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As Filed with the Securities and Exchange Commission on March 30, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
/x/ Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
DECEMBER 31, 1999.
/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ________ to ________.
Commission File Number 000-22091
GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Maryland 33-0724736
(State or other jurisdiction of (I.R.S Employer Identification Number)
incorporation or organization)
14 North Adger's Wharf, Charleston, South Carolina 29401; (843) 723-4653
(Address of principal executive offices) (Zip Code) (Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value American Stock Exchange
Preferred Stock, Purchase Rights American Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
On March 22, 2000 there were 8,118,147 common shares outstanding of the
registrant's only class of common stock. Based on the March 22, 2000 closing
price of $17.938 per share, the aggregate market value of the voting stock
held by nonaffiliates of the registrant was $145,623,320.89. On March 22,
2000, there were 800,000 shares outstanding of the registrant's 9.25% Series A
Cumulative Convertible Preferred Stock which is the registrant's only class
of preferred stock.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive Proxy Statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's 1999 fiscal year, are
incorporated by reference in Part III of this Form 10-K; and certain exhibits to
the Company's prior reports on Forms 10-Q and 8-K, Registration Statements of
Employee Stock Purchase Plan and Employee Stock Option Plans on Forms S-8 (nos.
333-46659 and 333-46657), and Registration Statements on Form S-11 (nos.
333-15965 and 333-36847) are incorporated by reference in Part IV hereof.
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TABLE OF CONTENTS
<TABLE>
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PART I....................................................................................................................1
ITEM 1. BUSINESS....................................................................................................1
(a) GENERAL DESCRIPTION OF THE BUSINESS.....................................................................1
COMPANY OVERVIEW...........................................................................................1
SUBSIDIARIES AND THE OPERATING PARTNERSHIP.................................................................2
RECENT DEVELOPMENTS........................................................................................3
PREFERRED INTEREST...............................................................................3
ACQUISITIONS.....................................................................................3
DISPOSITIONS.....................................................................................3
EVENTS OF DEFAULT UNDER THE PARTICIPATING LEASE..................................................4
ADOPTION OF SHAREHOLDER RIGHTS PLAN..............................................................6
CREDIT FACILITY AND LINE OF CREDIT...............................................................6
INTEREST RATE SWAP AGREEMENT.....................................................................6
REORGANIZATION OF THE ACQUISITION DEPARTMENT.....................................................6
LOANS TO OFFICERS................................................................................7
STOCK REPURCHASE PROGRAM.........................................................................7
UNSOLICITED PROPOSAL.............................................................................7
APPOINTMENT OF FINANCIAL ADVISOR.................................................................8
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS...........................................................9
(c) NARRATIVE DESCRIPTION OF BUSINESS......................................................................10
BUSINESS OBJECTIVE AND STRATEGY...........................................................................10
INVESTMENT CRITERIA.............................................................................12
ACQUISITION STRATEGY............................................................................13
INTERNAL GROWTH.................................................................................16
EMPLOYEES ................................................................................................19
ENVIRONMENTAL MATTERS.....................................................................................19
TAX STATUS................................................................................................19
GOVERNMENT REGULATION.....................................................................................20
COMPETITION...............................................................................................20
THE GOLF INDUSTRY.........................................................................................20
COMPETITIVE CONDITIONS..........................................................................21
DEMOGRAPHICS....................................................................................22
SEASONALITY.....................................................................................22
(d) FOREIGN OPERATIONS........................................................................................23
ITEM 2. PROPERTIES................................................................................................24
RESORT COURSES............................................................................................25
HIGH-END DAILY FEE COURSES................................................................................26
PRIVATE CLUB COURSES......................................................................................27
THE PARTICIPATING LEASES..................................................................................28
ITEM 3. LEGAL PROCEEDINGS.........................................................................................34
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................................36
PART II..................................................................................................................37
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................37
MARKET INFORMATION..............................................................................37
SHAREHOLDER INFORMATION.........................................................................37
DIVIDENDS.......................................................................................38
RECENT SALES OF UNREGISTERED SECURITIES.........................................................39
ITEM 6. SELECTED FINANCIAL DATA................................................................................40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................42
Results of operations of the Company for the years ended December 31, 1999 and December 31,1998
and the period from February 12 (inception) to December, 1997..........................................44
Liquidity and Capital Resources of the Company.........................................................49
Funds From Operations and Cash Available for Distribution..............................................55
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................................57
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ITEM 9. CHANGES IN THE COMPANY'S CERTIFIED PUBLIC ACCOUNTANT...................................................57
PART III.................................................................................................................58
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....................................................58
ITEM 11. EXECUTIVE COMPENSATION.................................................................................58
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................................58
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................58
PART IV..................................................................................................................59
a) FINANCIAL STATEMENTS...................................................................................59
FINANCIAL STATEMENTS............................................................................59
FINANCIAL STATEMENT SCHEDULES...................................................................59
EXHIBITS........................................................................................59
b) REPORTS ON FORM 8-K....................................................................................59
SIGNATURES.............................................................................................................. 60
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PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF THE BUSINESS
COMPANY OVERVIEW
Golf Trust of America, Inc. ("GTA") is a self-administered real estate
investment trust ("REIT") formed to capitalize upon consolidation opportunities
in the ownership of upscale golf courses throughout the United States. GTA was
incorporated in Maryland on November 8, 1996. GTA holds its golf course
interests through Golf Trust of America, L.P., a Delaware limited partnership
and, in one instance, through a wholly-owned affiliate of Golf Trust of America,
L.P. (collectively, the "Operating Partnership"), controlled by GTA. (In this
Annual Report, the term "Company" generally includes GTA, the Operating
Partnership, and their subsidiaries.) As of March 20, 2000, the Company holds
participating interests in 47 golf courses (the "Golf Courses"), 43 of which are
owned and four of which serve as collateral for a 30-year participating mortgage
loan made by the Company to the owner of the Westin Innisbrook Resort
("Participating Mortgage"). Golf Course quantities are stated in terms of
18-hole equivalents, such that one 27-hole golf course facility would be counted
as 1.5 golf courses. The Golf Courses are located in Florida (14), South
Carolina (6), Illinois (3.5), Ohio (3), Michigan (3.5), California (2.5),
Georgia (2), Virginia (2), Missouri (1.5), Nebraska (1.5), Texas (1.5), Alabama,
Kansas, Kentucky, North Carolina, New Mexico, and West Virginia.
The Golf Courses which the Company owns are leased to multiple
independent third party lessees (the "Lessees") pursuant to leases
("Participating Leases") which provide for payments ("Lease Payments") of fixed
base rent ("Base Rent") and participating rent ("Participating Rent") based on
growth in revenue at the Golf Courses, excepting a single Golf Course that is
currently being managed by GTA as explained in the section titled "Events of
Default under the Participating Lease" herein. The interest payment under the
Participating Mortgage is structured similarly to the Participating Leases to
provide the Company with base interest payments and additional interest payments
based on growth in revenue at the Westin Innisbrook Resort. Neither the Company
nor its executive officers own any interest in, or participate in the management
of, the Lessees or the owner of the Westin Innisbrook Resort, Golf Host Resorts,
Inc. (the "Westin Innisbrook Resort Owner").
The Company's executive offices are located at 14 North Adger's Wharf,
Charleston, South Carolina 29401 and its telephone number is (843) 723-GOLF
(4653).
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SUBSIDIARIES AND THE OPERATING PARTNERSHIP
GTA has two wholly owned subsidiaries, GTA GP, Inc. ("GTA GP") and GTA
LP, Inc. ("GTA LP"), each of which is a Maryland corporation (collectively, the
"Subsidiaries"). The Subsidiaries exist solely to hold the Company's general and
limited partnership interests in the Operating Partnership. The board of
directors of each Subsidiary is comprised of the executive officers of GTA. The
Operating Partnership was formed in Delaware in November 1996.
The Operating Partnership owns the Golf Courses that are subject to the
Participating Leases and holds the Participating Mortgage. In addition, the
Operating Partnership owned approximately 95% of the economic interest in a
taxable subsidiary formed to hold title to a 14-acre development site adjacent
to the Sandpiper Golf Course, with the balance owned for tax reasons by Mr.
Blair, President and Mr. Young, a director of the Company. This site was sold in
June of 1999, consequently, this legal entity was dissolved and the note
receivable for the land is now held by GTA LP. As of March 22, 2000, GTA held a
64.4% interest in the Operating Partnership, through its Subsidiaries. GTA GP is
the sole general partner of the Operating Partnership and GTA LP is a limited
partner of the Operating Partnership. The other limited partners include those
Prior Owners who received OP Units in exchange for the contribution of their
Golf Courses, including Larry D. Young. The limited partners do not have
day-to-day control over the Operating Partnership. However, the limited partners
are entitled to vote on certain matters, including the sale of all or
substantially all of the Company's assets or the merger or consolidation of the
Operating Partnership, which decisions require the approval of the holders of at
least 66.7% of the interests in the Operating Partnership (including GTA LP).
Each of the limited partners (other than GTA LP), generally, may exercise
Redemption Rights (as herein defined) for up to 50% of its OP Units beginning
one year after transfer of their Golf Course to the Operating Partnership and
the remaining 50% beginning two years after completion of such transfer for
shares of Common Stock on a one-for-one basis or for cash at the election of the
Company.
The current relationship among GTA, its subsidiaries, the Operating
Partnership (including its wholly-owned affiliate), the limited partners
(including many Prior Owners and the Westin Innisbrook Resort Owner) and the
operators is described in the following chart (excepting the two single member
LLCs established to manage foreclosure property as explained in the section
titled "Events of Default under the Participating Lease" herein):
[CHART]
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RECENT DEVELOPMENTS
Since March 26, 1999, the filing date of the Company's annual report on
Form 10-K for the year ended December 31, 1998, the following developments have
occurred:
PREFERRED INTEREST
On April 2, 1999, GTA completed a private placement of 800,000 shares
of its 9.25% Series A Cumulative Convertible Preferred Stock, par value $0.01
per share ("Series A Preferred Stock"), at a price of $25.00 per share to a
single purchaser, AEW Targeted Securities Fund, L.P., for gross proceeds of
$20,000,000, less associated costs of approximately $878,000. The net proceeds
were used as follows: (i) to pay down $1,025,000 under the Credit Facility; (ii)
to repay promissory notes to Nations Credit of $5,169,000; (iii) to pay loan
costs associated with the amendment and restatement of the Credit Facility of
$1,399,000; (iv) to make new officer loans of $648,000; and (v) the balance for
general working capital needs.
ACQUISITIONS
The following is a summary of the Company's acquisitions in 1999:
<TABLE>
<CAPTION>
ACQUISITION
ACQUISITION COST
DATE COURSE NAME LOCATION (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/11/99 Metamora Golf & Country Club Metamora, MI $5,865
7/28/99 Pete Dye Golf Club Bridgeport, WV 10,000
-----------------
$15,865
=================
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For the year ended December 31, 1999, the Company purchased two Golf
Courses for an aggregate acquisition cost of approximately $15.9 million. In
conjunction with the purchase of the Pete Dye Golf Club, the lessee executed
two promissory notes: (i) a $2.3 million capital improvement loan to
construct the new clubhouse, and (ii) a $3.5 million secured land loan. These
two promissory notes initially bear interest at 10.5% per annum with annual
increases of 5% per annum. The purchase price, together with the original
principal balance of the promissory notes, totaled $21.7 million.
DISPOSITIONS
In June 1999, Sandpiper GTA Development, Inc. sold the undeveloped
14-acre parcel of land located near Sandpiper Golf Course in Santa Barbara,
California for $5.3 million, which approximated our basis in the property.
The sales price included a $4.2 million promissory note from the buyer
secured by a first deed of trust on the parcel; the promissory note accrues
interest at 10% per annum and matures one year from closing, subject to two
one-year extensions. These extensions can only be exercised by the borrower
subject to borrower's payment of all outstanding and accrued interest on the
note, an installment payment of $1,000,000 from the buyer for each
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extension, and an increase in the interest rate on the note to 12% per annum
effective as of the second installment. The installment dates are June 2,
2000 and June 2, 2001. The promissory note matures on June 2, 2002, in the
event that no extensions are exercised.
EVENTS OF DEFAULT UNDER THE PARTICIPATING LEASE
GTA has a policy of acting promptly and aggressively on tenant
defaults in accordance with the terms of the Participating Leases. In the
event a tenant fails to pay their rent in accordance with the applicable
Participating Lease, an "Event of Default" (further defined under ITEM 2.
PROPERTIES) may be asserted by GTA as landlord.
In the third quarter of 1999, GTA elected to pursue legal remedies
available to it under its Participating Leases as a result of tenant defaults
at Bonaventure and the four Golf Courses previously leased to Granite Golf
(I.E., Tiburon Golf Club, Silverthorn Country Club, Persimmon Ridge Golf Club
and Black Bear Golf Course). As a result, GTA approved the assignment of the
tenant's interest in these Participating Leases to a new lessee. The
financial results submitted by the new lessee indicated that same store
rounds at these Golf Courses for the fourth quarter 1999 increased--75% for
Bonaventure and an average of 6% for the four Granite Golf Courses. Same
store revenues for the fourth quarter 1999 increased 23% for Bonaventure and
an average of 23% for the four Granite Golf Courses. GTA has also declared
events of default in the past several months at four other Golf Courses
"Tierra Del Sol Golf Club," "Osage National Golf Club," "Mystic Creek Golf
Course," and "Brentwood Golf & Country Club".
GTA management believes that in cases where events of default occur
under its Participating Leases, proactive management of the issues in a
timely manner is required and, that such action is necessary (i) to ensure an
effective and efficient legal process, (ii) to maintain the value of the golf
course, and (iii) to stabilize and/or improve operating performance of the
applicable Golf Course. When GTA is forced to "foreclose" on a Golf Course,
the Internal Revenue Code (Section 856(e)(4)(C)) allows a 90-day grace period
during which GTA can operate the Golf Course and still permit these revenues
to be qualifying income for REIT tax purposes. At the expiration of such
period, the Golf Course should either be sold, leased to an experienced Golf
Course operator, or an agreement must be secured with an independent
contractor to assume management of the applicable Golf Course. Management by
an independent contractor is allowed until the close of the third taxable
year following the taxable year in which the "foreclosure" occurred.
GTA has elected to pursue legal remedies available to it under its
Participating Lease to cure events of default that have occurred in the past
several months at the four Golf Courses listed below:
TIERRA DEL SOL GOLF CLUB: This Golf Course is an 18 hole, high-end
daily fee Golf Course located in Albuquerque, New Mexico which GTA purchased
in May 1998 for $3,600,000. On November 3, 1999, GTA filed an eviction action
against the tenant at Tierra Del Sol Golf Club with the District Clerk of
Court in Valencia County, New Mexico, as a result of the tenant's failure to
pay rent. As a result of this lawsuit, the tenant was removed and GTA took
possession of this Golf Course on February 7, 2000, pursuant to an order
issued by the District Court. GTA has created a wholly owned subsidiary, GTA
Tierra Del Sol, LLC, to operate this Golf Course during the 90-day grace
period. It is GTA's view that the operational problems at this Golf Course
were due to the tenant's executive management; therefore, the existing Golf
Course-level management team and all Course-level key employees at the Golf
Course have remained employed at the Golf Course. GTA has also implemented
additional financial reporting policies and procedures to enhance internal
controls and facilitate tracking of the financial performance of the Golf
Course. GTA has initiated a business plan to explore opportunities to (i)
seek to re-let the Golf Course, (ii) enter into a management agreement with a
more experienced golf operator than the original tenant, or (iii) potentially
sell the Golf Course. OP Units initially pledged as collateral for the
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lease by the former tenant of the Golf Course have been redeemed and applied
to past due rent obligations and other accrued charges. The collateral
balance remaining after these outstanding amounts were cured is valued at
approximately $170,000, which represents approximately five months of Base
Rent, and will be recognized as Other Income in the first quarter of 2000.
OSAGE NATIONAL GOLF CLUB: This Golf Course is a 27-hole, high-end
daily fee Golf Course in Lake of the Ozarks, Missouri, which GTA purchased in
August 1998 for $11,200,000 in a sale-leaseback transaction. On February 25,
2000, GTA declared an event of default under the Participating Lease as a
result of the tenant's failure to pay rent. As a result, GTA, the prior owner
of the Golf Course, and the tenant entered into discussions to terminate the
tenant's Participating Lease and the tenant's possessory rights at the Golf
Course. We expect to have the Participating Lease terminated and obtain
possession of the Golf Course within approximately 30-45 days. We have
created a wholly owned subsidiary, GTA Osage, LLC, which expects to assume
management of the Golf Course during the 90-day grace period. In this role,
GTA will facilitate the transition of management, implement additional
internal controls to more effectively manage the operations of the Golf
Course, and implement additional financial reporting policies and procedures
to improve the monitoring of the financial performance of the Golf Course. In
addition, GTA has initiated a business plan to explore opportunities to (i)
seek to re-let the Golf Course, (ii) enter into a management agreement with a
more experienced golf course operator than the original tenant, or (iii)
potentially sell the Golf Course. We expect that all Golf Course-level key
management and employees will remain employed at the Golf Course. Under GTA
management's current assumptions, the value of the tenant's collateral
(66,124 OP units) securing the obligations of the defaulting tenant under the
Participating Lease will be adequate to cover accrued rent (approximately
$408,000 through February 25, 2000) and any other accrued charges. The
remaining collateral value will be recognized as Other Income and should
offset any possible shortfalls in revenue in fiscal year 2000 resulting from
tenant's event of default.
MYSTIC CREEK GOLF COURSE: This Golf Course is a 27-hole, high-end
daily fee Golf Course located in Milford, Michigan, which GTA purchased in
January 1998 for $10,000,000 in a sale-leaseback transaction. On October 25,
1999, GTA declared an event of default under the Participating Lease as a
result of the tenant's failure to pay rent. On February 3, 2000, GTA filed an
eviction action with a District Court in Oakland County, Michigan. A hearing
was set for February 29, 2000, but was stayed because the tenant filed a
voluntary petition for Chapter 11 Bankruptcy in the United States Bankruptcy
Court on February 25, 2000. It is our intention to continue the eviction
action as soon as legally permissible to seek to shorten the time for the
tenant to accept the lease (by bringing the rent current) or reject the lease
(which would mean a return of the Golf Course to GTA) and to seek to compel
the payment of ongoing rent during the pendancy of the bankruptcy. The tenant
continues to operate the Golf Course pending the resolution of the pending
action and its bankruptcy. Under GTA management's current assumptions, the
value of the tenant's collateral ($879,630 in cash and 52,724 OP units)
securing the obligations of the defaulting tenant under the Participating
Lease is adequate to cover accrued rent (approximately $554,000 through
February 29, 2000) and any other accrued charges. The remaining collateral
value will be recognized as Other Income and should offset any possible
shortfalls in revenue in fiscal year 2000 resulting from tenant's event of
default.
BRENTWOOD GOLF & COUNTRY CLUB: This Golf Course is an 18-hole,
daily fee Golf Course in White Lake, Michigan, that GTA purchased in December of
1998 for $7,000,000. On November 21, 1999, GTA declared an event of default
under the Participating Lease as a result of the tenant's failure to pay rent.
On February 3, 2000, GTA filed an eviction action with a District Court in
Oakland County, Michigan. In response, the tenant filed a counterclaim against
GTA. On March 8, 2000, a hearing was held and the Court ruled that the case be
moved to Oakland County Circuit Court, where the action for possession and the
allegations in the counterclaim will be heard. On March 28, 2000, an order
was entered requiring escrow payment of rent and prorated taxes within seven
days of the Order, and thereafter, within seven days of the 25th of each
month. The first payment required will be February and March rents, and
payments in the subsequent months will be current months rent.
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Subject to the foregoing limitations, the tenant continues to operate the
Golf Course pending resolution of the pending actions. Under management's
current assumptions, the value of the tenant's collateral (a $350,000
Certificate of Deposit and 24,482 OP Units) securing the obligations of the
defaulting tenant under the Participating Lease is adequate to cover accrued
rent (approximately $455,000 through February 29, 2000) and any other accrued
charges. Any remaining collateral value will be recognized as Other Income
and will be used to offset any possible shortfalls in revenue in fiscal year
2000 resulting from tenant's event of default.
ADOPTION OF SHAREHOLDER RIGHTS PLAN
On August 6, 1999, the Board of Directors of Golf Trust of America, Inc.
declared a dividend distribution of one preferred stock purchase right ("Right")
for each outstanding share of common stock to stockholders of record at the
close of business on September 6, 1999 (the "Record Date"). Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a share
of Series B Junior Participating Preferred Stock, par value $0.01 per share (the
"Preferred Stock"), at a purchase price of $75.00, subject to adjustment. The
agreement (the "Rights Agreement") is between the Company and the rights agent
thereunder. On August 30, 1999, the Company filed a current report on Form 8-K
more fully describing the terms of the Rights.
CREDIT FACILITY AND LINE OF CREDIT
The Company intends to draw upon the Credit Facility, or any
successor credit facility, to fund future acquisitions of additional golf
courses. There can be no assurance, however, that the Company will close any
future acquisitions or that the Company will continue to have access to
sufficient debt and equity financing to allow it successfully to pursue its
acquisition strategy.
The one-year term $25.0 million unsecured line of credit from Bank of
America that GTA obtained in 1999 was originally scheduled to mature on April 1,
2000; however, a six-month extension of this facility was granted with the same
pricing that was in effect under the original line with a 3/4% up-front
commitment fee. The new maturity date is October 1, 2000.
INTEREST RATE SWAP AGREEMENT
The interest rate swap agreement that GTA entered into with Bank of
America in September 1998 expired on March 27, 2000. The notional amount
under this agreement of $76,800,000 converted to floating rate debt as of the
March 27th expiration date. This increases GTA's total floating rate debt to
$210,700,000. As of the date of this filing, GTA had not entered into a new
interest rate swap agreement.
REORGANIZATION OF THE ACQUISITION DEPARTMENT
In November 1999, Mr. David D. Joseph resigned as Director of
Acquisitions and Executive Vice President of the Company and as a member of
our Board of Directors to pursue other business interests. At the present
time, we do not contemplate replacing this management position due to (i) the
current reduced
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priority on acquisitions, (ii) the skills of our existing acquisition staff, and
(iii) our ability to utilize outside brokers and tenant introductions to support
this function. As a part of the separation agreement, Mr. Joseph executed an
extension to his covenant not to compete. A one-time charge of $0.5 million is
included in the General & Administrative expenses for fourth quarter 1999
related to this reorganization. The Company's Chief Financial Officer, Scott D.
Peters, was elected by the Board of Directors to fill the vacant board position.
Mr. Peters will stand for re-election at the next meeting of the stockholders.
LOANS TO OFFICERS
Loans of approximately $938,000, secured by OP Units and common
stock, with interest rates of between 4.4 % to 6.2 % per annum, were made to
officers of the Company for the payment of related taxes for Restricted Stock
Grants issued in 1997, 1998 and 1999. Of this total, approximately $173,000
related to the Restricted Stock Grants issued on March 10, 1999 for 44,000
shares. It is expected that additional loans will be made to the officers to
cover tax liabilities resulting from future vesting of the Restricted Stock
Grants. Under the 1998 Senior Executive Loan Program, as amended on August
10, 1999, loans of $2.3 million have been made to officers of the Company to
purchase Company stock on the open market. These loans are collateralized by
the shares purchased, bear interest at between 4.51 % to 5.89 % per annum and
are due at the earlier of (i) sale greater than $25 per share, (ii) within 3
years of applicable employee termination or (iii) five years after the making
of the loan. These promissory notes are recourse to the borrower. Upon any
change of control of GTA, all outstanding amounts to the current officers of
GTA are forgiven and the Promissory Notes are cancelled.
Of the total officer loans outstanding, approximately $739,000 in
loans to the former Executive Vice President were reclassified to Other
Assets from Stockholders' Equity upon his resignation in November 1999.
STOCK REPURCHASE PROGRAM
On December 15, 1999, GTA announced that its Board of Directors
authorized a program to repurchase up to one million shares of its common stock.
Any such repurchases will be made on the open market or in block purchase
transactions. The timing of any repurchases and the number of shares repurchased
pursuant to the stock repurchase program are dependent upon market conditions
and corporate requirements. Under this program, on January 4, 2000, GTA
purchased 10,000 shares of its stock at a price of $16.9375 per share.
UNSOLICITED PROPOSAL
On December 15, 1999, GTA received an unsolicited letter from
Schooner Capital LLC. In sum, Schooner expressed its belief that GTA's
current real estate investment trust structure is not optimal to best
leverage both current and future marketing opportunities. Schooner expressed
interest in working with GTA on a going private transaction that would seek
to address the interests of all shareholders. Schooner Capital LLC filed a
13D, a General Statement of Beneficial Ownership, on January 28, 2000. As
yet, Schooner Capital LLC has not been willing to meet with our financial
advisor, Banc of America Securities LLC, to review any proposal it may have.
APPOINTMENT OF FINANCIAL ADVISOR
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After deliberate interview and diligence process by management and
review by the Company's Board of Directors, on February 9, 2000 GTA engaged
Banc of America Securities LLC to act as its financial advisor to undertake a
review of a broad range of strategic alternatives available to the Company in
light of the current and prospective market conditions facing the Company and
the REIT industry. Executive management is meeting regularly with our
financial advisor in furtherance of considering of alternatives to enhance
shareholder value. These alternatives include the possibility of a merger,
sale, recapitalization, privatization or restructuring, including de-REITing
(revoking election of REIT-tax status), among others. The professional fee
structure of Banc of America Securities LLC should not have a material impact
on General & Administrative expenses for 2000.
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(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's principal business strategy is to own upscale Golf
Courses and lease these Golf Courses to qualified third party operators,
including affiliates of sellers. See the Consolidated Financial Statements and
notes thereto included in Item 8 on this Form 10-K for certain financial
information required to be included in response to this Item 1.
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(c) NARRATIVE DESCRIPTION OF BUSINESS
BUSINESS OBJECTIVE AND STRATEGY
The Company's primary objectives are to increase its cash available for
distribution per share to stockholders and to enhance stockholder value. The
Company's primary strategies for such growth are to own upscale Golf Courses
that meet the Company's investment criteria and to participate in increased
revenues at these Golf Courses. The Company intends to acquire additional Golf
Courses that meet the Company's investment criteria at such time as market
conditions are favorable for the acquisition of golf courses at attractive
returns.
The Company believes that its investments are consistent with its goal
of becoming a leading owner of, and participating in increased revenue from,
nationally and regionally recognized upscale golf courses. The Company's Golf
Courses include a number of nationally recognized golf courses as noted below:
- The Pete Dye Golf Club: "America's 100 Greatest Golf Courses,"
GOLF DIGEST, 1999; ranked 2nd in "Top 100 Courses of the Modern
Era," GOLF WEEK, 1999.
- Royal New Kent: "America's 100 Greatest Golf Courses," GOLF
DIGEST, 1999; "Best New Upscale Course," GOLF DIGEST, 1997
- Legends of Stonehouse: "14th Best Public Course," GOLF WEEK,
1998; "Best New Upscale Course", GOLF DIGEST, 1996
- Emerald Dunes Golf Course: "Best of America," THE GOLFER, 1996 &
1997; "Top 100 Public Courses" in America, GOLF DIGEST, 1999
- Westin Innisbrook Resort: Copperhead, "Top 100 U.S. Resort
Courses," GOLF DIGEST, 1999; Island Course, "Top 75 Resort
Courses," GOLF DIGEST, 1992
- Eagle Ridge Inn and Resort: The General, "Top 10 Best New Upscale
Public Courses," GOLF DIGEST, 1997; South Course, "Top 100 U.S.
Resort Course," GOLF DIGEST, 1999
- Legends Golf Resort: Parkland, "Top 100 U.S. Resort Courses,"
GOLF DIGEST, 1999; Heathland, "Top 100 U.S. Resort Courses," GOLF
DIGEST, 1999; Heritage Club: "Top 50 Public Courses," GOLF
DIGEST, 1992; Oyster Bay: "Top 50 Public Courses," GOLF DIGEST,
1992
- Sandpiper Golf Course: "Top 25 Public Courses in the Nation,"
GOLF DIGEST, 1992
- Persimmon Ridge Golf Club: Ranked 2nd in "Best Courses By State"
in Kentucky, GOLF DIGEST, 1999
- Cooks Creek Golf Club: Ranked 18th in "Best Course By State" in
Ohio, GOLF DIGEST, 1999; Ohio Chapter for "The First Tee" program
The Company believes that the quality of its Golf Courses is further
reflected in the average green fees at its Golf Courses, which significantly
exceed national industry averages.
10
<PAGE>
When the Company acquires a Golf Course, the course is either leased
back to its prior owner or leased to another qualified operator. Under the
Company's standard Participating Lease, the Company receives fixed Base Rent and
Participating Rent based on increases in Gross Golf Revenues (as herein defined)
if any, at such Golf Course. Each lessee joins the Company's Lessee Advisory
Association ("Advisory Association"), which provides marketing information and
opportunities as well as potential economic benefits to the lessees, such as
bulk purchasing power for certain golf course products and services.
In certain instances, state and federal tax laws make
purchase-leaseback transactions prohibitively expensive. Accordingly, in such
cases, the Company may provide financing to a particular Golf Course, provided
the Company receives a participating interest in revenues pursuant to a
participating mortgage at the Golf Course on a basis comparable to the rentals
received by the Company pursuant to its standard Participating Lease. The
Company expects that the Company's participating mortgage would be secured by a
first-lien on the Golf Course and would include an option to purchase the Golf
Course at the end of the participating mortgage's term. In considering any
financing transactions, including the Participating Mortgage, the Company seeks
to obtain economic terms similar to the standard Participating Lease.
To fund acquisitions, the Company may utilize a variety of debt or
equity financing, including the Credit Facility and the ability to issue OP
Units; however, financing vehicles are presently relatively limited in the
current capital markets.
11
<PAGE>
We have described below the Company's (i) investment criteria, (ii)
acquisition strategy, and (iii) internal growth strategy.
(i) INVESTMENT CRITERIA
The Company intends to concentrate its investment activities on golf
courses, including multi-course Golf Course portfolios, available at attractive
prices that meet one or more of the following criteria:
- upscale daily fee courses that target avid golfers, who the
Company believes are generally willing to pay the higher green
fees associated with upscale golf courses;
- private or semi-private golf courses with proven operating
histories that the Company believes have the potential for
significant cash flow growth;
- courses that offer superior facilities and service and attract a
relatively high number of affluent destination golfers;
- courses owned by multi-course owners and operators who have a
strong regional presence and afford the Company the opportunity
to expand in a particular region;
- newly developed, well-designed courses with high growth
potential; and
- upscale, well-maintained golf courses with proven operating
histories located in areas where significant barriers to entry
exist.
The Company will undertake an analysis with respect to golf courses to
be considered for acquisition, including an evaluation of the following:
- product and service differentiation;
- competitive position in market;
- barriers to entry in development of new golf courses such as
scarcity of land and long lead-times for course development;
- condition of the golf course and agronomy review;
- quantity, quality and cost of irrigation;
- strength of the lodging industry, including hotels and
condominiums, in destination golf areas; and
- the experience of the proposed lessee and the security for the
lessee's obligations under the Participating Lease.
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<PAGE>
(ii) ACQUISITION STRATEGY
The Company believes it is highly regarded and recognized as having a
significant presence in the ownership of upscale assets due to:
- management's substantial industry knowledge, experience and
relationships within the golf course industry,
- the Company's ability to issue OP Units to golf course owners on
a tax-deferred basis,
- the Company's utilization of the multiple independent lessee
structure, and
- the Company's strategic alliances with prominent golf course
operators.
As capital becomes more available, the Company is positioned to quickly and
efficiently identify and acquire courses which complement its portfolio and
which meet its strategic objectives.
MANAGEMENT'S KNOWLEDGE EXPERTISE AND RELATIONSHIPS
Prior to joining the Company as its President, Chairman and Chief
Executive Officer, W. Bradley Blair, II served as Executive Vice President,
Chief Operating Officer and General Counsel of Legends Group, Ltd., a leading
golf course owner, developer and operator in the southeast and Mid-Atlantic
regions of the United States. As an officer of Legends Group Ltd., Mr. Blair was
responsible for all aspects of operations, including acquisitions, development
and marketing. Prior to joining the Legends Group Ltd., Mr. Blair had extensive
experience in the acquisition, disposition, development and financing of golf
courses and golf course development in his role as Managing Partner of Blair,
Conaway, Bograd and Martin, PA, Attorneys at Law. Prior to joining the Company
as Chief Financial Officer, Mr. Peters served as Senior Vice President and Chief
Financial Officer of the Pacific Holding Company in Los Angeles, from 1992
through 1996, where he participated in the management of a 4,000 acre real
estate portfolio of residential, commercial and country club properties focusing
on master-planned golf communities. From 1988 to 1992, Mr. Peters served as
Senior Vice President and Chief Financial Officer of Castle & Cooke Homes, Inc;
and during 1990 and 1991 lectured on Real Estate Finance and Asset Management at
California State University at Bakersfield. Larry D. Young, a director of the
Company, is the founder of Legends Golf. Mr. Young has been involved in the golf
business for more than 25 years and has developed 10 golf courses during that
time, four of which were rated the best new course in their respective category
in the year developed by GOLF DIGEST.
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<PAGE>
ISSUANCE OF OP UNITS
The Company has the ability to issue units of limited partnership
interest, including common and preferred units, in the Operating Partnership
("OP Units"). OP Units may be issued to a prospective golf course seller in
exchange for his golf course. Holders of OP Units generally have the right (the
"Redemption Right") to cause the Company to redeem their OP Units after certain
holding periods for cash or, at the Company's option, for common stock in the
Company on a one-for-one basis. When the Company acquires a golf course in
exchange for OP Units, the golf course seller generally will not recognize
taxable income until it exercises the Redemption Right. Thus, the issuance of OP
Units can provide an attractive tax-deferred transaction for sellers of golf
courses.
MULTIPLE INDEPENDENT LESSEE STRUCTURE
The Company believes many golf course owners are single-business
entrepreneurs who could benefit from diversification, but desire to remain
involved in the day-to-day operation of their courses. The Company believes such
golf course owners will continue to be attracted to the Company's multiple
independent lessee structure, in which the Company acquires a course and then
leases it back to an affiliate of the seller. Such structure satisfies the
owner/seller's desire to remain involved in the day-to-day operation of his
course, while also satisfying his desire to obtain liquidity. Specifically the
structure offers prospective sellers:
- the ability to retain control over the operations of the golf
course pursuant to a lease-back transaction;
- the tax deferral and increased liquidity associated with owning
OP Units;
- the ability to obtain additional OP Units through the Lessee
Performance Option (as described below);
- the marketing and purchasing economies of scale potentially
gained from participation in the Lessee Advisory Association; and
- the ability to diversify the seller's investment by participating
as an equity owner in the Company's portfolio of Golf Courses.
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<PAGE>
RELATIONSHIPS WITH STRATEGIC PARTNERS
The following table is a summary of the Company's current lessees/golf
operators:
<TABLE>
<CAPTION>
--------------------------------------------------------- --------------------
GTA COURSES
UNDER
MANAGEMENT
GOLF LESSEES/OPERATORS (18-HOLE
EQUIVALENTS)
--------------------------------------------------------- --------------------
<S> <C>
Legends Group 13.5
Troon Golf 8.5
Emerald Dunes Golf Group 3.0
John Rainieri and Cook/Rainieri Management 3.0
Total Golf 3.5
Crescent Company 2.0
Stonehenge Golf Development 2.0
Diamond Players Club 2.0
Northgate Forest 1.5
Palm Desert Country Club 1.5
Craft Farms 1.0
Environmental Golf 1.0
Properties of the Country 1.0
Burning Embers 1.0
Osage Golf Properties 1.5
Courses currently managed by GTA(1) 1.0
--------------------------------------------------------- --------------------
TOTAL 18-HOLE EQUIVALENTS 47
--------------------------------------------------------- --------------------
---------------------------------------------------------
RESORT/HOTEL OPERATORS
---------------------------------------------------------
Westin Hotels
Starwood Hotels and Resorts
Eagle Ridge Inn & Resort
---------------------------------------------------------
</TABLE>
(1) This represents Tierra Del Sol Golf Course which is classified as
foreclosure property and is being managed by GTA during the 90-day grace period.
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<PAGE>
(iii) INTERNAL GROWTH
The Company seeks to increase revenue from its current assets through
internal growth. Based on the experience of its management, the Company believes
its Golf Courses offer opportunities for revenue growth through effective
marketing and efficient operations. The Participating Leases and the
Participating Mortgage have been structured to provide the operators with
incentives to manage and maintain the Golf Courses in a manner designed to
increase revenue and, as a result, increase payments to the Company under the
Participating Leases and the Participating Mortgage. The Company believes that
the Golf Courses are positioned to benefit from favorable trends in the golf
industry. In 1998, the last year for which results are available, the number of
rounds played in the United States equaled 529 million, a 14% increase since
1994.
EXPANSIONS, IMPROVEMENTS, AND WORKING CAPITAL LINES
Under certain circumstances, the Company agrees to make funds available
to the lessees to fund significant capital improvements, to expand the existing
Golf Courses and, in limited circumstances, to provide the lessees with working
capital for the applicable Golf Course. When significant capital improvements
are funded, the underlying Base Rent and Base Interest (in the case of the
Participating Mortgage) are increased. Working capital lines are evidenced by
promissory notes or set forth in the Participating Lease itself.
PARTICIPATING LEASES
The Participating Leases generally provide that for any year the
Company will receive with respect to each leased Golf Course, the greater of (a)
Base Rent (as adjusted by the Base Rent Escalator described below) or (b)
Participating Rent. Participating Rent is generally established to be an amount
equal to the original (unescalated) Base Rent plus 33 1/3% of the difference
between that year's Gross Golf Revenue and Gross Golf Revenue at the Golf Course
in the year prior to the course's acquisition, as adjusted in determining the
original Base Rent. Base Rent under each Participating Lease generally increases
annually by the lesser of (i) 3% or (ii) a multiple of the change in the
Consumer Price Index ("CPI") for the prior year (the "Base Rent Escalator")
during each of the first five years of the Participating Lease and, if the
Lessee Performance Option is exercised, for an additional five years thereafter.
Annual increases in lease payments are generally limited to 5% to 7% during the
first five years of the lease terms.
"Gross Golf Revenue" is generally defined as all revenues from a Golf
Course, including green fees, golf cart rentals, range fees, membership dues,
member initiation fees and transfer fees, excluding food and beverage and
merchandise revenue. In certain circumstances, the Company participates in food
and beverage revenue and merchandise revenue.
