by insurance shall belong to Tenant.
If the costs of restoration or reconstruction exceeds the amount
of proceeds received by Landlord or Tenant from insurance, Tenant shall pay for
such excess cost of restoration or reconstruction, except that Tenant shall be
entitled to withdraw from the Capital Replacement Fund an amount necessary to
cover some or all of such excess; provided any amount so withdrawn must be
restored by Tenant to the Capital Replacement Fund within two (2) years of such
withdrawal.
15.11 RECONSTRUCTION COVERED BY INSURANCE.
(a) DESTRUCTION RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15
and the Property thereby is rendered Unsuitable For Its Primary Intended
Use, Tenant shall, at its election, either (i) diligently restore the
Property to substantially the same condition as existed immediately
before the damage or destruction, or (ii) terminate the Lease and assign
all of its rights to any insurance proceeds required under this Lease to
Landlord.
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(b) DESTRUCTION NOT RENDERING PROPERTY UNSUITABLE FOR ITS
PRIMARY USE. If during the term, the Property is totally or partially
destroyed from a risk covered by the insurance described in Article 15,
but the Real Property is not thereby rendered Unsuitable For Its Primary
Intended Use, Tenant shall diligently restore the Property to
substantially the same condition as existed immediately before the damage
or destruction; PROVIDED, HOWEVER, Tenant shall not be required to
restore certain Tangible Personal Property and/or any Tenant
Improvements if failure to do so does not adversely affect the amount of
Rent payable hereunder or the Primary Intended Use in substantially the
same manner immediately prior to such damage or destruction. Such damage
or destruction shall not terminate this Lease; PROVIDED FURTHER, HOWEVER,
if Tenant cannot within eighteen (18) months obtain all necessary
governmental approvals, including building permits, licenses, conditional
use permits and any certificates of need, after diligent efforts to do so
in order to be able to perform all required repair and restoration work
and to operate the Property for its Primary Intended Use in substantially
the same manner immediately prior to such damage or destruction, Tenant
may terminate the Lease.
15.12 RECONSTRUCTION NOT COVERED BY INSURANCE. If during the
Term, the Property is totally or materially destroyed from a risk not covered by
the insurance described in Article 15, whether or not such damage or destruction
renders the Property Unsuitable For Its Primary Intended Use, Tenant shall
restore the Property to substantially the same condition as existed immediately
before the damage or destruction. Tenant shall have the right to use proceeds
from the Capital Replacement Fund to perform such work, subject to the
conditions set forth in Section 12.4 hereof.
15.13 NO ABATEMENT OF RENT. This Lease shall remain in full
force and effect and Tenant's obligation to make rental payments and to pay all
other charges required by this Lease shall remain unabated during the period
required for repair and restoration.
15.14 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Property which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
15.15 DAMAGE NEAR END OF TERM. Notwithstanding any other
provision to the contrary in this Article 15, if damage to or destruction of the
Property occurs during the last twenty-four (24) months of the Lease Term, and
if such damage or destruction cannot reasonably be expected by Landlord to be
fully repaired or restored prior to the date that is twelve (12) months prior to
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the end of the then-applicable Term, then either Landlord or Tenant shall have
the right to terminate the Lease on thirty (30) days' prior notice to the other
by giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Landlord shall be entitled to retain
all insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention. If Landlord shall give Tenant a notice under this
Section 15.15 that it seeks to terminate this Lease at a time when Tenant has a
remaining Extended Term, then such termination notice shall be of no effect if
Tenant shall exercise its rights to extend the Term not later than the earlier
of the time required by Section 3.2 or thirty (30) days after Landlord's notice
given under this Section 15.15.
ARTICLE 16
CONDEMNATION
16.1 TOTAL TAKING. If at any time during the Term the Property
is totally and permanently taken by Condemnation, this Lease shall terminate on
the Date of Taking and Tenant shall promptly pay all outstanding rent and other
charges through the date of termination.
16.2 PARTIAL TAKING. If a portion of the Property is taken by
Condemnation, this Lease shall remain in effect if the Property is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Property is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
16.3 RESTORATION. If there is a partial taking of the Property
and this Lease remains in full force and effect pursuant to Section 16.2,
Landlord at its cost shall accomplish all necessary restoration up to but not
exceeding the amount of the Award payable to Landlord, as provided herein. If
Tenant receives an Award under Section 16.4, Tenant shall repair or restore any
Tenant Improvements up to but not exceeding the amount of the Award payable to
Tenant therefor.
16.4 AWARD-DISTRIBUTION. The entire Award shall belong to and
be paid to Landlord, except that, subject to the rights of the Facility
Mortgagee, Tenant shall be entitled in the event Tenant restores the Property to
receive from the Award disbursements in the same manner as the disbursement of
insurance proceeds pursuant to Section 15.9. If and to the extent such Award
specifically includes such items, Tenant shall also be entitled to
disbursements, a sum attributable to the value, if any, of: (i) the loss of
Tenant's business during the remaining term, (ii) any Tenant Improvements and
(iii) the leasehold interest of Tenant under this Lease.
16.5 TEMPORARY TAKING. The taking of the Property, or any part
thereof, by military or other public authority shall
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constitute a taking by Condemnation only when the use and occupancy by the
taking authority has continued for longer than six (6) months. During any such
six (6) month period, which shall be a temporary taking, all the provisions of
this Lease shall remain in full force and effect with no abatement of rent
payable by Tenant hereunder. In the event of any such temporary taking, the
entire amount of any such Award made for such temporary taking allocable to the
Lease Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant.
ARTICLE 17
EVENTS OF DEFAULT
17.1 EVENTS OF DEFAULT. If any one or more of the following
events (individually, an "Event of Default") shall occur:
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of ten (10) days after
receipt by Tenant of notice thereof from Landlord; PROVIDED, HOWEVER,
Tenant is only entitled to three (3) such notices per twelve (12) month
period and that such notice shall be in lieu of and not in addition to
any notice required under applicable law;
(b) if Tenant shall fail to observe or perform any material
term, covenant or condition of this Lease and such failure is not cured
by Tenant within a period of thirty (30) days after receipt by Tenant of
notice thereof from Landlord, unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case
such failure shall not be deemed to continue if Tenant proceeds promptly
and with due diligence to cure the failure and diligently completes the
curing thereof as soon as reasonably practicable following receipt of
notice from Landlord of the default; PROVIDED, HOWEVER, that such notice
shall be in lieu of and not in addition to any notice required under
applicable law; PROVIDED FURTHER, HOWEVER, 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,
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(ii) file a petition in bankruptcy or a petition to
take advantage of any insolvency act,
(iii) make an assignment for the benefit of its
creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself
or of the whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
state thereof;
(d) if Tenant shall, on a petition in bankruptcy filed against
it, be adjudicated as bankrupt or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of Tenant, a
receiver of Tenant or of the whole or substantially all of its property,
or approving a petition filed against it seeking reorganization or
arrangement of Tenant under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof, and such judgment, order or decree shall not be vacated or set
aside or stayed within sixty (60) days from the date of the entry
thereof;
(e) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant shall be contesting
such lien or attachment in accordance with Article 14); PROVIDED,
HOWEVER, that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation, Tenant voluntarily ceases operations on the
Property;
(h) any representation or warranty made by Tenant herein or in
any certificate, demand or request made pursuant hereto proves to be
incorrect, now or hereafter, in
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any material respect and the same has not been cured or remedied within a
period of thirty (30) days after receipt by Tenant of notice thereof from
Landlord; or
(i) an "Event of Default" under the Primary Collateral Pledge
Agreement, the Secondary Collateral Pledge Agreement [or the Mortgage];
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:
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(i) the worth at the time of award of the unpaid
Rent which had been earned at the time of termination,
(ii)the worth at the time of award of the amount by
which the unpaid Rent which would have been earned after
termination until the time of award exceeds the amount of such
unpaid Rent that Tenant proves could have been reasonably avoided,
and
(iii)the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time
of award exceeds the amount of such unpaid Rent that Tenant proves
could be reasonably avoided.
In making the above determinations, the "worth at the time of the
award" in subsections (i) and (ii) shall be determined by the court having
jurisdiction thereof including interest at the Overdue Rate and the "worth at
the time of the award" in subsection (iii) shall be determined by the court
having jurisdiction thereof using a discount rate equal to the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%) and the Percentage Rent shall be deemed to be the same as for the
then-current Fiscal Year or, if not determinable, the immediately preceding
Fiscal Year, for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of the Term
or any portion thereof; or
(b) without termination of Tenant's right to possession of the
Property, each installment of said Rent and other sums payable by Tenant to
Landlord under the Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate from the date when due until
paid, and Landlord may enforce, by action or otherwise, any other term or
covenant of this Lease.
17.5 ADDITIONAL REMEDIES. Landlord has all other remedies that
may be available under applicable law.
17.6 APPOINTMENT OF RECEIVER. Upon the occurrence of an Event
of Default, and upon filing of a suit or other commencement of judicial
proceedings to enforce the rights of Landlord hereunder, Landlord shall be
entitled, as a matter or right, to the appointment of a receiver or receivers
acceptable to Landlord of the Property and of the revenues, earnings, income,
products and profits thereof, pending such proceedings, with such powers as the
court making such appointment shall confer.
17.7 WAIVER. If this Lease is terminated pursuant to Section
17.1, Tenant waives, to the extent permitted by
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applicable law (a) any right of redemption, re-entry or repossession and (b) any
right to a trial by jury.
17.8 APPLICATION OF FUNDS. Any payments received by Landlord
under any of the provisions of this Lease during the existence or continuance of
any Event of Default (and such payment is made to Landlord rather than Tenant
due to the existence of an Event of Default) shall be applied to Tenant's
obligations in the order which Landlord may determine or as may be prescribed by
the laws of the State.
17.9 IMPOUNDS. Landlord shall have the right during the
continuance of an Event of Default to require Tenant to pay to Landlord an
additional monthly sum (each an "Impound Payment") sufficient to pay the Impound
Charges (as hereinafter defined) as they become due. As used herein, "Impound
Charges" shall mean real estate taxes on the Property or payments in lieu
thereof and premiums on any insurance required by this Lease. Landlord shall
determine the amount of the Impound Charges and of each Impound Payment. The
Impound Payments shall be held in a separate account and shall not be commingled
with other funds of Landlord and interest thereon shall be held for the account
of Tenant. Landlord shall apply the Impound Payments to the payment of the
Impound Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Impound Payments theretofore paid to
Landlord shall be insufficient for the payment of the Impound Charges, Tenant,
within ten (10) days after Landlord's demand therefor, shall pay the amount of
the deficiency to Landlord.
ARTICLE 18
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Article 17, Landlord, after notice to and
demand upon Tenant, and without waiving or releasing any obligation or default,
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Property for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 18 shall survive the expiration or earlier
termination of this Lease.
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ARTICLE 19
LEGAL REQUIREMENTS
Subject to Article 14 regarding permitted contests, Tenant, at its
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural changes in any of the Improvements or interfere with the use and
enjoyment of the Property; and (b) procure, maintain and comply with all
licenses and other authorizations required for any use of the Property then
being made, and for the proper erection, installation, operation and maintenance
of the Property or any party thereof.
ARTICLE 20
HOLDING OVER
If Tenant shall for any reason remain in possession of the
Property after the expiration of the Term or earlier termination of the Term
hereof, such possession shall be deemed to be a tenant at sufferance during
which time Tenant shall pay as rental each month, 125% of the aggregate of (i)
the aggregate Base Rent and monthly portion of the Percentage Rent payable with
respect to that month in the last Fiscal Year; (ii) all Additional Charges
accruing during the month; and (iii) all other sums, if any, payable by Tenant
pursuant to the provisions of this Lease with respect to the Property. During
such period of month-to-month tenancy, Tenant shall be obligated to perform and
observe all of the terms, covenants and conditions of this Lease, but shall have
no rights hereunder other than the right, to the extent given by law to
month-to-month tenancies, to continue its occupancy and use of the Property.
Nothing contained herein shall constitute the consent, express or implied, of
Landlord to the holding over of Tenant after the expiration or earlier
termination of this Lease.
ARTICLE 21
RISK OF LOSS
During the Lease Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Property as a consequence of the damage or
destruction thereof by fire, flood, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Landlord and those claiming from, through or under
Landlord) is assumed by Tenant. In the absence of gross negligence, willful
misconduct or breach of this Lease by Landlord pursuant to Section 28.3,
Landlord shall in no event be answerable or accountable therefor nor shall any
of the events mentioned in this Article 21 entitle Tenant to any abatement of
Rent.
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ARTICLE 22
INDEMNIFICATION
22.1 TENANT'S INDEMNIFICATION OF LANDLORD. Except as otherwise
provided in Section 10.2 and notwithstanding the existence of any insurance
provided for in Article 15, and without regard to the policy limits of any such
insurance, Tenant will protect, indemnify, save harmless and defend Landlord,
the Company and Affiliates of the Company from and against all liabilities,
obligations, claims, actual damages (but excluding consequential damages),
penalties, causes of action, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against Landlord, the Company or Affiliates of the Company by reason
of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining
property, including, but not limited to, any accident, injury to or death
of Person or loss of or damage to property resulting from golf balls,
golf clubs, golf shoes, lawn mowers or other equipment, pesticides,
fertilizers or other substances, golf carts, tractors or other motorized
vehicles present on or adjacent to the Property;
(b) any use, misuse, non-use, condition, maintenance or repair
of the Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease;
(e) any so-called "dram shop" liability associated with the
sale and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of
any and all existing and future subleases of the Property to be performed
by the landlord (Tenant) thereunder;
(g) the negligence or alleged negligence of Landlord with
respect to the Property; or
(h) any liability Landlord may incur or suffer as a result of
any permitted contest by Tenant pursuant to Article 14.
22.2 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall
protect, indemnify, save harmless and defend Tenant from
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and against all liabilities, obligations, claims, actual or consequential
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees) imposed upon or incurred by or asserted against Tenant as a
result of Landlord's gross negligence or willful misconduct.
22.3 MECHANICS OF INDEMNIFICATION. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 22, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 22 as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the indemnified party may at all times participate in such defense
at its expense, and PROVIDED FURTHER, HOWEVER, that the indemnifying party shall
not, in defense of any such claim, except with the prior written consent of the
indemnified party, consent to the entry of any judgment or to enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff in question to the indemnified party and its
affiliates a release of all liabilities in respect of such claims, or that does
not result only in the payment of money damages by the indemnifying party. If
the indemnifying party shall fail to undertake such defense within thirty (30)
days after such notice, or within such shorter time as may be reasonable under
the circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
22.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS; AVAILABLE
INSURANCE PROCEEDS. Tenant's or Landlord's liability for a breach of the
provisions of this Article 22 arising during the term hereof shall survive any
termination of this Lease. Notwithstanding anything herein to the contrary,
each party agrees to look first to the available proceeds from any insurance it
carries in connection with the Property prior to seeking indemnification or
otherwise seeking to recover any amounts to compensate a party for its damages
and then to seek indemnification only to the extent of any loss not covered by
their available insurance proceeds.
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ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 PROHIBITION AGAINST ASSIGNMENT. Tenant shall not, without
the prior written consent of Landlord, which consent Landlord may withhold in
its reasonable discretion, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer (except to an Affiliate of Tenant or a Permitted Assignee)
the Lease or any interest therein, all or any part of the Property, whether
voluntarily, involuntarily or by operation of law. For purposes of this Article
23, a Change in Control of the Tenant shall constitute an assignment of this
Lease.
23.2 SUBLEASES.
(a) PERMITTED SUBLEASES. Without prejudice to Section
23.7, in no event shall Tenant sublease all or any portion of the
Property (except to an Affiliate of Tenant or a Permitted Assignee) in a
manner which is inconsistent with Tenant's obligation to enhance the
long-term value of the Property, nor shall Landlord withhold its consent
to any assignment or sublease of the Property which is consistent with
such obligations. Tenant's proposed sublease or any of the following
transfers shall require Landlord's prior written consent, which consent
Landlord may withhold in its reasonable discretion provided Landlord
determines that such sublease or transfer is inconsistent with Tenant's
obligation to enhance the long-term value of the Property:
(i) Sublease or license to operate golf courses;
(ii) Sublease or license to operate golf
professionals' shops;
(iii) Sublease or license to operate golf driving
ranges;
(iv) Sublease or license to operate hotel and
conference facilities; and
(v) lease or license to operate any other portions
(but not the entirety) of the Property customarily
associated with or incidental to the operation of the golf
course which provide for an annual lease or license payment
of in excess of $25,000 (which amount shall be increased by
increases in the CPI from the Commencement Date).
(b) TERMS OF SUBLEASE. Each sublease with respect to the
Property shall be subject and subordinate to the provisions of this
Lease. No sublease made as permitted by this Section 23.2 shall affect
or reduce any of the
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obligations of Tenant hereunder, and all such obligations shall continue
in full force and effect as if no sublease had been made. No sublease
shall impose any additional obligations on Landlord under this Lease.
(c) COPIES. Tenant shall, not less than sixty (60) days
prior to any proposed assignment or sublease, deliver to Landlord written
notice of its intent to assign or sublease, which notice shall identify
the intended assignee or sublessee by name and address, shall specify the
effective date of the intended assignment or sublease, and shall be
accompanied by an exact copy of the proposed assignment or sublease.
Tenant shall provide Landlord with such additional information or
documents reasonably requested by Landlord with respect to the proposed
transaction and the proposed assignee or subtenant, and an opportunity to
meet and interview the proposed assignee or subtenant, if requested.
(d) ASSIGNMENT OF RIGHTS IN SUBLEASES. As security for
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant
in and to all subleases now in existence or hereinafter entered into for
any or all of the Property, and all extensions, modifications and
renewals thereof and all rents, issues and profits therefrom. Landlord
hereby grants to Tenant a license to collect and enjoy all rents and
other sums of money payable under any sublease of any of the Property;
provided, however, that Landlord shall have the absolute right at any
time after the occurrence and continuance of an Event of Default upon
notice to Tenant and any subtenants to revoke said license and to collect
such rents and sums of money and to retain the same. Tenant shall not
(i) consent to, cause or allow any material modification or alteration of
any of the terms, conditions or covenants of any of the subleases or the
termination thereof, without the prior written approval of Landlord nor
(ii) accept any rents (other than customary security deposits) more than
ninety (90) days in advance of the accrual thereof nor permit anything to
be done, the doing of which, nor omit or refrain from doing anything, the
omission of which, will or could be a breach of or default in the terms
of any of the subleases.
(e) LICENSES, ETC. For purposes of this Section 23.2,
subleases shall be deemed to include any licenses, concession
arrangements, management contracts (except to an Affiliate of the Lessee)
or other arrangements relating to the possession or use of all or any
part of the Property.
23.3 TRANSFERS. No assignment or sublease shall in any way
impair the continuing primary liability of Tenant hereunder, as a principal and
not as a surety or guarantor, and
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no consent to any assignment or sublease in a particular instance shall be
deemed to be a waiver of the prohibition set forth in Section 23.1. Any
assignment shall be solely of Tenant's entire interest in this Lease. Any
assignment or other transfer of all or any portion of Tenant's interest in the
Lease in contravention of the terms of this Lease shall be voidable at
Landlord's option. Anything in this Lease to the contrary notwithstanding,
Tenant shall not sublet all or any portion of the Property which is inconsistent
with Tenant's obligation to maximize the long-term value of the Property, nor
shall Landlord withhold its consent to any assignment or sublease of the
Property which is consistent with such obligation.
23.4 REIT LIMITATIONS. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not (i) sublet or assign or enter into
other arrangements such that the amounts to be paid by the sublessee or assignee
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of the sublessee or assignee; (ii) sublet or assign
the Property or this Lease to any person that Landlord owns, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code), a 10% or greater interest; or (iii) sublet or assign the
Property or this Lease in any other manner or otherwise derive any income which
could cause any portion of the amounts received by Landlord pursuant to this
Lease or any sublease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or which could cause any other income
received by Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code. The requirements of this Section 23.4 shall likewise apply to any
further subleasing by any subtenant.
23.5 RIGHT OF LANDLORD TO ACQUIRE LEASEHOLD. In addition to
Landlord's rights in Section 23.1, from and after January 1, 2008, Landlord
shall have the right to purchase ("Landlord's Right to Purchase Lease") Tenant's
leasehold interest under this Lease and all rights, title and interest Tenant
may have in the Property (Tenant's Leasehold Interest") on the terms and
conditions set forth herein. Subject to the foregoing, Landlord may give Tenant
written notice of its intent to exercise Landlord's Right to Purchase Lease at
any time during the period between December 15, 2007 and the first Business Day
of January of the immediately following calendar year (the "Exercise Period")
(and for each such Exercise Period during an Extended Term of the Lease), and in
any case, in no event later than thirty (30) days in advance of the proposed
date of such purchase (the "Purchase Date"). On such Purchase Date, Landlord
shall purchase Tenant's Leasehold Interest, and shall pay to Tenant in
immediately available funds an amount equal to the product of (a) Net Cash Flow
for the previous Calendar Year (inclusive of management fees) and (b) the number
of years remaining under the Lease (assuming Tenant exercised all options
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for Extended Terms hereunder) (the "Remaining Years"), increased by three
percent (3%) for each Remaining Year and discounted to present value at twelve
percent (12%) for each Remaining Year (the "Leasehold Purchase Price").
Notwithstanding anything to the contrary herein, closing costs and prorations
for any such purchase shall be paid by the parties as is customary for
comparable transactions in the city, county and state where the Property is
located. Concurrent with Landlord's purchase of the Lease hereunder, Landlord
shall release all collateral pledged by Tenant pursuant to the Primary
Collateral Pledge Agreement, the Secondary Collateral Pledge Agreement, the
Mortgage, and all other deposits then being held by Landlord under the Lease.
Notwithstanding anything to the contrary in the foregoing, the Leasehold
Purchase Price shall not be less than the greater of (i) $2,500,000 or (ii) the
amount calculated in the formula set forth above assuming an annual Net Cash
Flow of $400,000.
23.6 BANKRUPTCY LIMITATIONS.
(a) Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively, the "Trustee") in any
proceeding under Title 11 of the United States Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease which arise from or after the order of relief.
(b) If the Trustee proposes to assume or to assign this Lease
or sublet the Property (or any portion thereof) to any Person which shall have
made a bona fide offer to accept an assignment of this Lease or a subletting on
terms acceptable to the Trustee, the Trustee shall give Landlord, and lessors
and mortgagees of Landlord of which Tenant has notice, written notice setting
forth the name and address of such person and the terms and conditions of such
offer, no later than twenty (20) days after receipt of such offer, but in any
event no later than ten (10) days prior to the date on which the Trustee makes
application to the bankruptcy court for authority and approval to enter into
such assumption and assignment or subletting. Landlord shall have the prior
right and option, to be exercised by written notice to the Trustee given at any
time prior to the effective date of such proposed assignment or subletting, to
receive and assignment of this Lease or subletting of the Property to Landlord
or Landlord's designee upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the consideration to be paid
by such person for the assignment or subletting of this Lease.