PARTICIPATING MORTGAGE
In June of 1997, the Operating Partnership closed and funded an initial
$69.975 million participating loan (the "Participating Mortgage) to Golf Host
Resorts, Inc. ("Golf Host Resorts"), which is affiliated with Starwood Capital
Group LLC and agreed to fund an additional $9 million for a nine-hole expansion
and other improvements to the Innisbrook Resort facilities.
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<PAGE>
. The loan is secured by the Innisbrook Resort, a 63-hole destination golf and
conference facility located near Tampa, Florida. The operator of the resort,
Westin, has guaranteed up to $2.5 million of debt service for each of the first
five years.
The Participating Mortgage term is 30 years from execution,
with an initial base interest rate of 9.63% per annum, annual increases (of at
least 5% per annum but no more than 7% per annum) in the interest payment for
the first five years, and a participating interest feature throughout the term
based upon the growth in revenues, if any, over the base year.
LESSEE PERFORMANCE OPTION
The Participating Leases generally utilize an incentive-based
performance structure. This Performance Option structure is designed to
encourage the operators to seek aggressive growth in revenue at the Golf
Courses. The structure also is designed to attract potential sellers of golf
courses that the Company believes have high growth potential and that might not
otherwise be available for purchase. Generally, Participating Leases with third
party operators do not contain a Lessee Performance Option. Under the
Performance Option for the Participating Leases, during years three through five
of each Participating Lease, the operator or its affiliate, subject to certain
qualifications and restrictions, may elect on a one time basis only to increase
the Base Rent in order to receive additional OP Units or common stock in the
Company. The Performance Option for the Participating Leases may only be
exercised if the current-year net operating income of the operator of the
applicable Golf Course, inclusive of a capital replacement reserve, exceeds
113.5% of such Lessee's Lease Payment after taking into account the increased
amount of Base Rent. If the Performance Option is exercised, the Base Rent is
increased by an amount calculated to be accretive to the Company's Funds From
Operations on a per share basis. Following exercise of the Lessee Performance
Option, the adjusted Base Rent will be increased by the Base Rent Escalator each
year for a period of five years. An operator's ability to exercise the
Performance Option and the number of OP Units or common stock issuable to such
prior owner in connection therewith, will depend on future operating results at
the applicable Golf Course and, therefore, cannot be determined in advance.
17
<PAGE>
PERFORMANCE OPTION FOR THE PARTICIPATING MORTGAGE
The structure of the Performance Option for the Participating Mortgage
is similar to the Performance Option for the Participating Leases. Under the
Performance Option for the Participating Mortgage, during years three and five
of the Participating Mortgage, the Westin Innisbrook Resort owner, subject to
certain qualifications and restrictions, may elect on a one time basis only to
require the Company to make an additional advance under the Participating
Mortgage and the Westin Innisbrook Resort owner will be required to purchase
additional OP Units with that advance. The Performance Option for the
Participating Mortgage may be exercised only if the current-year net operating
income of the Westin Innisbrook Resort, inclusive of a capital replacement
reserve, but exclusive of certain management fees paid to Westin, exceeds 113.5%
of such operator's Participating Mortgage obligation after taking into account
the increased amount of Base Interest. If the Performance Advance is made,
interest on the Performance Advance will be calculated to be accretive to the
Company's Funds From Operations on a per share basis. Following exercise of the
Performance Option for the Participating Mortgage, the adjusted Base Interest
will be increased by 3% per year for five years. The Westin Innisbrook Resort
owner's ability to exercise the Performance Option will depend on future
operating results and, therefore, cannot be determined in advance.
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<PAGE>
EMPLOYEES
The Company is self-administered and has 13 full-time employees.
ENVIRONMENTAL MATTERS
Operations of the Golf Courses involve the use and storage of various
hazardous materials such as herbicides, pesticides, fertilizers, motor oils and
gasoline. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real property may become liable for the
costs of removal or remediation of certain hazardous substances released on or
in its property. Such laws often impose such liability without regard to whether
the owner or operator knew of, or was responsible for, the release of such
hazardous substances. The presence of such substances, or the failure to
remediate such substances properly when released, may adversely affect the
owner's ability to sell such real estate or to borrow using such real estate as
collateral. The Company has not been notified by any governmental authority of
any material non-compliance, liability or other claim in connection with any of
the Golf Courses. All of the Golf Courses have been subjected to a Phase I
environmental audit (which does not involve invasive procedures, such as soil
sampling or ground water analysis) by an independent environmental consultant.
Based on the results of the Phase I environmental audits, the Company
is not aware of any existing environmental liabilities that the Company believes
would have a material adverse effect on the Company's business, assets, results
of operations or liquidity, nor is the Company aware of any condition which
would create such a liability. No assurance, however, can be given that these
reports reveal all potential environmental liabilities, that no prior or
adjacent owner created any material environmental condition not known to the
Company or the independent consultant, or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability. The
Participating Leases provide that the lessees will indemnify the Company for
certain potential environmental liabilities at the Golf Courses.
At Bonaventure Country Club, there was remediation work performed
respecting maintenance and facilities operations, including the construction of
a new maintenance area to remedy prior practices that resulted in low level soil
contamination at the property. In addition, underground storage tanks at the
property, which have subsequently been abandoned, have leaked, resulting in
localized soil contamination. The Company believes that the completed remedial
work and soil contamination will not have a material adverse effect on the
operations of the Company.
In addition, a significant portion of the Sandpiper Golf Course was
previously an operating oil field and there is significant residual oil
contamination on the property. In connection with the acquisition of the
property, the Company obtained an indemnification from Atlantic Richfield
Company ("ARCO") in a form and in an amount that the Company believes is
adequate to protect the Company from liability for such contamination. Certain
circumstances may require ARCO to enter the property and perform remediation
actions.
TAX STATUS
The Company has elected to be taxed as a REIT under Section 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"). If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative
19
<PAGE>
minimum tax) on its taxable income at regular corporate tax rates. The
Company may be subject to certain state and local taxes on its income and
property and to federal income and excise taxes on its undistributed income.
When GTA forecloses on a Golf Course as a result of a tenant default under
a Participating Lease, the Internal Revenue Code (Section 856(e)(4)(C))
allows a 90-day grace period during which GTA can operate the Golf Course and
still permit these revenues to be qualifying income for REIT tax purposes. At
the expiration of such period, the Golf Course should either be sold or an
agreement must be secured with an independent contractor to assume
management. Management of the Golf Course by an independent contractor is
allowed until the close of the third taxable year following the taxable year
in which the "foreclosure" occurred. The only Golf Course being operated
pursuant to this rule as of March 22, 2000, is Tierra Del Sol Golf Club;
however, the other three Golf Courses ("Osage National Golf Club," "Mystic
Creek Golf Course" and "Brentwood Golf & Country Club") currently in default
may in the future be operated pursuant to this rule.
GOVERNMENT REGULATION
The Golf Courses, like other such assets, are subject to the Americans
with Disabilities Act of 1990, as amended (the "ADA"). The ADA has separate
compliance requirements for "public accommodations" and "commercial facilities"
but generally requires public facilities such as clubhouses and recreation areas
are made accessible to people with disabilities. These requirements became
effective in 1992. Compliance with the ADA requirements could require removal of
access barriers and other capital improvements at the Golf Courses.
Noncompliance could result in imposition of fines or an award of damages to
private litigants. Under the Participating Leases, the lessees are responsible
for any costs associated with ADA compliance.
COMPETITION
The Golf Courses are, and any additional golf courses and related
facilities acquired by the Company will be, subject to competition for players
and members from other golf courses located in the same geographic areas.
Changes in the number and quality of golf courses in a particular area could
have a material effect on the revenues of the Golf Courses. In addition, the
Company will be subject to competition for the acquisition of golf courses and
related facilities with other purchasers of golf courses, including other golf
course acquisition companies. See "The Golf Industry--Competitive Conditions"
below.
THE GOLF INDUSTRY
UNLESS OTHERWISE NOTED, REFERENCES HEREIN TO NATIONAL INDUSTRY STATISTICS AND
AVERAGES ARE BASED ON REPORTS OF THE NATIONAL GOLF FOUNDATION ("NGF"), AN
INDUSTRY TRADE ASSOCIATION NOT AFFILIATED WITH THE COMPANY.
The Company believes the United States golf industry is entering a
period of significant growth. This belief is based, in part, on the fact that
people over the age of 50 play more golf than younger people, and the
expectation that over the next several years the number of people aged 50 and
older will increase significantly as the "baby boomers" age. The Company expects
that the aging population will contribute to an increase in the number of rounds
played and Gross Golf Revenues at the Golf Courses and any golf courses
subsequently acquired by the Company. In addition, the emergence of golf stars
such as Tiger Woods, David Duvall and Sergio Garcia has lead to an increase in
junior, women and minority participants.
20
<PAGE>
COMPETITIVE CONDITIONS
The Company is one of two publicly traded REITs in the United States
focused exclusively on owning and acquiring golf courses. The Company is the
only such company with an idependent lessee structure.
Golf course ownership in the United States is highly fragmented. There
are approximately 15,000 golf courses (approximately 13,000 eighteen-hole
equivalents) in the United States that are owned by approximately 13,000
different entities. There are relatively few owners of more than one course. The
Company believes that the 15 largest golf course owners in the United States
collectively own fewer than 5% of the total number of golf courses and that
fewer than 10 golf course owners own more than 10 golf courses. The Company
believes that this fragmented ownership provides an opportunity for
consolidation of the ownership of upscale golf courses.
The Company believes the current fragmentation of golf course ownership
is a result of a variety of factors, including a scarcity of capital, the
entrepreneurial nature of many golf course owners and operators and their
associated pride of ownership. The Company believes that the economies of scale
in owning and operating multiple golf courses, the growing significance of
professional financial management in the operation of golf courses and the
desire for liquidity by golf course owners could lead to consolidation of golf
course ownership. In particular, the Company believes golf course owners will be
attracted to the Company's multiple independent lessee structure, which permits
the Company to acquire a course and then lease it back to an affiliate of the
seller. Such structure satisfies the owner's desire to remain involved in the
day-to-day operation of his course post sale, while also satisfying his desire
to obtain liquidity. The Company further believes its ability to issue OP Units
in exchange for a golf course will attract potential sellers, who generally can
defer recognition of taxable gain on the exchange until they exercise their
Redemption Right. By offering golf course owners the tax planning benefit of OP
Units and the economic benefit of participating in the independent lessee
structure, including resulting economies of scale in operating golf courses, the
Company believes it is able to acquire desirable upscale courses that may not
otherwise be available for purchase.
Largely in response to the popularity of golf, the construction of golf
courses in the United States has increased significantly in recent years. Since
1987, an average of approximately 280 new golf courses were opened each year. A
total of 496 facilities were completed in 1999, of which 327 were new courses
and the rest were expansions of existing facilities.
In 1999, 73% of new golf course openings were daily fee facilities,
while municipal facilities represented 11% and the remaining 16% were private
clubs. For 2000, it is estimated that over 500 new courses will open, an all
time high.
The emergence and popularity of younger professional golfers, including
Tiger Woods, Justin Leonard, Phil Mickelson and Karrie Webb, have increased
awareness and interest in golf. According to industry statistics, 19.4 million
homes watched the final round of the four major golf championships in 1996. In
1997, television viewership of the final four rounds of the four major golf
championships increased 56 percent to 30.3 million. The Company believes this
resurgent interest will result in increasing golf participation, including
increasing participation by women and younger golfers.
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<PAGE>
The Company believes the game of golf has exhibited strong growth in
popularity in the past five years as illustrated below:
<TABLE>
<CAPTION>
1996 1998 % CHANGE
---- ---- --------
(millions)
<S> <C> <C> <C>
Number of Golfers . . . . . . . . . . . . 24.8 26.4 7%
Rounds Played . . . . . . . . . . . . . . 477.4 528.5 11%
</TABLE>
According to current participation rates, it is expected that the number of
golfers will increase nearly 2% each year for the next 12 years.
DEMOGRAPHICS
The Company believes the game of golf will benefit from favorable
demographic trends. The United States Census Bureau estimates that the
population aged 50 and over will increase by 39% between 1996 and 2010, from
69.3 million to 96.3 million. The average number of rounds played per golfer on
an annual basis increases significantly as the golfer ages. Golfers in their
50's play nearly twice as many rounds annually as golfers in their 30's, and
golfers age 65 and older generally play three times as many rounds annually as
golfers in their 30's. The Company believes that the number of golfers as well
as the total number of rounds played will increase significantly as the average
age of the population continues to increase. The Company believes that "baby
boomers," the oldest of whom are now in their early 50's, will contribute to the
growth in total rounds played due to growing wealth and leisure time as well as
the suitability of golf as a sport for an aging population.
SEASONALITY
The golf industry is seasonal in nature because of weather conditions
and the fewer available tee times during the rainy season and the winter months.
Each of the lessees operating a daily fee Golf Course may vary green fees based
on changes in demand. The Company does not expect seasonal fluctuations in
lessee revenues to have a significant impact on the Company's operating results.
The Company's Participating Leases require Base Rent to be paid ratably
throughout the year and in certain cases requires funds to be set aside by
lessees to offset expected seasonal fluctuations.
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<PAGE>
(d) FOREIGN OPERATIONS
The Company does not engage in any foreign operations or derive any
revenue directly from foreign sources.
23
<PAGE>
ITEM 2. PROPERTIES
The Company believes its investments are consistent with its goal of
becoming a leading owner of, and participating in increased revenue from,
nationally or regionally recognized upscale golf courses. The Golf Courses
include a number of nationally recognized golf courses.
The Golf Courses include 22 upscale Daily Fee courses, 14.5 Resort
Courses and 10.5 Private Country Clubs. "Daily Fee" courses are open to the
public and generate revenues principally through green fees, golf cart rentals,
food and beverage operations, merchandise sales and driving range charges.
"Resort Courses" are Daily Fee golf courses that attract a significant
percentage of players from outside the immediate area in which the golf course
is located and generate a significant amount of revenue from golf vacation
packages. The Company considers its Daily Fee and Resort Courses to be high-end
Golf Courses because of the quality and maintenance of each Golf Course. Private
country clubs are generally closed to the public and derive revenues principally
from membership dues, initiation fees, transfer fees, golf cart rentals, guest
fees, food and beverage operations and merchandise sales.
The Company believes that the overall quality of its Golf Courses is
reflected in the green fees charged at each Golf Course, which significantly
exceed national averages. The Company believes its focus on upscale Daily Fee
golf courses and private country clubs, which attract golfers with attractive
demographic and economic profiles, will result in stronger and less cyclical
revenue growth in comparison to golf courses with lower green fees.
Five of the Golf Courses are located in the Myrtle Beach, South
Carolina vicinity, a popular year-round golf destination area. Myrtle Beach is
considered one of the nation's premier golf resort locations with just over 100
golf courses and approximately 4.2 million rounds played in 1999, according to
the MYRTLE BEACH GOLF HOLIDAY-TM-. In addition to golf courses, Myrtle Beach
offers a mix of entertainment, shopping and dining, as well as proximity to
beaches. All of the Golf Courses located in the Myrtle Beach vicinity were
developed and contributed to the Company by Legends Golf, a leading golf course
owner, developer and operator in the Southeast and Mid-Atlantic regions of the
United States.
Five of the Golf Courses are located near Tampa, Florida. Of these,
four are located at the Westin Innisbrook Resort, a destination golf resort that
includes one of the largest hotel and conference facilities in the state. The
fifth course, Lost Oaks of Innisbrook, is located near the Westin Innisbrook
Resort, and all five courses are near the Gulf of Mexico. Additionally, the
courses benefit from the millions of tourists annually that visit Disney
World-TM-, Busch Gardens-TM- and other regional recreational attractions.
The Company owns a fee simple interest in each of the Golf Courses with
the exception of Oyster Bay and Mystic Creek, which are subject to long-term
ground leases, and the four Golf Courses at the Westin Innisbrook Resort, where
the Company holds a first lien on the Golf Courses and all of the related
facilities (other than the separately-owned condominium units comprising the
hotel). The Company additionally holds an option to purchase the Westin
Innisbrook Resort and such facilities at the expiration of the Participating
Mortgage for the lesser of its fair market value or a pre-determined number of
shares of common stock in the Company.
Certain information regarding each of the Golf Courses owned by the
Company or in which the Company has an interest as of December 31, 1999, is set
forth on the following pages:
24
<PAGE>
RESORT COURSES
Resort Courses are Daily Fee golf courses that draw a high percentage
of players from outside the immediate area in which the course is located and
generate a significant amount of revenue from golf vacation packages. Some
Resort Courses are semi-private, in that they offer membership packages that
allow members special privileges at the golf course, but also allow public play.
<TABLE>
<CAPTION>
NO. OF
COURSE NAME CITY AND STATE HOLES YARDAGE YEAR OPENED
- -------------------------------------- ------------------------ ----------- -------------- -----------------------
<S> <C> <C> <C> <C>
Legends Resort
Heathland . . . . . . . . . . . Myrtle Beach, SC 18 6,785 1990
Parkland . . . . . . . . . . . Myrtle Beach, SC 18 7,170 1992
Moorland . . . . . . . . . . . Myrtle Beach, SC 18 6,799 1990
Heritage Golf Club . . . . . . . Pawleys Island, SC 18 7,040 1986
Oyster Bay . . . . . . . . . . . . . Sunset Beach, NC 18 6,685 1983
Woodlands . . . . . . . . . . . . . Gulf Shores, AL 18 6,584 1994
Westin Innisbrook Resort
Copperhead Course . . . Palm Harbor, FL 18 7,087 1972
Island Course . . . . . . . . Palm Harbor, FL 18 6,999 1970
Eagle's Watch . . . . . . . Palm Harbor, FL 18 6,245 1971
Hawk's Run . . . .. . . . .. . Palm Harbor, FL 18 6,245 1971
Lost Oaks of Innisbrook . . . Palm Harbor, FL 18 6,450 1977
Eagle Ridge Inn and Resort
The General . . . . . . . . . Galena, IL 18 6,820 1997
North Course . . . . . . . . . . Galena, IL 18 6,836 1977
South Course . . . . . . . . . . Galena, IL 18 6,762 1984
East Course . . . . . . . . . . Galena, IL 9 2,648 1991
</TABLE>
25
<PAGE>
HIGH-END DAILY FEE COURSES
The Company considers its Daily Fee courses to be high-end courses,
reflected in the quality and maintenance standards of the golf courses, and the
green fees, which are generally higher than other golf courses in their
respective markets. Some high-end daily fee courses are semi-private, in that
they offer membership packages but also allow public play.
<TABLE>
<CAPTION>
NO. OF YEAR
COURSE NAME CITY AND STATE HOLES YARDAGE OPENED
- ------------------------------------------------ ------------------------------ --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Royal New Kent . . . . Williamsburg, VA 18 7,291 1996
Legends of Stonehouse . . Williamsburg, VA 18 6,963 1996
Olde Atlanta . . . . . . . . . . Atlanta, GA 18 6,789 1993
Tiburon . . . . . . . . . . . . . . Omaha, NE 27 7,005 1989
Raintree . . . . . . . . . . . . . Akron, OH 18 6,886 1992
Eagle Watch . . . . . . . . . . Atlanta, GA 18 6,896 1989
Black Bear Golf Club . . . Orlando, FL 18 7,002 1995
Bonaventure
Green Monster Course Ft. Lauderdale, FL 18 7,011 1970
The Resort Course Ft. Lauderdale, FL 18 6,189 1978
Mystic Creek . . . . . . . . . Milford, MI 27 6,802 1996
Emerald Dunes Golf Course West Palm Beach, FL 18 7,006 1990
Sandpiper Golf Course Santa Barbara, CA 18 7,068 1972
Tierra Del Sol . . . . . . . . . Albuquerque, NM 18 6,351 1982
Links at Polo Trace . . . . . Delray Beach, FL 18 7,100 1989
Osage National . . . . . . . . Lake of the Ozarks, MO 27 7,150 1992
Wekiva Golf Club . . . . . . Orlando, FL 18 6,640 1975
Cypress Creek . . . . . . . . . Boynton Beach, FL 18 6,808 1964
Cooks Creek . . . . . . . . . . Ashville, OH 18 7,000 1983
Brentwood . . . . . . . . . . . White Lake, MI 18 6,262 1995
Palm Desert . . . . . . . . . . . Palm Desert, CA 27 6,678 1957
</TABLE>
26
<PAGE>
PRIVATE CLUB COURSES
Private clubs are generally closed to the public and generate revenue
principally through initiation fees and membership dues, golf cart rentals and
guest green fees. Initiation fees and membership dues are determined according
to the particular market segment in which the club operates.
Revenue and cash flows of private country clubs generally are more
stable and predictable than those of public courses, because the receipt of
membership dues generally is independent of the level of course utilization.
<TABLE>
<CAPTION>
NO. OF YEAR
COURSE NAME CITY AND STATE HOLES YARDAGE OPENED
- ------------------------------------------- ---------------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Northgate Country Club . . . . . . . Houston, TX 27 6,540 1984
Club of the Country . . . . . . . . . . Kansas City, KS 18 6,357 1979
Stonehenge Golf
Wildewood Country Club Columbia, SC 18 6,751 1974
Woodcreek Farms Columbia, SC 18 7,002 1997
Persimmon Ridge Country Club . Louisville, KY 18 7,129 1989
Silverthorn Country Club . . . . . . Brooksville, FL 18 6,827 1994
Ohio Prestwick Country Club . . . Akron, OH 18 7,066 1972
Sweetwater Country Club . . . . . Orlando, FL 18 6,300 1980
The Pete Dye Golf Club . . . . . . . Bridgeport, WV 18 7,248 1994
Metamora Golf & Country Club Metamora, MI 18 6,933 1992
(semi-private). . . . . . . . . . . . .
</TABLE>
27
<PAGE>
THE PARTICIPATING LEASES
THE FOLLOWING SUMMARY OF THE PARTICIPATING LEASES IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE PARTICIPATING LEASES, A FORM OF WHICH WAS PREVIOUSLY FILED.
THE FOLLOWING DESCRIPTION OF THE PARTICIPATING LEASES DOES NOT PURPORT TO BE
COMPLETE BUT CONTAINS A SUMMARY OF THE MATERIAL PROVISIONS THEREOF. PURSUANT TO
THE COMPANY'S MULTIPLE INDEPENDENT LESSEE STRUCTURE, LEASES ARE INDIVIDUALLY
NEGOTIATED AND CONSEQUENTLY VARY FROM ONE ANOTHER, AT TIMES IN MATERIAL WAYS.
All of the Participating Leases contain the same basic provisions
described below. The leases for any golf course properties acquired by the
Company in the future will contain such terms and conditions as are agreed upon
between the Lessee and the Company at the time of such acquisitions, and such
terms and conditions may vary from the terms and conditions described below with
respect to the Participating Leases. The Company anticipates that each new lease
will be with an existing Lessee, with an affiliate of the seller or with an
unaffiliated third party experienced in the operation of similar courses.
LEASE TERM
Each Participating Lease was entered into upon the conveyance to the
Company of the underlying Golf Course. Generally, the Company's interest in each
leased Golf Course includes the land, buildings and improvements, maintenance
equipment, related easements and rights, and fixtures (collectively, the "Leased
Property"). Each Leased Property is leased to the respective Lessee under a
Participating Lease which, generally, has a primary term of 10 years (the "Fixed
Term"). In addition, each Lessee generally has an option to extend the term of
its Participating Lease for up to six terms of five years each (the "Extended
Terms") subject to earlier termination upon the occurrence of certain
contingencies described in the Participating Lease.
In addition, at the expiration of the Fixed Term and the Extended
Terms, the Lessee will generally have a right of first offer to continue to
lease the Golf Course on the terms and conditions pursuant to which the Company
intends to lease the Golf Course to a third party.
USE OF THE GOLF COURSES
Each Participating Lease permits the Lessee to operate the Leased
Property as a golf course, along with a clubhouse and other activities
customarily associated with or incidental to the operation of a golf course and
other facilities located at the golf course, including, where applicable, swim
and tennis operations. Operations may include sale or rental of golf-related
merchandise, sale of memberships, furnishing of lessons, operation of practice
facilities and sales of food and beverages.
28
<PAGE>
BASE RENT; PARTICIPATING RENT
The Participating Leases provide for the Company to receive, with
respect to each Golf Course, the greater of Base Rent or an amount equal to
Participating Rent plus the initial Base Rent payable under each Participating
Lease. Participating Rent is generally equal to 33 1/3% of any increase in Gross
Golf Revenue over Gross Golf Revenue for the base year, as adjusted in
determining the initial Base Rent, which base year will be reset to the year
immediately preceding the date on which the Prior Owner exercises the Lessee
Performance Option, if applicable. Base Rent will generally be increased
annually by the Base Rent Escalator (generally, the lesser of (i) 3% or (ii) a
multiple of the change in CPI for the prior year) during the first five years of
each Participating Lease term and, if the Lessee Performance Option is
exercised, an additional five years thereafter from the date of exercise. Annual
increases in Lease Payments are generally limited to 5% - 7% during the first
five years of the initial lease terms. "Gross Golf Revenue" generally is defined
as all revenues from a Golf Course including green fees, golf cart rentals,
range fees, membership dues, membership initiation fees and transfer fees,
excluding, however, food and beverage and merchandise revenue. In certain
circumstances, the Company participates in food and beverage and merchandise
revenue. Base Rent is required to be paid in twelve equal monthly installments
in arrears on the first day of each calendar month. Participating Rent is
payable quarterly in arrears.
TRIPLE NET LEASES
The Participating Leases are structured as triple net leases under
which each Lessee is required to pay all real estate and personal property
taxes, insurance, utilities and services, golf course maintenance and other
operating expenses.
SECURITY DEPOSIT
As security for its affiliated Lessee's obligations under its
Participating Leases, each prior owner of each Golf Course generally is
obligated to pledge OP Units (or cash or other collateral acceptable to the
Company) with a value initially up to 15% of the purchase price for the
applicable Golf Course. The security deposit generally will not be released for
two years. Beginning in the third year and any time thereafter, one-third of
pledged collateral will be released if the net operating income to lease payment
coverage ratio (the "Coverage Ratio") of the Lessee for the two prior fiscal
years equals or exceeds 120%, 130% and 140%, respectively. If the Coverage Ratio
falls below 120% at any time following the release of pledged collateral, then
the Lessee shall be required to retain and not distribute profits until such
time as the Lessee has retained cash equal to at least six-months of
then-current Base Rent. In addition, the Participating Leases with the Legends
Lessees are cross-collateralized and cross-defaulted.
The security deposit will be increased following the exercise of any
Lessee Performance Option to equal approximately 15% of the sum of the initial
purchase price of such Golf Course and the value of any additional OP Units
issued in connection with the exercise of the Lessee Performance Option. If the
Company acquires any Expansion Facility, the security deposit also will be
increased by an amount equal to approximately 15% of the purchase price of the
Expansion Facility.
In instances where the Golf Course is not leased to a prior owner, the
security deposit provided to the Company varies, and is generally less than
where a Golf Course is leased back to its Prior Owners
29
<PAGE>
and the Company seeks to cross-collateralize any security deposits otherwise
provided by such Lessee or its affiliates to the Company.
GTA LESSEE ASSOCIATION
Each Lessee is a member of the GTA Lessee Association, which
participates in cross-marketing of the Golf Courses and identifies each Golf
Course as owned by the Company, thereby increasing the golfing consumer's brand
name awareness of the Company. Membership in the GTA Lessee Association is
designed to provide the Lessees, collectively, greater purchasing power with
vendors than each would have individually. The GTA Lessee Association attempts
to ensure a consistent, high-quality product at each member Golf Course.
MAINTENANCE AND MODIFICATIONS
Each Lessee, at its sole cost and expense, is required, to maintain
and operate its respective Leased Property in good order, repair and
appearance and to make such interior and exterior, structural and
non-structural, foreseen and unforeseen, and ordinary and extraordinary
repairs as are necessary and appropriate to keep such Leased Property in good
order, repair and appearance. Each Lessee also must maintain each Golf Course
it leases in substantially the same condition it was in at the commencement
of the Participating Lease and otherwise in a condition comparable to other
comparable golf courses in its vicinity. If the Company, in consultation with
the GTA Lessee Association, determines that a Lessee has failed to comply
with its maintenance and operation obligations, then the Company shall
provide a written list to the Lessee of remedial work and/or steps to be
performed. If the Lessee disputes the Company's assertions, then the matter
shall be handled by a committee composed of members of the GTA Lessee
Association and representatives of the Company.
The Company has generally established and will maintain, through the
payment of additional rent, with respect to each Golf Course, a capital
replacement reserve (a "Capital Replacement Fund") in an amount equal to between
2% and 5% of Gross Golf Revenue at such Golf Course, depending on certain
factors, including the condition of the structures and the age and condition of
the Golf Course. The Company and each Lessee will agree on the use of funds in
these reserves and the Company has the right to approve each Lessee's annual and
long-term capital expenditure budgets. Funds in the Capital Replacement Fund
shall be paid to a Lessee to reimburse such Lessee for expenditures made in
connection with approved capital replacements. The Lessees generally are
obligated to increase their lease payment each year in an amount equal to the
increase in the Capital Replacement Fund from the prior year. Amounts in the
Capital Replacement Fund will be deemed to accrue interest at a money market
rate. Generally, any amounts in the Capital Replacement Fund at the expiration
of the applicable Participating Lease will be retained by the Company, with
limited exceptions.
Except for its obligation to fund the Capital Replacement Fund and
except for certain improvements, the Company is not required to build or rebuild
any improvements on any Leased Property, or to make any repairs, replacements,
alterations, restorations or renewals of any nature or description to any Leased
Property, whether ordinary or extraordinary, structural or non-structural,
foreseen or unforeseen, or to make any expenditure whatsoever with respect
thereto, in connection with any Participating Lease, or to maintain any Leased
Property in any way. In the event that the Company elects to fund additional
capital improvements on a Golf Course, the Company generally will condition such
election on an increase in minimum rent under the Participating Lease with
respect to such Golf Course to reflect such expenditures.
30
<PAGE>
During the Fixed Term and each Extended Term, each Lessee, at its sole
cost and expense, may make alterations, additions, changes and/or improvements
("Lessee Improvements") to each Leased Property, without the Company's prior
written consent, provided such alterations do not diminish the value or
appearance of the Golf Course. All such Lessee Improvements will be subject to
all the terms and provisions of each applicable Participating Lease and will
become the property of the Company upon termination of such Participating Lease.
At the end of the Participating Lease, all remaining personal property
at each Leased Property will become the property of the Company.
INSURANCE
Each Lessee is required to maintain insurance on its Leased Property
under insurance policies providing for all-risk, liability, flood (if carried by
comparable golf course facilities in the area and otherwise available at
commercially reasonable rates) and worker's compensation coverage, which at the
time is usual and commonly obtained in connection with properties similar in
type of building size and use to the Leased Property located in the geographic
area where the Leased Property is located. Each insurance policy names the
Company as additional insured or loss payee, as applicable. In 1999, the GTA
Lessee Association selected a preferred vendor for insurance products and
services for the purpose of providing lessees access to better rates and
coverage.
ASSIGNMENT AND SUBLETTING
A Lessee, without the prior written consent of the Company (which
consent may generally be withheld by the Company in its sole discretion, except
in limited instances), may not assign, mortgage, pledge, hypothecate, encumber
or otherwise transfer any Participating Lease or any interest therein, all or
any part of the Leased Property or suffer or permit any lease or the leasehold
estate created thereby or any other rights arising under any Participating Lease
to be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in
whole or in part, whether voluntarily, involuntarily or by operation of law. An
assignment of a Participating Lease will be deemed to include any change of
control of such Lessee, as if such change of control were an assignment of the
Participating Lease. However, each Lessee has the right to assign its
Participating Lease to its affiliates.
Each Lessee, with the Company's prior approval, which approval the
Company may withhold in its discretion, may be permitted to sublease portions of
any Leased Property to sublessees to operate portions (but not the entirety of
the operations customarily associated with or incidental to the operation of a
golf course (e.g., driving range, restaurant, etc.).
COMPANY'S RIGHT OF FIRST OFFER
In the event a Lessee desires to sell its interest in its Participating
Lease to an unaffiliated third party, it must first offer the Company or its
designee the right to purchase such interest. The Lessee must give the Company
written notice of its intent to sell, which shall indicate the terms and
conditions upon which such Lessee intends to sell its interest in the
Participating Lease. The Company or its designee shall thereafter generally have
a period of 60 days to elect to purchase the leasehold interest on the terms and
conditions at which such Lessee proposes to sell its interest. If the Company or
its designee elects not
31
<PAGE>
to purchase the interest of the Lessee, then such Lessee shall be free to sell
its interest to a third party, subject to the Company's approval as described
above (see "-- Assignment and Subletting"). However, if the terms on which the
Lessee intends to sell its interest are reduced by 5% or more, then such Lessee
generally shall again offer the Company the right to acquire its interest,
provided the Company shall have only 15 days to accept such offer.
LESSEE'S RIGHT OF FIRST OFFER
The Company may sell a Golf Course, but must first offer the Lessee of
such course the right to purchase the Golf Course. The Company must give the
relevant Lessee written notice of its intent to sell, which shall indicate the
terms and conditions upon which the Company intends to sell such Golf Course.
Such Lessee shall thereafter generally have a period of 60 days to elect to
purchase the Golf Course on the terms and conditions at which the Company
proposes to sell the Golf Course. If such Lessee elects not to purchase the Golf
Course, then the Company shall be free to sell the Golf Course to a third party.
However, if the price at which the Company intends to sell the Golf Course is
reduced by 5% or more from the price offered to the Lessee, then generally the
Company again shall offer such Lessee the right to acquire the Golf Course at
the reduced price provided that such Lessee shall have only 15 days to accept
such offer.
DAMAGE TO, OR CONDEMNATION OF, A LEASED PROPERTY
In the event of damage to or destruction of any Leased Property caused
by an insured risk, the Lessee will be obligated to diligently restore the
Leased Property to substantially the same condition as existed immediately prior
to such damage or destruction and, to the extent the insurance proceeds and the
Capital Replacement Fund are insufficient to do so, such Lessee will be
obligated to contribute the excess funds needed to restore the Leased Property.
Any excess insurance proceeds will be paid to the Company. Notwithstanding the
foregoing, in the event the damage or destruction of the Leased Property renders
the Leased Property unsuitable for use as a golf course for a period of 12
months or more, the Lessee may terminate the Participating Lease.
INDEMNIFICATION GENERALLY
Under each Participating Lease, the Lessee has agreed to indemnify, and
hold harmless, the Company from and against all liabilities, obligations,
claims, actual or consequential damages, penalties, causes of action, costs and
expenses (including reasonable attorneys' fees and expenses) imposed upon or
asserted against the Company as owner of the applicable Leased Property on
account of, among other things, (i) any accident, injury to or death of a person
or loss of or damage to property on or about the Leased Property, (ii) any use,
non-use or misuse by such Lessee of the Leased Property, (iii) any impositions
(which are the obligations of the relevant Lessee to pay pursuant to the
applicable provisions of such Participating Lease) or the operations thereon,
(iv) any failure on the part of the Lessee to perform or comply with any of the
terms of the Participating Lease or any sublease, (v) any taxes levied against
the Leased Property and (vi) any liability the Company may incur or suffer as a
result of any permitted contest by the Lessee under any Participating Lease.
32
<PAGE>
EVENTS OF DEFAULT
Events of Default are defined in each Participating Lease generally to
include, among others, the following:
(i) if a Lessee fails to make a rent payment when such payment
becomes due and payable and such failure is not cured by such
Lessee within a period of 10 days after receipt of written
notice thereof from the Company;
(ii) if a Lessee fails to observe or perform any material term,
covenant or condition of a Participating Lease and such
failure is not cured by such Lessee within a period of 30 days
after receipt by such Lessee of written notice thereof from
the Company, unless such failure cannot be cured with due
diligence within a period of 30 days, in which case such
failure will not constitute an Event of Default if such Lessee
proceeds promptly and with due diligence to cure the failure
and diligently completes the curing thereof within 120 days;
(iii) if a Lessee: (a) admits in writing its inability to pay its
debts generally as they become due, (b) files a petition in
bankruptcy or a petition to take advantage of any insolvency
act, (c) makes an assignment for the benefit of its creditors,
(d) is unable to pay its debts as they mature, (e) consents to
the appointment of a receiver for itself or of the whole or
any substantial part of its property or (f) files a petition
or answer seeking reorganization or arrangement under the
federal bankruptcy laws or any other applicable law or statute
of the United States of America or any state thereof;
(iv) if the Lessee is liquidated or dissolved;
(v) if the Lessee voluntarily ceases operations on the Leased
Property, except as a result of damage, destruction or a
partial or complete condemnation or other unavoidable delays;
or
(vi) if the Lessee or an affiliate thereof is in default under any
other Participating Lease with the Company.
If an Event of Default occurs and is continuing under a Participating
Lessee then upon not less than 10 days notice (only if required by the
Participating Lease) of such termination and upon the expiration of such time,
the Fixed or Extended Term, as the case may be, will terminate and all rights of
the Lessee under the Participating Lease shall cease.
SEE "EVENTS OF DEFAULT" UNDER ITEM 1 FOR SPECIFIC COURSES TO WHICH THIS
MAY APPLY.
GOVERNING LAW
The Participating Leases will be governed by and construed in
accordance with the law of the state where the Golf Course is located. Because
the Golf Courses are located in various states, the Participating Leases may be
subject to restrictions imposed by applicable local law.
33
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course, including
proceedings relating to personal injury and property damage. Such proceedings
are generally brought against the operator of a golf course, but may also be
brought against the owner. The Participating Leases provide that each Lessee is
responsible for claims based on personal injury and property damage at the Golf
Courses which are leased and require each Lessee to maintain insurance for such
purposes. Although the Company is currently not party to any legal proceedings
relating to the Golf Courses that would have a material adverse effect upon the
Company's business or financial position, it is possible that in the future the
Company could become a party to such proceedings.
LITIGATION ARISING THROUGH EVENTS OF DEFAULT
TIERRA DEL SOL GOLF CLUB: On November 3, 1999, GTA filed an eviction
action against the tenant at Tierra Del Sol Golf Club with the District Clerk of
Court in Valencia County, New Mexico, as a result of the tenant's failure to pay
rent. As a result of this lawsuit, GTA took possession of this property on
February 7, 2000, pursuant to an order issued by the District Court. GTA has
created a wholly owned subsidiary, GTA Tierra Del Sol LLC, to operate this Golf
Course during the 90-day grace period allowed by the Internal Revenue which
permits these revenues from operations to be qualifying income for REIT tax
purposes for this 90-day period. See further explanation of the Internal Revenue
Code addressing this situation in the TAX STATUS section of this document.