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(c) The Trustee shall have the right to assume Tenant's rights
and obligations under this Lease only if the Trustee: (a) promptly cures any
Event of Default then existing or provides adequate assurance that the Trustee
will promptly compensate Landlord for any actual pecuniary loss incurred by
Landlord as a result of Tenant's default under this Lease; and (c) provides
adequate assurance of future performance under this Lease. Adequate assurance
of future performance by the proposed assignee shall include, as a minimum,
that: (i) any proposed assignee of this Lease shall provide to Landlord an
audited financial statement, dated no later than six (6) months prior to the
effective date of such proposed assignment or sublease, with no material change
therein as of the effective date, which financial statement shall show the
proposed assignee to have a net worth equal to at least One Million Dollars
($1,000,000) or, in the alternative, the proposed assignee shall provide a
guarantor of such proposed assignee's obligations under this Lease, which
guarantor shall provide an audited financial statement meeting the requirements
of (i) above and shall execute and deliver to Landlord a guaranty agreement in
form and substance acceptable to Landlord; and (ii) any proposed assignee shall
grant to Landlord a security interest in favor of Landlord in all furniture,
fixtures, and other personal property to be used by such proposed assignee in
the Property. All payments required of Tenant under this Lease, whether or not
expressly denominated as such in this Lease, shall constitute rent for the
purposes of Title 11 of the Bankruptcy Code.
(d) The parties agree that for the purposes of the Bankruptcy
code relating to (a) the obligation of the Trustee to provide adequate assurance
that the Trustee will "promptly" cure defaults and compensate Landlord for
actual pecuniary loss, the word "promptly" shall mean that cure of defaults and
compensation will occur no later than sixty (60) days following the filing of
any motion or application to assume this Lease; and (b) the obligation of the
Trustee to compensate or to provide adequate assurance that the Trustee will
promptly compensate Landlord for "actual pecuniary loss", (the term "actual
pecuniary loss" shall mean, in addition to any other provisions contained herein
relating to Landlord's damages upon default obligations of Tenant to pay money
under this Lease and all attorneys' fees and related costs of Landlord incurred
in connection with any default of Tenant in connection with Tenant's bankruptcy
proceedings).
(e) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed, without
further act or deed, to have assumed all of the obligations arising under this
Lease and each of the conditions and provisions hereof on and after the date of
such assignment. Any such assignee shall, upon the request of Landlord,
forthwith execute and deliver to Landlord an instrument, in form and substance
acceptable to Landlord, confirming such assumption.
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23.7 MANAGEMENT AGREEMENT. Tenant shall not enter into any
management agreement that provides for the management and operation of the Hotel
by an unaffiliated third party without the prior written consent of Landlord,
which shall not be unreasonably withheld or delayed for any hotel management
company specializing in luxury hotels which is comparable in reputation and
market segment to Sheraton or Westin. Tenant shall not enter into any
management agreement that provides for the management and operation of the golf
courses on the Property, and all operations related thereto, by an unaffiliated
third party without prior written consent of Landlord, which shall not be
unreasonably withheld for any golf management company which is comparable in
reputation and market segment to Troon Golf, L.L.C. Notwithstanding the
foregoing Landlord shall be deemed to have consented to Sheraton and Westin
(with respect to hotel management) and Troon Golf L.L.C. or its wholly-owned
subsidiary (with respect to golf management).
ARTICLE 24
OFFICER'S CERTIFICATES AND OTHER STATEMENTS
24.1 OFFICER'S CERTIFICATES. At any time, and from time to time
upon Tenant's receipt of not less than ten (10) days' prior written request by
Landlord, Tenant will furnish to Landlord an Officer's Certificate certifying
that:
(a) this Lease is unmodified and in full force and effect (or
that this Lease is in full force and effect as modified and setting forth
the modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is
in default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which
Tenant may have knowledge;
(d) that, except as otherwise specified, there are no
proceedings pending or, to the knowledge of the signatory, threatened,
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such Officer's Certificate within such
time shall constitute an acknowledgement by Tenant that this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Landlord, Landlord is not in default in the performance of any covenant,
agreement or
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condition contained in this Lease and the other matters set forth in such
request, if any, are true and correct. Any such Officer's Certificate furnished
pursuant to this Section 24.1 may be relied upon by Landlord and any prospective
lender or purchaser.
24.2 ENVIRONMENTAL STATEMENTS. Immediately upon Tenant's
learning, or having reasonable cause to believe, that any Hazardous Material in
a quantity sufficient to require remediation or reporting under applicable law
is located in, on or under the Property or any adjacent property, Tenant shall
notify Landlord in writing of (a) the existence of any such Hazardous Material;
(b) any enforcement, cleanup, removal, or other governmental or regulatory
action instituted, completed or threatened; (c) any claim made or threatened by
any Person against Tenant or the Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Material; and (d) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous Material
in or removed from the Property, including any complaints, notices, warnings or
asserted violations in connection therewith.
ARTICLE 25
LANDLORD MORTGAGES
25.1 LANDLORD MAY GRANT LIENS. Subject to Section 25.2, without
the consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any Landlord's Encumbrance upon the Property,
or any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. This Lease is and at all times shall
be subject and subordinate to any ground or underlying leases, mortgages, trust
deeds or like encumbrances, which may now or hereafter affect the Property and
to all renewals, modifications, consolidations, replacements and extensions of
any such lease, mortgage, trust deed or like encumbrance, provided the holder of
any such subsequently executed ground or underlying leases, mortgages, trust
deeds or like encumbrances executes a subordination non-disturbance agreement
acknowledging and agreeing to be bound by Section 25.2 below, and agreeing to
recognize Tenant as tenant under this Lease in accordance with the terms and
provisions hereof. This clause shall be self-operative and no further
instrument of subordination shall be required by any ground or underlying lessor
or by any mortgagee or beneficiary, affecting any lease or the Property. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Landlord may request for such purposes.
25.2 TENANT'S NON-DISTURBANCE RIGHTS. So long as Tenant shall
pay all Rent as the same becomes due and shall fully comply with all of the
terms of this Lease and fully perform its
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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 on or 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 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
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such compliance by the non-complying party and to supervise or arrange for the
supervision of the non-complying party. To the maximum extent practicable, the
arbitrator and the parties, and the AAA if applicable, shall take any action
necessary to insure that the arbitration shall be concluded within ninety (90)
days of the filing of such dispute. The fees and expenses of the arbitrator
shall be shared equally by Landlord and Tenant except as otherwise specified
above in this Section 27.2. Unless otherwise agreed in writing by the parties
or required by the arbitrator or AAA, if applicable, arbitration proceedings
hereunder shall be conducted in the State. Notwithstanding formal rules of
evidence, each party may submit such evidence as each party deems appropriate to
support its position and the arbitrator shall have access to and right to
examine all books and records of Landlord and Tenant regarding the Property
during the arbitration.
ARTICLE 28
MISCELLANEOUS
28.1 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord
and its authorized representatives to inspect the Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
Tenant or any governmental agency or insurance requirement relating to the
Property, or imposed by law or applicable regulations. Landlord shall indemnify
Tenant for all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Tenant by
reason of Landlord's inspection pursuant to this Section 28.1.
28.2 LANDLORD'S GOLFING AND HOTEL PRIVILEGES. The members of
Landlord's or Landlord's Affiliates senior executive staff (not to exceed a
total of seven (7) persons) and their guests shall have the right, upon
reasonable notice to Tenant and subject to availability, to play an 18-hole
round of golf and utilize the clubhouse and other Improvements located on the
Property free of charge on any day on which the Property is open for golf to the
general public or the membership, as applicable. Landlord and Landlord's
Affiliates may, subject to availability, reserve the Hotel and/or its conference
and recreational facilities for its or their use and shall, in connection with
any such use of the Hotel and its conference and recreational facilities pay a
reduced rate for such use, which rate shall not exceed Tenant's cost plus ten
percent (10%).
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
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thirty (30) days, in which case such failure shall not be deemed to continue if
Landlord, within said thirty (30)-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which Landlord shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay. In no event shall any breach by Landlord permit Tenant to terminate this
Lease or subject to Section 28.20, 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 or golf resorts
that may be geographically proximate to one or more golf courses that Tenant or
Affiliates of Tenant may own, manage or lease.
28.5 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
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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 not prohibited by this Lease.
28.10 NOTICES. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and delivered
or mailed (by registered or certified mail, return receipt requested and postage
prepaid), addressed to the respective parties, as set forth below:
If to Landlord: Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Telephone No.: (803) 723-4653
Facsimile No.: (803) 723-0479
Attn: W. Bradley Blair, II
With a copy to: O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street
San Francisco, California 94111
Attn: Peter T. Healy, Esq.
Telephone No.: (415) 984-8833
Facsimile No.: (415) 984-8701
If to Tenant: Mr. John Sauter
c/o Eagle Ridge Lease Company LLC
16100 N. Greenway-Hayden Loop
Scottsdale, Arizona 85260
Telephone No.: (602) 606-1000
Facsimile No.: (602) 606-1010
With a copy to: Michael Sloyer, Esq.
Mayer, Brown & Platt
1675 Broadway, Suite 1900
New York, New York 10019
Telephone No.: (212) 506-2500
Facsimile No.: (212) 262-1910
28.11 SURVIVAL OF CLAIMS. Anything contained in this Lease to
the contrary notwithstanding, all claims against, and
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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 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
and their respective successors and assigns permitted under this Lease. 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 reasonably satisfactory to Landlord and suitable for
recording under the State, in which reference to this Lease, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such Memorandum of Lease.
28.19 ATTORNEYS' FEES. For the purpose of this Lease, the terms
"attorneys' fees" and "attorneys' fees and costs" shall each mean the fees and
expenses of counsel to the parties hereto, which may include printing,
photostating, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals, librarians and others not admitted to the bar
but performing services under the supervision of an attorney. The terms
"attorneys' fees" and "attorneys' fees and costs" shall also each include all
such fees and expenses incurred with respect to appeals, arbitrations and
bankruptcy
69
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proceedings, and whether or not any action or proceeding is brought with respect
to the matter for which said fees and expenses were incurred and shall also
include all such fees and expenses incurred in enforcing any judgement. In the
event of any dispute between the parties hereto involving the covenants or
conditions contained in this Lease or arising out of the subject matter of this
Lease, the prevailing party shall be entitled to recover against the other party
reasonable attorneys' fees and court costs.
28.20 NON-RECOURSE AS TO LANDLORD AND TENANT. (a) Anything
contained herein to the contrary notwithstanding, any claim based on or in
respect of any liability of Landlord under this Lease shall be enforced only
against the Property and not against any other assets, properties or funds of
(i) Landlord, (ii) any director, officer, general partner, limited partner,
employee or agent of Landlord, or any general partner of Landlord, any of their
respective general partners or stockholders (or any legal representative, heir,
estate, successor or assign of any thereof), (iii) any predecessor or successor
partnership or corporation (or other entity) of Landlord, or any of their
respective general partners, either directly or through either Landlord or their
respective general partners or any predecessor or successor partnership or
corporation or their stockholders, officers, directors, employees or agents (or
other entity), or (iv) any other Person affiliated with any of the foregoing, or
any director, officer, employee or agent of any thereof. Tenant shall have the
right of setoff against payments due under the Lease following a judicial
determination of a court of competent jurisdiction of Landlord's liability for
the breach of one or more of its obligations hereunder.
(b) Except as expressly set forth below, the recourse of
Landlord with respect to its obligations under this Lease shall be solely to the
Property. Notwithstanding the foregoing, nothing shall be deemed in any way to
impair, limit or prejudice the rights of Landlord:
(i) in lease termination proceedings or in any ancillary
proceedings brought to facilitate the termination of this Lease or
the ejection of Tenant or the Primary Collateral or Secondary
Collateral or any portion thereof, provided such exception shall
not expand Landlord's ability to seek recourse against Tenant or
assets in which it has no security interest;
(ii) to recover from Tenant any condemnation or insurance
proceeds attributable to the Property which were not paid to
Landlord or used to restore the Property in accordance with the
terms of this Agreement;
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(iii) to recover from Tenant any rents, profits, security
deposits, advances, rebates, prepaid rents, room or other hotel
or golf course revenues or other similar sums attributable to the
Property collected by or for Tenant following an Event of Default
and not properly applied to the reasonable fixed and operating
expenses of the Property, including payments of the Loan; and
(iv) to recover any damages as a result of any fraud or
misrepresentation by Tenant in connection with the Property or
this Lease.
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 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 in a manner which attempts to
minimize any disruption to Tenant's operations.
28.23 LANDLORD'S DETERMINATION OF FACTS. Landlord shall at all
times be free to hire such independent consultants as it deems reasonably
necessary to independently establish the existence or nonexistence of any fact
or facts, the existence or nonexistence of which is a condition of this
Agreement or of any disbursement for Landlord Improvements hereunder. The costs
of such consultants are to be paid by Tenant, provided such consultants are
hired in the ordinary course of Landlord's business and similar consultants are
generally engaged to review all properties in which Landlord owns a fee,
leasehold or mortgagee's interest. Provided no Event of Default then exists (in
which case the foregoing limitation shall not apply) the annual cost of
Landlord's regular consultants shall not exceed on average Two Thousand Five
Hundred Dollars ($2,500) per year, which amount shall be increased to reflect
increases in the CPI from the date hereof.
28.24 TIME IS OF THE ESSENCE. Time is of the essence in this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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:
---------------------------------------
Its:
---------------------------------------
By:
---------------------------------------
Its:
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TENANT: EAGLE RIDGE LEASE COMPANY LLC
a Delaware limited liability company
By: TROON GOLF L.L.C.
Its: Member
By:
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Its:
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S-1
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
That certain real property more particularly described as
follows:
A-1
<PAGE>
EXHIBIT B
SCHEDULE OF IMPROVEMENTS
B-2
<PAGE>
EXHIBIT C
OTHER LEASED PROPERTIES
NONE
C-1
<PAGE>
EXHIBIT D
PRIMARY COLLATERAL PLEDGE AGREEMENT
THIS PRIMARY COLLATERAL PLEDGE AGREEMENT (this "Agreement") is entered
into as of this ___ day of _____, 1998, by and between (i) GOLF TRUST OF
AMERICA, L.P., a Delaware limited partnership ("Secured Party"), and (ii) EAGLE
RIDGE LEASE COMPANY LLC, a Delaware limited liability company ("Pledgor").
RECITALS:
This Agreement is entered into based on the following understandings:
a. Pursuant to that certain Lease (the "Lease") dated as of
_______________, 1998, by and between Secured Party and Pledgor, Secured Party
has agreed to lease certain property to Pledgor.
b. As a condition to Secured Party entering into the Lease, Secured
Party has required that Pledgor pledge the Landlord's Shares (as hereinafter
defined) as security for the Obligations (as hereinafter defined).
i. DEFINITIONS
(1) Capitalized terms not otherwise defined herein shall have
the meaning given to them in the Lease.
(2) The following terms shall have the indicated meanings:
"AGREEMENT" has the meaning set forth in the introductory
Paragraph of this Agreement.
"ASSIGNMENT AND ASSUMPTION OF PURCHASE AND SALE AGREEMENT" means
the Assignment and Assumption of Purchase and Sale Agreement dated ________,
1998 between Pledgor and Landlord.
"EVENT OF DEFAULT" has the meaning set forth in Section 13 of
this Agreement.
"LANDLORD'S SHARES" means, the [INSERT NUMBER OF UNITS] Class A
partnership units of Landlord granted to Tenant pursuant to the Assignment and
Assumption of Purchase and Sale Agreement.
D-1
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"OBLIGATIONS" has the meaning set forth in Section 2(a) of this
Agreement.
"PLEDGED LANDLORD'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.
"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.
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:
ii. GRANT OF SECURITY INTEREST.
(1) As security for the payment and performance of all
obligations and liabilities (including, without limitation, indemnities, fees
and interest thereon) of Pledgor, or any of Pledgor's direct or indirect
subsidiaries or Affiliates arising under the Lease or in connection with any
agreement, instrument or extension contemplated by the Lease (collectively, the
"Obligations"), Pledgor hereby pledges, hypothecates and grants to Secured Party
a first and prior security interest in Landlord's Shares owned by Pledgor (the
"Pledged Landlord's Shares"), together with, after an occurrence and during the
continuance of an Event of Default hereunder, 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 Landlord's Shares (the Pledged Landlord'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 in an amount equal to the fair market value of the substituted shares.
Prior to 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 Loan Agreement 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. Notwithstanding the foregoing, all dividends with respect to the
Pledged Landlord's Shares shall be accrued by Secured Party until such time as
the Net Operating Income for the Property (stabilized to reflect historical and
projected Net Operating Income) after funding the Capital Replacement Reserve
Fund shall have been, for any trailing twelve (12) month period at least one
hundred thirteen point five (113.5%) of the Debt Service payable by Pledgor for
Fiscal Year 1998. The word "OBLIGATIONS" is used
D-2
<PAGE>
herein in its most comprehensive sense and includes without limitation any and
all debts, obligations and liabilities of Pledgor, Pledgor or any of Pledgor's
direct or indirect subsidiaries arising under 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, 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.
(2) 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.
iii. 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 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.
iv. SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT
OF LIABILITY. 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.
v. REPRESENTATIONS AND WARRANTIES.
(1) Pledgor represents and warrants to Secured Party that:
(i) Pledgor is the owner, directly or indirectly, and has possession or control
of the Pledged Landlord's Shares; (ii) Pledgor has the right to pledge the
Pledged Landlord's Shares; (iii) the Pledged Landlord'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
Landlord'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 Landlord's
Shares are true and complete; (vi) no financing statement covering any of the
Pledged Landlord's Shares and naming any secured party other than Secured Party,
is on
D-3
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file in any public office; and (vii) the pledge, assignment and delivery of the
Pledged Landlord's Shares pursuant to this Agreement creates a valid lien and a
security interest in the Pledged Landlord's Shares.
vi. COVENANTS OF PLEDGOR.
(1) 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, excepting losses relating to the decrease in
the market value of the Pledged Landlord's Shares; (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 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 Landlord's
Shares without first giving Secured Party written notice of the address to which
Pledgor is moving same.
(2) 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 Landlord'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 Landlord'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 to receive and use reasonable diligence to
collect proceeds from the Pledged Landlord'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 Landlord's Shares with other property; (vii) to provide any
service and do any other acts or things necessary to keep the Pledged Landlord's
Shares free and clear of all defenses, rights of offset and counterclaims; and
(viii) if the Pledged Landlord's Shares consists of securities and so long as no
Event of Default 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.
vii. 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,
D-4
<PAGE>
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 Landlord'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 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 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 Landlord'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 Landlord'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
Landlord's Shares and in connection therewith, the right to deposit and deliver
any and all of the Pledged Landlord'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 Landlord's Shares and shall not be responsible for
any failure to do so or delay in so doing.
viii. CASH COLLATERAL ACCOUNT. Any money received by Secured Party in
respect of the Security Fund will be retained by Secured Party in an
interest-bearing cash collateral account and the same shall, for all purposes,
be deemed part of the Security Fund hereunder.
ix. SECURED PARTY'S CARE AND DELIVERY OF PLEDGED LANDLORD'S SHARES;
RELEASE.
(1) 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. Such duty shall not
include any obligation to
D-5
<PAGE>
ascertain or to initiate any action with respect to maturity dates, conversion,
call or exchange rights, or offers to purchase the Pledged Landlord's Shares or
any similar matters; PROVIDED, HOWEVER, that Secured Party shall be obligated to
inform Pledgor, in writing, of maturity dates, conversion, call or exchange
rights, or offers to purchase the Pledged Landlord's Shares or any similar
matters of which it has knowledge. 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 Landlord's Shares. Secured Party shall not be
obligated to take any actions with respect to the Pledged Landlord's Shares
requested by Pledgor unless such request is made in writing and Secured Party
determines, in its reasonable discretion, that the requested action would not
unreasonably jeopardize the value of the Pledged Landlord'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.
(2) The Pledged Landlord's Shares shall be released from the
lien of the Secured Party under this agreement at the times and in the manner
specified in EXHIBIT D-1.
x. PLEDGOR'S WAIVERS.
Pledgor waives any right to require Secured Party to (i) give
notice of the terms, time and place of any public or private sale of personal
property security held from Pledgor or any other person or otherwise comply with
any other provisions of Section 9-504 Uniform Commercial Code; (ii) pursue any
other remedy in Secured Party's power, including the disposition of any other
Collateral; or (iii) 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 security or which constitute in whole or in part the
Obligations secured hereunder, or in connection with the creation of new or
additional Obligations.
xi. 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) take
and hold security, other than the Pledged Landlord's Shares, for the payment of
the Obligations or any part thereof and exchange, enforce, waive and release the
Pledged Landlord's Shares, or any part thereof, or any such other security; (b)
after an Event of Default, apply the Pledged Landlord'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; (c) 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 (d) apply payments received by Secured Party
from Pledgor to any Obligations of 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
D-6
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hereby waives any provision of law regarding application of payments which
specifies otherwise.
xii. 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 16 of this Agreement,
and shall be secured by the Security Fund, subject to all terms and conditions
of this Agreement.
xiii. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any Event of Default
under the Lease; or (b) any representation or warranty made by Pledgor herein
shall prove to be incorrect in any material respect when made; or (c) 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.
xiv. 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, 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 Landlord'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
D-7
<PAGE>
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.
xv. DISPOSITION OF PLEDGED LANDLORD'S SHARES. Secured Party shall
not transfer all or any part of the Pledged Landlord's Shares or Security Fund
except in connection with the exercise of remedies as provided in Section 14
above. Any proceeds of any disposition of any of the Pledged Landlord'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.
xvi. 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 Landlord'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.
xvii. GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to principles of conflicts of laws (other than Section 5-1401
of the New York General Obligations Law) and shall be binding upon and inure to
the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties.
xviii. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision
D-8
<PAGE>
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.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
PLEDGOR
EAGLE RIDGE LEASE COMPANY LLC,
a Delaware limited liability company
By: TROON GOLF L.L.C.
Its: Member
By:
------------------------------
Name:
----------------------------
Its:
-----------------------------
SECURED PARTY
GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By:
------------------------------
Name:
----------------------------
Its:
-----------------------------
By:
------------------------------
Name:
----------------------------
Its:
-----------------------------
D-9
<PAGE>
EXHIBIT D-1
RELEASE OF PLEDGED LANDLORD'S SHARES
The Pledged Landlord's Shares shall be released, and shall no longer
constitute collateral security for the Lease, at the following times and in
accordance with the following provisions:
(a) Fifty percent (50%) of the Pledged Landlord'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 after
funding the Capital Replacement Reserve Fund shall have been, for any
trailing twelve (12) month period, at least one hundred thirty (130%)
of the Debt Service payable by Pledgor for Fiscal Year 1998.