OSAGE NATIONAL GOLF CLUB: On February 25, 2000, GTA declared an
event of default under the Participating Lease as a result of the tenant's
failure to pay rent. As a result GTA, the prior owner of the golf course, and
the tenant entered into discussions to terminate the tenant's Participating
Lease and the tenant's possessory rights at the Golf Course. We expect to
have the Participating Lease terminated and obtain possession of the Golf
Course within approximately 30-45 days. GTA has created a wholly owned
subsidiary, GTA Osage LLC, which expects to assume management of the Golf
Course during the 90-day grace period allowed by the Internal Revenue which
permits these revenues from operations to be qualifying income for REIT tax
purposes for this 90-day period. See further explanation of the Internal
Revenue Code addressing this situation in the TAX STATUS section of this
document.
MYSTIC CREEK GOLF COURSE: On October 25, 1999, GTA declared an event
of default under the Participating Lease as a result of the tenant's failure
to pay rent. On February 3, 2000, GTA filed an eviction action with a
District Court in Oakland County, Michigan. A hearing was set for February
29,2000, but was stayed because the tenant filed a voluntary petition for
Chapter 11 Bankruptcy in the United States Bankruptcy Court on February 25,
2000. It is our intention to continue the eviction action as soon as legally
permissible to seek to shorten the time for the tenant to accept the lease
(by bringing rent current) or reject the lease (which would mean a return of
the property to GTA) and to seek to compel the payment of ongoing rent during
the pendancy of the bankruptcy.
BRENTWOOD GOLF & COUNTRY CLUB: On November 21, 1999, GTA declared an
event of default under the Participating Lease as a result of the tenant's
failure to pay rent. On February 3, 2000, GTA filed an eviction action with a
District Court in Oakland County, Michigan. In response, the tenant has filed a
counterclaim against GTA. On March 8, 2000, a hearing was held and the Court
ruled to remove
34
<PAGE>
the case to Oakland County Circuit Court, where the action for possession and
the allegations in the counterclaim will be heard. On March 28, 2000, an
order was entered requiring escrow payment of rent and prorated taxes within
seven days of the Order, and thereafter, within seven days of the 25th of
each month. The first payment required will be February and March rents, and
payments in the subsequent months will be the current months rent.
35
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the shareholders in the fourth quarter of
1999.
36
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's sole class of common stock is traded on the NASDAQ
American Stock Exchange (the "AMEX").
The following table sets forth for periods shown the high and low sales
price for the Company's Common Stock on AMEX and distributions declared for the
quarter.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
HIGH LOW DISTRIBUTION
- -----------------------------------------------------------
<S> <C> <C> <C>
1999
First Quarter 27 3/4 20 1/2 $0.44
Second Quarter 25 3/4 21 5/8 $0.44
Third Quarter 24 3/8 18 3/8 $0.44
Fourth Quarter 19 1/2 14 1/2 $0.44
- -----------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------
HIGH LOW DISTRIBUTION
- -------------------------------------------------------------
<S> <C> <C> <C>
1998
First Quarter 32 3/8 27 5/8 $0.41
Second Quarter 35 1/8 30 1/4 $0.44
Third Quarter 35 1/2 26 $0.44
Fourth Quarter 29 9/16 24 $0.44
- -------------------------------------------------------------
</TABLE>
SHAREHOLDER INFORMATION
As of March 22, 2000, the number of holders of record of Common Stock
of the Company was approximately 145 and there were 8,118,147 shares
outstanding. On that date a total of 4,905,086 OP Units (including 59,188
preferred OP units) were held by 21 entities, excluding the Company's two
subsidiaries. On that date, 800,000 shares of the Company's Convertible
Preferred Stock were held by a single holder.
37
<PAGE>
DIVIDENDS
The Company intends to continue to make regular quarterly distributions
to its stockholders. The Board of Directors, in its sole discretion, will
determine the actual distribution rate based on the Company's actual results of
operations, economic conditions, tax considerations (including those related to
REITs) and other factors. The Company's distributions, for the year ended
December 31, 1999, was $1.76 per share of Common Stock. For the period ended
December 31, 1999, and including payments made for fourth quarter, the
distributions represent 75% of cash available for distribution. Holders of OP
Units will receive distributions on a per unit basis equal to the per share
distributions to owners of Common Stock, except Preferred OP Units which were
issued at a specified dividend yield. Also, OP Units issued since the prior
record date to partners other that GTA GP or GTA LP will receive a pro rata
distribution based on duration of ownership.
The Company's actual cash available for distribution will be affected
by a number of factors, including Gross Golf Revenues generated at the Golf
Courses. The Company anticipates that cash available for distribution will
exceed earnings and profits due to non-cash expenses, primarily depreciation and
amortization, to be incurred by the Company. Distributions by the Company to the
extent of its current or accumulated earnings and profits for federal income tax
purposes, other than capital gain dividends, will be taxable to stockholders as
ordinary dividend income. Any dividends designated by the Company, as capital
gain dividends generally will give rise to capital gain for stockholders.
Distributions in excess of the Company's current or accumulated earnings and
profits generally will be treated as a non-taxable reduction of a stockholder's
basis in the Common Stock to the extent thereof, and thereafter as capital gain.
Distributions treated as non-taxable reduction in basis will have the effect of
deferring taxation until the sale of a stockholder's Common Stock or future
distributions in excess of the stockholder's basis in the Common Stock. Based
upon the total earnings and profits of the Company, the Company estimates that
2.3% of the expected annual distribution would represent a return of capital for
federal income tax purposes. If actual cash available for distribution or
taxable income vary from these amounts, or if the Company is not treated as the
owner of one or more of the Initial Courses, the percentage of distributions
which represents a return of capital may be materially different.
In order to maintain its qualification as a REIT, the Company must make
annual distributions to its stockholders of at least 95 percent of its taxable
income (excluding net capital gains). Based on the Company's results of
operations for year ended December 31, 1999, the Company was required to
distribute approximately $9.08 million in order to maintain its status as a
REIT. Under certain circumstances, the Company may be required to make
distributions in excess of cash available in order to meet such distribution
requirements.
The Board of Directors, in its sole discretion, will determine the
actual distribution rate based on a number of factors, including the amount of
cash available for distribution, the Company's financial condition, capital
expenditure requirements for the Company's properties, the annual distribution
requirements under the REIT Provisions of the Code and such other factors as the
Board of Directors deems relevant.
RECENT SALES OF UNREGISTERED SECURITIES
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On March 10, 1999, Restricted Stock grants totaling 44,000 common
shares were issued to the Executive Officers of the Company under the 1998 Stock
Based Incentive Plan. On January 30, 2000, Restricted Stock grants totaling
55,000 common shares were issued to the Executive Officers of the Company under
the 1998 Stock Based Incentive Plan. On January 30, 2000, Stock Options were
issued for 145,000 common shares to Executive Officers of The Company under the
1998 Stock Based Incentive Plan. These issuances were effected in reliance upon
an exemption from registration under Section 4(2) of the Securities Act as a
transaction not involving a public offering.
On May 11, 1999, the Operating Partnership issued 10,169 Preferred OP
Units to the prior owner of Metamora Golf and Country Club as partial
consideration for its interest in Metamora Golf and Country Club. On July 28,
1999, the Operating Partnership issued 48,949 Preferred OP Units to the prior
owner of Pete Dye Golf Club as partial consideration for its interest in the
Pete Dye Golf Club. OP Units may generally be redeemed by their holder one-year
after issuance for cash or, at the option of the Company, shares of Common Stock
on a one-for-one basis. This issuance was effected in reliance upon an exemption
from registration under Section 4(2) of the Securities Act as a transaction not
involving a public offering.
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ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected consolidated financial
information for the Company.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED FOR THE YEAR ENDED FROM FEBRUARY 12 TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Rent from Affiliates $15,041 $12,365 $10,802
Rent 31,630 23,097 3,607
Mortgage interest 9,106 8,922 4,318
- ---------------------------------------- -------------------- -------------------- -------------------
$55,777 $44,384 $18,727
Depreciation and amortization $17,299 $ 11,667 $ 3,173
General and administrative 6,098 5,416 2,532
Interest income (1,480) (478) (624)
Interest expense 15,603 9,673 $ 1,879
Loss on disposal of assets - 370 -
- ---------------------------------------- -------------------- -------------------- -------------------
Total Expenses $37,520 $ 9,565 $ 6,960
- ---------------------------------------- -------------------- -------------------- -------------------
Net income before minority interest $18,257 $17,736 $11,767
Income applicable to minority interest
7,026 7,130 5,798
Preferred Dividends
1,383 - -
- ---------------------------------------- -------------------- -------------------- -------------------
Net income applicable to common
stockholders $ 9,848 $10,606 $ 5,969
- ---------------------------------------- -------------------- -------------------- -------------------
Earnings per common share - basis $ 1.28 $ 1.39 $ 1.32
Weighted average number of common
shares - basis 7,720 7,635 4,535
Earnings per common share -diluted $ 1.27 $ 1.34 $ 1.29
Weighted average number of common
shares - diluted 7,734 7,905 4,626
Distribution declared per share and
unit (1) $ 1.76 $ 1.73 $ 1.43
Distribution paid per share and unit $ 1.76 $ 2.14 $ 1.03
</TABLE>
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<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEAR ENDED FOR THE YEAR ENDED FEBRUARY 12 TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOW INFORMATION
Cash flows provided by operating 24,608 30,593 13,644
activities
Cash flows used in investing
activities 29,293 201,504 148,738
Cash flows provided by financing 1,699 157,834 150,062
activities
OTHER INFORMATION
Funds from operations (2) 34,107 29,773 14,899
Cash available for distribution 30,549 27,221 13,652
Weighted average common stock and 12,990 13,052 9,030
OP Units
</TABLE>
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- ------------------------ --------------------
1999 1998 1997
<S> <C> <C> <C>
Net Investment in Golf Courses $ 327,702 $ 323,500 $ 101,044
Mortgage Notes Receivable $73,160 $ 72,252 $ 65,129
Total Assets $ 433,912 $ 411,981 $ 186,306
---------------------- ------------------------ --------------------
---------------------- ------------------------ --------------------
Mortgages and Notes Payable $ 223,085 $ 210,634 $ 4,325
Total Liabilities $233,881 $ 225,824 $ 7,354
Minority Interest $69,747 $ 76,510 $ 54,625
Stockholders' Equity $130,284 $ 109,647 $ 124,327
Total Liabilities and Stockholders' Equity $433,912 $ 411,981 $ 186,306
---------------------- ------------------------ --------------------
---------------------- ------------------------ --------------------
---------------------- ------------------------ --------------------
</TABLE>
(1) The 1997 quarterly distribution declared per share and unit includes
$.41 declared in January 1998 related to the fourth quarter 1997.
(2) In accordance with the resolution adopted by the Board of Governors of
the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"), Funds From Operations (FFO) represents net income (loss)
(computed in accordance with generally accepted accounting principles
(GAAP)), excluding gains of real property, and after adjustments for
unconsolidated partnerships and joint ventures. Effective 1/1/2000, FFO
should include both recurring and non-recurring operating results -
except those results defined as "extraordinary items" under GAAP and
gains and losses from sales of depreciable operating property. Funds
From Operations should not be considered as an alternative to net
income or other measurements under generally accepted accounting
principles as an indicator of operating performance or to cash flows
from operating, investing or financial activities as a measure of
liquidity. Funds From Operations does not reflect working capital
changes, cash expenditures for capital improvements or principal
payments on indebtedness. The Company believes that Funds From
Operations is helpful to investors as a measure of the performance of
an equity REIT, because, along with cash flows from operating
activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur
and service debt and make capital expenditures. Compliance with the
NAREIT definition of Funds From Operations is voluntary. Accordingly,
the Company's calculation of Funds From Operations
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in accordance with NAREIT definition may be different than similarly
titled measures used by other REITs.
42
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and other sections of this report contain various "forward-looking
statements" which represent the Company's expectations concerning future events
including the following: statements regarding the Company's continuing ability
to target and acquire high-quality golf courses; the expected availability of
the Credit Facility, Bridge Loan and other debt and equity financing; the
Lessees' and Mortgagee's future cash flows and ability to make Lease and
Mortgage Payments; results of operations and overall financial performance and
the expected tax treatment of the Company's operations; and the Company's
beliefs about continued growth in the golf industry. Because of the foregoing
factors, the actual results achieved by the Company in the future may differ
materially from the expected results described in the forward-looking
statements. The following discussion should read in conjunction with the
accompanying Consolidated Financial Statements appearing elsewhere herein.
OVERVIEW AND FORMATION
Golf Trust of America, Inc. (the "Company") conducts business through Golf
Trust of America, L.P. (the "Operating Partnership"), of which the Company, as
of March 22, 2000, owns 64.4 percent interest through its two wholly owned
subsidiaries and is the general partner. Larry D. Young, a director of the
Company, along with his affiliates, owns 27.0 percent of the Operating
Partnership and is a significant lessee. Operators of the golf courses, their
affiliates and an officer of the Company hold the remaining interest in the
Operating Partnership.
Concurrent with the initial public offering of the Company's stock, the
Company acquired ten initial golf courses in exchange for the issuance of 4.1
million OP units, the repayment of $47.5 million of notes payable and affiliate
debt, and $6.2 million cash. The seven golf courses acquired from Legends Golf
have been accounted for at a carryover basis as Legends Golf is considered the
accounting acquirer under APB Opinion No. 16. The value of the OP units issued
and debt assumed was approximately $73.7 million greater than the carryover
basis of Legends Golf.
The Company was formed to capitalize upon consolidation opportunities in
the ownership of upscale golf courses in the United States. The Company's
principal business strategy is to own upscale golf courses and lease these golf
courses to qualified third-party operators which may include the sellers of the
courses. In addition to the ability to acquire golf courses for cash and/or the
assumption of indebtedness, the Company has the ability to issue units of
limited partnership interest ("OP Units") in the Operating Partnership. OP Unit
holders are partners who have the right ("their Redemption Right"), subject to
certain terms and conditions to convert their OP Units to shares of Common
Stock, or to cash at the discretion of the Company. When the Company acquires a
golf course in exchange for OP Units, in most instances the seller of the course
does not recognize taxable income gain until it exercises the Redemption Right.
OP Units can thus provide an attractive tax-deferred sale structure for golf
course sellers. The Company believes it is highly regarded and recognized as
having a significant presence in the ownership of upscale assets due to (i) its
utilization of a multiple independent lessee structure (ii) management's
substantial industry knowledge, experience, and relationships within the golf
community, (iii) the Company's strategic alliances with prominent golf course
operators and (iv) its ability to issue OP Units to golf course owners on a
tax-deferred basis.
The Company's primary sources of revenue are lease payments under the
participating leases and mortgage payments under the participating mortgage. The
Company generally participates in the
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increase in gross golf revenues over the base year. Base rent will generally
increase each year between 3% and 5%. Annual increases in lease payments are
generally limited to a maximum of 5% to 7% for the first five years of the lease
term.
Management believes the principal source of growth in gross golf
revenues at the golf courses will be increased green fees, cart fees, and other
related fees (due to increases in rounds and/or rates). In order to achieve
higher revenues, management believes the lessees will need to continue to offer
golfers a high quality golf experience as it relates to the pace of play,
condition of the golf course and overall quality of the facilities and services.
GOLF COURSE ACQUISITIONS
For the year ended December 31, 1999, the Company purchased
two Golf Courses for an aggregate acquisition cost of approximately $15.9
million. In conjunction with the purchase of the Pete Dye Golf Club, the
lessee executed two promissory notes: (i) a $2.3 million capital improvement
loan to construct the new clubhouse and (ii) a $3.5 million secured land
loan. These two promissory notes initially bear interest at 10.5% per annum
with annual increases of 5% per annum. The purchase price, together with the
original balance of the promissory notes totaled $21.7 million and were
funded as follows: $8.6 million in cash, $10.0 million in assumed debt, $1.4
million in deferred payments ($0.7 million on the Pete Dye Clubhouse
Construction and $0.7 million reserve for a Maintenance Facility and
Wastewater Treatment at Metamora), and $1.7 million represented by the
issuance of Preferred OP Units (approximately 59,000 OP Units) to the sellers.
DISPOSITIONS
In June 1999, Sandpiper GTA Development, Inc. sold the undeveloped
14-acre parcel of land located near Sandpiper Golf Course in Santa Barbara,
California for $5.3 million, which approximated our basis in the property.
The sales price included a $4.2 million promissory note from the buyer
secured by a first deed of trust on the parcel; the promissory note accrues
interest at 10% per annum and matures one year from closing, subject to two
one-year extensions. These extensions can only be exercised by the borrower
subject to borrower's payment of all outstanding and accrued interest on the
note, an installment payment of $1,000,000 from the buyer for each extension,
and an increase in the interest rate on the note to 12% per annum effective
as of the second installment. The installment dates are June 2, 2000 and June
2, 2001. The Promissory Note matures on June 2, 2002 in the event no
extentions are exercised.
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<PAGE>
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998
For the years ended December 31, 1999, and December 31, 1998, the
Company recognized $55,777,000 and $44,384,000, respectively, in revenue from
the participating leases and from the mortgage note receivable. The increase
in revenues of $11,393,000 or 25.7% is due to 1) minimum increases in rent
(including additional rent on improvements at the courses acquired in 1997)
of approximately $1,554,000, 2) rent for a full year of operations for 1998
acquisitions (including additional rent on improvements at these courses) of
approximately $8,305,000, 3) rent from Golf Courses acquired in 1999 of
approximately $1,179,000, 4) increased interest from the Mortgage Note
Receivable of approximately $672,000, 5) increase in straight line rents of
approximately $33,000, offset by 6) a decrease of approximately $350,000 in
Participating Rent and/or Participating Interest.
Expenses totaled $23,397,000 and $17,083,000 for the years ended
December 31, 1999 and December 31, 1998, respectively. The increase of
$6,312,000 or 37%, reflects 1) additional depreciation of $5,658,000 for the
acquisitions and improvements made during 1999 and a full year of depreciation
for those courses added in 1998, 2) increase in loan cost amortization of
$370,000, 3) a one-time charge of approximately $500,000 which was primarily
severance costs related to the reorganization of the Acquisition department, and
offset by 4) a reduction in general and administrative costs and restricted
stock compensation expense of $209,000.
For the year ended December 31, 1999, interest expense was
$15,603,000, compared to $9,673,000 for the year ended December 31, 1998. The
increase of $5,930,000 can be primarily attributed to the increase of
$60,000,000 in the average balance of outstanding debt for the four quarters
of 1998 versus the average balance of outstanding debt for the four quarters
of 1999. The increase in the average balance of outstanding debt is due to a
full year of the outstanding debt obtained to fund 1998 acquisitions and to
the $10,000,000 debt assumption in 1999 for the purchase of Pete Dye Golf
Club. In addition, the interest rates have increased primarily in the last
quarter of 1999 causing an increase in the interest expense on our floating
rate debt which averaged approximately $133,900,000 in 1999.
Net income for the years ended December 31, 1999, and December 31,
1998, was $11,231,000 and $10,606,000, respectively for a year over year
increase of $625,000.
For the year ended December 31, 1999 the diluted earnings per share was
$1.27 reflecting a $0.07, or 5%, decrease over the prior year. This decrease is
primarily due to Preferred Dividend payments in 1999 to AEW of $1,383,000 which
reduces the earnings available to common shareholders. Diluted earnings per
share prior to reduction for Preferred Dividends would be $1.45, or an 8%
increase.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE
PERIOD FROM FEBRUARY 12 (INCEPTION) TO DECEMBER 31, 1997
For the year ended December 31, 1998 and the period from February 12 to
December 31, 1997, the Company recognized $44,384,000 and $18,727,000,
respectively, in revenue from the participating leases and from the mortgage
note receivable. The increase in revenues of $25,657,000 or 137% is due to 1)
minimum increases in rent of approximately $422,000, 2) rent of $14,735,000 from
new course acquisitions and expansions subsequent to December 31, 1997, 3)
$4,604,000 of increased interest from
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<PAGE>
the Mortgage Note Receivable, which was issued June 20, 1997, 4) the $369,000
increase in Participating Rent, 5) rent of $5,527,000 for a full year of
operations for 1997 acquisitions.
Expenses totaled $17,083,000 and $5,705,000 for the year ended December 31,
1998 and the period from February 12 to December 31, 1997, respectively. The
increase of $11,378,000 or 200%, reflects 1) additional depreciation of
$8,494,000 for the acquisitions made during 1998 and a full year of depreciation
for those courses added in 1997, and 2) additional general and administrative
costs of $2,884,000 for loan cost amortization, for amortization of restricted
stock compensation, additional salaries and administrative costs.
For the year ended December 31, 1998, interest expense was $9,673,000,
compared to $1,879,000 for the period from February 12 to December 31, 1997. The
increase for $7,794,000 reflects the increase in outstanding borrowings from
$4,325,000 at December 31, 1997 to $210,634,000 at December 31, 1998. The
proceeds of the current year borrowings ($188,600,000) and $14,968,000 of the
proceeds of the Company's secondary offering were used primarily to fund
$195,541,000 of the cash paid for acquisitions and improvements and advances of
$5,963,000 under the mortgage note receivable commitment.
The loss on disposal of assets occurred when the golf carts at one course
were traded in as part of a new leasing program and at another location where a
new clubhouse was built and the existing facility was removed.
Net income for the period from February 12 to December 31, 1997 and the
year ended December 31, 1998 was $5,969,000 and $10,606,000, respectively.
For the year ended December 31, 1998 the diluted earnings per share was
$1.34, reflecting a $0.05, or 4%, increase over the period from February 12 to
December 31, 1997.
LESSEE RESULTS OF OPERATIONS
GTA has a policy of acting promptly and aggressively on tenant
defaults in accordance with the terms of the Participating Leases. In the
event a tenant fails to pay their rent in accordance with the applicable
Participating Lease, an "Event of Default" (further defined under ITEM 2.
PROPERTIES) may be asserted by GTA as landlord.
In the third quarter of 1999, GTA elected to pursue legal remedies
available to it under its Participating Leases as a result of tenant defaults
at Bonaventure and the four Golf Courses previously leased to Granite Golf
(I.E., Tiburon Golf Club, Silverthorn Country Club, Persimmon Ridge Golf Club
and Black Bear Golf Course). As a result, GTA approved the assignment of the
tenant's interest in these Participating Leases to a new lessee. The
financial results submitted by the new lessee indicated that same store
rounds at these Golf Courses for the fourth quarter 1999 increased--75% for
Bonaventure and an average of 6% for the four Granite Golf Courses. Same
store revenues for the fourth quarter 1999 increased 23% for Bonaventure and
an average of 23% for the four Granite Golf Courses. GTA has also declared
events of default in the past several months at four other Golf Courses
"Tierra Del Sol Golf Club," "Osage National Golf Club," "Mystic Creek Golf
Course," and "Brentwood Golf & Country Club".
GTA management believes that in cases where events of default occur
under its Participating Leases, proactive management of the issues in a
timely manner is required and, that such action is necessary (i) to ensure an
effective and efficient legal process, (ii) to maintain the value of the Golf
Course, and
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(iii) to stabilize and/or improve operating performance of the applicable
Golf Course. When GTA is forced to "foreclose" on a Golf Course, the Internal
Revenue Code (Section 856(e)(4)(C)) allows a 90-day grace period during which
GTA can operate the Golf Course and still permit these revenues to be
qualifying income for REIT tax purposes. At the expiration of such period,
the Golf Course should either be sold, leased to an experienced Golf Course
operator, or an agreement must be secured with an independent contractor to
assume management of the applicable Golf Course. Management by an independent
contractor is allowed until the close of the third taxable year following the
taxable year in which the "foreclosure" occurred.
GTA has elected to pursue legal remedies available to it under its
Participating Lease to cure events of default that have occurred in the past
several months at the four Golf Courses listed below:
GRANITE GOLF ASSIGNMENT OF LEASES
Granite golf or one of its affiliates was the lessee ("Granite") at
four of our Golf Courses until June of 1999. Those Golf Courses included:
Silverthorn Country Club, an 18-hole private Golf Course located in Florida
and purchased in June of 1998 for $4,700,000; Black Bear Golf Course, an
18-hole high-end daily fee Golf Course located in Florida and purchased in
November of 1997 for $4,784,000; Tiburon Golf Club, a 27-hole high-end daily
fee Golf Course located in Nebraska and purchased in August of 1997 for
$6,003,000; Persimmon Ridge Country Club, an 18-hole high-end daily fee Golf
Course located in Kentucky and purchased in March of 1998 for $7,500,000. On
June 24, 1999, GTA declared a tenant default under each of the Participating
Leases where Granite Golf or one of its affiliates was the lessee for failure
to timely pay rent under the respective Participating Leases. GTA applied the
redemption value of Granite's OP units against past due rent obligations. W.
Bradley Blair, II, President and Chief Executive Officer of GTA, purchased
the 21,429 common shares (previously held by Granite as OP units) for $22.15
per share, the 10 day trailing average market price of GTA common stock, from
Golf Trust of America, L.P., in conjunction with this default. Effective
August 17, 1999, each of the tenant's interest in the Participating Leases
with Granite was assigned to and assumed by Legends National Golf Management,
LLC, an affiliate of Mr. Young. As yet, we have not restructured the
Participating Leases in any material manner. However, new working capital
loans aggregating $1.2 million and bearing interest under existing
Participating Lease terms were committed by GTA to facilitate the transition
period and to cover seasonal financial needs. The new lessee had a positive
impact on the financial performance of these Golf Courses in the fourth
quarter of 1999 reporting an average increase of 6% in same store rounds and
an average increase of 23% in same store revenues for the four Golf Courses.
BONAVENTURE ASSIGNMENT OF LEASE
BONAVENTURE: This club is made up of two 18 hole, high-end daily fee
Golf Courses located in Ft. Lauderdale, Florida which GTA purchased in January
of 1998 for $24,500,000. Effective July 1, 1999, Mr. Young acquired the
outstanding stock of Emerald Dunes - Bonaventure, Inc., the lessee at
Bonaventure. There was no reduction in payment terms under the Participating
Lease; however, the Participating Lease was modified to allow the new lessee
additional capital improvement and working capital funding to facilitate the
repositioning and improvement of the facility. The collateral to secure the
lessee's obligations under the participating lease pledged by the initial lessee
was released and substituted with equivalent collateral by Mr. Young and his
affiliates. This restructure had a positive impact on the financial performance
of the Course in the fourth quarter of 1999 with the lessee reporting an
increase in same store rounds of 75% with a corresponding increase in same store
revenue of 23%.
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GTA ASSUMES MANAGEMENT OF TIERRA DEL SOL GOLF CLUB
TIERRA DEL SOL GOLF CLUB: This Golf Course is an 18 hole, high-end
daily fee Golf Course located in Albuquerque, New Mexico which GTA purchased
in May 1998 for $3,600,000. On November 3, 1999, GTA filed an eviction action
against the tenant at Tierra Del Sol Golf Club with the District Clerk of
Court in Valencia County, New Mexico, as a result of the tenant's failure to
pay rent. As a result of this lawsuit, the tenant was removed and GTA took
possession of this Golf Course on February 7, 2000, pursuant to an order
issued by the District Court. GTA has created a wholly owned subsidiary, GTA
Tierra Del Sol, LLC, to operate this Golf Course during the 90-day grace
period. It is GTA's view that the operational problems at this Golf Course
were due to the tenant's executive management; therefore, the existing Golf
Course-level management team and all Course-level key employees at the Golf
Course have remained employed at the Golf Course. GTA has also implemented
additional financial reporting policies and procedures to enhance internal
controls and facilitate tracking of the financial performance of the Golf
Course. GTA has initiated a business plan to explore opportunities to (i)
seek to re-let the Golf Course, (ii) enter into a management agreement with a
more experienced golf operator than the original tenant, or (iii) potentially
sell the Golf Course. OP Units initially pledged as collateral for the lease
by the former tenant of the Golf Course have been redeemed and applied to
past due rent obligations and other accrued charges. The collateral balance
remaining after these outstanding amounts were cured is valued at
approximately $170,000, which represents approximately five months of Base
Rent, and will be recognized as Other Income in the first quarter of 2000.
OSAGE NATIONAL GOLF CLUB
OSAGE NATIONAL GOLF CLUB: This Golf Course is a 27-hole, high-end
daily fee Golf Course in Lake of the Ozarks, Missouri, which GTA purchased in
August 1998 for $11,200,000 in a sale-leaseback transaction. On February 25,
1999, GTA declared an event of default under the Participating Lease as a
result of the tenant's failure to pay rent. As a result, GTA, the prior owner
of the Golf Course, and the tenant entered into discussions to terminate the
tenant's Participating Lease and the tenant's possessory rights at the Golf
Course. We expect to have the Participating Lease terminated and obtain
possession of the Golf Course within aproximately 30-45 days. We have created
a wholly owned subsidiary, GTA Osage, LLC, which expects to assume management
of the Golf Course during the 90-day grace period. In this role, GTA will
facilitate the transition of management, implement additional internal
controls to more effectively manage the operations of the Golf Course and
implement additional financial reporting policies and procedures to improve
the monitoring of the financial performance of the Golf Course. In addition,
GTA has initiated a business plan to explore opportunities to (i) seek to
re-let the Golf Course, (ii) enter into a management agreement with a more
experienced golf course operator than the original tenant, or (iii)
potentially sell the Golf Course. We expect that all Golf Course-level key
management and employees will remain employed at the Golf Course. Under GTA
management's current assumptions, the value of the tenant's collateral
(66,124 OP units) securing the obligations of the defaulting tenant under the
Participating Lease will be adequate to cover accrued rent (approximately
$408,000 through February 25, 2000) and any other accrued charges. The
remaining collateral value will be recognized as Other Income and should
offset any possible shortfalls in revenue in fiscal year 2000 resulting from
tenant's event of default.
MYSTIC CREEK GOLF COURSE
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MYSTIC CREEK GOLF COURSE: This Golf Course is a 27-hole, high-end
daily fee Golf Course located in Milford, Michigan, which GTA purchased in
January 1998 for $10,000,000 in a sale-leaseback transaction. On October 25,
1999, GTA declared an event of default under the Participating Lease as a
result of the tenant's failure to pay rent. On February 3, 2000, GTA filed an
eviction action with a District Court in Oakland County, Michigan. A hearing
was set for February 29, 2000, but was stayed because the tenant filed a
voluntary petition for Chapter 11 Bankruptcy in the United States Bankruptcy
Court on February 25, 2000. It is our intention to continue the eviction
action as soon as legally permissible to seek to shorten the time for the
tenant to accept the lease (by bringing the rent current) or reject the lease
(which would mean a return of the Golf Course to GTA) and to seek to compel
the payment of ongoing rent during the pendancy of the bankruptcy. The tenant
continues to operate the Golf Course pending the resolution of the pending
action and its bankruptcy. Under GTA management's current assumptions, the
value of the tenant's collateral ($879,630 in cash and 52,724 OP units)
securing the obligations of the defaulting tenant under the Participating
Lease is adequate to cover accrued rent (approximately $554,000 through
February 29, 2000) and any other accrued charges. The remaining collateral
value will be recognized as Other Income and should offset any possible
shortfalls in revenue in fiscal year 2000 resulting from tenant's event of
default.
BRENTWOOD GOLF & COUNTRY CLUB: This Golf Course is an 18-hole, daily
fee Golf Course in White Lake, Michigan, that GTA purchased in December of
1998 for $7,000,000. On November 21, 1999, GTA declared an event of default
under the Participating Lease as a result of the tenant's failure to pay
rent. On February 3, 2000, GTA filed an eviction action with a District Court
in Oakland County, Michigan. In response, the tenant filed a counterclaim
against GTA. On March 8, 2000, a hearing was held and the Court ruled that
the case be moved to Oakland County Circuit Court, where the action for
possession and the allegations in the counterclaim will be heard. On March
28, 2000, an order was entered requiring escrow payment of rent and prorated
taxes within seven days of the Order, and thereafter, within seven days of
the 25th of each month. The first payment required will be February and
March rents, and payments in the subsequent months will be current months
rent. Subject to the foregoing limitations, the tenant continues to operate
the Golf Course pending resolution of the pending actions. Under management's
current assumptions, the value of the tenant's collateral (a $350,000
Certificate of Deposit and 24,482 OP Units) securing the obligations of the
defaulting tenant under the Participating Lease is adequate to cover accrued
rent (approximately $455,000 through February 29, 2000) and any other accrued
charges. Any remaining collateral value will be recognized as Other Income
and will be used to offset any possible shortfalls in revenue in fiscal year
2000 resulting from tenant's event of default.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
CASH FLOWS
CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Cash flow from operating activities for the year ended December 31,1999
was $24,467,000 compared to $30,593,000 for the year ended December 31, 1998.
This reflects net income before minority interest, plus non-cash charges to
income for depreciation, loan cost amortization, restricted stock
compensation amortization, straight line rents and interest and working
capital changes. The decrease of $6,126,000 year over year is primarily due
to the release of escrowed funds from Golf Courses purchased in 1998.
Cash flows used in investing activities reflect increases in the
Participating Mortgage notes receivable related to the Westin Innisbrook
facility of $94,000, golf course acquisitions and capital additions of
$15,371,000 offset by the disposition of a parcel of land at the Sandpiper
Golf Course for $975,000. The Golf Course acquisitions and capital additions
included the $3.3 million acquisition of an additional nine holes at
Northgate Country Club, the cash portion of the Metamora Golf Course of $5.0
million, and $3.6 million for improvements at Eagle Ridge and $3.5 million in
improvements at other Golf Courses. This compares to acquisitions of 22 Golf
Courses plus capital additions totaling $195,541,000, and the increase in the
Participating Mortgage notes receivable of $5,963,000 in the year ended
December 31, 1998.
On April 2, 1999, GTA completed a private placement of 800,000
shares of its 9.25% Series A Cumulative Convertible Preferred Stock, par
value $0.01 per share ("Series A Preferred Stock"), at a price of $25.00 per
share to a single purchaser, AEW Targeted Securities Fund, L.P., for gross
proceeds of $20,000,000, net of associated costs of approximately $878,000.
The net proceeds were used as follows: (i) to pay down $1,025,000 under the
Credit Facility, (ii) to repay promissory notes to Nations Credit of
$5,169,000; (iii) to pay loan costs associated with the amendment and
restatement of the Credit Facility of $1,399,000; (iv) to make new officer
loans of $648,000; and (v) the balance for general working capital needs.
Cash flows used in financing activities, totaling $7,963,000 represents
the net proceeds from the AEW offering of $19,122,000, net borrowings of
$6,255,000 under the Credit Facility and Bridge Loan, proceeds from issuance
of common stock $42,000, less promissory note payments to Nations Credit of
$5,324,000 redemption of OP Units of $2,478,000, loans to officers of
$1,278,000, and dividends and partner distributions totaling $24,302,000 for
the year ended December 31,1999. The 1999 financing activities compare to net
borrowings of $188,600,000 under the Credit Facility and Bridge Loan, less
dividends and partner distributions totaling $27,135,000 for the year ended
December 31,1998.
CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD FROM
FEBRUARY 12 (INCEPTION) TO DECEMBER, 1997
Cash flow from operating activities for the year ended December 31,1998 was
$30,593,000 compared to $13,644,000 for the period from February 12, 1997 to
December 31,1997. This reflects net income
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<PAGE>
before minority interest, plus noncash charges to income for depreciation, loan
cost amortization and working capital changes.
Cash flows used in investing activities reflect increases in the mortgage
notes receivable of $5,963,000 and golf course acquisitions of $195,541,000 for
the year ended December 31,1998. This compares to acquisitions and capital
additions of $84,332,000 and the increase in the mortgage notes receivable of
$64,406,000 in the period from February 12 to December 31,1997.
Cash flows provided by financing activities, totaling $157,834,000
represents the net borrowing of $188,600,000 under the Credit Facility and
Bridge Loan, less dividends and partner distributions totaling $27,135,000 for
the year ended December 31,1998. This compares to the initial and follow-on
offering proceeds of $155,720,000 and borrowings of $4,325,000 to fund the 1997
acquisitions and the participating mortgage for the period from February 12,
1997 to December 31,1997. Distributions to partners and stockholders totaled
$8,535,000 represented a partial period distribution of $.21 per share for the
first quarter of 1997 and $.41 per share for the remaining quarters through
December 31,1997.
FINANCING AND CAPITAL RESOURCES
REVOLVING CREDIT FACILITY AND LINE OF CREDIT
As of April 6, 1999, GTA amended and restated its unsecured Revolving
Credit Facility ("Credit Facility") to increase the borrowing capacity to $200.0
million with a consortium of banks led by Bank of America, as lead agent. GTA
pays interest-only on the Credit Facility with the principal balance due in
April 2002. Borrowings typically bear interest at an adjusted Eurodollar rate
plus an applicable margin. The applicable margin (between 1.50% and 2.00%) is
subject to adjustment based upon certain leverage ratios. At December 31, 1999,
all amounts outstanding under the Credit Facility were based on the Eurodollar
rate and a margin of 1.75% for an average interest rate of 7.0% per annum. The
amended and restated Credit Facility replaced the Bridge Loan.
The Credit Facility availability is limited to an unencumbered pool
calculation, including a 20% limitation for working capital needs. Financial
covenants include net worth, liquidity and cash flow covenants, among others.
Non-financial covenants include restrictions on loans outstanding, construction
in progress, loan to officers and changes in the Board of Directors, among
others. At the present time, these covenants have been met.
In addition to the amended and restated Credit Facility, on April 6,
1999 GTA also obtained a $25.0 million unsecured line of credit from Bank of
America which may be incorporated into the $200.0 million Credit Facility at a
later date. The rates, covenants, conditions and other material provisions are
essentially the same as the Credit Facility, except for the term, which was one
year with an expiration date of April 1, 2000. In March of 2000, this line was
granted a six-month extension with a new maturity date of October 1, 2000. The
extension was granted with the same pricing that was in effect under the
original line plus a 3/4% up-front commitment fee.
INTEREST RATE SWAP AGREEMENT
The interest rate swap agreement that GTA entered into with Bank of
America in September 1998 expired on March 27, 2000. The notional amount under
this agreement of $76,800,000 converted to floating rate debt as of the March
27th expiration date. This brings the total floating rate debt to
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<PAGE>
$210,700,000. As of the date of this filing, GTA had not entered into a new
interest rate swap agreement.
UNIVERSAL SHELF REGISTRATION
GTA has on file with the Securities and Exchange Commission a universal
shelf registration statement registering the issuance of debt securities, common
stock, preferred stock or warrants as well as resales of securities issued upon
redemption of certain OP Units by their holders, with a remaining availability
of approximately $280.0 million. The exact amount of debt, common stock,
preferred stock, and warrants issued will depend on acquisitions, asset shares,
GTA's unsecured debt and preferred stock ratings, and the general interest rate
environment.