(b) All of the Pledged Landlord'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 after funding the
Capital Replacement Reserve Fund shall have been, for any trailing
twelve (12) month period, one hundred and forty percent (140%) of the
Debt Service payable by Pledgor for Fiscal Year 1998.
Upon Pledgor's request, and at Pledgor's expense, Secured Party shall
execute a written instrument of release with respect to any Pledged Landlord's
Shares that are released in accordance with the above paragraph.
D-1-1
<PAGE>
EXHIBIT E
Intentionally Deleted
E-1
<PAGE>
EXHIBIT F-1
CALCULATION
CALCULATION OF BASE GROSS REVENUE
ON A QUARTER-BY-QUARTER BASIS
<TABLE>
<CAPTION>
Golf Rev. Golf Food & Bev. Hotel Rev. Rental Pool Other Rev.
Merch. Rev. Rev.
Rev.
<S> <C> <C> <C> <C> <C>
Q1 1998 20,835.50 28,804.90 495,226.00 402,446.60 480,164.40 378,638.60
1st
Breakpt.
Q1 1998 23,366.90 N/A N/A 435,983.80 502,497.60 N/A
2nd
Breakpt.
Q1 1998 27,261.30 N/A N/A 503,058.20 530,414.10 N/A
3rd
Breakpt.
Q2 1998 1,715,939.70 272,714.50 1,443,997.20 837,757.90 1,029,535.80 675,508.30
1st
Breakpt.
Q2 1998 1,924,418.30 N/A N/A 907,571.10 1,077,421.20 N/A
2nd
Breakpt.
Q2 1998 2,245,154.70 N/A N/A 1,047,197.40 1,137,277.90 N/A
3rd
Breakpt.
Q3 1998 3,064,824.90 510,107.00 2,079,613.20 1,108,483.20 1,745,791.60 996,151.90
1st
Breakpt.
Q3 1998 3,437,186.80 N/A N/A 1,200,856.80 1,826,991.20 N/A
2nd
Breakpt.
Q3 1998 4,010,051.30 N/A N/A 1,385,604.00 1,928,490.70 N/A
3rd
Breakpt.
</TABLE>
F-1-1
<PAGE>
<TABLE>
<CAPTION>
Golf Rev. Golf Food & Hotel Rental Other
Merch. Bev. Rev. Pool Rev.
Rev. Rev. Rev.
<S> <C> <C> <C> <C> <C> <C>
Q4 1998 548,399.90 88,373.70 1,181,163.60 651,312.30 1,044,508.20 699,701.20
1st
Breakpt.
Q4 1998 615,028.00 N/A N/A 705,588.40 1,093,090.00 N/A
2nd
Breakpt.
Q4 1998 717,532.60 N/A N/A 814,140.40 1,153,817.30 N/A
3rd
Breakpt.
Annual 5,350,000.00 900,000.00 5,200,000.00 3,000,000.00 4,300,000.00 2,750,000.
Threshold
1st
Breakpt.
Annual 6,000,000.00 N/A N/A 3,250,000.00 4,500,000.00 N/A
Threshold
2nd
Breakpt.
Annual 7,000,000.00 N/A N/A 3,750,000.00 4,750,000.00 N/A
Threshold
3rd
Breakpt.
1st Per- 35% 10% 15% 35% 25% 5%
centage
2nd Per- 2.5% N/A N/A 2.5% 2.5% N/A
centage
3rd Per- 2.5% N/A N/A 2.5% 2.5% N/A
centage
</TABLE>
F-1-2
<PAGE>
EXHIBIT F-2
CALCULATION OF PERCENTAGE RENT
Percentage Rent shall be calculated for each of the Revenue Categories
(as shown on Exhibit F-1) for the relevant period as follows:
Percentage Rent for such period for such category ("Category
Percentage Rent") shall be the sum of (a) the product of the excess of the
Revenue for such category ("Category Revenue") over the First Break Point for
such period for such category and the First Percentage, and (b) the product of
(i) the excess of the Category Revenue over the Second Break Point, if any, and
(ii) the Second Percentage and (c) the product of (i) the excess of the
Incremental Revenue over the Third Break Point, if any and (ii) the Third
Percentage.
The total Percentage Rent for the Property for a relevant period shall
be the sum of Category Percentage Rent for each category for such period and the
Base Year Rent for such period.
F-2-1
<PAGE>
EXHIBIT G
[Intentionally Deleted]
G-1
<PAGE>
EXHIBIT H
DISBURSEMENT PROCEDURES
No disbursement for Landlord Improvements unless Tenant shall have met
the conditions set forth in SECTION 4.2 and shall have submitted to Landlord,
and Landlord shall have approved, the following documents, completed and signed
by the appropriate parties:
(a) For a direct construction cost relating to construction of the
Landlord Improvements: (1) an Application and Certificate for Payment from the
general contractor and any applicable construction contractor; (2) if required
by Landlord in its sole discretion, work certifications from soils, structural,
mechanical and electrical engineers for the Project; (3) a copy of each executed
construction contract and material subcontract not previously delivered to
Landlord for each item of material, labor and service for which a disbursement
has been requested (other than work to be performed by the general contractor
under the general contract); (4) a partial lien waiver and release from the
general contractor, each construction contractor and each subcontractor covering
the full amount of the disbursement for direct construction costs through the
date of the previous disbursement request; (5) a final lien waiver and release
from each construction contractor and if requested by Landlord from each
subcontractor who has completed the work covered by its construction contract or
subcontract, respectively, covering the final payment due and included in the
application and certificate for payment; and (6) a final lien waiver and release
from each construction contractor and if requested by Landlord from each
subcontractor who had completed the work covered by and received final payment
under its construction contract or subcontract, respectively, as of the previous
disbursement request, covering the full amount due such construction contract or
subcontractor, as the case may be.
(b) For each item of indirect costs in amounts over $10,000: copies of
invoices or purchase orders from each payee with an identifying reference
to the Project, which invoices or purchase orders shall support the full
amount of indirect costs contained in the requested disbursement.
(c) For Indirect Costs in amounts less than $10,000: when and as
required by Landlord in its sole discretion, a certified statement from
Tenant reflecting the identity of the supplier, the materials purchased and
the amount of all invoices under $10,000.
(d) An up-to-date list, on the current form of the application and
certificate for payment, prepared by Tenant (with respect to construction
contracts) and the general contractor (with respect to subcontracts), of
all construction contracts and material subcontracts which have been or are
intended to be executed since the date of the last disbursement and have
not theretofore been listed for Landlord, and showing, for items not yet
contracted for, the most current cost estimates and potential construction
contractors or subcontractors, as the case may be.
H-1
<PAGE>
(e) Copies, certified by Tenant, of all licenses, permits and
approvals which have not previously been delivered to Landlord.
H-2
<PAGE>
EXHIBIT I
SECONDARY COLLATERAL PLEDGE AGREEMENT
THIS SECONDARY COLLATERAL PLEDGE AGREEMENT (this "Agreement") is
entered into as of this _____ day of __________, 1998, by and between (i) GOLF
TRUST OF AMERICA, L.P., a Delaware limited partnership ("Secured Party"), and
(ii) EAGLE RIDGE LEASE COMPANY LLC, a Delaware limited liability company
("Pledgor").
RECITALS:
This Agreement is entered into based on the following understandings:
A. Pursuant to that certain Lease (the "Lease") dated as of ______,
1998, by and between Secured Party and Pledgor, Secured Party has agreed to
lease certain property to Pledgor.
B. As a condition to Secured Party entering into the Lease, Secured
Party has required that Pledgor pledge the Landlord's Shares (as hereinafter
defined) as security for the Obligations (as hereinafter defined).
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.
"COMMON STOCK" means shares of common stock as described on
EXHIBIT A attached hereto and incorporated herein by reference.
"EVENT OF DEFAULT" has the meaning set forth in Section 13(a) of
this Agreement.
I-1
<PAGE>
"LANDLORD'S SHARES" means ___________ shares of Common Stock
[$1,198,750, BASED ON THE AVERAGE CLOSING PRICE OF COMMON STOCK FOR THE FIVE
DAYS PRIOR TO CLOSING].
"OBLIGATIONS" has the meaning set forth in Section 2(a) of this
Agreement.
"PLEDGED LANDLORD'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.
"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.
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, or any of Pledgor's direct or indirect
subsidiaries or Affiliates arising under the Lease or in connection with any
agreement, instrument or extension contemplated by the Lease (collectively, the
"Obligations"), Pledgor hereby pledges, hypothecates and grants to Secured Party
a first and prior security interest in the Landlord's Shares owned by Pledgor
(the "Pledged Landlord's Shares"), together with, after an occurrence and during
the continuance of an Event of Default hereunder, 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 Landlord's Shares (the Pledged Landlord'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 in an amount equal to the fair market value of the substituted shares.
Prior to 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
I-2
<PAGE>
part of the Security Fund and shall only be disbursed in accordance with the
terms of 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, Pledgor or any of Pledgor's direct or
indirect subsidiaries arising under 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, Pledgor 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.
(b) 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. 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 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.
4. SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT
OF LIABILITY. 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.
5. 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 Landlord's Shares; (ii) Pledgor has the right to pledge the
Pledged Landlord's Shares; (iii) the Pledged Landlord'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
Landlord'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
I-3
<PAGE>
Landlord's Shares are true and complete; (vi) no financing statement covering
any of the Pledged Landlord's Shares and naming any secured party other than
Secured Party, is on file in any public office; and (vii) the pledge, assignment
and delivery of the Pledged Landlord's Shares pursuant to this Agreement creates
a valid lien and a security interest in the Pledged Landlord's Shares.
6. 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, excepting losses relating to the decrease in
the market value of the Pledged Landlord's Shares; (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 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 Landlord'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 Landlord'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 Landlord'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 to receive and use reasonable diligence to
collect proceeds from the Pledged Landlord'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 Landlord's Shares with other property; (vii) to provide any
service and do any other acts or things necessary to keep the Pledged Landlord's
Shares free and clear of all defenses, rights of offset and counterclaims; and
(viii) if the Pledged Landlord's Shares consists of securities and so long as no
Event of Default 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.
7. 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
I-4
<PAGE>
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 Landlord'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 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 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 Landlord'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 Landlord'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 Landlord's Shares and
in connection therewith, the right to deposit and deliver any and all of the
Pledged Landlord'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 Landlord's Shares and shall not be responsible for any failure to do so
or delay in so doing.
8. CASH COLLATERAL ACCOUNT. Any money received by Secured Party in
respect of the Security Fund will be retained by Secured Party in an
interest-bearing cash collateral account and the same shall, for all purposes,
be deemed part of the Security Fund hereunder.
I-5
<PAGE>
9. SECURED PARTY'S CARE AND DELIVERY OF PLEDGED LANDLORD'S SHARES;
RELEASE.
(a) 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. Such duty shall not
include any obligation to ascertain or to initiate any action with respect to
maturity dates, conversion, call or exchange rights, or offers to purchase the
Pledged Landlord's Shares or any similar matters; PROVIDED, HOWEVER, that
Secured Party shall be obligated to inform Pledgor, in writing, of maturity
dates, conversion, call or exchange rights, or offers to purchase the Pledged
Landlord's Shares or any similar matters of which it has knowledge. 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 Landlord's Shares.
Secured Party shall not be obligated to take any actions with respect to the
Pledged Landlord's Shares requested by Pledgor unless such request is made in
writing and Secured Party determines, in its reasonable discretion, that the
requested action would not unreasonably jeopardize the value of the Pledged
Landlord'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.
(b) The Pledged Landlord's Shares shall be released from the
lien of the Secured Party under this agreement at the times and in the manner
specified in EXHIBIT A.