The Company believes that its current borrowing capacity and anticipated
cash flow from operations are sufficient to meet liquidity needs for the
foreseeable future. There can be no assurance that the Company will be able to
negotiate extensions of such facilities or borrow from other lenders on similar
terms. There can be no assurance that the impact of market conditions on the
debt and equity markets will not adversely affect the Company's future needs for
capital.
FUTURE INVESTMENTS IN ASSETS
The Company intends to continue to analyze potential investments in
additional golf courses as suitable opportunities arise, but the Company will
not undertake investments unless adequate sources of financing are available.
The Company anticipates that future acquisitions would be funded with debt
financing provided by the Credit Facility, secured borrowing options, the
issuance of OP Units or with proceeds of additional equity offerings. In the
future, the Company may negotiate additional credit facilities or issue
corporate debt instruments. Any debt issued or incurred by the Company may be
secured or unsecured, long-term or short-term, fixed or variable interest rate
and may be subject to such other terms as the Board of Directors deems prudent.
COMMITMENTS TO LESSEES
The participating leases generally require the Company to reserve
annually between 2% to 5% of the annual gross golf revenues of the golf courses
to fund capital expenditures, which are funded on a monthly basis from the
lessees in addition to the base rent. The lessees will fund any capital
expenditures in excess of such amounts. The capital expenditure reserve is used
for replacement and enhancement of the existing facilities and is allocated to
short and long-term categories and therefore the balance may not be currently
available to the lessees. At December 31, 1999, the amount reserved was
$2,452,000 compared to $1,105,000 at December 31, 1998.
Under certain circumstances, the underlying base rent for a course will
be increased when the Company agrees to pay for significant capital improvements
or to expand the existing facilities. Of the Company's $8,478,000 outstanding
capital improvement commitments (which includes the Pete Dye Clubhouse loan for
$2,300,000), approximately $1,918,000 has been funded to date. This loan may be
capitalized into the base rent when the Clubhouse is completed.
In limited circumstances the Company agrees to provide working capital
loans to existing lessees. Working capital loans are evidenced by promissory
notes or as set forth in the lease agreement and bear
52
<PAGE>
interest at fixed rates between 9.74% and 10.5%. Of the Company's $12,224,000
working capital commitments, approximately $9,245,000 has been funded to date.
In addition, a $3,500,000 land loan was funded to the Lessee of the Pete Dye
Golf Club at the time of purchase. Typically, the Lessee is required to increase
the pledged collateral for the funded amounts.
In summary, the Company has currently funded $14,663,000 of the total
commitments to date of $24,202,000, and subject to certain conditions,
anticipates it will fund the balance of $9,539,000 over the next two years.
The Company has agreed to maintain minimum loan balances of approximately
$17.2 million for up to ten years to accommodate certain prior owners' efforts
to seek to minimize certain adverse tax consequences from their contribution of
their courses to the Company.
LITIGATION
Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course, including
proceedings relating to personal injury and property damage. Such proceedings
are generally brought against the operator of a golf course, but may also be
brought against the owner. Although the Company is currently not a party to any
legal proceedings relating to the Golf Courses that would have a material
adverse effect upon the Company's business or financial position, it is possible
that in the future the Company could become a party to such proceedings.
SEE "LESSEE RESULTS OF OPERATIONS" REGARDING LITIGATION BETWEEN
GTA AND CERTAIN LESSEES OF ITS OF GOLF COURSES ARISING THROUGH EVENTS OF
DEFAULT.
NEW COURSES
The Company may from time to time be in various stages of negotiation
and due diligence review for the acquisition of a golf course. Completion of
such a transaction would be subject to negotiation and execution of definitive
documentation and certain other customary closing conditions. No assurances can
be given that the Company will continue to pursue or complete any future golf
course acquisitions.
COMMITMENTS TO OFFICERS
Loans of approximately $890,000, secured by OP Units and common
stock, with interest rates of between 4.4 % to 6.2 % per annum were made to
officers of the Company for the payment of related taxes for Restricted Stock
Grants issued in 1997, 1998 and 1999. Of this total, approximately $173,000
related to the Restricted Stock Grants issued on March 10, 1999 for 44,000
shares. It is expected that additional loans will be made to the officers to
cover tax liabilities resulting from future vesting of the Restricted Stock
Grants. Under the 1998 Senior Executive Loan Program, as amended on August
10, 1999, loans of $2.3 million have been made to officers of the Company to
purchase Company stock on the open market. These loans are collateralized by
the shares purchased, bear interest at between 4.51 % to 5.89 % per annum and
are due at the earlier of (i) sale greater than $25 per share, (ii) within 3
years of the applicable employee termination or (iii) five years after the
making of the loan. These Promissory Notes are recourse to the borrower. Upon
any change of control of GTA, all outstanding amounts to the current officers
of GTA are forgiven and the promissory notes are cancelled.
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<PAGE>
Of the total officer loans outstanding, approximately $725,000 in
loans to the former Executive Vice President were reclassified to Other Assets
from Stockholders' Equity upon his resignation in November of 1999.
ADOPTION OF SHAREHOLDER RIGHTS PLAN
On August 6, 1999, the Board of Directors of Golf Trust of America, Inc.
declared a dividend distribution of one preferred stock purchase right
("Right") for each outstanding share of common stock to stockholders of
record at the close of business on September 6, 1999 (the "Record Date").
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series B Junior Participating Preferred Stock,
par value $0.01 per share (the "Preferred Stock"), at a purchase price of
$75.00, subject to adjustment. The agreement (the "Rights Agreement") is
between the Company and the rights agent thereunder. On August 30, 1999, the
Company filed a current report on Form 8-K more fully describing the terms of
the Rights.
REORGANIZATION OF THE ACQUISITION DEPARTMENT
In November 1999, Mr. David D. Joseph resigned as Director of
Acquisitions and Executive Vice President of the Company and as a member of
our Board of Directors to pursue other business interests. At the present
time, we do not contemplate replacing this management position due to (i) the
current reduced priority on acquisitions, (ii) the skills of our existing
acquisition staff, and (iii) our ability to utilize outside brokers and
tenant introductions to support this function. As a part of the separation
agreement, Mr. Joseph executed an extension to his covenant not to compete. A
one-time charge of $0.5 million is included in the General & Administrative
expenses for fourth quarter 1999 related to this reorganization.
STOCK REPURCHASE PROGRAM
On December 15, 1999, GTA announced that its Board of Directors
authorized a program to repurchase up to one million shares of its common
stock. Any such repurchases will be made on the open market or in block
purchase transactions. The timing of any repurchases and the number of shares
repurchased pursuant to the stock repurchase program are dependent upon
market conditions and corporate requirements. Under this program, on January
4, 2000, GTA purchased 10,000 shares of its common stock at a price of
$16.9375 per share.
UNSOLICITED PROPOSAL
On December 15, 1999, GTA received a letter from Schooner Capital
LLC. In sum, Schooner expressed its belief that GTA's current real estate
investment trust structure is not optimal to best leverage both current and
future marketing opportunities. Schooner expressed interest in working with
GTA on a going private transaction that would seek to address the interests
of all shareholders. Schooner Capital LLC filed a 13D, a General Statement of
Beneficial Ownership, on January 28, 2000. As yet, Schooner Capital LLC has
not been willing to meet with our financial advisor, Banc of America
Securities LLC, to review any proposal it may have.
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<PAGE>
APPOINTMENT OF FINANCIAL ADVISOR
After a deliberate interview and diligence process by management and
review by the Company's Board of Directors, on February 9, 2000 GTA engaged
Banc of America Securities LLC to act as its financial advisor to undertake a
review of a broad range of strategic alternatives available to the Company in
light of the current and prospective market conditions facing the Company and
the REIT industry. Executive management is meeting regularly with our
financial advisor in furtherance of considering alternatives to enhance
shareholder value. These alternatives include the possiblity of a merger,
sale, recapitalization, privatization or restructuring, including de-REITing
(revoking election of REIT-tax status), among others. The professional fee
structure of Banc of America Securities LLC should not have a material
minimal impact on General & Administrative expenses for 2000.
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FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Funds From Operations and Cash Available for Distribution are
calculated as follows:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED PERIOD FROM
DECEMBER 31, DECEMBER 31, FEBRUARY 12 TO
1999 1998 DECEMBER 31, 1997
--------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Income before Minority Interest $18,257 $ 17,736 $11,767
Loss on sale of assets............. - 370 -
Depreciation and amortization for
real estate assets.......... 17,299 11,667 3,132
- ----------------------------------------------------------------------------------------------
Funds from Operations............... 35,556 29,773 14,899
- ----------------------------------------------------------------------------------------------
Adjustments:
Noncash mortgage interest and
straight line rents........... (1,106) (1,417) (723)
Preferred Dividends/Distributions (1,449) - -
Capital expenditure reserve ...... (2,452) (1,135) (524)
- ----------------------------------------------------------------------------------------------
Cash Available for Distribution..... $30,549 $ 27,221 $ 13,652
==============================================================================================
</TABLE>
Noncash mortgage interest revenue and straight line rents represents the
difference between interest revenue on the Participating Mortgage and the rent
recognized and reported by the Company in accordance with generally accepted
accounting principles ("GAAP") and the actual cash payments received by the
Company. The participating leases generally require the Company to reserve
annually between 2% to 5% of the gross golf revenues of the golf courses to fund
capital expenditures. The lessees will fund any capital expenditures in excess
of such amounts.
Preferred dividends/distributions represent preferred dividends paid on the
800,000 shares of 9.25% Series A Cumulative Convertible Preferred Stock that
were issued to AEW Targeted Securities through a private placement in April of
1999 and preferred distributions on 59,118 preferred OP units issued to the
sellers in the 1999 acquisitions of Pete Dye Golf Club and Metamora Golf &
Country Club.
In accordance with the resolution adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT") (as
revised on October 27, 1999), Funds From Operations represents net income
(computed in accordance with GAAP) including all operating results, both
recurring and non-recurring -- EXCLUDING those results defined as "extraordinary
items" under GAAP and gains (or losses) from sales of depreciable property.
Funds From Operations should not be considered as an alternative to net income
or other measurements under GAAP as an indication of operating performance or to
cash flows from operating investing or financial activities as a measure of
liquidity. Funds From Operations does not reflect working capital changes, cash
expenditures for capital improvements or principal payments on indebtedness. The
Company believes that Funds From Operations is helpful to investors as a measure
of the performance of an equity REIT, because along with cash flows from
operating activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. Compliance with the NAREIT
definition of Funds From Operations is voluntary. Accordingly, the Company's
calculation of Funds From Operations in accordance with the NAREIT definition
may be different than similarly titled measures used by other REITs.
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<PAGE>
As noted above NAREIT approved a revision to the definition of FFO on October
27, 1999. Effective January 1, 2000, FFO includes both recurring and
non-recurring results of operations which encompasses "costs of unusual
compensation or severance arrangements." This definition has been applied in
calculating FFO in this report. Under the former definition of FFO, the
Company's non-recurring restructuring charge of $462,000 would be added back
to Net Income in the FFO calculation resulting in Total FFO of $36,018,000
and Total Cash Available for Distribution of $31,011,000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," effective for fiscal quarters
of fiscal years beginning after June 15, 1999 (subsequently delayed to June
15, 2000). SFAS No. 133 requires recording all derivative instruments as
assets or liabilities measured at fair value. The Company does not expect
this pronouncement to have a material impact on its financial results.
INFLATION
The golf course leases generally provide for initial term of 10 years with
base rent and participating rent features. Base rent will increase by a base
rent escalator for each year during the first five years of the term of each
lease and for an additional five years if certain conditions are met. All of
such leases are triple net lease requiring the lessees to pay for all
maintenance and repair, insurance, utilities and services. The participating
mortgage has a 5% increase in the base interest for up to five years, and an
additional 3% for an additional five years if the performance option is
exercised. As a result, the Company believes the effect of inflation on the
Company is not material.
SEASONALITY
The golf industry is seasonal in nature because of weather conditions and
fewer available tee times in the rainy season and the winter months. The
operator of each of the daily fee golf courses may vary greens fees based on
changes in demand. The Company does not expect seasonal fluctuation in Lessee
revenues to have a significant impact on the Company's operating result. The
Company's leases require Base Rent to be paid ratably throughout to year.
IMPACT OF YEAR 2000
There have been no malfunctions, to date, of the Company's computer system
with respect to dates in the Year 2000 and thereafter. In addition, there has
been no impact on the Company with respect to third parties and any Year 2000
complications that they may have experienced.
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not entered into any transactions using derivative
commodity instruments. The Company is subject to market risk associated with
changes in interest rates. Prior to the expiration of the Company's interest
rate swap agreement on March 27, 2000, GTA's interest rate exposure was
primarily limited to the $133.9 million of debt of the Company outstanding at
December 31, 1999 that was priced at interest rates that float with the market.
As of the date of this filing the Company has not entered in to a new interest
rate swap agreement; therefore, the total outstanding debt subject to interest
rate exposure is $210.7 million. A 25 basis point movement in the interest rate
on the floating rate debt would result in an approximate $.527 million
annualized increase or decrease in interest expense and cash flows. The
remaining debt is fixed rate debt. Reference is made to Item 2 above and Note 7
for additional debt information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation
S-X are included in this Annual Report on Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN THE COMPANY'S CERTIFIED PUBLIC ACCOUNTANT
Effective February 28, 1997, the Company engaged BDO Seidman, LLP as
principal accountants. There have been no changes in the most recent two fiscal
years.
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PART III
CERTAIN INFORMATION REQUIRED IN PART III IS OMITTED FROM THIS REPORT BUT WILL BE
INCLUDED IN A DEFINITIVE PROXY STATEMENT WHICH THE COMPANY WILL FILE WITHIN 120
DAYS OF THE END OF ITS FISCAL YEAR PURSUANT TO REGULATION 14A FOR ITS ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD IN MAY 1999 (THE "PROXY STATEMENT").
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Directors and Officers" is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Executive Compensation" is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management" is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Certain Relationships and Related Transactions" is incorporated herein by this
reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) FINANCIAL STATEMENTS
1) FINANCIAL STATEMENTS
The financial statements filed as part of this Annual Report
on Form 10-K are listed on page F-1
2) FINANCIAL STATEMENT SCHEDULES
SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (SEE PAGE S-1)
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
(SEE PAGE S-2)
3) EXHIBITS
The exhibits filed as part of this Annual Report on Form 10-K
are listed in the Exhibit Index that follows the financial
statements.
b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the 4th Quarter of
1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report for the year ended
December 31, 1999 to be signed on its behalf by the undersigned, thereunto duly
authorized, in Charleston, South Carolina, on March 27, 2000.
GOLF TRUST OF AMERICA, INC.
By: /S/ W. Bradley Blair, II
-------------------------
W. Bradley Blair, II
PRESIDENT & CHIEF EXECUTIVE OFFICER
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POWER OF ATTORNEY
We, the undersigned officers and directors of Golf Trust of America,
Inc., do hereby constitute and appoint W. Bradley Blair, II and Scott D. Peters,
and each of them, our true and lawful attorneys-in-fact and agents, each with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
report, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby, ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------- ---------------------------------------------------------------- ----------------------
<S> <C> <C>
/s/ W. Bradley Blair, II
- -------------------------------- President, Chief Executive Officer and Chairman of March 27, 2000
W. Bradley Blair, II the Board of Directors --------------
/s/ Scott D. Peters
- -------------------------------- Senior Vice President, Chief Financial Officer, and March 27, 2000
Scott D. Peters Director --------------
/s/ Larry D. Young
- -------------------------------- Director March 27, 2000
Larry D. Young --------------
/s/ Roy C. Chapman
- -------------------------------- Director March 27, 2000
Roy C. Chapman --------------
/s/ Raymond V. Jones
- -------------------------------- Director March 27, 2000
Raymond V. Jones --------------
/s/ Fred W. Reams
- -------------------------------- Director March 27, 2000
Fred W. Reams --------------
/s/ Edward L. Wax
- -------------------------------- Director March 27, 2000
Edward L. Wax --------------
</TABLE>
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ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON EXHIBIT 8-K
<TABLE>
<CAPTION>
PAGE
<S> <C>
FINANCIAL STATEMENTS OF GOLF TRUST OF AMERICA, INC.
Report of Management........................................................................... F-2
Report of Independent Certified Accountants.................................................... F-3
Consolidated Balance Sheets at December 31, 1999 and December 31, 1998......................... F-4
Consolidated Statements of Income for the years ended December 31, 1999 and December 31, 1998
and for the Period from February 12, 1997 (inception) through December 31, 1997 ............... F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999 and
December 31, 1998 and for the Period from February 12, 1997 (inception) through December 31,
1997........................................................................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and December 31,
1998 and for the Period from February 12, 1997 (inception) through December 31, 1997......... F-8
Notes to Consolidated Financial Statements..................................................... F-10
GOLF TRUST OF AMERICA, INC. 1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN (1)
Report of Independent Certified Accountants.................................................... F-31
Statement of Financial Condition as of December 31, 1999 and December 31, 1998................. F-32
Statement of Financial Changes in Plan Equity for the year ended December 31, 1999
and for the Period from March 1, 1998 (inception) to December 31, 1998......................... F-33
Notes to Financial Statements.................................................................. F-34
FINANCIAL STATEMENTS OF LEGENDS GOLF (2)
Table of Contents.............................................................................. F-37
Report of Independent Certified Public Accountants............................................. F-38
Combined Balance Sheets as of December 31, 1999, December 31, 1998, and December 31, 1997...... F-39
Combined Statements of Operations for the years Ended December 31, 1999, December 31, 1998,
and December 31, 1997.......................................................................... F-40
Combined Statements of Owner's Equity for the years ended December 31, 1999, December 31,
1998, and December 31, 1997.................................................................... F-41
Combined Statements of Cash Flows -- Years Ended December 31, 1997, 1998 and 1999.............. F-42
Notes to Combined Financial Statements......................................................... F-43
REPORTS ON FORM 8-K
SCHEDULES
EXHIBITS
</TABLE>
F-1
<PAGE>
REPORT OF MANAGEMENT
To the Directors and Stockholders of Golf Trust of America, Inc.:
The consolidated financial statements and other financial information
of Golf Trust of America, Inc. in this report was prepared by management that is
responsible for their contents. They reflect amounts based upon management's
best estimates and informed judgments. In management's opinion, the financial
statements present fairly the financial position, results of operations and cash
flows of the Company in conformity with generally accepted accounting
principles.
The Company maintains a system of internal accounting controls and
procedures which is intended, consistent with reasonable cost, to provide
reasonable assurance that transactions are executed as authorized, that they are
included in the financial records in all material respects, and that
accountability for assets is maintained. The accounting controls and procedures
are supported by careful selection and training of personnel and a continuing
management commitment to the integrity of the system.
The financial statements have been audited to the extent required by
generally accepted auditing standards by BDO Seidman, LLP independent auditors.
The independent auditors have evaluated the Company's internal control structure
and performed tests of procedures and accounting records in connection with the
issuance of their report on the fairness of the financial statements.
The Board of Directors has appointed an Audit Committee composed
entirely of directors who are not employees of the Company. The Audit Committee
meets with representatives of management and the independent auditors, both
separately and jointly. The Committee discusses with the independent auditors
and approves in advance the scope of the audit, reviews with the independent
auditors the financial statements and their auditor's report, consults with and
reviews management's administration of the system of internal accounting
controls. The Committee reports to the Board on its activities and findings.
/S/ W. BRADLEY BLAIR, II /S/ SCOTT D. PETERS
- ------------------------ -------------------
W. Bradley Blair, II Scott D. Peters
Chairman, President and Chief Senior Vice President and Chief
Executive Officer Financial Officer
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Directors and Stockholders of Golf Trust of America, Inc.:
We have audited the accompanying consolidated balance sheets of Golf
Trust of America, Inc. and subsidiaries as of December 31, 1998 and 1999 and
the related consolidated statements of income, stockholders' equity and cash
flows for the period from February 12, 1997 (inception) through December 31,
1997, and each of the two years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Golf Trust of America, Inc. at December 31, 1998 and 1999 and the results of
its operations and its cash flows for the period from February 12, 1997
(inception) through December 31, 1997 and each of the two years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
Charlotte, North Carolina /S/BDO SEIDMAN, LLP
February 4, 2000
F-3
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
<S> <C> <C>
ASSETS
Property and equipment (Notes 1, 3 and 7):
Land ..................................................................... $ 53,779 $ 55,462
Golf course improvements ................................................. 204,635 171,348
Buildings and improvements ............................................... 80,708 77,629
Furniture, fixtures, and equipment ....................................... 31,581 44,756
--------- ---------
Total property and equipment ............................................... 370,703 349,195
Less accumulated depreciation ............................................ 43,001 25,695
--------- ---------
Property and equipment, net ................................................ 327,702 323,500
--------- ---------
Mortgage notes receivable (Notes 4 and 6) .................................. 73,160 72,252
Cash and cash equivalents .................................................. 3,905 1,891
Receivable from affiliates (Note 13) ....................................... 6,952 1,030
Other assets (Notes 5, 6 and 9) ............................................ 22,193 13,308
--------- ---------
Total assets ............................................................... $ 433,912 $ 411,981
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt (Note 7) .............................................................. $ 223,085 $ 210,634
Accounts payable and other liabilities (Note 3) ............................ 10,796 15,190
--------- ---------
Total liabilities .......................................................... 233,881 225,824
--------- ---------
Commitments and Contingencies (Notes 4, 6, 7 and 14)
Minority interest (Notes 8, 12 and 14) ..................................... 69,747 76,510
--------- ---------
Stockholders' equity:
Convertible Preferred stock, $.01 par value, 10,000,000 shares authorized,
800,000 and -0- shares issued and outstanding, respectively (Note 8) .... 20,000 -
Common stock, $.01 par value, 90,000,000 shares authorized,
7,736,450 and 7,637,488 shares issued and outstanding, respectively ..... 78 76
Additional paid-in capital ............................................... 125,218 120,253
Accumulated earnings (dividends in excess of accumulated earnings) ....... (7,720) (3,958)
Unamortized restricted stock compensation (Note 9) ....................... (1,530) (1,533)
Note receivable from stock sale (Note 4) ................................. (3,298) (3,298)
Loans to officers (Note 9) ............................................... (2,464) (1,893)
--------- ---------
Stockholders' equity ....................................................... 130,284 109,647
--------- ---------
Total liabilities and stockholders' equity ................................. $ 433,912 $ 411,981
========= =========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
-----------------
<S> <C> <C> <C>
REVENUES (Notes 4 and 5):
Rent from affiliates (Note 13) ................... $ 15,041 $ 12,365 $ 10,802
Rent ............................................. 31,630 23,097 3,607
Mortgage interest ................................ 9,106 8,922 4,318
-------- -------- --------
Total revenues ..................................... 55,777 44,384 18,727
-------- -------- --------
EXPENSES:
Depreciation and amortization .................... 17,299 11,667 3,173
General and administrative ....................... 6,098 5,416 2,532
-------- -------- --------
Total expenses ..................................... 23,397 17,083 5,705
-------- -------- --------
Operating income ................................... 32,380 27,301 13,022
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income .................................. 1,480 478 624
Interest expense ................................. (15,603) (9,673) (1,879)
Loss on disposal of assets ....................... - (370) -
-------- -------- --------
Total other income (expense) ....................... (14,123) (9,565) (1,255)
-------- -------- --------
Income before minority interest .................... 18,257 17,736 11,767
Income applicable to minority interest ............. 7,026 7,130 5,798
-------- -------- --------
Net income ......................................... 11,231 $ 10,606 $ 5,969
Preferred Dividends ................................ (1,383) - -
-------- -------- --------
Net income available to Common Shareholders ........ $ 9,848 $ 10,606 $ 5,969
======== ======== ========
Basic earnings per share ........................... $ 1.28 $ 1.39 $ 1.32
======== ======== ========
Weighted average number of shares - basic .......... 7,720 7,635 4,535
======== ======== ========
Diluted earnings per share ......................... $ 1.27 $ 1.34 $ 1.29
======== ======== ========
Weighted average number of shares - diluted ........ 7,734 7,905 4,626
======== ======== ========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
EARNINGS
(DIVIDENDS IN UNEARNED
PREFERRED SHARES COMMON STOCK ADDITIONAL EXCESS OF RESTRICTED
PAID-IN ACCUMULATED STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS) COMPENSATION
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 12, 1997 ........... - $ - - $ - $ - $ - $ -
Proceeds from Initial Public
Offering ............................. - - 3,910 39 82,071 - -
Payment of underwriters discount
and initial offering costs ........... - - - - (9,055) - -
Issuance of shares in
exchange for note .................... - - 159 2 3,296 - -
Issuance of shares for acquistion .... - - - 22 - 600 -
Issuance of restricted stock ......... - - 70 1 1,827 - (1,828)
Proceeds from follow-on offering ..... - - - 3,450 34 88,372 -
Payment of underwriters
discount and costs ................... - - - - (5,741) - -
Amortization of restricted stock
Compensation ......................... - - - - - - -
Adjustment for minority interest in
operating partnership ................ - - - - (33,882) - -
Dividends ............................ - - - - - (4,195) -
Net income ........................... - - - - - 5,969 -
---------------------------------------------------------------------------------
BALANCE, December 31, 1997 ........... - $ - 7,611 $ 76 $127,488 $ 1,774 $(1,713)
Issuance of restricted stock ......... - - 21 - 607 - (607)
Issuance of shares for option
exercise and employee stock
purchase plans ....................... - - 5 - 159 - -
Amortization of restricted
stock compensation ................... - - - - - - 787
Loans to officers .................... - - - - - - -
Adjustment for minority interest in
operating partnership ................ - - - - (8,001) - -
Dividends ............................ - - - - - (16,338) -
Net income ........................... - - - - - 10,606 -
---------------------------------------------------------------------------------
BALANCE, December 31, 1998 ........... - $ - 7,637 $ 76 $120,253 $ (3,958) $(1,533)
<CAPTION>
NOTE
RECEIVABLE LOANS TOTAL
FROM STOCK TO STOCKHOLDERS'
SALE OFFICERS EQUITY
------------------------------------------
<S> <C> <C> <C>
BALANCE, February 12, 1997 ........... $ - $ - $ -
Proceeds from Initial Public
Offering ............................. - - 82,110
Payment of underwriters discount
and initial offering costs ........... - - (9,055)
Issuance of shares in
exchange for note .................... (3,298) - -
Issuance of shares for acquistion .... - - 600
Issuance of restricted stock ......... - - -
Proceeds from follow-on offering ..... - - 88,406
Payment of underwriters
discount and costs ................... - - (5,741)
Amortization of restricted stock
Compensation ......................... 115 - 115
Adjustment for minority interest in
operating partnership ................ - - (33,882)
Dividends ............................ - - (14,993)
Net income ........................... - - 11,231
-------- -------- --------
BALANCE, December 31, 1997 ........... $(3,298) $ - $124,327
Issuance of restricted stock ......... - - -
Issuance of shares for option
exercise and employee stock
purchase plans ....................... - - 159
Amortization of restricted
stock compensation ................... - - 787
Loans to officers .................... - (1,893) (1,893)
Adjustment for minority interest in
operating partnership ................ - - (8,001)
Dividends ............................ - - (16,338)
Net income ........................... - - 10,606
-------- -------- --------
BALANCE, December 31, 1998 ........... $(3,298) $ (1,893) $109,647
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
ACCUMULATED
EARNINGS
(DIVIDENDS IN UNEARNED
PREFERRED SHARES COMMON STOCK ADDITIONAL EXCESS OF RESTRICTED
PAID-IN ACCUMULATED STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS) COMPENSATION
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of preferred stock .......... 800 $20,000 - $ - $ - $ - $ -
Costs of preferred stock issuance .... - - - - (878) - -
Issuance and cancellation of
restricted stock ..................... - - 32 1 555 - (4,001)
Amortization and cancellation
of restricted stock .................. - - - - - - 1,004
Value of unvested options
for non-employees .................... - - - - 72 - -
Adjustments for minority interest
in operating partnership .......... - - - - 3,503 - -
Conversion of OP Units into
common stock ...................... - - 63 1 1,671 - -
Loans to officers .................... - - - - - - -
Issuance of shares of employee
stock purchase plan ............... - - 4 - 42 - -
Dividends ............................ - - - - - (14,993) -
Net Income ........................... - - - - - 11,231 -
---------------------------------------------------------------------------------
BALANCE at December 31, 1999 ......... 800 $20,000 7,736 $78 $125,218 $ (7,720) $(1,530)
<CAPTION>
NOTE
RECEIVABLE LOANS TOTAL
FROM STOCK TO STOCKHOLDERS'
SALE OFFICERS EQUITY
-------------------------------------
<S> <C> <C> <C>
Issuance of preferred stock .......... $ - $ - $ 20,000
Costs of preferred stock issuance .... - - (878)
Issuance and cancellation of
restricted stock ..................... - - (445)
Amortization and cancellation
of restricted stock .................. - - 1,004
Value of unvested options
for non-employees .................... - - 72
Adjustments for minority interest
in operating partnership .......... - - 3,503
Conversion of OP Units into
common stock ...................... - - 1,672
Loans to officers .................... - (571) (571)
Issuance of shares of employee
stock purchase plan ............... - - 42
Dividends ............................ - - (14,993)
Net Income ........................... - - 11,231
-------------------------------------
BALANCE at December 31, 1999 ......... $(3,298) $(2,464) $130,284
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED FEBRUARY 12
DECEMBER 31, DECEMBER 31, (INCEPTION)
1999 1998 THROUGH
DECEMBER 31, 1997
--------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................ $ 11,231 $ 10,606 $ 5,969
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ................................... 17,414 11,667 3,173
Loss on disposal of assets ...................................... - 370 -
Loan cost amortization .......................................... 958 588 280
Straight-line interest and rent ................................. (1,106) (1,417) (723)
Amortization of restricted stock compensation ................... 563 787 115
Income applicable to minority interest .......................... 7,026 7,130 5,798
Increase in receivable from affiliate ........................... (5,922) (26) (1,004)
Increase in other assets ........................................ (1,303) (8,265) (2,993)
Increase(decrease) in accounts payable and other liabilities .... (4,394) 9,153 3,029
--------------- ------------------ ---------------
Net cash provided by operating activities ........................... 24,467 30,593 13,644
--------------- ------------------ ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Golf course acquisitions and improvements ......................... (15,371) (195,541) (84,332)
Disposition of Property ........................................... 975 - -
Increase in mortgage notes receivable ............................. (94) (5,963) (64,406)
--------------- ------------------ ---------------
Net cash used in investing activities ............................... (14,490) (201,504) (148,738)
--------------- ------------------ ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit .................................. 7,775 120,675 4,325
Payments on notes ................................................. (5,324) (292) -
Bridge loan proceeds .............................................. - 67,925 -
Loan fees ......................................................... (1,520) (1,213) (1,448)
Loans to officers ................................................. (1,278) (1,853) -
Net Proceeds from issuance of Preferred Stock ..................... 19,122
Net proceeds from issuance of common stock ........................ 42 159 155,720
Redemption of OP Units ............................................ (2,478) (432) -
Distributions to partners ......................................... (9,309) (10,797) (4,340)
Dividends paid .................................................... (14,993) (16,338) (4,195)
--------------- ------------------ ---------------
Net (cash used in) provided by financing activities ................. (7,963) 157,834 150,062
--------------- ------------------ ---------------
Net increase (decrease) in cash and cash equivalents ............... 2,014 (13,077) 14,968
--------------- ------------------ ---------------
Cash and cash equivalents, beginning of period ...................... 1,891 14,968 -
Cash and cash equivalents, end of period ............................ 3,905 $ 1,891 $ 14,968
=============== ================== ===============
</TABLE>
See accompanying notes to financial statements
F-8
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------
<S> <C> <C> <C>
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Net assets of Legends Golf transferred to the Company .......... - $ 3,296 $ 981
Accrued receivables for disposals of property and equipment
and deferred payments for purchases of property and < $2,588 > $ 4,523 $ -
equipment.......................................................
OP Units issued in golf course acquisitions .................... $ 1,645 $14,687 $18,304
Common stock issued in golf course acquisition ................. - $ - $ 600
Debt assumed with acquisitions ................................. $10,000 $18,001 $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period ................................ $15,603 $ 9,243 $ 1,829
</TABLE>
See accompanying notes to financial statements
F-9
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Golf Trust of America, Inc. (the "Company") was incorporated in
Maryland on November 8, 1996. The Company is a self-administered real estate
investment trust ("REIT") formed to capitalize upon consolidation opportunities
in the ownership of upscale golf courses in the United States. The principal
business strategy of the Company is to own upscale golf courses with superior
marketplace positions and to lease the golf courses pursuant to long-term triple
net leases to qualified third party operators, including affiliates of the
sellers. Title to the acquired courses, is held by Golf Trust of America, L.P.,
a Delaware limited partnership (the "Operating Partnership" or "OP") or a wholly
owned subsidiary of the Operating Partnership. Golf Trust of America, Inc.,
through its wholly owned subsidiaries GTA GP, Inc. ("GTA GP") and GTA LP, Inc.
("GTA LP"), holds a 64.4 percent interest as of March 22, 2000, in the Operating
Partnership. GTA GP is the sole general partner of the Operating Partnership and
owns a 0.2 percent interest therein. GTA LP is a limited partner in the
Operating Partnership and owns a 58.69 percent interest therein. Larry D. Young,
a director of the Company, along with his affiliates, owns 27.0 percent of the
Operating Partnership and is a significant lessee. Operators of the golf
courses, their affiliates and officers of the Company hold the remaining
interest in the Operating Partnership.
The Company commenced operations on February 12, 1997 with the completion of
its initial public stock offering ("IPO") which raised net proceeds of
approximately $73.0 million through the sale of 3,910,000 shares of common
stock. The Company contributed the net proceeds of the IPO to the Operating
Partnership in exchange for a then 48.6 percent interest in the Operating
Partnership. Concurrently with the closing of the IPO, the Operating Partnership
acquired ten golf courses in exchange for the issuance of 4.1 million OP Units,
the repayment of $47.5 million of related debt and $6.2 million in cash. Seven
of the courses were acquired from Legends Golf, a group of companies controlled
by Larry D. Young in exchange for 3,738,556 OP Units and the repayment of debt.
The courses acquired from Legends Golf have been accounted for at a carryover
basis as Legends Golf is considered the accounting acquirer under APB Opinion
No. 16. The value of the OP Units issued and debt assumed was approximately
$73.7 million greater than the carryover basis of Legends Golf. In November
1997, the Company completed a follow-on equity offering of 3,450,000 shares of
common stock. The Company contributed the net proceeds of approximately $82.7
million to the Operating Partnership to repay approximately $60.6 million under
the credit facility that had been used primarily for golf course acquisitions
and for golf course acquisitions subsequent to the offering. On April 2, 1999,
GTA completed a private placement of 800,000 shares of its 9.25% Series A
Cumulative Convertible Preferred Stock, par value $0.01 per share ("Series A
Preferred Stock"), at a price of $25.00 per share to a single purchaser, AEW
Targeted Securities Fund, L.P., for gross proceeds of $20,000,000 net of
associated costs of approximately $878,000. The net proceeds were used as
follows: (i) to pay down $1,025,000 under the credit facility; (ii) to repay
promissory notes to Nations Credit of $5,169,000; (iii) to pay loan costs
associated with the amendment and restatement of the Credit Facility of
$1,399,000; (iv) to make new officer loans of $648,000; and (v) the balance for
general working capital needs.
In order for the Company to maintain its qualification as a REIT, not more
than 50% in value of its Common Stock may be owned, directly or constructively,
by five or fewer individuals. For the purpose of preserving the Company's REIT
qualification, the Certificate of Incorporation prohibits direct or constructive
ownership of more than 9.8% of the Common Stock by any person. Thus, although an
OP Unit is convertible into a share of Common Stock, the conversion of the
majority of the OP Units owned by affiliates of Larry D. Young is restricted by
the Company through these ownership limitations in order to preserve its REIT
status.
F-10
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company, the Operating Partnership and their wholly owned subsidiaries.
All significant inter-company transactions and balances have been eliminated in
consolidation.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company calculates the fair value of financial instruments and
includes this additional information in the notes to the consolidated financial
statements when the fair value is different than the carrying value. The
carrying value of receivables, the mortgage notes receivable and liabilities
reasonably approximates the fair value. The estimated fair value has been
determined using available market information and appropriate valuation
methodologies. However, considerable judgement is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
CONCENTRATION OF CREDIT RISK
The Company has cash and cash equivalents in a financial institution
which is insured by the Federal Deposit Insurance Corporation (FDIC) for amounts
up to $100,000 per institution. At December 31, 1999, 1998 and 1997, the Company
had amounts in excess of FDIC limits. The Company limits its risk by placing its
cash and cash equivalents in a high quality financial institution.
Concentration of credit risk with respect to the Company's portfolio of
47 golf courses for 1999 was:
<TABLE>
<CAPTION>
--------------------------- ------------------------ ----------------------
Revenue
Amounts
(In thousands) Percentage
<S> <C> <C>
Florida(1) $ 19,091 34.2%
South Carolina (1) $ 8,087 14.5%
Virginia (1) $ 3,905 7.0%
Illinois $ 5,994 10.8%
California $ 3,589 6.4%
Other(1) $ 15,111 27.1%
--------------------------- ------------------------ ----------------------
-------------------------- ------------------------ -----------------------
Total $ 55,777 100.0%
-------------------------- ------------------------ -----------------------
</TABLE>
(1)The courses operated by Legends Golf located in VA and in the Myrtle Beach
areas of NC and SC plus the partial year of revenue on those courses that
Legends assumed in 1999 located in Nebraska, Kentucky, and FL (4 out of 14 in
that state) comprised approximately $15,131,000 in revenue or 27.0% of the total
revenues.
F-11
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
CONCENTRATION OF CREDIT RISK (CONT'D)
The Company mitigates concentration of credit risk with respect to its
leases by requiring collateral of up to 15% of the initial purchase price. The
Company has assessed the credit worthiness of its lessees and is continually
evaluating and monitoring the ongoing and additional collateral requirements.
These collateral requirements are adjusted annually for working capital loans to
certain lessees and for capital improvements made at particular properties.
The Company is also subject to a concentration of credit risk from the
participating mortgage. The Company has evaluated the credit worthiness of the
borrower and its affiliates and has obtained a security interest in the property
and equipment of the borrower. The Company has also obtained a limited guarantee
of the debt service from the operator of the resort.