10. PLEDGOR'S WAIVERS.
Pledgor waives any right to require Secured Party to (i) give
notice of the terms, time and place of any public or private sale of personal
property security held from Pledgor or any other person or otherwise comply with
any other provisions of Section 9-504 Uniform Commercial Code; (ii) pursue any
other remedy in Secured Party's power, including the disposition of any other
Collateral; or (iii) 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 security or which constitute in whole or in part the
Obligations secured hereunder, or in connection with the creation of new or
additional Obligations.
11. 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) take
and hold security, other than the Pledged Landlord's Shares, for the payment of
the Obligations or any part thereof and exchange, enforce, waive and release the
Pledged Landlord's Shares, or any part thereof, or any such other security; (b)
after an Event of Default, apply the Pledged Landlord's Shares or any other
security and direct the order or manner of sale thereof, including without
I-6
<PAGE>
limitation, a non-judicial sale permitted by the terms of this Agreement, as
Secured Party in its discretion may determine; (c) 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 (d) apply payments received by Secured Party
from Pledgor to any Obligations of 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.
12. 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.
13. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any Event of Default
under the Lease; or (b) any representation or warranty made by Pledgor herein
shall prove to be incorrect in any material respect when made; or (c) 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.
14. 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, 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
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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 Landlord'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.
15. DISPOSITION OF PLEDGED LANDLORD'S SHARES. Secured Party shall
not transfer all or any part of the Pledged Landlord's Shares or Security Fund
except in connection with the exercise of remedies as provided in Section 14
above. Any proceeds of any disposition of any of the Pledged Landlord'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.
16. 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 Landlord'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.
17. GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to principles of conflicts of laws (other than Section 5-1401
of the New York General Obligations Law) and shall be binding upon and inure to
the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision
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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.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
PLEDGOR
EAGLE RIDGE LEASE COMPANY LLC,
a Delaware limited liability company
By: TROON GOLF L.L.C.
Its: Member
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
SECURED PARTY
GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
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EXHIBIT I-1
RELEASE OF PLEDGED LANDLORD'S SHARES
The Pledged Landlord's Shares (or an equivalent dollar amount if held
in cash or other securities) shall be released, and shall no longer constitute
collateral security for the Obligations, at such time as the Net Operating
Income after funding the Capital Replacement Reserve with respect to the
Property shall have been, for any trailing twelve (12) month period, one hundred
twenty percent (120%) of the Debt Service payable by Pledgor for Fiscal Year
1997.
Upon Pledgor's request, and at Pledgor's expense, Secured Party shall
execute a written instrument of release with respect to any Pledged Landlord's
Shares that are released in accordance with the above Paragraph.
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EXHIBIT J*
EAGLE RIDGE
CAPITAL IMPROVEMENT BUDGET
<TABLE>
<CAPTION>
PRELIMINARY REVISED
----------- -------
<S> <C> <C>
GOLF
Cart Storage $ - $ 50,000
Golf Maintenance Building $ - 75,000
Bunker Renovation $ - 100,000
Restrooms on General $ - 70,000
100 Golf Carts $ - 250,000
Golf Signage $ 25,000 25,000
Rinse Area $ - 25,000
Golf Equipment $ 75,000 80,000
Clubhouse Upgrades $ 100,000 $ 100,000
-------- -------
TOTAL GOLF $ 200,000 $ 775,000
HOTEL
Room Renovations $ 500,000 $ 700,000
Fire & Life Safety $ 50,000 $ 350,000
ADA $ 10,000 $ 50,000
Mechanical and Electrical $ 50,000 $ 100,000
Systems & Computers $ 100,000 $ 250,000
Resurface Parking Lot & Cart Paths $ 10,000 $ 50,000
Hotel Signage $ 50,000 $ 10,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Preliminary Revised
----------- -------
<S> <C> <C>
Lobby Renovation $ - $ 40,000
Hotel Equipment $ 50,000 $ 90,000
----------- -----------
TOTAL HOTEL $ 820,000 $ 1,640,000
Contingency $ 105,000 $ 285,000
Total $ 1,125,000 $ 2,700,000
</TABLE>
*Tenant may, with Landlord's consent which cannot be unreasonably withheld,
increase or decrease specific line item amounts so long as the total capital
expended does not exceed $2,700,000.
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EXHIBIT K
MORTGAGE
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MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING (ILLINOIS)
BY AND FROM
EAGLE RIDGE LEASE COMPANY LLC, "MORTGAGOR"
TO
GOLF TRUST OF AMERICA, L.P., "MORTGAGEE"
THE SECURED PARTY (MORTGAGEE) DESIRES THIS FIXTURE FILING
TO BE INDEXED AGAINST THE RECORD OWNER OF THE REAL ESTATE
DESCRIBED HEREIN
PREPARED BY, RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:
O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, CA 94111-3305
Attention: Steven A. Cowan, Esq.
File # 319,440-033
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<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES AND
FIXTURE FILING (this "MORTGAGE") is dated as of May ____, 1998 by and from EAGLE
RIDGE LEASE COMPANY LLC, a Delaware limited liability company ("MORTGAGOR"),
whose address is 16100 N. Greenway-Hayden Loop, Scottsdale, AZ 85260 to GOLF
TRUST OF AMERICA, L.P., a Delaware limited partnership ("MORTGAGEE"), having an
address at 14 North Adger's Wharf, Charleston, South Carolina 29401.
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. All capitalized terms used herein
without definition shall have the respective meanings ascribed to them in that
certain Lease dated as of even date herewith between mortgagee as Landlord and
mortgagor as Tenant (as amended, supplemented or otherwise modified from time to
time, the "EAGLE RIDGE LEASE"). As used herein, the following terms shall have
the following meanings:
(a) "FINANCIAL OBLIGATIONS": (1) All amounts owed Mortgagor to
Mortgagee, including, without limitation, the sum of all (a) Debt Service under
and as defined in the Eagle Ridge Lease, and (b) any other amounts loaned by
Mortgagee under or in connection with the Eagle Ridge Lease, whether evidenced
by a promissory note or other instrument which, by its terms, is secured hereby,
and (2) all other indebtedness, obligations and liabilities now or hereafter
existing of any kind of Mortgagor to Mortgagee under documents which recite that
they are intended to be secured by this Mortgage.
(b) "MORTGAGED PROPERTY": All of Mortgagor's interest in (1) the
leasehold interest in the real property described in EXHIBIT A attached hereto
and incorporated herein by this reference and held by Mortgagor under the Eagle
Ridge Lease, together with any greater estate therein as hereafter may be
acquired by Mortgagor (the "LAND"), (2) all improvements now owned or hereafter
acquired by Mortgagor, now or at any time situated, placed or constructed upon
the Land (the "IMPROVEMENTS"; the Land and Improvements are collectively
referred to as the "PREMISES"), (3) all materials, supplies, equipment,
apparatus and other items of personal property now owned or hereafter acquired
by Mortgagor and now or hereafter attached to, installed in or used in
connection with any of the Improvements or the Land, and water, gas, electrical,
telephone, storm and sanitary sewer facilities and all other utilities whether
or not situated in easements (the "FIXTURES"), (4) all right, title and interest
of Mortgagor in and to all goods, accounts, general intangibles, instruments,
documents, chattel paper and all other personal property of any kind or
character, including such items of personal property as defined in the UCC
(defined below), now owned or hereafter acquired by Mortgagor and now or
hereafter affixed to, placed upon, used in connection with, arising from or
otherwise related to the Premises (the "PERSONALTY"), (5) all reserves, escrows
or impounds required under the Eagle Ridge Lease and all deposit accounts
maintained by Mortgagor with respect to the Mortgaged Property (the "DEPOSIT
ACCOUNTS"), (6) all subleases, licenses, concessions,
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occupancy agreements or other agreements (written or oral, now or at any time in
effect) which grant to any Person a possessory interest in, or the right to use,
all or any part of the Mortgaged Property, together with all related security
and other deposits (the "LEASES"), (7) all of the rents, revenues, royalties,
income, proceeds, profits, security and other types of deposits, and other
benefits paid or payable by parties to the Leases for using, leasing, licensing
possessing, operating from, residing in, selling or otherwise enjoying the
Mortgaged Property (the "RENTS"), (8) all other agreements, such as construction
contracts, architects' agreements, engineers' contracts, utility contracts,
maintenance agreements, management agreements, service contracts, listing
agreements, guaranties, warranties, permits, licenses, certificates and
entitlements in any way relating to the construction, use, occupancy, operation,
maintenance, enjoyment or ownership of the Mortgaged Property (the "PROPERTY
AGREEMENTS"), (9) all rights, privileges, tenements, hereditaments,
rights-of-way, easements, appendages and appurtenances appertaining to the
foregoing, (10) all property tax refunds (the "TAX REFUNDS"), (11) all
accessions, replacements and substitutions for any of the foregoing and all
proceeds thereof (the "PROCEEDS"), (12) all insurance policies, unearned
premiums therefor and proceeds from such policies covering any of the above
property now or hereafter acquired by Mortgagor (the "INSURANCE"), and (13) all
of Mortgagor's right, title and interest in and to any awards, damages,
remunerations, reimbursements, settlements or compensation heretofore made or
hereafter to be made by any governmental authority pertaining to the Land,
Improvements, Fixtures or Personalty (the "CONDEMNATION AWARDS"). As used in
this Mortgage, the term "Mortgaged Property" shall mean all or, where the
context permit or requires, any portion of the above or any interest therein.
(c) "OBLIGATIONS": All of the agreements, covenants, conditions,
warranties, representations and other obligations of Mortgagor (including,
without limitation, the Financial Obligations) under the Eagle Ridge Lease.
(d) "UCC": The Uniform Commercial Code of Illinois or, if the
creation, perfection and enforcement of any security interest herein granted is
governed by the laws of a state other than Illinois, then, as to the matter in
question, the Uniform Commercial Code in effect in that state.
ARTICLE 2
GRANT
SECTION 2.1. GRANT. To secure the full and timely performance of the
Obligations, Mortgagor MORTGAGES, GRANTS, BARGAINS, ASSIGNS, SELLS and CONVEYS,
to Mortgagee the Mortgaged Property, subject, however, to the Permitted
Encumbrances, TO HAVE AND TO HOLD the Mortgaged Property to Mortgagee, and
Mortgagor does hereby bind itself, its successors and assigns to WARRANT AND
FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee.
ARTICLE 3
WARRANTIES, REPRESENTATIONS AND COVENANTS
Mortgagor warrants, represents and covenants to Mortgagee as follows:
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<PAGE>
SECTION 3.1. TITLE TO MORTGAGED PROPERTY AND LIEN OF THIS INSTRUMENT.
Mortgagor owns the Mortgaged Property free and clear of any liens, claims or
interests, except the Permitted Encumbrances. This Mortgage creates valid,
enforceable first priority liens and security interests against the Mortgaged
Property.
SECTION 3.2. FIRST LIEN STATUS. Mortgagor shall preserve and protect
the first lien and security interest status of this Mortgage. If any lien or
security interest other than the Permitted Encumbrances is asserted against the
Mortgaged Property, Mortgagor shall promptly, and at its expense, (a) give
Mortgagee a detailed written notice of such lien or security interest (including
origin, amount and other terms), and (b) pay the underlying claim in full or
take such other action so as to cause it to be released or contest the same in
compliance with the requirements of the Eagle Ridge Lease (including the
requirement of providing a bond or other security satisfactory to Mortgagee).
SECTION 3.3. PAYMENT AND PERFORMANCE. Mortgagor shall perform the
Obligations in full (including, without limitation, payment of the Financial
Obligations when due) when they are required to be performed.
SECTION 3.4. REPLACEMENT OF FIXTURES AND PERSONALTY. Mortgagor shall
not, without the prior written consent of Mortgagee, permit any of the Fixtures
or Personalty to be removed at any time from the Land or Improvements, unless
the removed item is removed temporarily for maintenance and repair or, if
removed permanently, is obsolete and is replaced by an article of equal or
better suitability and value, owned by Mortgagor subject to the liens and
security interests of this Mortgage, and free and clear of any other lien or
security interest except such as may be permitted under the Eagle Ridge Lease or
first approved in writing by Mortgagee.
SECTION 3.5. INSPECTION. Mortgagor shall permit Mortgagee, and
Mortgagee's agents, representatives and employees, upon reasonable prior notice
to Mortgagor, to inspect the Mortgaged Property and all books and records of
Mortgagor located thereon, and to conduct such environmental and engineering
studies as Mortgagee may require, provided that such inspections and studies
shall not materially interfere with the use and operation of the Mortgaged
Property.
SECTION 3.6. OTHER COVENANTS. All of the covenants in the Eagle
Ridge Lease are incorporated herein by reference and, together with covenants in
this ARTICLE 3, shall be covenants running with the land.
SECTION 3.7. CONDEMNATION AWARDS AND INSURANCE PROCEEDS.
(a) CONDEMNATION AWARDS. Mortgagor assigns all awards and
compensation to which it is entitled for any condemnation or other taking, or
any purchase in lieu thereof, to Mortgagee and authorizes Mortgagee to collect
and receive such awards and compensation and to give proper receipts and
acquittances therefor, subject to the terms of the Eagle Ridge Lease.
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<PAGE>
(b) INSURANCE PROCEEDS. Mortgagor assigns to Mortgagee all
proceeds of any insurance policies insuring against loss or damage to the
Mortgaged Property. Mortgagor authorizes Mortgagee to collect and receive such
proceeds and authorizes and directs the issuer of each of such insurance
policies to make payment for all such losses directly to Mortgagee, instead of
to Mortgagor and Mortgagee jointly.
ARTICLE 4
[INTENTIONALLY OMITTED]
ARTICLE 5
DEFAULT AND FORECLOSURE
SECTION 5.1. REMEDIES. If an Event of Default exists, Mortgagee may,
at Mortgagee's election, exercise any or all of the following rights, remedies
and recourses:
(a) ACCELERATION. Declare the Financial Obligations which are loans
to Mortgagor to be immediately due and payable, without further notice,
presentment, protest, notice of intent to accelerate, notice of acceleration,
demand or action of any nature whatsoever (each of which hereby is expressly
waived by Mortgagor), whereupon the same shall become immediately due and
payable.
(b) ENTRY ON MORTGAGED PROPERTY. Enter the Mortgaged Property and
take exclusive possession thereof and of all books, records and accounts
relating thereto or located thereon. If Mortgagor remains in possession of the
Mortgaged Property after an Event of Default and without Mortgagee's prior
written consent, Mortgagee may invoke any legal remedies to dispossess
Mortgagor.
(c) OPERATION OF MORTGAGED PROPERTY. Hold, lease, develop, manage,
operate or otherwise use the Mortgaged Property upon such terms and conditions
as Mortgagee may deem reasonable under the circumstances (making such repairs,
alternations, additions and improvements and taking other actions, from time to
time, as Mortgagee deems necessary or desirable), and apply all Rents and other
amounts collected by Mortgagee in connection therewith in accordance with the
provisions of SECTION 5.7.
(d) FORECLOSURE AND SALE. Institute proceedings for the complete
foreclosure of this Mortgage by judicial action, in which case the Mortgaged
Property may be sold for cash or credit in one or more parcels. With respect to
any notices required or permitted under the UCC, Mortgagor agrees that five (5)
days' prior written notice shall be deemed commercially reasonable. At any such
sale by virtue of any judicial proceedings or any other legal right, remedy or
recourse, the title to and right of possession of any such property shall pass
to the purchaser thereof, and to the fullest extent permitted by law, Mortgagor
shall be completely and irrevocably divested of all of its right, title,
interest, claim, equity, equity of redemption, and demand whatsoever, either at
law or in equity, in and to the property sold and such sale shall be a perpetual
bar both at law and in equity against Mortgagor, and against all other Persons
claiming or to claim the property sold or any part thereof, by, through or under
Mortgagor.
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Mortgagee may be a purchaser at such sale and if Mortgagee is the highest
bidder, Mortgagee may credit the portion of the purchase price that would be
distributed to Mortgagee against the Financial Obligations in lieu of paying
cash. In the event this Mortgage is foreclosed by judicial action, appraisement
of the Mortgaged Property is waived.
(e) RECEIVER. Make application to a court of competent jurisdiction
for, and obtain from such court as a matter of strict right and without notice
to Mortgagor or regard to the adequacy of the Mortgaged Property for the payment
of the Financial Obligations, the appointment of a receiver of the Mortgaged
Property, and Mortgagor irrevocably consents to such appointment. Any such
receiver shall have all the usual powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Mortgaged Property upon such terms as may be approved by the court, and shall
apply such Rents in accordance with the provisions of SECTION 5.7.
(f) OTHER. Exercise all other rights, remedies and recourses granted
under the Eagle Ridge Lease or otherwise available at law or in equity.
SECTION 5.2. SEPARATE SALES. The Mortgaged Property may be sold in
one or more parcels and in such manner and order as Mortgagee in its sole
discretion may elect; the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.
SECTION 5.3. REMEDIES CUMULATIVE, CONCURRENT AND NONEXCLUSIVE.
Mortgagee shall have all rights, remedies and recourses granted in the Eagle
Ridge Lease and available at law or equity (including the UCC), which rights (a)
shall be cumulated and concurrent, (b) may be pursued separately, successively
or concurrently against Mortgagor or against the Mortgaged Property, or against
any one or more of them, at the sole discretion of Mortgagee, (c) may be
exercised as often as occasion therefor shall arise, and the exercise or failure
to exercise any of them shall not be construed as a waiver or release thereof or
of any other right, remedy or recourse, and (d) are intended to be, and shall
be, nonexclusive. No action by Mortgagee in the enforcement of any rights,
remedies or recourses under the Eagle Ridge Lease or otherwise at law or equity
shall be deemed to cure any Event of Default.
SECTION 5.4. RELEASE OF AND RESORT TO COLLATERAL. Mortgagee may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of any subordinate lien on the Mortgaged Property, any
part of the Mortgaged Property without, as to the remainder, in any way
impairing, affecting, subordinating or releasing the lien or security interest
created in or evidenced by the Eagle Ridge Lease or their status as a first and
prior lien and security interest in and to the Mortgaged Property. For payment
of the Financial Obligations, Mortgagee may resort to any other security in such
order and manner as Mortgagee may elect.
SECTION 5.5. WAIVER OF REDEMPTION, NOTICE AND MARSHALLING OF ASSETS.
To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefit that might accrue to
Mortgagor by virtue of any present or future statute of limitations or law or
judicial decision exempting the Mortgaged Property from attachment, levy or sale
on execution or providing for any stay of execution, exemption from
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civil process, redemption or extension of time for payment, (b) all notices of
any Event of Default or of Mortgagee's election to exercise or the actual
exercise of any right, remedy or recourse provided for under the Eagle Ridge
Lease, and (c) any right to a marshalling of assets or a sale in inverse order
of alienation.
SECTION 5.6. DISCONTINUANCE OF PROCEEDINGS. If Mortgagee shall have
proceeded to invoke any right, remedy or recourse permitted under the Eagle
Ridge Lease and shall thereafter elect to discontinue or abandon it for any
reason, Mortgagee shall have the unqualified right to do so and, in such an
event, Mortgagor and Mortgagee shall be restored to their former positions with
respect to the Obligations, the Eagle Ridge Lease, the Mortgaged Property and
otherwise, and the rights, remedies, recourses and powers of Mortgagee shall
continue as if the right, remedy or recourse had never been invoked, but no such
discontinuance or abandonment shall waive any Event of Default which may then
exist or the right of Mortgagee thereafter to exercise any right, remedy or
recourse under the Eagle Ridge Lease for such Event of Default.
SECTION 5.7. APPLICATION OF PROCEEDS. The proceeds of any sale of,
and the Rents and other amounts generated by the holding, leasing, management,
operation or other use of the Mortgaged Property, shall be applied by Mortgagee
(or the receiver, if one is appointed) in the following order unless otherwise
required by applicable law:
(a) to the payment of the costs and expenses of taking possession of
the Mortgaged Property and of holding, using, leasing, repairing, improving and
selling the same, including, without limitation (1) receiver's fees and
expenses, including the repayment of the amounts evidenced by any receiver's
certificates, (2) court costs, (3) attorneys' and accountants' fees and
expenses, and (4) costs of advertisement;
(b) to the payment of the Financial Obligations in such manner and
order of preference as Mortgagee in its sole discretion may determine; and
(c) the balance, if any, to the payment of the Persons legally
entitled thereto.
SECTION 5.8. OCCUPANCY AFTER FORECLOSURE. Any sale of the Mortgaged
Property or any part thereof in accordance with SECTION 5.1(d) will divest all
right, title and interest of Mortgagor in and to the property sold. Subject to
applicable law, any purchaser at a foreclosure sale will receive immediate
possession of the property purchased. If Mortgagor retains possession of such
property or any part thereof subsequent to such sale, Mortgagor will be
considered a tenant at sufferance of the purchaser, and will, if Mortgagor
remains in possession after demand to remove, be subject to eviction and
removal, forcible or otherwise, with or without process of law.
SECTION 5.9. ADDITIONAL ADVANCES AND DISBURSEMENTS; COSTS OF
ENFORCEMENT.
(a) If any Event of Default exists, Mortgagee shall have the right,
but not the obligation, to cure such Event of Default in the name and on behalf
of Mortgagor. All sums advanced and expenses incurred at any time by Mortgagee
under this SECTION 5.9, or otherwise under this Mortgage or the Eagle Ridge
Lease or applicable law, shall bear interest from the date
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that such sum is advanced or expense incurred, to and including the date of
reimbursement, computed at the rate or rates at which interest is then computed
on the Financial Obligations, and all such sums, together with interest thereon,
shall be secured by this Mortgage.
(b) Mortgagor shall pay all expenses (including reasonable attorneys'
fees and expenses) of or incidental to the perfection and enforcement of this
Mortgage and the Eagle Ridge Lease, or the enforcement, compromise or settlement
of the Obligations or any claim under this Mortgage and the Eagle Ridge Lease,
and for the curing thereof, or for defending or asserting the rights and claims
of Mortgagee in respect thereof, by litigation or otherwise.
SECTION 5.10. NO MORTGAGEE IN POSSESSION. Neither the enforcement of
any of the remedies under this ARTICLE 5, the assignment of the Rents and Leases
under ARTICLE 6, the security interests under ARTICLE 7, nor any other remedies
afforded to Mortgagee under the Eagle Ridge Lease, at law or in equity shall
cause Mortgagee to be deemed or construed to be a mortgagee in possession of the
Mortgaged Property, to obligate Mortgagee to lease the Mortgaged Property or
attempt to do so, or to take any action, incur any expense, or perform or
discharge any obligation, duty or liability whatsoever under any of the Leases
or otherwise.