PROPERTY AND EQUIPMENT
Property and equipment is carried at the lower of cost or net
realizable value (except for the golf courses acquired from Legends Golf that
are carried at the prior basis of Legends Golf). Cost includes purchase price,
closing costs and other direct costs associated with the purchase. Depreciation
is computed on a straight-line basis over the estimated useful lives of the
assets as follows:
<TABLE>
--------------------------------------------------------------------
<S> <C>
Golf course improvements 15 years
--------------------------------------------------------------------
Buildings and improvements 30 years
--------------------------------------------------------------------
Furniture, fixtures, and equipment 3-8 years
--------------------------------------------------------------------
</TABLE>
The leases presently provide that at the end or termination of the
existing leases, all improvements and fixtures placed on the rental property,
become the property of the Company. In addition, the leases provide for a
capital replacement reserve to be established by the Company for each property.
The Company will approve disbursements from this fund for capital improvements
to the properties and the acquisition of equipment.
The Company assesses whether there has been a permanent impairment in
the value of rental property by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's ability
to perform its duties and pay rent under the terms of the lease. If the property
was leased at a significantly lower rent, the Company may recognize a permanent
impairment of loss if the income stream were not sufficient to recover its
investment. Such a loss would be determined as the difference between the
carrying value and the fair value of the property. Management believes no
permanent impairment has occurred in its net property carrying values.
LOAN COSTS
Loan costs, included in other assets, are amortized over the
contractual term of the agreement. Accumulated amortization of these costs at
December 31, 1999 and 1998 was approximately $1,826,000 and $868,000,
respectively.
REVENUE RECOGNITION
The Company recognizes rental revenue on an accrual basis over the
terms of the leases. The Company recognizes interest income ratably over the
term of the loan.
See accompanying notes to financial statements
F-12
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
In May 1998, the Emerging Issues Task Force ("EITF") issued Issue No.
98-9, "Accounting for Contingent Rent in Interim Financial Periods." This
statement provided that recognition of contingent rental income should be
deferred until specified targets that trigger the contingent rent are achieved.
Consequently, we generally will not recognize percentage rent until the third or
fourth quarter of a tenant's fiscal year, which in some instances may be
different than the third and fourth quarter of the calendar year. This statement
applies to all contingent rental income effective with the second quarter of
1998. On a quarterly basis, there may be material impact to GTA's earnings per
share, financial condition, and results of operations while, on an annual basis,
there is no effect to GTA's earnings per share, financial condition, or results
of operations. In November 1998, Issue No. 98-9 was withdrawn by the EITF.
However, the Company has continued to account for contingent rents in accordance
with Issue No. 98-9. As a result of EITF 98-9, no percentage rent or
participating interest was recognized in the first three quarters of 1999.3.
INCOME TAXES
The Company qualifies as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). A
REIT will generally not be subject to federal income taxation to the extent that
it distributes at least 95% of its taxable income to its stockholders and
complies with other requirements. When GTA is forced to foreclose on a Golf
Course, the Internal Revenue Code (Section 856(e)(4)(C)) allows a 90-day grace
period during which GTA can operate the Golf Course and still permit these
revenues to be qualifying income for REIT tax purposes. At the expiration of
such period, the property should either be sold or an agreement must be secured
with an Independent Contractor to assume management. Management by an
Independent Contractor is allowed until the close of the third taxable year
following the taxable year in which the foreclosure occurred. The only Golf
Course subject to this rule as of March 22, 2000, is Tierra Del Sol Golf Club;
however, the other three Golf Courses ("Osage National Golf Club," "Mystic Creek
Golf Course" and "Brentwood Golf & Country Club") currently in default may be
subject to this rule within the next 30-45 days.
The Company paid distributions to common stockholders of $1.76 per
share in 1999 of which $1.72 was ordinary income and $0.04 was return of
capital. The Company paid distributions to common stockholders of $2.14 per
share in 1998, of which $2.03 was ordinary income and $0.11 was return of
capital. The Company paid distributions to common stockholders of $1.03 per
share in 1997 which was ordinary income.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The Company uses the "intrinsic value" method of accounting for
its plan in accordance with Accounting Principle Board (APB) Opinion No. 25,
and, therefore, recognized no compensation expense for stock options. For
disclosure purposes only, the Black-Scholes option-pricing model was used to
calculate the "fair values" of stock options.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
F-13
<PAGE>
EARNINGS PER COMMON SHARE
Earnings per common share are presented under two formats: basic
earnings per common share and diluted earnings per common share. Earnings per
common share are computed by dividing net income (after deducting dividends
on preferred stock) by weighted average number of common shares outstanding
during the year. Diluted earnings per common share are computed by dividing
net income (after deducting dividends on preferred stock) by the weighted
average number of common shares outstanding during the year, plus the impact
of those common stock equivalents (i.e., stock options, convertible preferred
stock and OP Units) that are dilutive. Common Stock equivalents for the
effect of dilutive stock options were 14,000, 270,000 and 91,000 for the
years ended December 31, 1999 and 1998 and for the period from February 12,
1997 through December 31, 1997, respectively.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal quarters of fiscal
years beginning after June 15, 1999 (subsequently delayed to June 15, 2000).
SFAS No. 133 requires recording all derivative instruments as assets or
liabilities measured at fair value. The Company does not expect this
pronouncement to have a material impact on its financial results.
F-14
<PAGE>
3. ACQUISITION OF GOLF COURSES
The following is a summary of the acquisitions in 1999:
<TABLE>
<CAPTION>
Acquisition
Acquisition Cost
Date Course Name Location (In thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/11/99 Metamora Golf & Country Club Metamora, MI $5,900
7/28/99 Pete Dye Golf Club Bridgeport, WV 10,000
-----------------
$ 15,900
=================
</TABLE>
For the year ended December 31, 1999, the Company purchased two Golf
Courses for an aggregate acquisition cost of approximately $15.9 million. In
conjunction with the purchase of the Pete Dye Golf Club, the lessee executed two
promissory notes: the first being a $2.3 million capital improvement loan to
construct the new clubhouse and the second being a $3.5 million secured land
loan. These two promissory notes initially bear interest at 10.5% per annum with
annual increases of 5% per annum. The purchase price together with the
promissory notes totaled $21.7 million and were funded as follows: $8.6 million
in cash, $10.0 million in assumed debt, $1.4 million in deferred payments ($0.7
million on the Pete Dye Clubhouse Construction and $0.7 million reserve for a
Maintenance Facility and Wastewater Treatment at Metamora), and $1.7 million
represented by the issuance of Preferred OP Units (approximately 59,000 OP
Units) to the sellers.
4. MORTGAGE NOTES RECEIVABLE
In June of 1997, the Operating Partnership closed and funded an initial
$69.975 million participating loan to Golf Host Resorts, Inc. ("Golf Host
Resorts"), which is affiliated with Starwood Capital Group LLC. The loan is
secured by the Innisbrook Resort, a 63-hole destination golf and conference
facility located near Tampa, Florida. The additional collateral includes, cash,
excess land at the Innisbrook Resort and a security interest in the Tamarron
Golf Course, which may be released upon the achievement of certain performance
levels. The operator of the resort, Westin, has guaranteed up to $2.5 million of
debt service for each of the first five years. The initial loan of $69.975
million is being followed by a $9 million loan, which is being used for a
nine-hole expansion and other improvements to the Innisbrook Resort facilities.
The loan term is 30 years, with an initial base interest rate of 9.63%
per annum (10.377% at December 31, 1999), annual increases (of at least 5%
but no more than 7%) in the interest payment for the first five years, and a
participating interest feature throughout the term based upon the growth in
revenues, if any, over the base year. Participating interest of approximately
$100,000 and $243,000 was received for the years ended December 31, 1999,
December 31, 1998 respectively, and none for 1997.
Golf Host Resorts used $8,975,000 of the proceeds of the loan to purchase
274,039 OP Units, 159,326 shares of common stock of the Company and were granted
an option to purchase an additional 150,000 shares of common stock of the
Company at a price (subject to certain adjustments) of $26 per share,
exercisable before December 31, 1999 (subject to extension in certain
circumstances). The $5,677,000 used to purchase the OP Units has been recorded
as a reduction in minority interest and the $3,298,000 used to purchase common
stock has been recorded as a reduction of stockholders' equity. The OP Units and
2,985 common shares are pledged as collateral against the
F-15
<PAGE>
loan. The 274,039 OP Units were converted to shares of common stock at the
request of Golf Host Resorts on March 3, 2000. These shares continue to be
pledged as collateral against the loan.
The Company recognizes interest income on a straight-line basis. Interest
income in excess of the cash received for this mortgage recognized was
approximately $814,000, $1,160,000 and $723,000, respectively, for the years
ended December 31, 1999 and 1998 and for the period from February 12 to December
31, 1997.
F-16
<PAGE>
5. LEASES
The non-cancelable leases generally provide for the Company to receive the
greater of Base Rent or Participating Rent. Participating Rent is generally
equal to the original Base Rent plus 33 1/3 percent of the difference between
that year's Gross Golf Revenue and the Gross Golf Revenue at the Golf Course in
the year prior to acquisition as adjusted in determining the original Base Rent.
The Base Rent generally increases annually by the lesser of (i) 3% to 5% or (ii)
a multiple of the change in the Consumer Price Index ). Annual increases in
lease payments are generally limited to 5% to 7% during the first five years of
the lease terms. Participating rent was $450,000, $657,000 and $280,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
Scheduled future minimum rents to be received by the Company under the
Leases, excluding Tierra Del Sol for whom we will recognize their Net Income,
are as follows for the year ending December 31:
<TABLE>
<CAPTION>
--------------------- ------------
(in thousands) Amount
<S> <C>
2000 $ 44,269
2001 44,541
2002 40,822
2003 38,792
2004 38,792
Thereafter 71,118
--------------------- ------------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
LESSEES
Typically, the Company leases its golf courses to affiliates of the
prior owners and other qualified operators under non-cancelable lease agreements
for an initial period of ten years with options to extend the term of each lease
up to six consecutive times for a period of 5 years. From the minimum lease
payments, the Company is generally required to make available a reserve of 2% to
5% of the annual gross golf revenue of each course for capital expenditure
reimbursement to the lessee subject to approval by the Company. The capital
expenditure reserve is used for replacement and enhancement of the existing
facilities and is allocated to short and long-term categories and therefore the
balance may not be currently available to the lessees. At December 31, 1999, the
amount reserved was $2,452,000 compared to $1,105,000 at December 31, 1998.
Under certain circumstances, the underlying base rent for a course will be
increased when the Company agrees to pay for significant capital improvements or
to expand the existing facilities. Of the Company's $8,478,000 outstanding
capital improvement commitments (which includes the Pete Dye Clubhouse loan for
$2,300,000), approximately $1,918,000 has been funded to date. This loan may be
capitalized into the base rent when the Clubhouse is completed.
In limited circumstances the Company agrees to provide working capital
loans to existing lessees. Working capital loans are evidenced by promissory
notes or as set forth in the lease agreement and bear interest at fixed rates
between 9.74% and 10.5%. Of the Company's $12,224,000 working capital
commitments, approximately $9,245,000 has been funded to date. In addition, a
$3,500,000 land loan was funded to the lessee of the Pete Dye Golf Club at the
time of purchase. Typically, the lessee is required to increase the pledged
collateral for the funded amounts.
In summary, the Company has currently funded $14,663,000 of the total
commitments to date of $24,202,000, and subject to certain conditions,
anticipates it will fund the balance of $9,539,000 over the next two years.
F-17
<PAGE>
The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owner's efforts to seek to minimize certain adverse tax consequences from their
contribution of their courses to the Company.
Under the Performance Option for the Participating Leases, during years
three through five of each Participating Lease, the operator or its affiliate,
subject to certain qualifications and restrictions, may elect one time to
increase the Base Rent in order to receive additional OP Units or Common Stock.
An operator's ability to exercise the Performance Option and the number of OP
Units or Common Stock issuable to such Prior Owner in connection therewith, will
depend on future operating results at the applicable Golf Course and therefore
cannot be determined in advance.
LITIGATION
Owners and operators of golf courses are subject to a variety of
legal proceedings arising in the ordinary course of operating a golf course,
including proceedings relating to personal injury and property damage. Such
proceedings are generally brought against the operator of a golf course, but may
also be brought against the owner. The Participating Leases provide that each
Lessee is responsible for claims based on personal injury and property damage at
the Golf Courses which are leased and require each Lessee to maintain insurance
for such purposes. Although the Company is currently not party to any legal
proceedings relating to the Golf Courses that would have a material adverse
effect upon the Company's business or financial position, it is possible that in
the future the Company could become a party to such proceedings.
EVENTS OF DEFAULT UNDER THE PARTICIPATING LEASE
An "event of default" may be declared when a tenant fails to pay rent
timely under the Participating Lease. GTA has elected to pursue legal remedies
available to it under its Participating leases to cure such events of default
that have occurred at the following courses in the past several months: Tierra
Del Sol Golf Club, Osage National Golf Club, Mystic Creek Golf Club and
Brentwood Golf & Country Club. As a result GTA has taken possession of Tierra
Del Sol Golf Club and is in various stages of litigation with regard to the
possession of the other three Golf Courses. These Golf Courses have a combined
Net Book Value of approximately $29,993,000 and each of them have adequate
pledged collateral to cover accrued rent and related charges to date. Based on
our review of underlying operations of these Golf Courses, we do not believe
that there has been any permanent impairment in the value of these assets.
F-18
<PAGE>
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------- ------------------ -----------------
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1999 1998
-------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
REVOLVING CREDIT FACILITY
$200.0 million unsecured revolver with weighted average interest rates
of 7.0% maturing April 2002 $200,000 $125,000
-------------------------------------------------------------------------- ------------------ -----------------
LINE OF CREDIT
$25.0 million unsecured line of credit with weighted average interest 700 _
rates of 7.3% maturing October 1, 2000
-------------------------------------------------------------------------- ------------------ -----------------
BRIDGE LOAN
$100.0 million unsecured bridge loan with a weighted average interest - 67,925
rate of 6.7% that matured April 1999 and was consolidated into the
Revolving Credit Facility
-------------------------------------------------------------------------- ------------------ -----------------
NOTE PAYABLE
Secured financing, net book value of the property of $20.3 million, with 12,385 12,691
an interest rate of 8.75% maturing November 2016
-------------------------------------------------------------------------- ------------------ -----------------
NOTE PAYABLE
Secured financing, net book value of the property is $9.8 million with 10,000
interest rate of prime (8.25% at December 31, 1999) maturing through
2002
-------------------------------------------------------------------------- ------------------ -----------------
Note Repaid in 1999 - 5,018
-------------------------------------------------------------------------- ------------------ -----------------
TOTAL $ 223,085 $210,634
-------------------------------------------------------------------------- ------------------ -----------------
</TABLE>
REVOLVING CREDIT FACILITY AND LINE OF CREDIT
On April 6, 1999, GTA amended and restated its unsecured Revolving Credit
Facility ("Credit Facility") to increase the borrowing capacity to $200.0
million with a consortium of banks led by Bank of America, as lead agent. GTA
pays interest-only on the Credit Facility with the principal balance due in
April 2002. Borrowings typically bear interest at an adjusted Eurodollar rate
plus an applicable margin. The applicable margin (between 1.50% and 2.00%) is
subject to adjustment based upon certain leverage ratios. At December 31, 1999,
all amounts outstanding under the Credit Facility were based on the Eurodollar
rate and a margin of 1.75% for an average interest rate of 7.1% per annum. The
amended and restated Credit Facility replaced the Bridge Loan.
The Credit Facility availability is limited to an unencumbered pool
calculation, including a 20% limitation for working capital needs of The
Company. Financial covenants include net worth, liquidity and cash flow
covenants, among others. Non-financial covenants include restrictions on loans
outstanding, construction in progress, loans to officers and changes in certain
members of the Board of Directors, among others. At the present time, these
covenants have been met.
In addition to the amended and restated Credit Facility, on April 6, 1999
GTA also obtained a $25.0 million unsecured line of credit from Bank of America
which may be incorporated into the $200.0 million Credit Facility at a later
date. The rates, covenants, conditions and other material provisions are
essentially the same as the Credit Facility, except for the term, which was one
year with an expiration date of April 1, 2000. In March of 2000, this line was
granted a six-month extension with a new maturity date of October 1, 2000. The
extension was granted with the same pricing that was in effect under the
original line plus a 3/4% up-front commitment fee.
F-19
<PAGE>
DEBT MATURITIES
Aggregate maturities of long-term debt for each of the five years
following December 31, 1999, are as follows:
<TABLE>
<CAPTION>
------------------------ --------------------
YEAR AMOUNT
------------------------ --------------------
(In thousands)
<S> <C>
2000 $ 1,035
2001 $ 5,365
2002 $ 205,398
2003 $ 435
2004 $ 474
Thereafter $ 10,378
------------------------ --------------------
</TABLE>
INTEREST RATE SWAP AGREEMENT
In September 1998, the Company entered into an interest rate swap
agreement with Bank of America N.A. to reduce the impact of changes in interest
rates on its floating rate Credit Facility. The agreement, which covered a total
notional amount of $76,800,000 matures on March 27, 2000. The swap agreement
effectively converts a portion of the Company's floating rate debt to a fixed
rate. The Company pays Bank of America N.A. a fixed rate of 5.08% per annum (for
an all-inclusive rate of 6.83% for December 31, 1999). The Company is exposed to
credit loss in the event of nonperformance by Bank of America N.A., however, the
Company does not anticipate nonperformance by Bank of America N.A. As of the
date of this filing, the Company had not entered in to a new interest rate swap
agreement; therefore, $76,800,000 will convert to floating rate debt as of March
27, 2000 bringing the total floating rate debt to $210,700,000.
F-20
<PAGE>
8. PREFERRED STOCK AND OTHER PREFERRED INTERESTS
SERIES A PREFERRED STOCK
On April 2, 1999, GTA completed a private placement of 800,000 shares of its
9.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share
("Series A Preferred Stock"), at a price of $25.00 per share to a single
purchaser, AEW Targeted Securities Fund, L.P.
Dividends on the Series A Preferred Shares are cumulative from the date of
original issue and are payable quarterly in arrears, when, and as if declared by
the Board of Directors, on the 15th day of January, April, July and October,
commencing on July 15, 1999. Such dividends will be in an amount per share equal
to the greater of (i) $0.578125 per quarter (or $2.3125 per annum)(equal to an
annual rate of 9.25% of the $25 price per share) or (ii) the cash dividend paid
or payable on the number of common shares into which a Series A Preferred Share
is then convertible (determined on each of the quarterly dividend payment dates
referred to above). The initial dividend paid in second quarter was prorated and
paid on July 15, 1999 based on the number of days between April 2, 1999 and June
30, 1999, the final day of the fiscal quarter.
The Series A Preferred Stock is convertible, in whole or in part, at the
option of the holder at any time into common shares at a conversion price of
$26.25 per common share (equivalent to an initial conversion rate of
approximately 0.95238 common shares per Series A Preferred Share), subject to
adjustment in certain circumstances.
Except in certain circumstances relating to preservation of GTA's
status as a "REIT", the Series A Preferred Shares are not redeemable at GTA's
option prior to April 2, 2004. On and after such date, the Series A Preferred
Shares will be redeemable, in whole but not in part, at the option of GTA on 20
days' notice for a cash payment equal to $25.00 plus accrued and unpaid
dividends (whether or not declared) to the redemption date without interest,
plus a premium initially equal to 4% of such sum and, thereafter, declining by
1% each year so that the premium is zero on and after April 2, 2008.
SERIES B OP UNITS
In May 1999, GTA acquired Metamora Golf and Country Club, an 18-hole
upscale golf facility located in Metamora, Michigan for $5.9 million. As part of
the purchase price, at the closing, 10,172 units of Series B OP Units valued at
$295,000 were issued at $29.00 per share (which reflects a 20% conversion
premium at the time of closing). The newly created Series B OP Units are
convertible into OP Units on a one-for-one basis at the election of the holder.
These perpetual preferred units are scheduled to pay a distribution of 8.25%
based on the initial issuance price.
SERIES C OP UNITS
In July 1999, GTA acquired the Pete Dye Golf Club, an 18-hole upscale,
private golf facility located in Bridgeport, West Virginia, approximately 90
miles south of Pittsburgh. As part of the $10.0 million purchase price, at the
closing, 48,949 units of Series C OP Units valued at $1,350,000 were issued at
$27.58 per share. The newly created Series C OP Units are convertible on a
one-for-one basis into common OP Units basis at the election of the holder.
These perpetual preferred units are scheduled to pay a distribution of 8.91%
based on the initial issuance price.
F-21
<PAGE>
9. STOCK OPTION AND AWARDS
EMPLOYEE STOCK OPTIONS AND AWARDS
The Compensation Committee of the Board of Directors ("Compensation
Committee") determines compensation, including stock options and awards. Options
are generally awarded with the exercise price equal to the market price at the
date of grant and become exercisable in three to five years.
In February 1997, the Company adopted the 1997 Stock Incentive Plan
(the "Stock Incentive Plan"). Under the Stock Incentive Plan, the Compensation
Committee granted stock awards relating to 500,000 shares of Common Stock which
vest ratably over a period of three years from the date of grant and expire ten
years from the date of grant.
In February 1997, the Company adopted the 1997 Non-Employee Directors'
Plan (the "Directors' Plan"). Under the Directors' Plan, the Compensation
Committee is authorized to grant stock awards to purchase up to 100,000 shares
of the Company's common stock at prices equal to the fair value of the stock on
the date of grant. On February 6, 1997, 1998, 1999, and 2000, respectively,
20,000 options were granted and vested immediately. As of February 6, 2000,
20,000 shares remain available for options and restricted stock grants.
In May 1997, the Company adopted the 1997 Stock-Based Incentive Plan
(the "New 1997 Plan"). Under the New 1997 Plan, the Compensation Committee is
authorized to grant awards of up to 600,000 shares of the Company's common
stock. Option grants generally vest ratably over a period of three years from
the date of grant and expire ten years from the date of grant. At December 31,
1999, 42,968 shares remained available for options and restricted stock grants.
On January 30, 2000, 25,000 options were issued under this plan leaving a
remaining balance of 17,968.
On November 11, 1998, the Company adopted the 1998 Stock-Based
Incentive Plan (the "1998 Plan") subject to approval by stockholders.
Concurrently with the plan approval, the Compensation Committee granted 350,000
of the authorized 500,000 options at an exercise price of $25.06. These options
generally vest ratably over a period of five years from the date of grant and
expire ten years from the date of grant. Eighty-eight thousand of these options
were cancelled upon the resignation the Company's executive Vice President in
November 1999. In addition, 8,000 of the 44,000 shares that were granted in
March 1999 were cancelled. At December 31, 1999, 202,000 shares remained
available for options and restricted stock grants. On January 30, 2000, 145,000
options and 55,000 restricted shares were issued under this plan leaving a
remaining balance of 2,000.
The New 1997 Plan and the 1998 Plan provides that the Company may grant
stock options or restricted stock to executive officers and other key employees.
Restricted stock is subject to restrictions determined by the Company's
Compensation Committee. The shares of restricted stock will be sold at a
purchase price equal to $0.01 and will vest over four-year period. Restricted
stock has the same dividend and voting rights as other common stock and is
considered to be currently issued and outstanding.
On September 19, 1997, the Company issued 70,000 restricted common
shares for $.01 when the market price was $26.1875 to officers of the Company
under the New 1997 Plan. On January 1, 1998 the Company issued 20,939 restricted
common shares for $0.01 when the market price was $29.00 to officers of the
Company under the New 1997 Plan. On March 10, 1999, the Company issued 44,000
restricted common shares for $.01 when the market prices was $22.75 to officers
of the Company under the 1998 Plan. Subsequent to these issuances, loans of
approximately $938,000, secured by OP Units and common stock, with interest
rates of 4.4% to 6.2% were made to officers of the Company for the payment of
related taxes through the date of this report. In November 1999, 11,904 of the
previously issued grants were cancelled as a result of the resignation of one of
the officers of the Company. Compensation expense is determined by reference to
the market value on the date of grant and is being amortized on a straight-line
basis over the vesting period. Such expense amounted to approximately $563,000
and $787,000 and $115,000 for the years ended December 31, 1999, 1998, and for
the period ended 1997, respectively.
F-22
<PAGE>
9. STOCK OPTIONS AND AWARDS (CONT'D)
LOANS TO OFFICERS
Loans of approximately $890,000, secured by OP Units and common stock,
with interest rates of 4.4 to 6.2 % per annum were made to officers of the
Company for the payment of related taxes for Restricted Stock Grants issued in
1997, 1998 and 1999. Of this total, approximately $173,000 related to the
Restricted Stock Grants issued on March 10, 1999 for 44,000 shares. Additional
loans will be made to the officers to cover tax liabilities resulting from
future vesting of the Restricted Stock Grants. Under the 1998 Senior Executive
Loan Program, as amended on August 10, 1999, loans of $2,300,000 have been made
to officers of the Company to purchase Company stock on the open market. These
loans are collateralized by the shares purchased, bear interest at 4.51 to 5.89
% per annum and are due at the earlier time of (i) sale greater than $25 per
share, (ii) within 3 years of employee termination or (iii) 5 years. These
Promissory Notes are recourse to the borrower. Upon any change of control in the
lender, all outstanding amounts to the current officers of GTA are forgiven and
the Promissory Notes are cancelled.
Of the total officer loans outstanding, approximately $725,000 in
loans to the former Executive Vice President were reclassified to Other Assets
from Stockholders Equity upon his resignation in November of 1999.
F-23
<PAGE>
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
Option Shares SHARES EXERCISE PRICE
------------------ ------------ -----------------
<S> <C> <C>
Outstanding at February 12, 1997................................. - $ -
Granted.......................................................... 940,000 23.88
Exercised........................................................ - -
Expired and/or canceled.......................................... - -
---------
Outstanding at December 31, 1997................................. 940,000 $23.88
Granted.......................................................... 445,000 26.08
Exercised........................................................ (4,666) (25.75)
Expired and/or canceled.......................................... - -
---------
Outstanding at December 31, 1998................................. 1,380,334 $24.59
Granted.......................................................... 55,000 17.80
Exercised........................................................ - -
Expired and/or canceled.......................................... (173,002) (25.27)
-----------
Outstanding at December 31, 1999................................. 1,262,332 $24.30
===========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------- -----------------------------------
Options Outstanding Options Exercisable
---------------------------------------------------------------- -----------------------------------
Range of Remaining Average
Exercise Contractual Exercise
Price Shares Life (years) Price Shares Price
---------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
$16 - $18 35,000 9.9 $17.71 - -
$21 335,000 7.1 $21.00 230,000 $21.00
$24 - $26 797,332 7.9 $25.32 598,999 $25.32
$29 70,000 8.1 $29.00 36,666 $29.00
$32 - $33 25,000 8.4 $32.13 8,333 $32.13
</TABLE>
F-24
<PAGE>
9. STOCK OPTIONS AND AWARDS (CONT'D).
Pro forma net income and earnings per share, as if the fair value method in
SFAS No. 123 had been used to account for stock-based compensation, and the
assumptions used, are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share
As reported $1.28 $1.39 $1.32
Pro forma $1.26 $1.16 $1.03
Diluted earnings per share
As reported $1.27 $1.34 $1.29
Pro forma $1.26 $1.12 $1.01
Black-Scholes assumptions*
Fair market value of option granted $2.29 $3.89 $1.16
Risk-free interest rate 5.96% 5.47% 6.00%
Dividend yield 8.96% 6.72% 5.66%
Stock volatility 36.23% 27.21% 17.14%
Expected option life 3 years 4.57 years 3 years
*Weighted-averages
------------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Effective March 1, 1998, the Company adopted an Employee Stock Purchase
Plan to provide substantially all employees an opportunity to purchase shares of
its common stock through payroll deduction, up to 10% of eligible compensation
with a $25,000 maximum deferral. Semi-annually, participant account balances
will be used to purchase shares of stock at the lesser of 85 percent of the fair
market value of shares at the beginning or ending of such six-month period. The
Employee Stock Purchase Plan expires on February 28, 2008. A total of 250,000
shares will be available for purchase under this plan. Shares have been issued
as per the table below:
<TABLE>
<CAPTION>
----------------- --------------
PURCHASE DATE # OF SHARES
ISSUED
----------------- --------------
<S> <C> <C>
6/30/98 1,128
----------------- --------------
12/31/98 1,768
----------------- --------------
6/30/99 2,149
----------------- --------------
12/31/99 1,592
----------------- --------------
</TABLE>
Compensation expense related to the Employee Stock Purchase Plan was $12,000 for
1999 and $18,000 for 1998.
NON-AFFILIATED STOCK OPTIONS
In conjunction with the February 1998 purchase of the Emerald Dunes
Golf Course, Raymond Finch, Jr. and Ray Finch, III (collectively, the
"Finches"), were granted 50,000 options each, of which 25,000 in the aggregate
will vest when, in any calendar year, the Company acquires $25.0 million in golf
courses identified by the Finches. After year five, all options immediately vest
if the stock price is $10.00 over the strike price at which the options were
issued ($28.00) and if the Finches have otherwise undertaken to promote and
market the Company. These options expire on May 1, 2003.
F-25
<PAGE>
9. STOCK OPTIONS AND AWARDS (CONT'D).
In addition, options to acquire 20,000 shares of common stock were
granted to J. Graffeo, J. Galante, H. Rostoff, I. Smoley and A. Inelli (for a
total of 100,000 options) as partial consideration for their interest in the
Polo Trace Golf Course. Ten Thousand of the options vested on January 4, 1999,
at $26.75 and 10,000 vested on January 4, 2000, at $16.83. All 100,000 of these
options expire on July 1, 2000.
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data is as follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
- ------------------------------- ------------------- ------------------ ------------------- --------------------
1999
- ------------------------------- ------------------- ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
Revenues $13,325 $13,720 $14,104 $14,628
Operating income $7,803 $8,513 $8,314 $7,750
Net income (after Preferred $2,714 $2,460 $2,413 $2,261
Dividends)
Basic earnings per share $.35 $.32 $.31 $.29
Diluted earnings per share $.35 $.32 $.31 $.29
- ------------------------------- ------------------- ------------------ ------------------- --------------------
1998
- ------------------------------- ------------------- ------------------ ------------------- --------------------
Revenues $ 8,920 $ 10,448 $ 12,039 $ 12,977
Operating income $ 5,943 $ 6,692 $ 7,646 $ 7,020
Net income $ 3,081 $ 2,639 $ 2,779 $ 2,107
Basic earnings per share $ .40 $ .35 $ .36 $ .28
Diluted earnings per share $ .39 $ .33 $ .35 $ .27
- ------------------------------- ------------------- ------------------ ------------------- --------------------
1997
- ------------------------------- ------------------- ------------------ ------------------- --------------------
Revenues $2,042 $3,998 $6,065 $6,622
Operating income $1,383 $2,598 $4,216 $4,825
Net income $ 716 $1,292 $1,615 $2,346
Basic earnings per share $ .19 $ .33 $ .40 $ .40
Diluted earnings per share $ .18 $ .32 $ .39 $ .39
</TABLE>
F-26
<PAGE>
11. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial information set forth below is presented as if the
1999 acquisitions (Note 3) had been consummated as of January 1, 1998. The pro
forma financial information is not necessarily indicative of what actual results
of operations of the Company would have been assuming the acquisitions had been
consummated as of January 1, 1998, nor does it purport to represent a forecast
of the results of operations for future periods (in thousands, except per share
amounts).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $56,678 $46,229
Net income Available to Common
Shareholders $10,112 $11,177
Basic earnings per share $1.31 $1.45
Diluted earnings per share $1.30 $1.40
</TABLE>
The pro forma financial information includes the following adjustments: (1)
increase in revenues; (2) an increase in depreciation and amortization expense;
(3) an increase in interest expense; (4) an increase in interest income; and (5)
an increase in income applicable to minority interest.
F-27
<PAGE>
12. MINORITY INTEREST
Minority interest represents the OP Units not held by GTA, GP and
GTA, LP and is adjusted for the OP Unit holders', proportionate share of net
income and distributions. An OP Unit and share of Common Stock of the Company
have the same economic characteristics inasmuch as they effectively share
equally in the net income or loss and any distributions of the Operating
Partnership. OP Unit holders have the right, subject to certain terms and
conditions, to convert their OP Units to shares of Common Stock or to cash at
the discretion of the Company. In 2000, 100% of the 5,252,995 OP Units will
be convertible. The following activity occurred in the OP Unit activity and
the minority interest account:
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------- -------------------------- -----------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- ---------------------------------- ----------------------------- -------------------------- -----------------------------
(IN THOUSANDS) OP UNITS DOLLARS OP UNITS DOLLARS OP UNITS DOLLARS
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance 5,325 $76,510 4,815 $54,625 -- $--
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Purchase of golf courses & 90 2,645 524 14,687 4,815 19,296
Recapitalization of leases
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Redemption (162) (3,556) (14) (432) -- --
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Contribution of property -- -- -- 3,296 -- --
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Adjustment of minority interest -- (3,569) -- 8,001 -- 33,882
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Distributions -- (9,309) -- (10,797) -- (4,351)
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Net income -- 7,026 -- 7,130 -- 5,798
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
Ending Balance 5,253 $69,747 5,325 $76,510 4,815 $54,625
- ---------------------------------- ------------ ---------------- ------------ ------------- ------------ ----------------
</TABLE>
F-28
<PAGE>
13. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE
Legends Golf is a significant lessee of the golf courses in the Company's
portfolio. Legends Golf is a golf course management group consisting of eight
companies affiliated through common ownership that operates a portfolio of
thirteen golf courses owned by the Company under triple-net leases. Legends Golf
derives revenues from the operation of golf courses principally through receipt
of green fees, membership fees, golf cart rentals, and sales of food, beverage
and merchandise. During 1999, Legends Golf acquired five additional leases for
six courses from the prior lessee in exchange for cash of $25 and the
assumption of debt including advances from the Company of $2,899.
Capital improvement and working capital Advances from the Company
totaling $5,328 bear interest at 10-percent. Advances of $661 are due in
August 2000 with the balance due at the end of the lease term.
The following table sets forth certain combined condensed financial
information for Legends Golf:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 4,912 $ 2,978
Non-current assets 29,884 20,650
------------------------------
Total assets $34,796 $23,628
==============================
Payable to Golf Trust of America, L.P. $ 6,952 $ 1,030
Other current liabilities 22,229 1,340
Total long-term liabilities 12,976 20,916
Total owners' equity (capital deficit) (7,360) 342
------------------------------
Total liabilities and owners' equity (capital deficit) $34,796 $23,628
==============================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS) FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Revenues $27,375 $22,874 $22,384
Operating Loss $(6,104) $(4,685) $(4,983)
Net Income (loss) $(934) $746 $(244)
</TABLE>
(Unaudited)
Total revenues from golf course operations for Legends Golf increased
by $4.5 million or 19.7 percent to $27.4 million for the year ended December 31,
1999. The increase was primarily attributed to the additional revenue of $4.2
million from the additional six courses under lease and increases in the Myrtle
Beach revenues of $1.0 million from higher green fees, cart fees, and food and
beverage sales offset by a $0.7 million decrease of revenue inVirginia.
Operating loss increased from $4.7 million to $6.1 million for the
years ended December 31, 1998 and 1999, respectively. The increase is primarily
due to the additional administrative, operating, and transition expenses of $6.7
million related to the additional six Golf Courses under lease offset by
reductions of $0.8 million in administrative and operating expenses at the
Myrtle Beach and Virginia Golf Courses and the $4.5 million increase in revenues
as noted above.
Legends Golf incurred a net loss of $0.9 million for the year ended
December 31, 1999 compared to net income of $0.7 million for the year ended
December 31, 1998 primarily as a result of the increase in the operating loss
and an increase in interest expense of $0.3 million in 1999.
F-29
<PAGE>
13. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONT'D)
RELATED PARTY TRANSACTIONS
Concurrent with the acquisition of the Sandpiper Golf Course, the Company
formed Sandpiper-Golf Trust, LLC (of which the Operating Partnership is the sole
member) to hold title to the golf course. In addition, the Operating Partnership
owns approximately 95% of the economic interest in a preferred stock subsidiary
formed to hold title to a 14 acre development site adjacent to the Sandpiper
Golf Course, with the balance owned by Mr. Blair, President, and Mr. Young, in
order to comply with certain REIT restrictions imposed by the Internal Revenue
Code. This parcel of land was sold in June of 1999 and this related preferred
stock subsidiary was dissolved effective December 31, 1999.
14. SUBSEQUENT EVENTS
PAYMENT OF DIVIDENDS
On December 15, 1999 the Board of Directors declared a quarterly dividend
distribution of $0.44 per share for the quarter ended December 31, 1999, to
common stockholders of record on December 31, 1999, which was paid on January
15, 2000. Preferred Stockholders were paid the dividend calculated according to
their contracted yield.
ISSUANCE OF STOCK OPTIONS AND RESTRICTED STOCK GRANTS
As consistent with prior years, on February 6, 2000, 20,000 stock
options at an exercise price of $17.938 were issued under the "Director's Plan"
to GTA's independent directors. These options vested upon issuance.
On January 30, 2000, 25,000 stock options under the New 1997 Plan and
145,000 stock options under the 1998 Plan were issued to GTA employees at an
exercise price of $17.25. These options vest ratably over a period of three
years. On January 30, 2000, 55,000 restricted stock grants at a par value of
$0.01 per share were issued to the Officers of GTA under the 1998 Plan.
STOCK REPURCHASE PROGRAM
On December 15, 1999, GTA announced that its Board of Directors
authorized a program to repurchase up to one million shares of its common stock.
Any such repurchases will be made on the open market or in block purchase
transactions. The timing of any repurchases and the number of shares repurchased
pursuant to the stock repurchase program are dependent upon market conditions
and corporate requirements. Under this program, on January 4, 2000, GTA
purchased 10,000 shares of its stock at a price of $16.9375 per share.
APPOINTMENT OF FINANCIAL ADVISOR
After an extended interview and diligence process by management and
review by the Company's Board of Directors, on February 9, 2000 GTA engaged Banc
of America Securities LLC to act as its financial advisor to undertake a review
of a broad range of strategic alternatives available to the Company in light of
the current and prospective market conditions facing the Company and the REIT
industry. Executive management and/or the Board is meeting regularly with our
financial advisor in furtherance of consideration of alternatives to enhance
shareholder value. These alternatives include a merger, sale, recapitalization,
privatization or restructuring, including de-REITing (revoking election of
REIT-tax status), among others.
F-30
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Compensation Committee of the Board of Directors
Golf Trust of America, Inc. 1998 Non-Qualified Employee Stock Purchase Plan:
We have audited the accompanying statements of financial condition of the
Golf Trust of America, Inc. 1998 Non-Qualified Employee Stock Purchase Plan
(the Plan) as of December 31, 1998 and 1999, and the related statements of
changes in net assets for the period from March 1, 1998 (inception) through
December 31, 1998, and the year ended December 31, 1999. These financial
statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial condition of the Plan at December 31, 1998 and 1999,
and the changes in net assets for the period from March 1, 1998 (inception)
through December 31, 1998, and the year ended December 31, 1999, in
conformity with generally accepted accounting principles.
Charlotte, North Carolina /s/ BDO Seidman, LLP
February 4, 2000
F-31
<PAGE>
GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
Receivable from Golf Trust of America, Inc.:
Participant contributions $ 22,921 $ 41,707
Employer contributions 4,045 7,354
---------------------------- ----------------------------
NET ASSETS $ 26,965 $ 49,061
============================ ============================
</TABLE>
F-32
<PAGE>
GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 1
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1999 1998
<S> <C> <C>
Net Assets at the Beginning of the Year $49,061 $ -
ADDITIONS:
Participant contributions 67,549 69,693
Employer contributions 11,921 18,143
------------------ -------------------
Total additions 79,471 87,836
------------------ -------------------
Deductions:
Purchase and distribution of common stock to participants 101,566 38,775
------------------ -------------------
NET ASSETS AT THE END OF THE YEAR $ 26,965 $ 49,061
================== ===================
</TABLE>
See accompanying notes to financial statements
F-33
<PAGE>
GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
1. THE PLAN:
The Golf Trust of America, Inc. (the Company) 1998 Non-Qualified Employee
Stock Purchase Plan (the Plan) was adopted by the Company's Board of Directors
in March 1998 and became effective on March 1, 1998. The Plan is a non-qualified
voluntary contribution plan designed to enable eligible employees and directors
(the Participants) of the Company to purchase common stock in the Company at a
discount. The Plan allows each Participant to purchase up to $25,000 per year of
the Company's common stock. The Plan is administered by the Company that has
delegated certain administrative responsibilities to the Compensation Committee
of the Board of Directors of the Company. The Plan provides for a series of six
month purchase periods ("purchase period"). A purchase period is a period of six
months beginning each January 1 and July 1 and ending each June 30 and December
31, respectively. The price of the shares of the common stock purchased is the
lesser of 85 percent of the closing price of such shares either on (a) the first
day of each purchase period, or (b) the last day of each purchase period.
The Company has reserved 250,000 shares of common stock for participants
under the Plan.
PARTICIPANTS CONTRIBUTIONS:
Full time employees who have completed three months service with the
Company are eligible to participate in the Plan by payroll withholding at any
time during each purchase period. Participants elect to participate in the Plan
by completing and submitting an election form to the plan administrator.
EMPLOYER CONTRIBUTIONS:
Employer contributions represent the discount or aggregate difference
between the market value price of the Company's common stock and the established
discount purchase price at the end of a purchase period.
DISTRIBUTIONS:
The Company's transfer agent and registrar issues shares of common
stock upon receipt of participant and Company contributions. The transfer agent
and registrar then prepares stock certificates, which are registered in the
participant's name, and holds such certificates on behalf of the participants or
issues stock certificates to the participant upon their written request.
Accordingly, all shares purchased under the provisions of the Plan are deemed to
be immediately distributed to the participants.
WITHDRAWALS:
A participant may withdraw all or any part of the contributions made
during a purchase period by delivering an amended election form to the plan
administrator on or before the last day of such purchase period.
F-34
<PAGE>
1. THE PLAN (CONT'D).
PLAN TERMINATION:
The Board of Directors of the Plan may terminate this Plan and any
purchase period at any time (together with any related contribution elections)
or may terminate any purchase period (together with any related contribution
elections) at any time, provided, however, no such termination shall be
retroactive unless the Board determines that applicable law requires a
retroactive termination of this Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING:
The accompanying financial statements have been prepared on the accrual
basis of accounting.
ADMINISTRATIVE EXPENSES:
All administrative expenses of the Plan are paid by the Company.
DISTRIBUTIONS:
Distributions are recorded when common stock has been distributed to
participants.
3. INTERNAL REVENUE SERVICE STATUS:
The Plan is not a qualified plan under Section 423(b) of the Internal
Revenue Code. Participants are subject to any required tax withholding by the
Company on the discount/compensation earned under the Plan.
4. DISTRIBUTIONS:
A summary of stock purchased and distributed for the purchase periods
ended June 30th and December 31st is as follows:
<TABLE>
<CAPTION>
6/30/99 12/31/98 6/30/98
<S> <C> <C> <C>
Participant contributions $44,629 $ 41,707 $ 27,986
Employer contributions 7,876 7,354 10,789
-------------- -------------- ---------------
Market value of stock $ 52,505 $ 49,061 $ 38,775
============== ============== ===============
Market value of stock purchased and distributed per share $24.44 $27.75 $ 29.19
-------------- -------------- ---------------
Shares purchased and distributed 2,149 1,768 1,128
============== ============== ===============
</TABLE>
F-35
<PAGE>
5. SUBSEQUENT EVENT:
On January 4, 2000, an additional 1,592 shares of common stock with a
market value of approximately $27,000 were purchased and distributed for the
purchase period ended December 31, 1999.
F-36
<PAGE>
LEGENDS GOLF
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL INFORMATION
Report of Independent Public Accountants--BDO Seidman, LLP.............................. F-38
Combined Balance Sheets--December 31, 1998 and 1999..................................... F-39
Combined Statements of Operations--Years Ended December 31, 1997, 1998,
and 1999.............................................................................. F-40
Combined Statements of Owners' Equity (Deficit)--Years Ended December 31,
1997, 1998, and 1999.................................................................. F-41
Combined Statements of Cash Flows--Years Ended December 31, 1997,
1998, and 1999........................................................................ F-42
Notes to Combined Financial Statements................................................. F-43
</TABLE>
F-37
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Legends Golf
Myrtle Beach, South Carolina
We have audited the accompanying combined balance sheets of LEGENDS GOLF
(as defined in Note 1) as of December 31, 1998 and 1999, and the related
combined statements of operations, owners' equity, and cash flows for each of
the three years in the period ended December 31, 1999. These combined financial
statements are the responsibility of LEGENDS GOLF'S management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully described in the notes to the combined financial statements,
LEGENDS GOLF has material transactions with its majority stockholder and
affiliates.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of LEGENDS GOLF at
December 31, 1998 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
February 12, 2000
Charlotte, North Carolina
F-38
<PAGE>
LEGENDS GOLF
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- --------------- ------------------------
<S> <C> <C>
ASSETS:
CURRENT:
Cash.................................................................................. $ 974 $ 1,127
Accounts receivable (Note 4):
Golf packages........................................................................ 818 2,285
Related parties...................................................................... 398 501
Other................................................................................ 215 84
Inventories........................................................................... 573 915
------------------------
Total current assets.............................................................. 2,978 4,912
------------------------
Property and equipment, less accumulated depreciation
and amortization (Notes 5 and 8)....................................................... 1,083 1,607
------------------------
Other assets:
Advances to affiliates (Note 4)....................................................... 14,401 20,464
Investment in GTA, LP (Notes 2 and 7)................................................. 5,126 4,151
Goodwill, net of accumulated amortization of $144..................................... - 3,508
Miscellaneous......................................................................... 40 154
------------------------
Total other assets................................................................ 19,567 28,277
------------------------
$ 23,628 $ 34,796
========================
LIABILITIES AND OWNERS' EQUITY (CAPITAL DEFICIT):
CURRENT LIABILITIES:
Accounts payable...................................................................... $ 550 $ 1,178
Accrued expenses:
Rent................................................................................. 1,061 1,624
Other................................................................................ 278 1,562
Advances from affiliates (Note 4)..................................................... - 661
Current maturities of long-term debt (Note 7)......................................... 481 19,489
------------------------
Total current liabilities......................................................... 2,370 24,514
Advances from affiliates (Note 7)....................................................... 9,039 15,682
Long-term debt, less current maturities (Note 7)........................................ 11,877 1,960
------------------------
Total liabilities................................................................. 23,286 42,156
------------------------
Commitments and contingencies (Notes 6 and 8)
Owners' equity (capital deficit):
Common stock, $1 par--shares authorized, 300,100; outstanding, 3,100................... 3 3
Members' contributions................................................................ 7 8
Additional paid-in capital............................................................ 3,832 3,857
Members' accumulated deficit.......................................................... (10,610) (14,840)
Retained earnings (deficit)........................................................... 7,110 3,612
------------------------
Total owners' equity (capital deficit)............................................ 342 (7,360)
------------------------
$ 23,628 $ 34,796
========================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-39
<PAGE>
LEGENDS GOLF
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1998 1999
- ---------------------------- -------------------------------------
<S> <C> <C> <C>
REVENUES (NOTE 4):
Green fees................................................................. $ 12,081 $ 12,766 $ 14,453
Cart rentals............................................................... 5,335 5,112 5,778
Membership dues............................................................ 149 175 771
Food and beverage sales.................................................... 2,464 2,579 3,743
Pro shop merchandise sales................................................. 2,355 2,242 2,630
-------------------------------------
Total revenues......................................................... 22,384 22,874 27,375
-------------------------------------
COSTS AND EXPENSES:
General and administrative (Note 4)........................................ 5,511 5,588 7,168
Repairs, maintenance, and other course operating expenses.................. 5,667 5,039 5,351
Depreciation and amortization.............................................. 958 219 274
Cost of merchandise sold................................................... 1,154 1,088 1,290
Rents (Note 8)............................................................. 11,068 12,601 15,445
Pro shop operations........................................................ 1,231 1,138 1,442
Cost of food and beverage sold............................................. 1,024 1,068 1,376
Food and beverage operations............................................... 754 818 1,133
-------------------------------------
Total costs and expenses............................................... 27,367 27,559 33,479
-------------------------------------
Operating loss............................................................... (4,983) (4,685) (6,104)
-------------------------------------
OTHER INCOME (EXPENSE):
Equity in earnings of GTA, LP (Note 2)..................................... 4,887 5,197 5,381
Interest expense........................................................... (347) (327) (659)
Gain on sale of assets..................................................... - 158 -
Miscellaneous.............................................................. 199 403 448
-------------------------------------
Total other income (expense)........................................... 4,739 5,431 5,170
-------------------------------------
Net income (loss)............................................................ $ (244) $ 746 $ (934)
=====================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-40
<PAGE>
LEGENDS GOLF
COMBINED STATEMENTS OF OWNERS' EQUITY (CAPITAL DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MEMBERS' PAID-IN RETAINED ACCUMULATED
SHARES AMOUNT CONTRIBUTIONS CAPITAL EARNINGS DEFICIT
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997............... 3 $ 3 $ 1 $ 300 $ 8,840 $ (1,970)
Capital contributions:
Cash................................. - - 6 - - -
Land (Note 2)........................ - - - 3,532 - -
Net income (loss)...................... - - - - 3,517 (3,761)
Cash dividends......................... - - - - (1,871) -
--------------------------------------------------------------------------
BALANCE, December 31, 1997............. 3 3 7 3,832 10,486 (5,731)
Net income (loss)...................... - - - - 4,514 (3,768)
Cash dividends......................... - - - - (7,890) (1,111)
--------------------------------------------------------------------------
BALANCE, December 31, 1998............. 3 3 7 3,832 7,110 (10,610)
Net income (loss)...................... - - - - 2,676 (3,610)
Cash dividends......................... - - - - (6,174) (620)
Capital contributions.................. - - 1 - - -
Acquisition of company................. - - - 25 - -
--------------------------------------------------------------------------
BALANCE, December 31, 1999............. 3 $ 3 $ 8 $ 3,857 $ 3,612 $ (14,840)
==========================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-41
<PAGE>
LEGENDS GOLF
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1998 1999
- ---------------------------- -------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................ $ (244) $ 746 $ (934)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................................... 958 219 274
(Gain) loss on disposal of property and equipment...................... - (158) -
Equity in earnings of GTA, LP.......................................... (4,887) (5,197) (5,381)
Decrease (increase) in:
Accounts receivable................................................... 171 350 (763)
Inventories........................................................... 45 (119) 97
Other assets.......................................................... (157) 7 29
Increase (decrease) in:
Accounts payable...................................................... (544) (323) (1,174)
Accrued expenses...................................................... 791 (141) 1,148
-------------------------------------
Net cash provided by (used in) operating activities........................ (3,867) (4,616) (6,704)
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions......................................... (2,014) (2,018) (294)
Proceeds from sale of property and equipment............................. - 807 -
Proceeds from transfer to GTA, LP........................................ 523 - -
Cash acquired in lease acquisitions...................................... - - 130
Distributions from GTA, LP............................................... 3,851 6,356 6,356
Increase in advances to affiliates....................................... (988) (1,253) (6,063)
-------------------------------------
Net cash provided by (used in) investing activities........................ 1,372 3,892 129
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt............................................. 1,086 11,368 16,049
Payments on long-term debt............................................... (226) (616) (6,958)
Increase (decrease) in advances from affiliates.......................... 3,228 (622) 4,405
Payments of dividends.................................................... (1,871) (9,001) (6,794)
Capital contribution..................................................... 6 - 26
-------------------------------------
Net cash provided by financing activities.................................. 2,223 1,129 6,728
-------------------------------------
Net increase (decrease) in cash............................................ (272) 405 153
Cash, beginning of year.................................................... 841 569 974
-------------------------------------
Cash, end of year.......................................................... $ 569 $ 974 $ 1,127
=====================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-42
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements include the accounts of two
S-Corporations (Golf Legends, Ltd. and Legends at Bonaventure, Inc.) and six
limited liability companies (Legends of Virginia, LC; Legends Golf Management,
LLC; Heritage Golf Management, LLC; Oyster Bay Golf Management, LLC; Legends
National Golf Management, LLC; and Virginia Legends Golf Management, LLC). The
entities, referred to collectively as Legends Golf (the Company), are engaged in
the operation of 14 golf courses in South Carolina (5), Florida (4), Virginia
(2), Kentucky, Nebraska, and North Carolina.
The operations of the companies listed above are being presented on a
combined basis, as under the terms of the operating leases, the lease
obligations are cross-collateralized among all Legends lessees. This
presentation better presents the ability of the lessees to service the leases.
All significant intercompany balances and transactions have been
eliminated. Additionally, certain classifications may vary from those of the
individual company's financial statements.
All dollar amounts are presented in thousands unless otherwise indicated.
INVENTORIES
Inventories are valued at the lower-of-cost (first-in, first-out) or market
and consist primarily of food, beverages, golf equipment, and clothing.
REVENUE RECOGNITION
Revenue from green fees, cart rentals, food and beverage sales, merchandise
sales, and range income are generally recognized at the time of sale. Membership
dues are recognized ratably over the applicable period. Initiation fees are
refundable and are not recognized as revenue.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
INVESTMENTS IN PARTNERSHIP
The Company accounts for its investments in Golf Trust of America, LP (GTA,
LP) under the equity method of accounting. Under this method, equity earnings
(losses) are recorded as increases (decreases) to the investment account and
dividend distributions, to the extent they do not lower the investment below
zero, are recorded as reductions in the investments.
GOODWILL
Goodwill is amortized on a straight-line basis over 15 years.
F-43
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets using straight-line methods.
Estimated useful lives for major asset categories approximate:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------- -----
<S> <C>
Buildings.................................................................................. 40
Machinery and equipment.................................................................... 3-8
Furniture.................................................................................. 8
Golf carts................................................................................. 5
</TABLE>
Major renewals and betterments are capitalized. Maintenance, repairs, and
minor renewals are expensed as incurred. When properties are retired or
otherwise disposed of, related cost and accumulated depreciation are removed
from the accounts. Golf course improvements, to the extent they are not
reimbursed by the Landlord, are amortized over the lesser of their useful lives
or the related lease term.
INCOME TAXES
For the S-Corporations, the absence of a provision for income taxes is due
to the election by the companies, and consent by their sole stockholder, to
include the taxable income or loss of the companies in his individual tax
returns. As a result, no federal or state income taxes are imposed on the
companies. For the limited liability companies, no provision has been made for
income taxes or related credits as under the Internal Revenue Code a limited
liability company is treated as a partnership for income tax purposes.
Therefore, the results of operations are includable in the income tax returns of
the members.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles required management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain 1998 amounts have been reclassified to conform to 1999
presentation.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of trade receivables.
Concentration of credit risk with respect to trade receivables, which
consists primarily of golf packages from hotels and charges, is limited due to
the large number of hotels comprising the Company's customer base. The trade
receivables are billed and due monthly, and all probable bad debt losses have
been appropriately considered in establishing an allowance for doubtful
accounts. As of December 31, 1998 and 1999, the Company had no
significant concentration of credit risk.
F-44
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs are
included in general and administrative costs in the amounts of $626, $655, and
$867 for December 31, 1997, 1998, and 1999, respectively.
2. TRANSFER OF ASSETS AND INVESTMENT IN GTA, LP
On February 12, 1997, the Company transferred land and improvements,
buildings, and certain equipment with a net book value of $36.3 million net of
related debt of $34.8 million to Golf Trust of America, LP (GTA, LP) for
approximately 3.7 million OP Units and reimbursement of approximately $522,500
of out-of-pocket expenses. Immediately prior to the transfer, the Company's
majority owner contributed land, previously leased to the Company, at a value of
$3.5 million. The transfer was concurrent with an initial public offering of the
common stock of Golf Trust of America, Inc. (GTA, Inc.), its general partner. OP
Units are convertible, subject to certain limitations as defined in the transfer
agreement, to common shares of GTA, Inc. At December 31, 1999, the common stock
equivalent value of the OP Units was approximately $63 million.
In addition, with the contribution of assets, the operations of the golf
courses were transferred to four newly formed management companies. These
companies entered into lease agreements with GTA, LP more fully described in
Note 7. During 1998, the Company completed construction of two clubhouses in
Virginia as required under the terms of the contribution agreement with GTA, LP
at a cost of approximately $3.4 million. These assets were transferred to GTA,
Inc. during 1998.
3. ACQUISITION OF LEASES
During 1999, Mr. Young and an affiliate acquired the operations of six
additional golf courses under lease to GTA. Effective July 1, 1999, Mr. Young
purchased the stock of Legends at Bonaventure, Inc. (formerly known as Emerald
Dunes--Bonaventure, Inc.) for $25,000 plus the assumption of certain
liabilities. Effective August 17, 1999, Legends National Golf Management, LLC
acquired the leases for four courses through assignment from the Granite Golf
Group in exchange for the assumption of certain liabilities. The acquisition
value has been allocated as follows:
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
Current assets................................................................ $ 1,359
Property and equipment........................................................ 384
Other assets.................................................................. 29
Goodwill...................................................................... 3,652
------------
TOTAL ASSETS.................................................................. 5,424
------------
Current liabilities........................................................... 2,500
Payable to GTA................................................................ 2,899
------------
TOTAL LIABILITIES............................................................. 5,399
------------
NET ASSETS $ 25
============
</TABLE>
F-45
<PAGE>
4. RELATED PARTY TRANSACTIONS
The Company's majority owner owns and operates Marsh Harbour, Ltd.;
Heritage Plantation, Ltd.; Legends Golf Development, Ltd.; The Legends Group,
Ltd.; Legends Scottish Village, LLC; Legends Properties, LLC; Legends Golf
Resorts, LLC; Gleneagles, Ltd.; and other related businesses.
The Legends Group, Ltd. provides various management and administrative
services including reservations, advertising, accounting, payroll and related
benefits, and telephone for all affiliated companies. These expenses are
allocated to the businesses using procedures deemed appropriate to the nature of
the expenses involved. The procedures utilize various allocation bases such as
relative investment and number of employees and direct effort expended. Interest
on allocated external debt is charged as incurred. The Company's management
believes the allocations are reasonable, but they are not necessarily indicative
of the costs that would have been incurred if the businesses had operated as
separate companies. Administrative fees paid by the Company for such services
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1997...................................................................................... $ 1,506
1998...................................................................................... $ 1,585
1999...................................................................................... $ 1,387
</TABLE>
During 1997, 1998, and 1999, the Company recognized golf course revenue of
$1,744, $2,972, and $3,653 respectively, under golf packages with an affiliated
company.
Advances to and from affiliated companies, as shown on the combined
balance sheets, have no fixed payment/repayment provisions. Interest income
and expense on advances to and from affiliates are not recorded for financial
statement purposes. Interest income of $577, in 1999 which approximates the
borrowing rate on the payable to bank, was recognized on advances to Mr.
Young.
Included in advances from affiliates is $2,899 payable to GTA, assumed by
the Company in the acquisition of the Bonaventure lessee and $2,429 in
additional advances from GTA to assist in the transition period for all the new
leases. In August 2000, $661 is due and the balance has no fixed payment terms.
All amounts bear interest at 10 percent per annum. Interest expense on these
advances was $124.
5. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
---------------- -------------------------
<S> <C> <C>
Golf course improvements.......................................................... $ 628 $ 1,206
Buildings......................................................................... 539 552
Machinery and equipment........................................................... 58 101
Furniture......................................................................... 288 86
Golf carts........................................................................ 15 15
Construction-in-progress.......................................................... - 8
-------------------------
1,528 1,967
Less accumulated depreciation..................................................... 445 360
-------------------------
Net property and equipment........................................................ $ 1,083 $ 1,607
=========================
</TABLE>
6. RETIREMENT PLAN
The Company sponsors a 401(k) profit-sharing plan for all eligible
employees of the Company and other affiliated companies including officers.
Legends Group, Ltd. may annually elect to make matching contributions as defined
in the plan. No matching contributions were made for the years ended December
31, 1997, 1998, and 1999.
F-46
<PAGE>
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1999
- ---------------- -------------------------
<S> <C> <C>
Payable to bank, under a $6 million loan agreement that the Company participates in,
along with Marsh Harbour, Ltd., an affiliated company. The note bears interest at
the 30-day LIBOR rate (6.01% at December 31, 1999) plus 175 basis points. The
outstanding balance for the Company and Marsh Harbour, Ltd. is payable in
graduated principal payments of $83 plus accrued interest; balance due May 2002.
The aforementioned companies are jointly liable for the debt and the majority
owner has guaranteed the loans. The loan is collateralized by certain OP Units..... $ 2,000 $ 2,000
Payable to bank, under a $12.5 million line-of-credit agreement. The line-of-credit
bears interest at the 30-day LIBOR rate plus 175 basis points. Interest is
payable in monthly installments, with the balance due April 2000. The majority
owner has guaranteed the line-of-credit. The loan is collateralized by certain OP
Units............................................................................... 4,858 7,692
Payable to financial institution, under a $12.5 million line-of-credit agreement.
The line-of-credit bears interest at the 30-day LIBOR rate plus 240 basis points.
Interest is payable in monthly installments, with the balance due April 2000. The
majority owner has guaranteed the line-of-credit. The loan is collateralized by
certain OP Units.................................................................... 5,500 11,757
-------------------------
12,358 21,449
Less current maturities .............................................................. 481 19,498
-------------------------
$ 11,877 $ 1,960
=========================
</TABLE>
The $6 million loan agreement provides, among other covenants, restrictions
on certain financial ratios, capital expenditures, indebtedness, liens, changes
in the nature of the business and significant other limitations as to the use of
funds. The Company has obtained a waiver of certain of the covenants as of
December 31, 1999.
Total debt of all affiliated entities of which the Company is jointly
liable is approximately $29,489 at December 31, 1999.
The Company has obtained commitments to extend the Payable to bank and
payable to financial institution agreements to January 2001.
The aggregate annual maturities for the above mortgage notes payable at
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
---------------- ------------
<S> <C>
2000................................................................... $ 19,489
2001................................................................... 1,374
2002................................................................... 586
------------
Total.................................................................. $ 21,449
============
</TABLE>
Notes payable increased primarily due to disbursements made to the majority
owner.
F-47
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
LEASES
Concurrent with the transfer of assets, as described in Note 2, the Company
entered into four lease agreements with GTA, LP. The leases provide for initial
annual payments aggregating approximately $12 million with annual adjustments
equal to the lesser of 3 percent or 200 percent of the consumer price index. In
addition, the leases provide for percentage rents based on one-third of the
increase in gross golf revenues, as defined in the agreement, over the base year
of 1996. The leases assumed as described in Note 3 have similar terms. The
leases, which have terms ending through December 31, 2006, may be renewed for up
to six additional periods of five years each. In addition, the leases provide
for reimbursements, subject to landlord approval, up to 2 percent of gross golf
revenues, of certain qualified capital expenditures, as defined in the lease
agreements. The Company records these expenditures as leasehold improvements or
equipment as applicable until they are reimbursed by the lessor. As of December
31, 1999, the lessor had approximately $182 available to the Company under these
lease agreements.
The Company also leases land from a third party under an agreement that
expires in 2032. The lease requires rental payments of 10 percent of monthly
green fees as defined in the lease agreement.
During 1996 and prior to the transfer of assets on February 12, 1997, the
Company leased land from the sole stockholder.
Total rental expense approximated the following:
<TABLE>
<CAPTION>
THIRD
YEAR ENDED DECEMBER 31, STOCKHOLDER PARTY GTA, LP
----------------------- ----------- ----- -------
<S> <C> <C> <C>
1997................................................ $ 25 $ 236 $ 10,807
1998................................................ $ - $ 236 $ 12,365
1999................................................ $ - $ 314 $ 15,131
</TABLE>
The Company also leases certain equipment under noncancelable operating
leases. Total equipment lease expense approximated $1,000, $604, and $1,275 for
1997, 1998, and 1999, respectively.
Minimum lease commitments for all noncancelable operating leases at
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
----------------------------- -------------
<S> <C>
2000...................................................................... $18,296
2001...................................................................... 18,134
2002...................................................................... 17,635
2003...................................................................... 17,236
2004...................................................................... 17,230
Thereafter................................................................ 32,781
-------------
Total..................................................................... $121,312
=============
</TABLE>
SELF-INSURANCE
The Company along with its affiliates maintains a self-insurance program
for that portion of health care costs not covered by insurance. The Company is
liable for claims up to $20 per employee annually with an annual aggregate
maximum liability under the program for all companies of $336. Cumulative
amounts estimated to be payable by the Company with respect to pending and
potential claims have been accrued as liabilities.
F-48
<PAGE>
9. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
---------------------------- ----------
<S> <C>
1997................................................................... $ 578
1998................................................................... $ 332
1999................................................................... $ 1,247
</TABLE>
During 1997 and 1998, the Company transferred assets and related debt to
GTA, LP (see Note 2).
During 1999, the Company acquired certain lease rights in exchange for the
assumption of certain liabilities (see Note 3).
F-49
<PAGE>
SCHEDULE III
GOLF TRUST OF AMERICA, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
COST
CAPITALIZED
SUBSEQUENT
Initial Cost to Acquisition
-------------------------------------------------
Building &
Property/Location Encumbrances Land Improvements Improvements Other
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Eagle Ridge Inn & Resort- Galena, IL - 7,087 39,913 1,020
Sandpiper Golf Course-Santa Barbara, CA - 2,668 33,832 -
Bonaventure-Green Monster and The Resort Course-Ft. Lauderdale, FL - 2,912 21,588 3,461
Emerald Dunes Golf Course- West Palm Beach 12,384 3,348 19,052 212
Heathland, Parkland, and Moorland- Myrtle Beach, SC - 3,207 15,609 560
Miscellaneous investments 10,000 38,713 163,682 8,227 -
Total $ 22,384 $ 57,935 $ 293,676 $ 13,480 $ -
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNTS OF WHICH
Carried at End of period
-------------------------------------
Building & Accumulated
Property/Location Land Improvements Total Depreciation
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eagle Ridge Inn & Resort- Galena, IL 7,087 43,868 50,955 4,617
Sandpiper Golf Course-Santa Barbara, CA 2,668 30,079 32,747 1,571
Bonaventure-Green Monster and The Resort Course-Ft. Lauderdale, FL 2,912 25,689 28,601 2,834
Emerald Dunes Golf Course- West Palm Beach 3,348 19,326 22,674 2,341
Heathland, Parkland, and Moorland- Myrtle Beach, SC 3,207 16,169 19,376 8,958
Miscellaneous investments 38,713 177,636 216,349 22,680
Total $ 57,935 $ 312,767 $ 370,702 $ 43,001
</TABLE>
<TABLE>
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
Statement of
Date of Date Operation is
Property/Location Construction Acquired Completed
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Eagle Ridge Inn & Resort- Galena, IL 1977 5/22/98 3-30 years
Sandpiper Golf Course-Santa Barbara, CA 1972 3/6/98 3-30 years
Bonaventure-Green Monster and The Resort Course-Ft. Lauderdale, FL 1970 1/1/98 3-30 years
Emerald Dunes Golf Course- West Palm Beach 1990 2/1/98 3-30 years
Heathland, Parkland, and Moorland- Myrtle Beach, SC 1990 2/12/97 3-30 years
Miscellaneous investments Various Various Various
</TABLE>
<PAGE>
SCHEDULE IV
Golf Trust of America, Inc.
Mortgage Loans on Real Estate
December 31, 1999
<TABLE>
<CAPTION>
Face Amount
Description Interest Rate Final Maturity Date Prior Liens of Mortgage
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Golf Host Resorts, Inc. 10.377-10.505% 6/20/2027 $-- $69,975,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Carrying Of Loans Subject to
Amount of Delinquent Principal
Description Mortgage Of Interest
- ---------------------------------------------------------------------
<S> <C> <C>
Golf Host Resorts, Inc. $73,160,000 $--
</TABLE>
PERIOD PAYMENT TERMS
Note payable interest only of $605,117 at 10.377% monthly with 5% annual
increases continuing until 2002. Amounts drawn on $9,000,000 Tranche I bear
interest at 10.505% with 5% annual increases continuing until 2002.
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index immediately
precedes the exhibits.
The following exhibits are part of this Annual Report on Form 10-K for fiscal
year 1999 (and are numbered in accordance with Item 601 of Regulation S-K).
Items marked with an asterisk (*) are filed herewith.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C>
3.1.1 Articles of Amendment and Restatement of the Company, as filed
with the State Department of Assessments and Taxation of Maryland
on January 31, 1997, (previously filed as Exhibit 3.1A to the
Company's Registration Statement on Form S-11 (Commission File No.
333-15965) Amendment No. 2 (filed January 30, 1997) and
incorporated herein by reference).
3.1.2 Articles of Amendment of the Company, as filed with the State
Department of Assessments and Taxation of Maryland on June 9, 1998
(previously filed as Exhibit 3.2B to the Company's Quarterly
Report on Form 10-Q, filed August 14, 1998 and incorporated herein
by reference).
3.2.1 Articles Supplementary of the Company relating to the Series A
Preferred Stock, as filed with the State Department of Assessments
and Taxation of the State of Maryland on April 2, 1999 (previously
filed as Exhibit 3.1 to the Company's Current Report on Form 8-K,
filed April 13, 1999, and incorporated herein by reference).
3.2.2 Articles Supplementary of the Company relating to the Series B
Junior Participating Preferred Stock, as filed with the State
Department of Assessments and Taxation of the State of Maryland on
August 27, 1999 (previously filed as Exhibit 3.1 to the Company's
Current Report on Form 8-K, filed August 30, 1999, and
incorporated herein by reference).
3.3 Bylaws of the Company, as amended by the Board of Directors on
February 16, 1998 and as currently in effect (previously filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q, filed
May 15, 1998 and incorporated herein by reference).
4.1 Form of Share Certificate for the Common Stock (previously filed
as Exhibit 4.3 to the Company's Current Report on Form 8-K, filed
August 30, 1999, and incorporated herein by reference).
4.2 Form of Share Certificate for the Series A Preferred Stock
(previously filed as Exhibit 3.2 to the Company's Current Report
on Form 8-K, filed April 13, 1999, and incorporated herein by
reference).
4.3 Shareholder Rights Agreement, by and between the Company and
ChaseMellon Shareholder Services, L.L.C., as rights agent, dated
August 24, 1999 (previously filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K, filed August 30, 1999, and
incorporated herein by reference).
10.1.1 First Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement") of Golf Trust of America, L.P. (the
"Operating Partnership"), dated February 12, 1997 (previously
filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K,
filed March 31, 1997, and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.1.2 First Amendment to the Partnership Agreement, dated as of February
1, 1998 (previously filed as Exhibit 10.1.2 to the Company's
Annual Report on Form 10-K, filed March 31, 1998, and incorporated
herein by reference).
10.1.3* Exhibit A to the Partnership Agreement (Schedule of Partnership
Interests), as revised through March 22, 2000.
10.1.4 Designation of Class B Common OP Units of the Operating
Partnership, dated February 1, 1998, which has been added as the
first entry in Exhibit D to the Partnership Agreement (included
within the First Amendment to the Partnership Agreement, which was
previously filed as Exhibit 10.1.2 to the Company's Annual Report
on Form 10-K, filed March 31, 1998, and incorporated herein by
reference).
10.1.5 Designation of Series A Preferred OP Units of the Operating
Partnership, dated April 2, 1999, which has been added to Exhibit
D to the Partnership Agreement (previously filed as Exhibit 10.3
to the Company's Current Report on Form 8-K, filed April 13, 1999,
and incorporated herein by reference).
10.1.6* Designation of Series B Preferred OP Units of the Operating
Partnership, dated May 11, 1999, which has been added to Exhibit D
to the Partnership Agreement.
10.1.7* Designation of Series C Preferred OP Units of the Operating
Partnership, dated July 28, 1999, which has been added to Exhibit
D to the Partnership Agreement.
10.2.1 Credit Agreement, dated as of June 20, 1997, by and among Golf
Trust of America, L.P., as Borrower, Golf Trust of America, Inc.,
GTA GP, Inc. and GTA LP, Inc., as Guarantors, the Lenders referred
to therein, and NationsBank N.A., as Agent (previously filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K, dated
June 20, 1997 and filed August 12, 1997, and incorporated herein
by reference).
10.2.2 Amended and Restated Credit Agreement, dated as of July 8, 1998,
by and among Golf Trust of America, L.P., as Borrower, Golf Trust
of America, Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors,
the Lenders referred to therein, and NationsBank N.A., as Agent
(previously filed as Exhibit 10.2.2 to the Company's Amended
Annual Report on Form 10-K/A, filed April 1, 1999, and
incorporated herein by reference).
10.2.3* Amended and Restated Credit Agreement, dated as of March 31, 1999,
by and among Golf Trust of America, L.P., as Borrower, Golf Trust
of America, Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors,
the Lenders referred to therein, NationsBank, N.A., as
Administrative Agent, First Union National Bank as Syndication
Agent, and BankBoston, N.A., as Documentation Agent.
10.3* Credit Agreement, dated as of March 31, 1999, by and among Golf
Trust of America, L.P., as Borrower, Golf Trust of America, Inc.,
GTA GP, Inc. and GTA LP, Inc., as Guarantors, the Lenders referred
to therein, and NationsBank, N.A., as Administrative Agent for the
Lenders
10.4 Loan Agreement, dated as of June 20, 1997, by and between Golf
Host Resorts, Inc., as Borrower, and Golf Trust of America, L.P.,
as Lender (previously filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, dated June 20, 1997 and filed August
12, 1997, and incorporated herein by reference).
10.5 1997 Non-Employee Directors' Plan of the Company (previously filed
as Exhibit 10.7 to the Company's Registration Statement on Form
S-11 (Commission File No. 333-15965) Amendment No. 1 (filed
January 15, 1997) and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.6 1997 Stock Incentive Plan (the "Original 1997 Plan") of the
Company (previously filed as Exhibit 10.6 to the Company's
Registration Statement on Form S-11 (Commission File No.
333-15965) Amendment No. 1 (filed January 15, 1997) and
incorporated herein by reference).
10.7 1997 Stock-Based Incentive Plan of the Company (the "New 1997
Plan") (previously filed as Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q (Commission File No. 000-22091),
filed August 15, 1997, and incorporated herein by reference).
10.8 Form of Nonqualified Stock Option Agreement for use under the New
1997 Plan (previously filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q (Commission File No. 000-22091),
filed August 15, 1997, and incorporated herein by reference).
10.9 Form of Employee Incentive Stock Option Agreement for use under
the New 1997 Plan (previously filed as Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q (Commission File No.
000-22091), filed August 15, 1997, and incorporated herein by
reference).
10.10 General Provisions Applicable to Restricted Stock Awards Granted
Under the New 1997 Plan (previously filed as Exhibit 10.14 to the
Company's Registration Statement on Form S-11 (Commission File No.
333-36847), dated September 30, 1997 and filed as of October 1,
1997, and incorporated herein by reference).
10.11 Form of Restricted Stock Award Agreement for use under the New
1997 Plan (previously filed as Exhibit 10.15 to the Company's
Registration Statement on Form S-11 (Commission File No.
333-36847), dated September 30, 1997 and filed as of October 1,
1997, and incorporated herein by reference).
10.12 1998 Stock-Based Incentive Plan of the Company (previously filed
as Exhibit A to the Company's definitive Proxy Statement, dated
April 1, 1999 and filed March 29, 1999, and incorporated herein by
reference).
10.13 Employee Stock Purchase Plan of the Company (previously filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(Commission File No. 333-46659), filed February 20, 1998, and
incorporated herein by reference).
10.14 Subscription Agreement for use with the Employee Stock Purchase
Plan (previously filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (Commission File No.
333-46659), filed February 20, 1998, and incorporated herein by
reference).
10.15* First Amended and Restated Employment Agreement between the
Company and W. Bradley Blair, II, dated November 7, 1999.
10.16* Second Amended and Restated Employment Agreement between the
Company and Scott D. Peters, dated November 7, 1999.
10.17 Stock Purchase Agreement, dated April 2, 1999, by and among Golf
Trust of America, Inc., Golf Trust of America, L.P., GTA GP, Inc.,
GTA LP, Inc. and AEW Targeted Securities Fund, L.P. (previously
filed as Exhibit 10.1 to the Company's Current Report on Form 8-K,
filed April 13, 1999, and incorporated herein by reference).
10.18 Registration Rights Agreement, dated April 2, 1999, by and between
Golf Trust of America, Inc. and AEW Targeted Securities Fund, L.P.
(previously filed as Exhibit 10.2
</TABLE>
<PAGE>
<TABLE>
<S> <C>
to the Company's Current Report on Form 8-K, filed April 13, 1999,
and incorporated herein by reference).