ARTICLE 6
ASSIGNMENT OF RENTS AND LEASES
SECTION 6.1. ASSIGNMENT. In furtherance of and in addition to the
assignment made by Mortgagor in SECTION 2.1 of this Mortgage, Mortgagor hereby
absolutely and unconditionally assigns, sells, transfers and conveys to
Mortgagee all of its right, title and interest in and to all Leases, whether now
existing or hereafter entered into, and all of its right, title and interest in
and to all Rents. This assignment is an absolute assignment and not an
assignment for additional security only. So long as no Event of Default shall
have occurred and be continuing, Mortgagor shall have a revocable license from
Mortgagee to exercise all rights extended to the landlord under the Leases,
including the right to receive and collect all Rents and to hold the Rents in
trust for use in the payment and performance of the Obligations and to otherwise
use the same. The foregoing license is granted subject to the conditional
limitation that no Event of Default shall have occurred and be continuing. Upon
the occurrence and during the continuance of an Event of Default, whether or not
legal proceedings have commenced, and without regard to waste, adequacy of
security for the Obligations or solvency of Mortgagor, the license herein
granted shall automatically expire and terminate, without notice by Mortgagee
(any such notice being hereby expressly waived by Mortgagor).
SECTION 6.2. PERFECTION UPON RECORDATION. Mortgagor acknowledges
that Mortgagee has taken all actions necessary to obtain, and that upon
recordation of this Mortgage Mortgagee shall have, to the extent permitted under
applicable law, a valid and fully perfected, first priority, present assignment
of the Rents arising out of the Leases and all security for such Leases.
Mortgagor acknowledges and agrees that upon recordation of this Mortgage
Mortgagee's interest in the Rents shall be deemed to be fully perfected,
"choate" and enforced as to Mortgagor and all third parties, including, without
limitation, any subsequently appointed trustee in any case under Title 11 of the
United States Code (the "BANKRUPTCY CODE"), without the necessity of commencing
a foreclosure action with respect to this Mortgage, making formal
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demand for the Rents, obtaining the appointment of a receiver or taking any
other affirmative action.
SECTION 6.3. BANKRUPTCY PROVISIONS. Without limitation of the
absolute nature of the assignment of the Rents hereunder, Mortgagor and
Mortgagee agree that (a) this Mortgage shall constitute a "security agreement"
for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest
created by this Mortgage extends to property of Mortgagor acquired before the
commencement of a case in bankruptcy and to all amounts paid as Rents and (c)
such security interest shall extend to all Rents acquired by the estate after
the commencement of any case in bankruptcy.
SECTION 6.4. NO MERGER OF ESTATES. So long as part of the
Obligations secured hereby remain undischarged, the fee and leasehold estates to
the Mortgaged Property shall not merge, but shall remain separate and distinct,
notwithstanding the union of such estates either in Mortgagor, Mortgagee, any
tenant or any third party by purchase or otherwise.
ARTICLE 7
SECURITY AGREEMENT
SECTION 7.1. SECURITY INTEREST. This Mortgage constitutes a
"security agreement" on personal property within the meaning of the UCC and
other applicable law and with respect to the Personalty, Fixtures, Leases,
Rents, Deposit Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance
and Condemnation Awards. To this end, Mortgagor grants to Mortgagee a first and
prior security interest in the Personalty, Fixtures, Leases, Rents, Deposit
Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance, Condemnation
Awards and all other Mortgaged Property which is personal property to secure the
performance of the Obligations, and agrees that Mortgagee shall have all the
rights and remedies of a secured party under the UCC with respect to such
property. Any notice of sale, disposition or other intended action by Mortgagee
with respect to the Personalty, Fixtures, Leases, Rents, Deposit Accounts,
Property Agreements, Tax Refunds, Proceeds, Insurance and Condemnation Awards
sent to Mortgagor at least five (5) days prior to any action under the UCC shall
constitute reasonable notice to Mortgagor.
SECTION 7.2. FINANCING STATEMENTS. Mortgagor shall execute and
deliver to Mortgagee, in form and substance satisfactory to Mortgagee, such
financing statements and such further assurances as Mortgagee may, from time to
time, reasonably consider necessary to create, perfect and preserve Mortgagee's
security interest hereunder and Mortgagee may cause such statements and
assurances to be recorded and filed, at such times and places as may be required
or permitted by law to so create, perfect and preserve such security interest.
Mortgagor's chief executive office is in the State of Arizona at the address set
forth in the first paragraph of this Mortgage.
SECTION 7.3. FIXTURE FILING. This Mortgage shall also constitute a
"fixture filing" for the purposes of the UCC against all of the Mortgaged
Property which is or is to become fixtures. Information concerning the security
interest herein granted may be obtained
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at the addresses of Debtor (Mortgagor) and Secured Party (Mortgagee) as set
forth in the first paragraph of this Mortgage.
ARTICLE 8
[INTENTIONALLY OMITTED]
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. NOTICES. Any notice required or permitted to be given
under this Mortgage shall be given in accordance with Section 28.10 of the Eagle
Ridge Lease.
SECTION 9.2. COVENANTS RUNNING WITH THE LAND. All Obligations
contained in this Mortgage are intended by Mortgagor and Mortgagee to be, and
shall be construed as, covenants running with the Mortgaged Property. As used
herein, "Mortgagor" shall refer to the party named in the first paragraph of
this Mortgage and to any subsequent owner of all or any portion of the Mortgaged
Property. All Persons who may have or acquire an interest in the Mortgaged
Property shall be deemed to have notice of, and be bound by, the terms of the
Eagle Ridge Lease; however, no such party shall be entitled to any rights
thereunder without the prior written consent of Mortgagee.
SECTION 9.3. ATTORNEY-IN-FACT. Mortgagor hereby irrevocably appoints
Mortgagee and its successors and assigns, as its attorney-in-fact, which agency
is coupled with an interest and with full power of substitution, (a) to execute
and/or record any notices of completion, cessation of labor or any other notices
that Mortgagee deems appropriate to protect Mortgagee's interest, if Mortgagor
shall fail to do so within ten (10) days after written request by Mortgagee, (b)
upon the issuance of a deed pursuant to the foreclosure of this Mortgage or the
delivery of a deed in lieu of foreclosure, to execute all instruments of
assignment, conveyance or further assurance with respect to the Leases, Rents,
Deposit Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance and
Condemnation Awards in favor of the grantee of any such deed and as may be
necessary or desirable for such purpose, (c) to prepare, execute and file or
record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve
Mortgagee's security interests and rights in or to any of the Mortgaged
Property, and (d) while any Event of Default exists, to perform any obligation
of Mortgagor hereunder, however: (1) Mortgagee shall not under any circumstances
be obligated to perform any obligation of Mortgagor; (2) any sums advanced by
Mortgagee in such performance shall be added to and included in the Financial
Obligations and shall bear interest at the rate or rates at which interest is
then computed on the Financial Obligations; (3) Mortgagee as such
attorney-in-fact shall only be accountable for such funds as are actually
received by Mortgagee; and (4) Mortgagee shall not be liable to Mortgagor or any
other person or entity for any failure to take any action which it is empowered
to take under this SECTION 9.3.
SECTION 9.4. SUCCESSORS AND ASSIGNS. This Mortgage shall be binding
upon and inure to the benefit of Mortgagee and Mortgagor and their respective
successors and assigns.
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Mortgagor shall not, without the prior written consent of Mortgagee, assign any
rights, duties or obligations hereunder.
SECTION 9.5. NO WAIVER. Any failure by Mortgagee to insist upon
strict performance of any of the terms, provisions or conditions of the Eagle
Ridge Lease shall not be deemed to be a waiver of same, and Mortgagee shall have
the right at any time to insist upon strict performance of all of such terms,
provisions and conditions.
SECTION 9.6. EAGLE RIDGE LEASE. If any conflict or inconsistency
exists between this Mortgage and the Eagle Ridge Lease, the Eagle Ridge Lease
shall govern.
SECTION 9.7. RELEASE OR RECONVEYANCE. Upon (a) execution of
definitive agreements for the Development or Timeshare Development of the
Additional Parcels (as defined in the Development Agreement dated of even date
herewith between Mortgagor and Mortgagee ("the Development Agreement")) (whether
Mortgagee participates in such development or not) in accordance with the
Development Agreement or (b) Transfer of the Additional Parcels in accordance
with Section 5 of the Development Agreement, Mortgagee, at Mortgagor's expense,
shall release the liens and security interests created by this Mortgage or
reconvey the Mortgaged Property to Mortgagor.
SECTION 9.8. WAIVER OF STAY, MORATORIUM AND SIMILAR RIGHTS.
Mortgagor agrees, to the full extent that it may lawfully do so, that it will
not at any time insist upon or plead or in any way take advantage of any stay,
marshalling of assets, extension, redemption or moratorium law now or hereafter
in force and effect so as to prevent or hinder the enforcement of the provisions
of this Mortgage or the Obligations secured hereby, or any agreement between
Mortgagor and Mortgagee or any rights or remedies of Mortgagee.
SECTION 9.9. APPLICABLE LAW. The provisions of this Mortgage
regarding the creation, perfection and enforcement of the liens and security
interests herein granted shall be governed by and construed under the laws of
the state in which the Mortgaged Property is located. All other provisions of
this Mortgage shall be governed by the laws of the State of New York (including,
without limitation, Section 5-1401 of the General Obligations Law of the State
of New York), without regard to conflicts of laws principles.
SECTION 9.10. HEADINGS. The Article, Section and Subsection titles
hereof are inserted for convenience of reference only and shall in no way alter,
modify or define, or be used in construing, the text of such Articles, Sections
or Subsections.
SECTION 9.11. ENTIRE AGREEMENT. This Mortgage and the Eagle Ridge
Lease embody the entire agreement and understanding between Mortgagee and
Mortgagor and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof. Accordingly, the
Eagle Ridge Lease may not be contradicted by evidence of prior, contemporaneous
or subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
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ARTICLE 10
LOCAL LAW PROVISIONS
SECTION 10.1. INCONSISTENCIES. In the event of any inconsistencies
between the terms and conditions of this ARTICLE 10 and the other provisions of
this Mortgage, the terms and conditions of this ARTICLE 10 shall control and be
binding.
SECTION 10.2. IN REM PROCEEDINGS. Supplementing SECTION 5.1 hereof,
mortgage foreclosures and other IN REM proceedings against Mortgagor may be
brought in Jo Daviess County, Illinois or any federal court of competent
jurisdiction in Illinois.
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IN WITNESS WHEREOF, Mortgagor has on the date set forth in the
acknowledgement hereto, effective as of the date first above written, caused
this instrument to be duly EXECUTED AND DELIVERED by authority duly given.
MORTGAGOR: EAGLE RIDGE LEASE COMPANY LLC
a Delaware limited liability company
By: TROON GOLF L.L.C.
Its: Member
By:_________________________________
Name:
Title:
Attest:________________________________
Name:
Title:
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STATE OF _________ )
) ss.:
COUNTY OF ________ )
I, ____________________________, a Notary Public in and for said
County, in the State aforesaid, DO HEREBY CERTIFY, that ______________,
personally known to me to be the ______________________ of TROON EAGLE RIDGE,
INC., a member of EAGLE RIDGE LEASE COMPANY LLC, a Delaware limited liability
company and _____________________, personally known to me to be the
_______________ Secretary of said corporation, whose names are subscribed to the
within instrument, appeared before me this day in person and severally
acknowledged that as such _________________ and __________________ Secretary
they signed and delivered the said instrument as _______________ and
_______________ Secretary of said corporation as their free and voluntary act
and as the free and voluntary act and deed of said corporation and said
partnership, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this ____ day of _____________,
A.D. 1998.
_____________________________
Notary Public
My Commission Expires:
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EXHIBIT A
The permanent tax index number for the Land is __________________.
Legal Description of premises located at __________________________:
Exh. A-1
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EXHIBIT B
Exh. A-1
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Exh. A-2