12.1* Computation of Earnings to Fixed Charges
21.1* List of Subsidiaries of the Company
23.1* Consent of BDO Seidman LLP
24.1 Powers of Attorney (included under the caption "Signatures")
27.1* Financial Data Schedule
</TABLE>
* Filed herewith
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/12/1997 Golf Legends Ltd., Inc. $ 30,647,030 1,532,352 11.82% 57-0886834
1500 Legends Drive
Myrtle Beach, SC 29577
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/12/1997 Seaside Resorts Ltd., Inc. $ 16,129,118 806,456 6.22% 57-0729308
1500 Legends Drive
Myrtle Beach, SC 29577
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/12/1997 Heritage Golf Club, Ltd., Inc. $ 16,031,230 801,561 57-0818596
1500 Legends Drive
Myrtle Beach, SC 29577
1/6/1999 Heritage (conversion) (11,700)
-----------
789,861 6.09%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/12/1997 Legends of Virginia L.C. $ 11,963,738 598,187 4.61% 57-1003883
1500 Legends Drive
Myrtle Beach, SC 29577
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/12/1997 Northgate $ 3,797,071 189,854 76-0527250
16450 Northgate Forest Drive
Houston, TX 77068
5/20/1998 Northgate (redemption) $ (158,969) (5,000)
1/6/1999 Northgate (conversion) $ - (30,000)
----------------- -----------
Northgate Total $ 3,638,102 154,854 1.19%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/12/1997 Olde Atlanta Golf Club Limited Partnership $ 1,444,926 72,246 36-3834881
c/o The Crescent Company
1580 S. Milwaukee Ave., Suite 101
Libertyville, IL 60048
4/13/1998 Olde Atlanta (redemption) $ (62,837.60) (2,000)
5/20/1998 Olde Atlanta (redemption) $ (64,017.60) (2,000)
8/21/1998 Olde Atlanta (redemption) $ (52,387.50) (1,500)
12/10/1998 Olde Atlanta (redemption) $ (30,166.11) (1,150)
1/20/1999 Olde Atlanta (redemption) $ (66,078.50) (2,500)
4/6/1999 Olde Atlanta (conversion) $ - (2,000)
5/1/1999 Olde Atlanta (recapitalization) $ 683,967 30,826
5/27/1999 Olde Atlanta (conversion) (2,000)
7/15/1999 Olde Atlanta (conversion) (3,500)
1/10/2000 Olde Atlanta (conversion) (3,300)
1/26/2000 Olde Atlanta (conversion) (4,100)
----------------- -----------
Olde Atlanta Total $ 1,853,405.98 79,022 0.61%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/12/1997 Bright's Creek Development Co. LLC $ 2,119,005 105,950 0.82% 63-1120089
104 Cotton Creek Drive
Gulf Shores, AL 36542
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
10/31/1996 David Dick Joseph - 12,500 0.00% ###-##-####
14 North Adger's Wharf
Charleston, SC 29401
12/14/1999 David Dick Joseph (conversion) (12,500)
----------------------------------------
- -
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/4/1997 W. Bradley Blair, II $ - 12,500 0.10% ###-##-####
14 North Adger's Wharf
Charleston, SC 29401
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/4/1997 James Hoppenrath $ - 3,750 0.00% ###-##-####
109 E. Bay Street
Charleston, SC 29401
1/6/2000 James Hoppenrath (conversion) (3,750)
----------------- -----------
$ - -
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
6/20/1997 Golf Host Resorts, Inc. $ - 274,039 0.00% 84-0631130
c/o Starwood Capital Group, LP
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
3/3/2000 Golf Host (conversion) (274,039)
-----------------------
-
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
9/2/1997 John J. Rainieri, Sr. $ 3,198,168 114,237 0.88% ###-##-####
Betty Rainieri ###-##-####
4350 Mayfair Road
Uniontown, OH 44685
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
9/2/1997 Raintree Country Club, Inc. $ 204,138 7,292 0.06% 34-1736212
4350 Mayfair Road
Uniontown, OH 44685
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
9/30/1997 Eagle Watch Golf Club, Limited Partnership $ 1,890,682 70,158 36-3903287
c/o E. Neal Trogdon
The Crescent Company
1580 South Milwaukee Avenue, Suite 101
Libertyville, IL 60048
11/2/1998 Eagle Watch (redemption) $ (64,199.00) (2,150)
5/21/1999 Eagle Watch (conversion) (1,250)
----------------- -----------
Eagle Watch Total $ 1,826,483 66,758 0.51%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
10/17/1997 Properties of the Country, Inc. $ 500,000 19,231 0.15% 48-1157265
908 N. 2nd Street East
Louisburg, KS 66053
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
11/25/1997 Granite Golf Corporation $ 650,000 24,424 86-0926890
1510 N. Hayden Road, Suite 7
Scottsdale, AZ 85260
-------------
-------------
7/2/1999 Granite Golf (redemption) $ (200,257) (8,393)
7/27/1999 Granite Golf (redemption) $ (237,935) (10,354)
8/13/1999 Granite Golf (redemption) $ (125,746) (5,677)
8/13/1999 Residual Value $ (86,062.00)
(Value at Issue - Value at Redemption) - - 0.00%
----------------- -----------
- ----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
12/19/1997 Stonehenge Golf Development, LLC $ 4,500,000 169,811 0.92% 56-2027442
90 Mallet Hill Road
Columbia, SC 29223
1/10/2000 Stonehenge Golf (conversion) $ - (50,000)
----------------- -----------
$ 4,500,000 119,811
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
1/16/1998 Mystic Creek Golf Club, Limited Partnership$ 1,500,000 52,724 0.41% 38-3187304
32605 West 12 Mile Road
Suite 350
Farmington Hills, MI 48334
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/1/1998 Okeechobee Championship Golf, Inc. $ 6,138,369 227,347 (1) 1.75% 65-0115196
2100 Emerald Dunes Drive
West Palm Beach, FL 33411
- -----------------------------------------------------------------------------------------------------------------------------
(1) Includes 218,088 Class A Common Units issued with a valuation of $5,888,376
and 9,259 Class B Common OP Units issued with a valuation of $249,993
- -----------------------------------------------------------------------------------------------------------------------------
5/22/1998 Eagle Ridge Lease Company LLC $ 1,198,750 35,794 0.28% 52-2099405
16100 N. Greenway-Hayden Loop
Scottsdale, AZ 85260
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5/28/1998 Golf Classic Resorts, LLC $ 879,995 26,357 0.00% 85-0453484
536 South Avenue
Glencoe, IL 60022
11/26/1999 Golf Classic Resorts (redemption) $ (199,633) (11,577)
12/31/1999 Golf Classic Resorts (redemption) $ (34,517) (2,060)
2/7/2000 Golf Classic Resorts (redemption) $ (221,408) (12,720)
2/7/2000 Residual Value $ (424,437)
(Value at Issue - Value at Redemption)
----------------------------------------
- -
- -----------------------------------------------------------------------------------------------------------------------------
8/28/1998 Osage National Golf Club LLC $ 3,451,068 124,700 43-1735431
900 Hickory Street
St. Louis, MO 63104
6/30/1999 Osage (Redemption) $ (1,393,382) (58,576)
----------------- -----------
$ 2,057,686 66,124 0.51%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/14/1998 Brentwood Golf & Country Club, Inc. $ 650,000 24,482 0.19% 38-3148750
4801 Faircourt, West Bloomfield, MI 48322
PO Box 386, Union Lake, MI 48387
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
12/22/1998 Gutta-Percha Golf, Inc. $ 870,000 32,986 0.25% 95-4493507
365 W. California Blvd. Suite 2
Pasadena, CA 91105
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/4/1997 GTA LP, Inc. $ - 8,090,594 62.41% 58-2290326
14 North Adger's Wharf
Charleston, SC 29401
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2/4/1997 GTA GP, Inc. $ - 27,553 0.21% 58-2290217
14 North Adger's Wharf
Charleston, SC 29401
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total Common OP Units 12,964,115 100.00%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Exhibit A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Value of non-cash Partnership Approx. Percentage Federal ID #
Admitted Name and address of partners capital contribution units issued Interests
-------- ---------------------------- -------------------- ------------ ---------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Series A Preferred OP Units
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
4/2/1999 GTA LP, Inc. 20,000,000 800,000 100%
14 North Adger's Wharf
Charleston, SC 29401
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Series B Preferred OP Units
- -----------------------------------------------------------------------------------------------------------------------------
5/11/1999 Metamora Golf Operating Company, L.L.C. 295,003 10,169 100% 38-3462287
c/o Total Golf, Inc.
1303 W. Commerce Drive
Milford, MI 48380
- -----------------------------------------------------------------------------------------------------------------------------
Series C Preferred OP Units
- -----------------------------------------------------------------------------------------------------------------------------
7/28/1999 Burning Embers Corporation 1,350,000 48,949 100% 55-0720833
Cooks Mine Road
Bridgeport, WV 26330
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Exhibit D
GOLF TRUST OF AMERICA, L.P.
Articles of Designation
Classifying and Designating 10,169 Units of
8.29% SERIES B LIMITED PARTNERSHIP INTEREST
May 11, 1999
SECTION 1. Number of Units and Designation. This series of preferred
partnership interest shall be designated as the 8.29% Series B Preferred
Partnership Interest (the "Series B Preferred Units") and the number of units of
8.29% Series B Preferred Partnership Interest which shall initially constitute
such series shall be 10,169 units.
SECTION 2. Definitions. For purposes of the Series B Preferred Units,
the following terms shall have the meanings indicated:
"AMEX" shall mean the American Stock Exchange.
"Asset Disposition" shall mean a sale, transfer or capital lease (as
determined in accordance with GAAP) of all or substantially all of the assets of
the Partnership to a Person that is not an affiliate of the Corporation or the
Operating Partnership.
"Articles of Designation" shall mean these provisions in Exhibit D to
the Partnership Agreement recording the preferences, conversion and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms and conditions of redemption and other terms and
conditions of the Series B Preferred Units.
"Board of Directors" shall mean the Board of Directors of the General
Partner or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Series B Preferred Units.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Common Share" shall mean one share of the common stock of GTA.
"Common Units" shall mean the common units of limited partnership
interest in the Partnership.
Exhibit D - Series B Preferred Page 1
<PAGE>
"Constituent Person" shall have the meaning set forth in paragraph (e)
of Section 7 hereof.
"Conversion Price" shall mean the conversion price per Common Share for
which each Series B Preferred Unit is convertible. The initial conversion price
shall be $29.01 (equivalent to a conversion rate of 1.0 Common Units for each
Series B Preferred Unit).
"Corporation" means Golf Trust of America, Inc., a Maryland
Corporation.
"Current Market Price" shall mean, on any date specified herein, the
average of the Market Price during the period of the most recent twenty
consecutive trading days ending on such date.
"Distribution Payment Date" shall mean, with respect to each
Distribution Period, the 15th calendar day of January, April, July and October,
in each year, commencing on July 15, 1999; provided, however, that if any
Distribution Payment Date falls on any day other than a Business Day, the
distribution payment due on such Distribution Payment Date shall be paid on the
first Business Day immediately following such Distribution Payment Date.
"Distribution Periods" shall mean quarterly distribution periods
commencing on January 1, April 1, July 1 and October 1 of each year and ending
on and including the day preceding the first day of the next succeeding
Distribution Period (other than the initial Distribution Period, which shall
commence on the Issue Date and end on and include June 30, 1999).
"GAAP" shall mean generally acceptable accounting practices,
consistently applied.
"Issue Date" shall mean the first date on which any Series B Preferred
Units are issued and sold.
"Junior Units" shall have the meaning set forth in paragraph (c) of
Section 9 hereof.
"Liquidation" shall mean a liquidation, dissolution or winding up of
the Corporation or the Partnership, whether voluntary or involuntary.
"Liquidation Event" shall mean (A) a Liquidation, or (B) an Asset
Disposition.
"Liquidation Preference" shall have the meaning set forth in paragraph
(a) of Section 4 hereof.
"Market Price" shall mean, with respect to the Common Shares on any
date, the last reported sales price, regular way on such day, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the American Stock Exchange ("AMEX") or, if the Common
Shares are not listed or admitted for trading on AMEX, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted for trading or, if the Common Shares are not listed or
admitted for trading on any national securities exchange, the last quoted price,
or if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASD Automated Quotation System or,
if such system is no longer in use, the principal other automated quotation
system that may then be in use, or if the Common Shares are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker regularly making a market in the Common Shares
selected for such purpose by the Board of Directors or, if there is no such
professional market maker, such amount as an independent investment banking firm
selected by the Board of Directors determines to be the value of a Common Share.
Exhibit D - Series B Preferred Page 2
<PAGE>
"Partnership" shall mean Golf Trust of America, L.P., a Delaware
limited partnership.
"Partnership Agreement" shall mean the First Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, dated February
12, 1997, as amended.
"Parity Units" shall have the meaning set forth in paragraph (b) of
Section 9 hereof.
"Person" shall mean any individual, firm, partnership, Corporation,
limited liability company or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Units" shall mean the Series B Preferred Units of limited
partnership interest in the Partnership in number and with rights and
preferences identical to the Series B Preferred Units.
"Senior Units" shall have the meaning set forth in paragraph (a) of
Section 9 hereof.
"Series B Preferred Unit" shall have the meaning set forth in Section 1
hereof.
"Set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Partnership in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of a distribution or other distribution by the Board of Directors,
the allocation of funds to be so paid on any series or class of units of
partnership interest of the Partnership; provided, however, that if any funds
for any class or series of Junior Units or any class or series of Parity Units
are placed in a separate account of the Partnership or delivered to a
disbursing, paying or other similar agent, then "set apart for payment" with
respect to the Series B Preferred Units shall mean placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the AMEX, or if such securities are not listed or admitted for
trading on the AMEX, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the Nasdaq National Market, or if such
securities are not quoted on such Nasdaq National Market, in the applicable
securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in paragraph (e) of
Section 7 hereof.
SECTION 3. Distributions.
(a) The holders of the Series B Preferred Units shall be
entitled to receive, when, as and if authorized and declared by the General
Partner out of funds legally available for that purpose, distributions payable
in cash at the rate per annum equal to the greater of (i) $2.40 per Series B
Preferred Unit or (ii) an amount per Series B Preferred Unit equal to the
aggregate annual amount of cash distributions paid or payable, if any, with
respect to that number of Common Units, or portion thereof, into which each
Series B Preferred Unit is then convertible, in accordance with the terms of
these Articles of Designation (such greater amount, the "Annual Distribution
Rate"). The amount referred in clause (ii) of this subparagraph (a) with respect
to each Distribution Period shall be determined as of the applicable
Distribution Payment Date by multiplying the number of Common Units, or portion
thereof calculated to the fourth decimal point, into which a Series B Preferred
Unit would be convertible at the opening of business on such Distribution
Payment Date (based on the Conversion Price then in effect) by the quarterly
cash distribution payable or paid for such Distribution Period in respect of a
Common Unit outstanding as of the record date for the payment of distributions
on the Common Units with respect to such Distribution Period and multiplying
such product by four. Such distributions shall be cumulative from the Issue
Date, whether or not in any Distribution Period or Periods there shall be funds
of the Partnership legally available for the payment of such distributions and
shall be payable quarterly, when, as and if authorized and declared by the Board
of Directors, in arrears on Distribution Payment Dates, commencing on the first
Distribution Payment Date after the Issue Date. Each such distribution shall be
payable in arrears to the holders of record of the Series B Preferred Units, as
they appear on the records of the Partnership at the close of business on each
record date which shall not be more than 30 days preceding the applicable
Distribution Payment Date (the "Distribution Payment Record Date"), as shall be
fixed by the Board of Directors. Accrued and unpaid distributions for any past
Distribution Periods may be authorized and declared and paid at any time,
without reference to any regular Distribution Payment Date, to holders of record
on such date, which shall not be more than 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors. The amount of accrued and
unpaid distributions on any Series B Preferred Unit at any date shall be the
amount of any distributions accumulated to and including such date, whether or
not earned or declared, which have not been paid in cash or set aside for
payment. Accumulated and unpaid distributions will not bear interest.
Exhibit D - Series B Preferred Page 3
<PAGE>
(b) The amount of distributions payable for each full
Distribution Period for the Series B Preferred Units shall be computed by
dividing the Annual Distribution Rate by four. The amount of distributions
payable for the initial Distribution Period, or any other period shorter or
longer than a full Distribution Period, on the Series B Preferred Units shall be
computed on the basis of twelve 30-day months and a 360-day year. Holders of
Series B Preferred Units shall not be entitled to any distributions, whether
payable in cash, property or stock, in excess of cumulative distributions, as
herein provided, on the Series B Preferred Units, plus any other amounts
provided in these Articles of Designation.
So long as any Series B Preferred Units are outstanding, no
distributions, except as described in the immediately following sentence, shall
be authorized and declared or paid or set apart for payment on any series or
class or classes of Parity Units for any period unless full cumulative
distributions have been or contemporaneously are authorized and declared and
paid or authorized and declared and a sum sufficient for the payment thereof set
apart for such payment on the Series B Preferred Units for all Distribution
Periods terminating on or prior to the distribution payment date for such class
or series of Parity Units. When distributions are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all distributions
authorized and declared upon Series B Preferred Units and all distributions
authorized and declared upon any other series or class or classes of Parity
Units shall be authorized and declared ratably in proportion to the respective
amounts of distributions accumulated and unpaid on the Series B Preferred Units
and such Parity Units.
Exhibit D - Series B Preferred Page 4
<PAGE>
(c) So long as any Series B Preferred Units are outstanding,
no distributions (other than distributions or distributions paid solely in Units
of, or options, warrants or rights to subscribe for or purchase Units of, Junior
Units) shall be authorized and declared or paid or set apart for payment or
other distribution authorized and declared or made upon Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Units made in connection
with an employee incentive or benefit plan of GTA or any subsidiary or pursuant
to the Redemption Right referred to in Section 8.05 of the Partnership
Agreement), for any consideration (or any moneys to be paid to or made available
for a sinking fund for the redemption of any such Units by the Partnership,
directly or indirectly (except by conversion into or exchange for Junior Units),
unless in each case (i) the full cumulative distributions on all outstanding
Series B Preferred Units and any other Parity Units of the Partnership shall
have been paid or set apart for payment for all past Distribution Periods with
respect to the Series B Preferred Units and all past distribution periods with
respect to such Parity Units and (ii) sufficient funds shall have been paid or
set apart for the payment of the distribution for the current Distribution
Period with respect to the Series B Preferred Units and any Parity Units.
(d) Any distribution payment made on the Series B Preferred
Units shall first be credited against the earliest accrued but unpaid
distribution due with respect to such Units which remains payable.
SECTION 3. Liquidation Preference.
(a) In the event of any Liquidation Event, before any payment
or distribution of the assets of the Partnership (whether capital or surplus)
shall be made to or set apart for the holders of Junior Units, the holders of
Series B Preferred Units shall be entitled to receive a liquidation preference
which is an amount equal to the greater of (i) Twenty-Nine Dollars and One Cent
($29.01) per Series B Preferred Unit plus distributions (whether or not earned
or declared) accrued and unpaid thereon to the date of final distribution to
such holder (the "Liquidation Preference") or (ii) an amount per Series B
Preferred Unit equal to the amount which would have been payable on the Common
Units, or portion thereof, into which one Series B Preferred Unit is then
convertible had each Series B Preferred Unit been converted into Common Units
immediately prior to such Liquidation Event. The foregoing amounts shall be
subject to equitable adjustment whenever there shall occur a stock distribution,
stock split, combination, reorganization, recapitalization, reclassification or
other similar event involving a change in the capital structure of the Series B
Preferred Units. Until the holders of the Series B Preferred Units have been
paid in full the amounts owed pursuant to this Section 4(a), no payment will be
made to any holder of Junior Units upon a Liquidation Event. If, upon any such
Liquidation Event, the assets of the Partnership, or proceeds thereof,
distributable among the holders of Series B Preferred Units shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other Units of any class or series of Parity Units, then such
assets, or the proceeds thereof, shall be distributed among the holders of such
Series B Preferred Units and such other Parity Units ratably in accordance with
the amounts that would be payable on such Series B Preferred Units and such
other Parity Units if all amounts payable thereon were paid in full.
Exhibit D - Series B Preferred Page 5
<PAGE>
(b) Subject to the rights of the holders of any Parity Units,
upon any Liquidation Event of the Partnership, after payment shall have been
made in full to the holders of Series B Preferred Units and any Parity Units, as
provided in this Section 4, any other series or class or classes of Junior Units
shall, subject to the respective terms thereof, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Series B
Preferred Units and any Parity Units shall not be entitled to share therein.
SECTION 5. Mandatory Redemption. Upon the occurrence of a Liquidation,
the Partnership will automatically redeem for cash all, and not less than all,
of the outstanding shares of Series B Preferred Units at a price per Series B
Preferred Unit equal to the Liquidation Preference. In order to effect the
mandatory redemption, the Partnership will deliver written notice to all holders
of Series B Preferred Units (the "Mandatory Redemption Notice"), such notice not
be delivered later than 60 days prior to the Liquidation, setting forth the date
of the intended redemption and the Liquidation Preference amount.
SECTION 6. Reacquired Units to be Retired. All Series B Preferred Units
which shall have been issued and reacquired in any manner by the Partnership
(including any Series B Preferred Units surrendered upon conversion as described
in Section 7) shall be retired and cancelled.
SECTION 7. Conversion. Holders of Series B Preferred Units shall have
the right to convert all or a portion of such shares into Common Units, as
follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of Series B Preferred Units shall have the right, at such
holder's option, at any time and from time to time, to convert such shares into
the number of fully paid and non-assessable Common Units obtained by dividing
the aggregate Liquidation Preference (excluding, for this purpose only, any
dividends accrued in respect of the then-current Distribution Period) of such
Series B Preferred Units by the Conversion Price (as in effect at the time and
on the date provided for in the last paragraph of paragraph (b) of this Section
7) by surrendering such Series B Preferred Units to be converted, such surrender
to be made in the manner provided in paragraph (b) of this Section 7; provided,
however, that the right to convert Series B Preferred Units called for
redemption pursuant to Section 5 hereof shall terminate at the close of business
on the Redemption Date fixed for such redemption, unless the Partnership shall
default in making payment of any cash payable upon such redemption under Section
5 hereof.
(b) In order to exercise the conversion right, the holder of
each Series B Preferred Unit to be converted shall provide written notice to the
Partnership that the holder thereof elects to convert such Series B Preferred
Units. Unless the Common Units issuable on conversion are to be issued in the
same name as the name in which such Series B Preferred Units are registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Partnership, duly executed by the holder
or such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Partnership
demonstrating that such taxes have been paid).
Exhibit D - Series B Preferred Page 6
<PAGE>
Holders of Series B Preferred Units at the close of business
on any Distribution Payment Record Date shall be entitled to receive the
dividend payable on such shares on the corresponding Distribution Payment Date
notwithstanding the conversion thereof following such Distribution Payment
Record Date and prior to such Distribution Payment Date. A holder of Series B
Preferred Units on a Distribution Payment Record Date who (or whose transferee)
tenders any such shares for conversion into Common Units on such Distribution
Payment Date will receive the distribution payable by the Partnership on such
Series B Preferred Units on such date.
As promptly as practicable, the Partnership shall issue and
shall deliver at such office to such holder, or send on such holder's written
order, a confirmation of the number of full Common Units issuable upon the
conversion of such Series B Preferred Units in accordance with the provisions of
this Section 7, and any fractional interest in respect of a Common Unit arising
upon such conversion shall be settled as provided in paragraph (c) of this
Section 7.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which notice is
received by the Partnership as aforesaid, and the Person or Persons in whose
name or names any certificate or certificates for Common Units shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the Common Units represented thereby at such time on such date, and
such conversion shall be at the Conversion Price in effect at such time and on
such date unless the stock transfer books of the Partnership shall be closed on
that date, in which event such Person or Persons shall be deemed to have become
such holder or holders of record at the close of business on the next succeeding
day on which such stock transfer books are open, but such conversion shall be at
the Conversion Price in effect on the date on which such Series B Preferred
Units shall have been surrendered and such notice received by the Partnership.
If the Distribution Payment Record Date for the Series B Preferred and Common
Units do not coincide, and the preceding sentence does not operate to ensure
that a holder of Series B Preferred Units whose shares are converted into Common
Units does not receive dividends on both the Series B Preferred Units and the
Common Units into which such shares are converted for the same Distribution
Period, then notwithstanding anything herein to the contrary, it is the intent
of this paragraph that, and the transfer agent is authorized to ensure that, no
conversion after the earlier of such record dates will be accepted until after
the latter of such record dates.
(c) No fractional shares or scrip representing fractions of
Common Units shall be issued upon conversion of the Series B Preferred Units.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series B Preferred Shares, the Partnership
shall pay to the holder of such Series B Preferred Shares an amount in cash
based upon the Current Market Price of Common Share on the Trading Day
immediately preceding the date of conversion. If more than one Series B
Preferred Shares shall be surrendered for conversion at one time by the same
holder, the number of full Common Units issuable upon conversion thereof shall
be computed on the basis of the aggregate number of Series B Preferred Units so
surrendered.
Exhibit D - Series B Preferred Page 7
<PAGE>
(d) The Conversion Price shall be adjusted from time to time
as follows:
(i) If the Partnership shall after the Issue Date (A)
pay a dividend or make a distribution on its shares of capital stock in Common
Units, (B) subdivide its outstanding Common Units into a greater number of
shares, (C) combine its outstanding Common Units into a smaller number of shares
or (D) issue any shares of capital stock by reclassification of its Common
Units, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or distribution or at the opening of business on the day
following the day on which such subdivision, combination or reclassification
becomes effective, as the case may be, shall be adjusted so that the holder of
any Series B Preferred Units thereafter surrendered for conversion shall be
entitled to receive the number of Common Units that such holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such Series B Preferred Units been converted immediately
prior to the record date in the case of a dividend or distribution or the
effective date in the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this subparagraph (i) shall become effective
immediately upon the opening of business on the day next following the record
date (subject to paragraph (h) below) in the case of a dividend or distribution
and shall become effective immediately upon the opening of business on the day
next following the effective date in the case of a subdivision, combination or
reclassification.
(ii) Notwithstanding anything else contained herein,
if the Partnership shall issue, after the Issue Date, rights, options or
warrants to all holders of Common Units entitling them (for a period expiring
within 45 days after the record date mentioned below in this subparagraph (ii))
to subscribe for or purchase Common Units at a price per share less than the
Market Price per Common Share on the record date for the determination of
stockholders entitled to receive such rights, options or warrants, then the
Conversion Price in effect at the opening of business on the day next following
such record date shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the opening of business
on the day following the date fixed for such determination by (B) a fraction,
the numerator of which shall be the sum of (I) the number of Common Units
outstanding on the close of business on the date fixed for such determination
and (II) the number of Common Units that the aggregate proceeds to the
Partnership from the exercise of such rights, options or warrants for Common
Units would purchase at such Market Price, and the denominator of which shall be
the sum of (I) the number of Common Units outstanding on the close of business
on the date fixed for such determination and (II) the number of additional
Common Units offered for subscription or purchase pursuant to such rights,
options or warrants. Such adjustment shall become effective immediately upon the
opening of business on the day next following such record date (subject to
paragraph (h) below). In determining whether any rights, options or warrants
entitle the holders of Common Units to subscribe for or purchase Common Units at
less than such Market Price, there shall be taken into account any consideration
received by the Partnership upon issuance and upon exercise of such rights,
options or warrants, the value of such consideration, if other than cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive.
Exhibit D - Series B Preferred Page 8
<PAGE>
(iii) If the Corporation shall distribute to all
holders of its Common Shares any shares of capital stock of the Corporation
(other than Common Shares) or evidence of its indebtedness or assets (excluding
cash dividends or distributions paid out of assets based upon a fair valuation
of the assets, in excess of the sum of the liabilities of the Corporation and
the amount of stated capital attributable to Common Shares, determined on the
basis of the most recent annual consolidated cost basis and current value basis
and quarterly consolidated balance sheets of the Corporation and its
consolidated subsidiaries available at the time of the declaration of the
dividend or distribution) or rights or warrants to subscribe for or purchase any
of its securities (excluding those rights and warrants issued to all holders of
Common Shares entitling them for a period expiring within 45 days after the
record date referred to in subparagraph (ii) above to subscribe for or purchase
Common Shares, which rights and warrants are referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), then in each case the Conversion
Price shall be adjusted so that it shall equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
receive such distribution by (B) a fraction, the numerator of which shall be the
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the shares of capital stock or assets or
evidences of indebtedness so distributed or of such rights or warrants
applicable to one Common Share, and the denominator of which shall be the
Current Market Price per Common Share on the record date mentioned below. Such
adjustment shall become effective immediately upon the opening of business on
the day next following (subject to paragraph (h) below) the record date for the
determination of stockholders entitled to receive such distribution. For the
purposes of this subparagraph (iii), the distribution of a Security, which is
distributed not only to the holders of the Common Shares on the date fixed for
the determination of shareholders entitled to such distribution of such
Security, but also is required to be distributed with each Common Share
delivered to a Person converting a Series B Preferred Share after such
determination date, shall not require an adjustment of the Conversion Price
pursuant to this subparagraph (iii); provided that on the date, if any, on which
a person converting a Series B Preferred Share would no longer be entitled to
receive such Security with a Common Share (other than as a result of the
termination of all such Securities), a distribution of such Securities shall be
deemed to have occurred, and the Conversion Price shall be adjusted as provided
in this subparagraph (iii) (and such day shall be deemed to be "the date fixed
for the determination of the shareholders entitled to receive such distribution"
and "the record date" within the meaning of the two preceding sentences).
The occurrence of a distribution or the occurrence of any other event
as a result of which holders of Series B Preferred Shares shall not be entitled
to receive rights, including exchange rights (the "Rights"), pursuant to any
shareholders protective rights agreement (the "Agreement") that may be adopted
by the Corporation as if such holders had converted such shares into Common
Shares immediately prior to the occurrence of such distribution or event shall
not be deemed a distribution of Securities for the purposes of any Conversion
Price adjustment pursuant to this subparagraph (iii) or otherwise give rise to
any Conversion Price adjustment pursuant to this Section 7; provided, however,
that in lieu of any adjustment to the Conversion Price as a result of any such a
distribution or occurrence, the Corporation shall make provision so that Rights,
to the extent issuable at the time of conversion of any Series B Preferred
Shares into Common Shares, shall issue and attach to such Common Shares then
issued upon conversion in the amount and manner and to the extent and as
provided in the Agreement in respect of issuances at the time of Common Shares
other than upon conversion.
Exhibit D - Series B Preferred Page 9
<PAGE>
(iv) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or decrease
of at least 1% in such price; provided, however, that any adjustments that by
reason of this subparagraph (iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in accordance
with the provisions of this Section 7 (other than this subparagraph (iv)) not
later than such time as may be required in order to preserve the tax-free nature
of a distribution to the holders of Common Shares. Notwithstanding any other
provisions of this Section 7, the Corporation shall not be required to make any
adjustment of the Conversion Price for the issuance of any Common Shares
pursuant to any plan providing for the reinvestment of dividends or interest
payable on securities of the Corporation and the investment of additional
optional amounts in Common Shares under such plan. All calculations under this
Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or
to the nearest one-tenth of a share (with .05 of a share being rounded upward),
as the case may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights, options or
warrants to purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to its
shareholders shall not be taxable.
(e) If the Partnership shall be a party to any transaction
(including without limitation a merger, consolidation, partnership interest
exchange, self tender offer for all or substantially all Common Units
outstanding, sale of all or substantially all of the Partnership's assets or
recapitalization of the Common Units (each of the foregoing being referred to
herein as a "Transaction"), in each case as a result of which Common Units shall
be converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each Series B Preferred Unit that
is not redeemed or converted into the right to receive stock, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of Units of stock, securities and other
property (including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of Common Units into
which one Series B Preferred Unit was convertible immediately prior to such
Transaction, assuming such holder of Common Units (i) is not a Person with which
the Partnership consolidated or into which the Partnership merged or which
merged into the Partnership or to which such sale or transfer was made, as the
case may be (a "Constituent Person"), or an affiliate of a Constituent Person
and (ii) failed to exercise his or her rights of the election, if any, as to the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction (provided that if the kind or amount of stock,
securities and other property (including cash) receivable upon such Transaction
is not the same for each Common Unit of the Partnership held immediately prior
to such Transaction by other than a Constituent Person or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
("Non-Electing Unit"), then for the purpose of this paragraph (d) the kind and
amount of stock, securities and other property (including cash) receivable upon
such Transaction by each Non-Electing Unit shall be deemed to be the kind and
amount so receivable per Unit by a plurality of the Non-Electing Units). The
Partnership shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (c), and it
shall not consent or agree to the occurrence of any Transaction until the
Partnership has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series B
Preferred Units that will contain provisions enabling the holders of the Series
B Preferred Units that remain outstanding after such Transaction to convert
their Series B Preferred Units into the consideration received by holders of
Common Units at the Conversion Price in effect under the Articles of Designation
immediately prior to such Transaction. The provisions of this paragraph (e)
shall similarly apply to successive Transactions.
Exhibit D - Series B Preferred Page 10
<PAGE>
(f) The Partnership covenants that any Common Units issued
upon conversion of the Series B Preferred Units shall be validly issued and
fully paid.
(g) Prior to the delivery of any securities that the
Partnership shall be obligated to deliver upon conversion of the Series B
Preferred Units, the Partnership shall comply with all federal and state laws
and regulations thereunder requiring the registration of such securities with,
or any approval or consent to the delivery thereof, by any governmental
authority.
(h) The Partnership shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
Common Units or other securities or property on conversion of the Series B
Preferred Units pursuant hereto; provided, however, that the Partnership shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of any Common Units or other securities or
property in a name other than that of the holder of the Series B Preferred Units
to be converted, and no such issue or delivery shall be made unless and until
the person requesting such issue or delivery has paid to the Partnership the
amount of any such tax or established, to the reasonable satisfaction of the
Partnership, that such tax has been paid.
(i) In any case in which paragraph (d) of this Section 7
provides that an adjustment shall become effective on the day next following the
record date for an event, the Partnership may defer until the occurrence of such
event (A) issuing to the holder of any Series B Preferred Share converted after
such record date and before the occurrence of such event the additional Common
Units issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Units issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder any amount of
cash in lieu of any fraction pursuant to paragraph (c) of this Section 7.
(j) There shall be no adjustment of the Conversion Price in
case of the issuance of any shares of capital stock of the Partnership in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section 7. If any action or transaction would require
adjustment of the Conversion Price pursuant to more than one paragraph of this
Section 7, only one adjustment shall be made, and such adjustment shall be the
amount of adjustment that has the highest absolute value.
(k) If the Partnership shall take any action affecting the
Common Units, other than action described in this Section 7, that in the opinion
of the Board of Directors would materially adversely affect the conversion
rights of the holders of the Series B Preferred Shares, the Conversion Price for
the Series B Preferred Shares may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.
Exhibit D - Series B Preferred Page 11
<PAGE>
SECTION 8. Permissible Distributions. In determining whether a distribution
(other than upon liquidation, dissolution or winding up), whether by
distribution, or upon redemption or other acquisition of Units or otherwise, is
permitted under Delaware law, amounts that would be needed, if the Partnership
were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of holders of Units of any class or series
of capital stock whose preferential rights upon dissolution are superior or
prior to those receiving the distribution shall not be added to the
Partnership's total liabilities.
SECTION 9. Ranking. Any class or series of partnership interests of the
Partnership shall be deemed to rank:
(a) prior to the Series B Preferred Units, as to the payment
of distributions and as to distribution of assets upon liquidation, dissolution
or winding up, if the holders of such class or series shall be entitled to the
receipt of distributions or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of Series B Preferred Units ("Senior Units");
(b) on a parity with the Series B Preferred Units, as to the
payment of distributions and as to the distribution of assets upon liquidation,
dissolution or winding up, whether or not the distribution rates, distribution
payment dates or redemption or liquidation prices per Unit thereof be different
from those of the Series B Preferred Units, if the holders of such class of
stock or series and the Series B Preferred Units shall be entitled to the
receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid distributions per Unit or liquidation preferences, without preference
or priority one over the other ("Parity Units"); and
(c) junior to the Series B Preferred Units, as to the payment
of distributions or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock or series shall be Common Units or
Class B Limited Partnership Interests or if the holders of Series B Preferred
Units shall be entitled to receipt of distributions or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in preference
or priority to the holders of units of such class series of partnership
interest, and such class or series shall not in either case rank prior to the
Series B Preferred Units ("Junior Units").
SECTION 10. Voting.
(a) Other than as required by law or paragraph (b) and (c) of
this Section 10, the Series B Preferred Units shall not have any voting rights
or powers, and the consent of the holders thereof shall not be required for the
taking of any partnership action.
Exhibit D - Series B Preferred Page 12
<PAGE>
(b) So long as any Series B Preferred Units are outstanding,
in addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of at least 66-2/3% of the votes
entitled to be cast by the holders of Series B Preferred Units, at the time
outstanding, voting as a single class, given in person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating any amendment, alteration of or
repeal of the Partnership Agreement materially and adversely affecting, directly
or indirectly, the terms and conditions of, or the rights or preferences of the
Preferred Units; provided, however, that (A) the amendment or supplement of the
provisions of the Partnership Agreement so as to authorize or create, or to
increase the authorized amount of, any Junior Units or any Parity Units shall
not be deemed to adversely affect Series B Preferred Units, and (B) any
amendment, alteration of or repeal of the Partnership Agreement in connection
with a merger or consolidation of GTA or the Partnership or the sale of all or
substantially all of the assets of the Partnership shall not be deemed to
adversely affect the Series B Preferred Units so long as (1) the Partnership is
the surviving entity and the Series B Preferred Units remains outstanding with
the terms thereof materially unchanged or (2) the Series B Preferred Units are
exchanged for a security of the resulting, surviving or transferee entity having
substantially the same terms and rights as the Series B Preferred Stock,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up.
(c) So long as any Series B Preferred Units are outstanding,
in addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of 100% of the votes entitled to be
cast by the holders of Series B Preferred Units, at the time outstanding, voting
as a single class, given in person or by proxy, either in writing without a
meeting or by vote at any meeting called for the purpose, shall be necessary for
effecting or validating the authorization or creation of, or the issuance of,
any Senior Units.
(d) The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding Series B Preferred Units shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been deposited in trust to effect such redemption.
(e) Except as otherwise required by law or provided herein or
elsewhere in the Partnership Agreement, the holders of Series B Preferred Units
shall not be entitled to receive any notice of any proceedings of the Company or
the Partnership.
For purposes of the foregoing provisions of this Section 10,
each Series B Preferred Unit shall have one (1) vote per Unit.
SECTION 11. Record Holders. The Partnership may deem and treat the
record holder of any Series B Preferred Units as the true and lawful owner
thereof for all purposes, and the Partnership shall not be affected by any
notice to the contrary.
SECTION 12. Effective Date. These Articles of Designation shall be
effective as of May 11, 1999.
Exhibit D - Series B Preferred Page 12
<PAGE>
EXHIBIT D
GOLF TRUST OF AMERICA, L.P.
Articles of Designation
Classifying and Designating
48,949 Units of
8.90% SERIES C LIMITED PARTNERSHIP INTEREST
July 28, 1999
SECTION 1. Number of Units and Designation. This series of preferred
partnership interest shall be designated as the 8.90% Series C Preferred
Partnership Interest (the "Series C Preferred Units") and the number of units of
8.90% Series C Preferred Partnership Interest which shall initially constitute
such series shall be 48,949 units.
SECTION 2. Definitions. For purposes of the Series C Preferred Units,
the following terms shall have the meanings indicated:
"AMEX" shall mean the American Stock Exchange.
"Asset Disposition" shall mean a sale, transfer or capital lease (as
determined in accordance with GAAP) of all or substantially all of the assets of
the Partnership to a Person that is not an affiliate of the Corporation or the
Operating Partnership.
"Articles of Designation" shall mean these provisions in Exhibit D to
the Partnership Agreement recording the preferences, conversion and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms and conditions of redemption and other terms and
conditions of the Series C Preferred Units.
"Board of Directors" shall mean the Board of Directors of the General
Partner or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Series C Preferred Units.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Common Share" shall mean one share of the common stock of GTA.
"Common Units" shall mean the common units of limited partnership
interest in the Partnership.
"Constituent Person" shall have the meaning set forth in paragraph (e)
of Section 7 hereof.
"Conversion Price" shall mean the conversion price per Common Share for
which each Series C Preferred Unit is convertible. The initial conversion price
shall $27.58 (equivalent to a conversion rate of 1.0 Common Units for each
Series C Preferred Unit).
Exhibit D - Series C Preferred Page 1
<PAGE>
"Corporation" means Golf Trust of America, Inc., a Maryland
corporation.
"Current Market Price" shall mean, on any date specified herein, the
average of the Market Price during the period of the most recent twenty
consecutive trading days ending on such date.
"Distribution Payment Date" shall mean, with respect to each
Distribution Period, the 15th calendar day of January, April, July and October,
in each year, commencing on October 15, 1999; provided, however, that if any
Distribution Payment Date falls on any day other than a Business Day, the
distribution payment due on such Distribution Payment Date shall be paid on the
first Business Day immediately following such Distribution Payment Date.
"Distribution Periods" shall mean quarterly distribution periods
commencing on January 1, April 1, July 1 and October 1 of each year and ending
on and including the day preceding the first day of the next succeeding
Distribution Period (other than the initial Distribution Period, which shall
commence on the Issue Date and end on and include September 30, 1999).
"GAAP" shall mean generally acceptable accounting practices,
consistently applied.
"Issue Date" shall mean the first date on which any Series C Preferred
Units are issued and sold.
"Junior Units" shall have the meaning set forth in paragraph (c) of
Section 9 hereof.
"Liquidation" shall mean a liquidation, dissolution or winding up of
the Corporation or the Partnership, whether voluntary or involuntary.
"Liquidation Event" shall mean (A) a Liquidation, or (B) an Asset
Disposition.
"Liquidation Preference" shall have the meaning set forth in paragraph
(a) of Section 4 hereof.
"Market Price" shall mean, with respect to the Common Shares on any
date, the last reported sales price, regular way on such day, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the American Stock Exchange ("AMEX") or, if the Common
Shares are not listed or admitted for trading on AMEX, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted for trading or, if the Common Shares are not listed or
admitted for trading on any national securities exchange, the last quoted price,
or if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASD Automated Quotation System or,
if such system is no longer in use, the principal other automated quotation
system that may then be in use, or if the Common Shares are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker regularly making a market in the Common Shares
selected for such purpose by the Board of Directors or, if there is no such
professional market maker, such amount as an independent investment banking firm
selected by the Board of Directors determines to be the value of a Common Share.
Exhibit D - Series C Preferred Page 2
<PAGE>
"Partnership" shall mean Golf Trust of America, L.P., a Delaware
limited partnership.
"Partnership Agreement" shall mean the First Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, dated February
12, 1997, as amended.
"Parity Units" shall have the meaning set forth in paragraph (b) of
Section 9 hereof.
"Person" shall mean any individual, firm, partnership, Corporation,
limited liability company or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Units" shall mean the Series C Preferred Units of limited
partnership interest in the Partnership in number and with rights and
preferences identical to the Series C Preferred Units.
"Senior Units" shall have the meaning set forth in paragraph (a) of
Section 9 hereof.
"Series C Preferred Unit" shall have the meaning set forth in Section 1
hereof.
"Set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Partnership in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of a distribution or other distribution by the Board of Directors,
the allocation of funds to be so paid on any series or class of units of
partnership interest of the Partnership; provided, however, that if any funds
for any class or series of Junior Units or any class or series of Parity Units
are placed in a separate account of the Partnership or delivered to a
disbursing, paying or other similar agent, then "set apart for payment" with
respect to the Series C Preferred Units shall mean placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the AMEX, or if such securities are not listed or admitted for
trading on the AMEX, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the Nasdaq National Market, or if such
securities are not quoted on such Nasdaq National Market, in the applicable
securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in paragraph (e) of
Section 7 hereof.
SECTION 3. Distributions.
Exhibit D - Series C Preferred Page 3
<PAGE>
(a) The holders of the Series C Preferred Units shall be
entitled to receive, when, as and if authorized and declared by the General
Partner out of funds legally available for that purpose, distributions payable
in cash at the rate per annum equal to the greater of (i) $2.45 per Series C
Preferred Unit or (ii) an amount per Series C Preferred Unit equal to the
aggregate annual amount of cash distributions paid or payable, if any, with
respect to that number of Common Units, or portion thereof, into which each
Series C Preferred Unit is then convertible, in accordance with the terms of
these Articles of Designation (such greater amount, the "Annual Distribution
Rate"). The amount referred in clause (ii) of this subparagraph (a) with respect
to each Distribution Period shall be determined as of the applicable
Distribution Payment Date by multiplying the number of Common Units, or portion
thereof calculated to the fourth decimal point, into which a Series C Preferred
Unit would be convertible at the opening of business on such Distribution
Payment Date (based on the Conversion Price then in effect) by the quarterly
cash distribution payable or paid for such Distribution Period in respect of a
Common Unit outstanding as of the record date for the payment of distributions
on the Common Units with respect to such Distribution Period and multiplying
such product by four. Such distributions shall be cumulative from the Issue
Date, whether or not in any Distribution Period or Periods there shall be funds
of the Partnership legally available for the payment of such distributions and
shall be payable quarterly, when, as and if authorized and declared by the Board
of Directors, in arrears on Distribution Payment Dates, commencing on the first
Distribution Payment Date after the Issue Date. Each such distribution shall be
payable in arrears to the holders of record of the Series C Preferred Units, as
they appear on the records of the Partnership at the close of business on each
record date which shall not be more than 30 days preceding the applicable
Distribution Payment Date (the "Distribution Payment Record Date"), as shall be
fixed by the Board of Directors. Accrued and unpaid distributions for any past
Distribution Periods may be authorized and declared and paid at any time,
without reference to any regular Distribution Payment Date, to holders of record
on such date, which shall not be more than 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors. The amount of accrued and
unpaid distributions on any Series C Preferred Unit at any date shall be the
amount of any distributions accumulated to and including such date, whether or
not earned or declared, which have not been paid in cash or set aside for
payment. Accumulated and unpaid distributions will not bear interest.
(b) The amount of distributions payable for each full
Distribution Period for the Series C Preferred Units shall be computed by
dividing the Annual Distribution Rate by four. The amount of distributions
payable for the initial Distribution Period, or any other period shorter or
longer than a full Distribution Period, on the Series C Preferred Units shall be
computed on the basis of twelve 30-day months and a 360-day year. Holders of
Series C Preferred Units shall not be entitled to any distributions, whether
payable in cash, property or stock, in excess of cumulative distributions, as
herein provided, on the Series C Preferred Units, plus any other amounts
provided in these Articles of Designation.
So long as any Series C Preferred Units are
outstanding, no distributions, except as described in the immediately following
sentence, shall be authorized and declared or paid or set apart for payment on
any series or class or classes of Parity Units for any period unless full
cumulative distributions have been or contemporaneously are authorized and
declared and paid or authorized and declared and a sum sufficient for the
payment thereof set apart for such payment on the Series C Preferred Units for
all Distribution Periods terminating on or prior to the distribution payment
date for such class or series of Parity Units. When distributions are not paid
in full or a sum sufficient for such payment is not set apart, as aforesaid, all
distributions authorized and declared upon Series C Preferred Units and all
distributions authorized and declared upon any other series or class or classes
of Parity Units shall be authorized and declared ratably in proportion to the
respective amounts of distributions accumulated and unpaid on the Series C
Preferred Units and such Parity Units.
(c) So long as any Series C Preferred Units are outstanding,
no distributions (other than distributions or distributions paid solely in Units
of, or options, warrants or rights to subscribe for or purchase Units of, Junior
Units) shall be authorized and declared or paid or set apart for payment or
other distribution authorized and declared or made upon Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Units made in connection
with an employee incentive or benefit plan of GTA or any subsidiary or pursuant
to the Redemption Right referred to in Section 8.05 of the Partnership
Agreement), for any consideration (or any moneys to be paid to or made available
for a sinking fund for the redemption of any such Units by the Partnership,
directly or indirectly (except by conversion into or exchange for Junior Units),
unless in each case (i) the full cumulative distributions on all outstanding
Series C Preferred Units and any other Parity Units of the Partnership shall
have been paid or set apart for payment for all past Distribution Periods with
respect to the Series C Preferred Units and all past distribution periods with
respect to such Parity Units and (ii) sufficient funds shall have been paid or
set apart for the payment of the distribution for the current Distribution
Period with respect to the Series C Preferred Units and any Parity Units.
(d) Any distribution payment made on the Series C Preferred
Units shall first be credited against the earliest accrued but unpaid
distribution due with respect to such Units which remains payable.
Exhibit D - Series C Preferred Page 4
<PAGE>
SECTION 4. Liquidation Preference.
(a) In the event of any Liquidation Event, before any payment
or distribution of the assets of the Partnership (whether capital or surplus)
shall be made to or set apart for the holders of Junior Units, the holders of
Series C Preferred Units shall be entitled to receive a liquidation preference
which is an amount equal to the greater of (i) $27.58 per Series C Preferred
Unit plus distributions (whether or not earned or declared) accrued and unpaid
thereon to the date of final distribution to such holder (the "Liquidation
Preference") or (ii) an amount per Series C Preferred Unit equal to the amount
which would have been payable on the Common Units, or portion thereof, into
which one Series C Preferred Unit is then convertible had each Series C
Preferred Unit been converted into Common Units immediately prior to such
Liquidation Event. The foregoing amounts shall be subject to equitable
adjustment whenever there shall occur a stock distribution, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series C Preferred
Units. Until the holders of the Series C Preferred Units have been paid in full
the amounts owed pursuant to this Section 4(a), no payment will be made to any
holder of Junior Units upon a Liquidation Event. If, upon any such Liquidation
Event, the assets of the Partnership, or proceeds thereof, distributable among
the holders of Series C Preferred Units shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any other Units of any
class or series of Parity Units, then such assets, or the proceeds thereof,
shall be distributed among the holders of such Series C Preferred Units and such
other Parity Units ratably in accordance with the amounts that would be payable
on such Series C Preferred Units and such other Parity Units if all amounts
payable thereon were paid in full.
(b) Subject to the rights of the holders of any Parity Units,
upon any Liquidation Event of the Partnership, after payment shall have been
made in full to the holders of Series C Preferred Units and any Parity Units, as
provided in this Section 4, any other series or class or classes of Junior Units
shall, subject to the respective terms thereof, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Series C
Preferred Units and any Parity Units shall not be entitled to share therein.
Exhibit D - Series C Preferred Page 5
<PAGE>
SECTION 5. Mandatory Redemption. Upon the occurrence of a Liquidation,
the Partnership will automatically redeem for cash all, and not less than all,
of the outstanding shares of Series C Preferred Units at a price per Series C
Preferred Unit equal to the Liquidation Preference. In order to effect the
mandatory redemption, the Partnership will deliver written notice to all holders
of Series C Preferred Units (the "Mandatory Redemption Notice"), such notice not
be delivered later than 60 days prior to the Liquidation, setting forth the date
of the intended redemption and the Liquidation Preference amount.
SECTION 6. Reacquired Units to be Retired. All Series C Preferred Units
which shall have been issued and reacquired in any manner by the Partnership
(including any Series C Preferred Units surrendered upon conversion as described
in Section 7) shall be retired and cancelled.
SECTION 7. Conversion. Holders of Series C Preferred Units shall have
the right to convert all or a portion of such shares into Common Units, as
follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of Series C Preferred Units shall have the right, at such
holder's option, at any time and from time to time, to convert such shares into
the number of fully paid and non-assessable Common Units obtained by dividing
the aggregate Liquidation Preference (excluding, for this purpose only, any
dividends accrued in respect of the then-current Distribution Period) of such
Series C Preferred Units by the Conversion Price (as in effect at the time and
on the date provided for in the last paragraph of paragraph (b) of this Section
7) by surrendering such Series C Preferred Units to be converted, such surrender
to be made in the manner provided in paragraph (b) of this Section 7; provided,
however, that the right to convert Series C Preferred Units called for
redemption pursuant to Section 5 hereof shall terminate at the close of business
on the Redemption Date fixed for such redemption, unless the Partnership shall
default in making payment of any cash payable upon such redemption under Section
5 hereof.
(b) In order to exercise the conversion right, the holder of
each Series C Preferred Unit to be converted shall provide written notice to the
Partnership that the holder thereof elects to convert such Series C Preferred
Units. Unless the Common Units issuable on conversion are to be issued in the
same name as the name in which such Series C Preferred Units are registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Partnership, duly executed by the holder
or such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Partnership
demonstrating that such taxes have been paid).
Holders of Series C Preferred Units at the close of business on any
Distribution Payment Record Date shall be entitled to receive the dividend
payable on such shares on the corresponding Distribution Payment Date
notwithstanding the conversion thereof following such Distribution Payment
Record Date and prior to such Distribution Payment Date. A holder of Series C
Preferred Units on a Distribution Payment Record Date who (or whose transferee)
tenders any such shares for conversion into Common Units on such Distribution
Payment Date will receive the distribution payable by the Partnership on such
Series C Preferred Units on such date.
Exhibit D - Series C Preferred Page 6
<PAGE>
As promptly as practicable, the Partnership shall issue and shall
deliver at such office to such holder, or send on such holder's written order, a
confirmation of the number of full Common Units issuable upon the conversion of
such Series C Preferred Units in accordance with the provisions of this Section
7, and any fractional interest in respect of a Common Unit arising upon such
conversion shall be settled as provided in paragraph (c) of this Section 7.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which notice is received by the
Partnership as aforesaid, and the Person or Persons in whose name or names any
certificate or certificates for Common Units shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
Common Units represented thereby at such time on such date, and such conversion
shall be at the Conversion Price in effect at such time and on such date unless
the stock transfer books of the Partnership shall be closed on that date, in
which event such Person or Persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such Series C Preferred Units
shall have been surrendered and such notice received by the Partnership. If the
Distribution Payment Record Date for the Series C Preferred and Common Units do
not coincide, and the preceding sentence does not operate to ensure that a
holder of Series C Preferred Units whose shares are converted into Common Units
does not receive dividends on both the Series C Preferred Units and the Common
Units into which such shares are converted for the same Distribution Period,
then notwithstanding anything herein to the contrary, it is the intent of this
paragraph that, and the transfer agent is authorized to ensure that, no
conversion after the earlier of such record dates will be accepted until after
the latter of such record dates.
(c) No fractional shares or scrip representing fractions of
Common Units shall be issued upon conversion of the Series C Preferred Units.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series C Preferred Shares, the Partnership
shall pay to the holder of such Series C Preferred Shares an amount in cash
based upon the Current Market Price of Common Share on the Trading Day
immediately preceding the date of conversion. If more than one Series C
Preferred Shares shall be surrendered for conversion at one time by the same
holder, the number of full Common Units issuable upon conversion thereof shall
be computed on the basis of the aggregate number of Series C Preferred Units so
surrendered.
(d) The Conversion Price shall be adjusted from time to time
as follows:
(i) If the Partnership shall after the Issue Date (A)
pay a dividend or make a distribution on its shares of capital stock in Common
Units, (B) subdivide its outstanding Common Units into a greater number of
shares, (C) combine its outstanding Common Units into a smaller number of shares
or (D) issue any shares of capital stock by reclassification of its Common
Units, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or distribution or at the opening of business on the day
following the day on which such subdivision, combination or reclassification
becomes effective, as the case may be, shall be adjusted so that the holder of
any Series C Preferred Units thereafter surrendered for conversion shall be
entitled to receive the number of Common Units that such holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such Series C Preferred Units been converted immediately
prior to the record date in the case of a dividend or distribution or the
effective date in the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this subparagraph (i) shall become effective
immediately upon the opening of business on the day next following the record
date (subject to paragraph (h) below) in the case of a dividend or distribution
and shall become effective immediately upon the opening of business on the day
next following the effective date in the case of a subdivision, combination or
reclassification.
Exhibit D - Series C Preferred Page 7
<PAGE>
(ii) Notwithstanding anything else contained herein,
if the Partnership shall issue, after the Issue Date, rights, options or
warrants to all holders of Common Units entitling them (for a period expiring
within 45 days after the record date mentioned below in this subparagraph (ii))
to subscribe for or purchase Common Units at a price per share less than the
Market Price per Common Share on the record date for the determination of
stockholders entitled to receive such rights, options or warrants, then the
Conversion Price in effect at the opening of business on the day next following
such record date shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the opening of business
on the day following the date fixed for such determination by (B) a fraction,
the numerator of which shall be the sum of (I) the number of Common Units
outstanding on the close of business on the date fixed for such determination
and (II) the number of Common Units that the aggregate proceeds to the
Partnership from the exercise of such rights, options or warrants for Common
Units would purchase at such Market Price, and the denominator of which shall be
the sum of (I) the number of Common Units outstanding on the close of business
on the date fixed for such determination and (II) the number of additional
Common Units offered for subscription or purchase pursuant to such rights,
options or warrants. Such adjustment shall become effective immediately upon the
opening of business on the day next following such record date (subject to
paragraph (h) below). In determining whether any rights, options or warrants
entitle the holders of Common Units to subscribe for or purchase Common Units at
less than such Market Price, there shall be taken into account any consideration
received by the Partnership upon issuance and upon exercise of such rights,
options or warrants, the value of such consideration, if other than cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive.
(iii) If the Corporation shall distribute to all
holders of its Common Shares any shares of capital stock of the Corporation
(other than Common Shares) or evidence of its indebtedness or assets (excluding
cash dividends or distributions paid out of assets based upon a fair valuation
of the assets, in excess of the sum of the liabilities of the Corporation and
the amount of stated capital attributable to Common Shares, determined on the
basis of the most recent annual consolidated cost basis and current value basis
and quarterly consolidated balance sheets of the Corporation and its
consolidated subsidiaries available at the time of the declaration of the
dividend or distribution) or rights or warrants to subscribe for or purchase any
of its securities (excluding those rights and warrants issued to all holders of
Common Shares entitling them for a period expiring within 45 days after the
record date referred to in subparagraph (ii) above to subscribe for or purchase
Common Shares, which rights and warrants are referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), then in each case the Conversion
Price shall be adjusted so that it shall equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
receive such distribution by (B) a fraction, the numerator of which shall be the
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the shares of capital stock or assets or
evidences of indebtedness so distributed or of such rights or warrants
applicable to one Common Share, and the denominator of which shall be the
Current Market Price per Common Share on the record date mentioned below. Such
adjustment shall become effective immediately upon the opening of business on
the day next following (subject to paragraph (h) below) the record date for the
determination of stockholders entitled to receive such distribution. For the
purposes of this subparagraph (iii), the distribution of a Security, which is
distributed not only to the holders of the Common Shares on the date fixed for
the determination of shareholders entitled to such distribution of such
Security, but also is required to be distributed with each Common Share
delivered to a Person converting a Series C Preferred Share after such
determination date, shall not require an adjustment of the Conversion Price
pursuant to this subparagraph (iii); provided that on the date, if any, on which
a person converting a Series C Preferred Share would no longer be entitled to
receive such Security with a Common Share (other than as a result of the
termination of all such Securities), a distribution of such Securities shall be
deemed to have occurred, and the Conversion Price shall be adjusted as provided
in this subparagraph (iii) (and such day shall be deemed to be "the date fixed
for the determination of the shareholders entitled to receive such distribution"
and "the record date" within the meaning of the two preceding sentences).
Exhibit D - Series C Preferred Page 8
<PAGE>
The occurrence of a distribution or the occurrence of any other event
as a result of which holders of Series C Preferred Shares shall not be entitled
to receive rights, including exchange rights (the "Rights"), pursuant to any
shareholders protective rights agreement (the "Agreement") that may be adopted
by the Corporation as if such holders had converted such shares into Common
Shares immediately prior to the occurrence of such distribution or event shall
not be deemed a distribution of Securities for the purposes of any Conversion
Price adjustment pursuant to this subparagraph (iii) or otherwise give rise to
any Conversion Price adjustment pursuant to this Section 7; provided, however,
that in lieu of any adjustment to the Conversion Price as a result of any such a
distribution or occurrence, the Corporation shall make provision so that Rights,
to the extent issuable at the time of conversion of any Series C Preferred
Shares into Common Shares, shall issue and attach to such Common Shares then
issued upon conversion in the amount and manner and to the extent and as
provided in the Agreement in respect of issuances at the time of Common Shares
other than upon conversion.
(iv) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or decrease
of at least 1% in such price; provided, however, that any adjustments that by
reason of this subparagraph (iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in accordance
with the provisions of this Section 7 (other than this subparagraph (iv)) not
later than such time as may be required in order to preserve the tax-free nature
of a distribution to the holders of Common Shares. Notwithstanding any other
provisions of this Section 7, the Corporation shall not be required to make any
adjustment of the Conversion Price for the issuance of any Common Shares
pursuant to any plan providing for the reinvestment of dividends or interest
payable on securities of the Corporation and the investment of additional
optional amounts in Common Shares under such plan. All calculations under this
Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or
to the nearest one-tenth of a share (with .05 of a share being rounded upward),
as the case may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights, options or
warrants to purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to its
shareholders shall not be taxable.
Exhibit D - Series C Preferred Page 9
<PAGE>
(e) If the Partnership shall be a party to any transaction
(including without limitation a merger, consolidation, partnership interest
exchange, self tender offer for all or substantially all Common Units
outstanding, sale of all or substantially all of the Partnership's assets or
recapitalization of the Common Units (each of the foregoing being referred to
herein as a "Transaction"), in each case as a result of which Common Units shall
be converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each Series C Preferred Unit that
is not redeemed or converted into the right to receive stock, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of Units of stock, securities and other
property (including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of Common Units into
which one Series C Preferred Unit was convertible immediately prior to such
Transaction, assuming such holder of Common Units (i) is not a Person with which
the Partnership consolidated or into which the Partnership merged or which
merged into the Partnership or to which such sale or transfer was made, as the
case may be (a "Constituent Person"), or an affiliate of a Constituent Person
and (ii) failed to exercise his or her rights of the election, if any, as to the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction (provided that if the kind or amount of stock,
securities and other property (including cash) receivable upon such Transaction
is not the same for each Common Unit of the Partnership held immediately prior
to such Transaction by other than a Constituent Person or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
("Non-Electing Unit"), then for the purpose of this paragraph (d) the kind and
amount of stock, securities and other property (including cash) receivable upon
such Transaction by each Non-Electing Unit shall be deemed to be the kind and
amount so receivable per Unit by a plurality of the Non-Electing Units). The
Partnership shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (c), and it
shall not consent or agree to the occurrence of any Transaction until the
Partnership has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series C
Preferred Units that will contain provisions enabling the holders of the Series
C Preferred Units that remain outstanding after such Transaction to convert
their Series C Preferred Units into the consideration received by holders of
Common Units at the Conversion Price in effect under the Articles of Designation
immediately prior to such Transaction. The provisions of this paragraph (e)
shall similarly apply to successive Transactions.
(f) The Partnership covenants that any Common Units issued
upon conversion of the Series C Preferred Units shall be validly issued and
fully paid.
(g) Prior to the delivery of any securities that the
Partnership shall be obligated to deliver upon conversion of the Series C
Preferred Units, the Partnership shall comply with all federal and state laws
and regulations thereunder requiring the registration of such securities with,
or any approval or consent to the delivery thereof, by any governmental
authority.
(h) The Partnership shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
Common Units or other securities or property on conversion of the Series C
Preferred Units pursuant hereto; provided, however, that the Partnership shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of any Common Units or other securities or
property in a name other than that of the holder of the Series C Preferred Units
to be converted, and no such issue or delivery shall be made unless and until
the person requesting such issue or delivery has paid to the Partnership the
amount of any such tax or established, to the reasonable satisfaction of the
Partnership, that such tax has been paid.
Exhibit D - Series C Preferred Page 10
<PAGE>
(i) In any case in which paragraph (d) of this Section 7
provides that an adjustment shall become effective on the day next following the
record date for an event, the Partnership may defer until the occurrence of such
event (A) issuing to the holder of any Series C Preferred Share converted after
such record date and before the occurrence of such event the additional Common
Units issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Units issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder any amount of
cash in lieu of any fraction pursuant to paragraph (c) of this Section 7.
(j) There shall be no adjustment of the Conversion Price in
case of the issuance of any shares of capital stock of the Partnership in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section 7. If any action or transaction would require
adjustment of the Conversion Price pursuant to more than one paragraph of this
Section 7, only one adjustment shall be made, and such adjustment shall be the
amount of adjustment that has the highest absolute value.
(k) If the Partnership shall take any action affecting the
Common Units, other than action described in this Section 7, that in the opinion
of the Board of Directors would materially adversely affect the conversion
rights of the holders of the Series C Preferred Shares, the Conversion Price for
the Series C Preferred Shares may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.
SECTION 8. Permissible Distributions. In determining whether a
distribution (other than upon liquidation, dissolution or winding up), whether
by distribution, or upon redemption or other acquisition of Units or otherwise,
is permitted under Delaware law, amounts that would be needed, if the
Partnership were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of holders of Units of any class or series
of capital stock whose preferential rights upon dissolution are superior or
prior to those receiving the distribution shall not be added to the
Partnership's total liabilities.
SECTION 9. Ranking. Any class or series of partnership interests of the
Partnership shall be deemed to rank:
(a) prior to the Series C Preferred Units, as to the payment
of distributions and as to distribution of assets upon liquidation, dissolution
or winding up, if the holders of such class or series shall be entitled to the
receipt of distributions or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of Series C Preferred Units ("Senior Units");
Exhibit D - Series C Preferred Page 11
<PAGE>
(b) on a parity with the Series C Preferred Units, as to the
payment of distributions and as to the distribution of assets upon liquidation,
dissolution or winding up, whether or not the distribution rates, distribution
payment dates or redemption or liquidation prices per Unit thereof be different
from those of the Series C Preferred Units, if the holders of such class of
stock or series and the Series C Preferred Units shall be entitled to the
receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid distributions per Unit or liquidation preferences, without preference
or priority one over the other ("Parity Units"); and
(c) junior to the Series C Preferred Units, as to the payment
of distributions or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock or series shall be Common Units or
Class B Limited Partnership Interests or if the holders of Series C Preferred
Units shall be entitled to receipt of distributions or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in preference
or priority to the holders of units of such class series of partnership
interest, and such class or series shall not in either case rank prior to the
Series C Preferred Units ("Junior Units").
SECTION 10. Voting.
(a) Other than as required by law or paragraph (b) and (c) of
this Section 10, the Series C Preferred Units shall not have any voting rights
or powers, and the consent of the holders thereof shall not be required for the
taking of any partnership action.
(b) So long as any Series C Preferred Units are outstanding,
in addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of at least 66-2/3% of the votes
entitled to be cast by the holders of Series C Preferred Units, at the time
outstanding, voting as a single class, given in person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating any amendment, alteration of or
repeal of the Partnership Agreement materially and adversely affecting, directly
or indirectly, the terms and conditions of, or the rights or preferences of the
Preferred Units; provided, however, that (A) the amendment or supplement of the
provisions of the Partnership Agreement so as to authorize or create, or to
increase the authorized amount of, any Junior Units or any Parity Units shall
not be deemed to adversely affect Series C Preferred Units, and (B) any
amendment, alteration of or repeal of the Partnership Agreement in connection
with a merger or consolidation of GTA or the Partnership or the sale of all or
substantially all of the assets of the Partnership shall not be deemed to
adversely affect the Series C Preferred Units so long as (1) the Partnership is
the surviving entity and the Series C Preferred Units remains outstanding with
the terms thereof materially unchanged or (2) the Series C Preferred Units are
exchanged for a security of the resulting, surviving or transferee entity having
substantially the same terms and rights as the Series C Preferred Stock,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up.
(c) So long as any Series C Preferred Units are outstanding,
in addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of 100% of the votes entitled to be
cast by the holders of Series C Preferred Units, at the time outstanding, voting
as a single class, given in person or by proxy, either in writing without a
meeting or by vote at any meeting called for the purpose, shall be necessary for
effecting or validating the authorization or creation of, or the issuance of,
any Senior Units.
Exhibit D - Series C Preferred Page 12
<PAGE>
(d) The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding Series C Preferred Units shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been deposited in trust to effect such redemption.
(e) Except as otherwise required by law or provided herein or
elsewhere in the Partnership Agreement, the holders of Series C Preferred Units
shall not be entitled to receive any notice of any proceedings of the Company or
the Partnership.
For purposes of the foregoing provisions of this Section 10,
each Series C Preferred Unit shall have one (1) vote per Unit.
SECTION 11. Record Holders. The Partnership may deem and treat the
record holder of any Series C Preferred Units as the true and lawful owner
thereof for all purposes, and the Partnership shall not be affected by any
notice to the contrary.
SECTION 12. Effective Date. These Articles of Designation shall be
effective as of July 28, 1999.
Exhibit D - Series C Preferred Page 13
<PAGE>
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of March 31, 1999
by and among
GOLF TRUST OF AMERICA, L.P.,
as Borrower,
the Guarantors referred to in this Agreement,
the Lenders referred to in this Agreement,
NATIONSBANK, N.A.
as Administrative Agent,
NATIONSBANC MONTGOMERY SECURITIES LLC,
Sole Lead Arranger and Book Manager,
and
FIRST UNION NATIONAL BANK,
As Syndication Agent
and
BANKBOSTON, N.A.,
As Documentation Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................1
SECTION 1.1 Definitions....................................................1
SECTION 1.2 General.......................................................18
SECTION 1.3 Other Definitions and Provisions..............................18
ARTICLE II REVOLVING CREDIT FACILITY.......................................18
SECTION 2.1 Loans.........................................................18
SECTION 2.2 Procedure for Advances of Loans...............................19
SECTION 2.3 Repayment of Loans............................................19
SECTION 2.4 Notes.........................................................20
SECTION 2.5 Termination of Credit Facility................................20
SECTION 2.6 Increases in Credit Facility..................................20
SECTION 2.7 Use of Proceeds...............................................21
ARTICLE IIA LETTER OF CREDIT FACILITY......................................21
SECTION 2A.1 Commitment....................................................21
SECTION 2A.2 Procedure for Issuance of Letters of Credit...................22
SECTION 2A.3 Commissions and Other Charges.................................22
SECTION 2A.4 L/C Participations............................................23
SECTION 2A.5 Reimbursement Obligation of the Borrower......................24
SECTION 2A.6 Obligations Absolute..........................................24
SECTION 2A.7 Effect of Application.........................................25
ARTICLE III GENERAL LOAN PROVISIONS........................................25
SECTION 3.1 Interest......................................................25
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans......27
SECTION 3.3 Fees..........................................................27
SECTION 3.4 Payment.......................................................28
SECTION 3.5 Right of Set-off; Adjustments.................................28
SECTION 3.6 Nature of Obligations of Lenders Regarding Extensions of
Credit;
Assumption by the Administrative Agent........................29
SECTION 3.7 Indemnity.....................................................30
SECTION 3.8 Increased Cost and Reduced Return.............................30
SECTION 3.9 Limitation on Types of Loans..................................32
SECTION 3.10 Illegality....................................................32
SECTION 3.11 Treatment of Affected Loans...................................32
SECTION 3.12 Compensation..................................................32
SECTION 3.13 Taxes.........................................................33
SECTION 3.14 REIT Status...................................................34
SECTION 3.15 Senior Debt...................................................33
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ARTICLE IV GUARANTY........................................................35
SECTION 4.1 Guaranty of Obligations of the Guarantors.....................35
SECTION 4.2 Nature of Guaranty............................................35
SECTION 4.3 Demand by the Administrative Agent............................36
SECTION 4.4 Waivers.......................................................36
SECTION 4.5 Benefits of Guaranty..........................................37
SECTION 4.6 Modification of Loan Documents etc............................37
SECTION 4.7 Reinstatement.................................................38
SECTION 4.8 Waiver of Subrogation and Contribution........................38
SECTION 4.9 Remedies......................................................38
SECTION 4.10 Limit of Liability............................................38
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING.....................39
SECTION 5.1 Closing.......................................................39
SECTION 5.2 Conditions to Closing and Initial Loan........................39
SECTION 5.3 Conditions to All Loans.......................................42
ARTICLE VI REPRESENTATIONS AND WARRANTIES..................................42
SECTION 6.1 Representations and Warranties................................42
SECTION 6.2 Survival of Representations and Warranties, Etc...............49
ARTICLE VII FINANCIAL INFORMATION AND NOTICES..............................50
SECTION 7.1 Financial Statements..........................................50
SECTION 7.2 Officer's Compliance Certificate..............................50
SECTION 7.3 Accountants'Certificate.......................................51
SECTION 7.4 Other Reports.................................................51
SECTION 7.5 Notice of Litigation and Other Matters........................51
SECTION 7.6 Accuracy of Information.......................................52
ARTICLE VIII AFFIRMATIVE COVENANTS.........................................53
SECTION 8.1 Preservation of Existence and Related Matters.................53
SECTION 8.2 Maintenance of Property.......................................53
SECTION 8.3 Insurance.....................................................53
SECTION 8.4 Accounting Methods and Financial Records......................53
SECTION 8.5 Payment and Performance of Obligations........................53
SECTION 8.6 Compliance With Laws and Approvals............................54
SECTION 8.7 Environmental Laws............................................54
SECTION 8.8 Compliance with ERISA.........................................54
SECTION 8.9 Compliance With Agreements....................................54
SECTION8.10 Unencumbered Pool.............................................55
SECTION 8.11 Visits and Inspections........................................57
SECTION 8.12 Subsidiaries..................................................57
SECTION 8.13 Further Assurances............................................57
SECTION 8.14 Line of Business..............................................57
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SECTION 8.15 Participating Leases..........................................57
SECTION 8.16 Year 2000 Compliance..........................................57
ARTICLE IX FINANCIAL COVENANTS.............................................58
SECTION 9.1 Minimum Tangible Net Worth....................................58
SECTION 9.2 Liabilities to Assets Ratio...................................58
SECTION 9.3 Interest Coverage Ratio.......................................58
SECTION 9.4 Debt Service Coverage Ratio...................................58
SECTION 9.5 Fixed Charge Coverage Ratio...................................58
ARTICLE X NEGATIVE COVENANTS...............................................59
SECTION 10.1 Limitations on Debt...........................................59
SECTION 10.2 Limitations on Contingent Obligations.........................59
SECTION 10.3 Limitations on Liens..........................................59
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions..60
SECTION 10.5 Limitations on Mergers and Liquidation........................61
SECTION 10.6 Limitations on Sale of Assets.................................61
SECTION 10.7 Limitations on Dividends and Distributions....................61
SECTION 10.8 Transactions with Affiliates..................................62
SECTION 10.9 Certain Accounting Changes....................................62
SECTION 10.10 Restrictions on Prepayments...................................62
SECTION 10.11 Limitations on Improvements...................................62
SECTION 10.12 Restrictive Agreements........................................62
SECTION 10.13 Amendments....................................................62
ARTICLE XI DEFAULT AND REMEDIES............................................63
SECTION 11.1 Events of Default.............................................63
SECTION 11.2 Remedies......................................................65
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc...............66
ARTICLE XII THE ADMINISTRATIVE AGENT.......................................66
SECTION 12.1 Appointment, Powers, and Immunities...........................66
SECTION 12.2 Reliance by Agent.............................................67
SECTION 12.3 Defaults......................................................68
SECTION 12.4 Rights as Lender..............................................68
SECTION 12.5 Indemnification...............................................68
SECTION 12.6 Non-Reliance on Agent and Other Lenders.......................69
SECTION 12.7 Resignation; Removal of Agent; Successor Agents...............69
SECTION 12.8 Documentation Agent and Syndication Agent.....................70
ARTICLE XIII MISCELLANEOUS.................................................70
SECTION 13.1 Notices.......................................................70
SECTION 13.2 Expenses; Indemnification.....................................71
SECTION 13.3 Set-off.......................................................72
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SECTION 13.4 Governing Law.................................................72
SECTION 13.5 Consent to Jurisdiction.......................................72
SECTION 13.6 Waiver of Jury Trial..........................................73
SECTION 13.7 Reversal of Payments..........................................73
SECTION 13.8 Injunctive Relief; Punitive Damages...........................73
SECTION 13.9 Accounting Matters............................................74
SECTION 13.10 Assignments and Participations................................74
SECTION 13.11 Amendments and Waivers........................................76
SECTION 13.12 Performance of Duties.........................................76
SECTION 13.13 All Powers Coupled with Interest..............................76
SECTION 13.14 Survival of Indemnities.......................................77
SECTION 13.15 Titles and Captions...........................................77
SECTION 13.16 Severability of Provisions....................................77
SECTION 13.17 Counterparts..................................................77
SECTION 13.18 Term of Agreement.............................................77
iv
<PAGE>
EXHIBITS
--------
A - Form of Revolving Credit Note
B - Form of Notice of Borrowing
C - Form of Notice of Repayment
D - Form of Notice of Conversion/Continuation
E - Form of Officer's Compliance Certificate
F - Form of Assignment and Acceptance
G - Form of Guaranty Supplement
H - Form of Pool Valuation Certificate
I - Form of "K-1" Report
J-1 - Form of New Lender Supplement
J-2 - Form of Commitment Increase Supplement
K - Form of Lessor's Estoppel Agreement
SCHEDULES
---------
1 - Lenders and Commitments
6.1(a) - Jurisdictions
6.1(b) - Subsidiaries; Capitalization
6.1(h) - Employee Benefit Plans
6.1(l) - Material Contracts
6.1(q) - Liens
6.1(r) - Debt and Contingent Obligations
6.1(s) - Litigation
8.10(b) - Unencumbered Pool (List of Properties and Property Value
of Each)
v
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 31st day of March,
1999, by and among (i) GOLF TRUST OF AMERICA, L.P., a limited partnership formed
under the laws of Delaware (the "Borrower"), (ii) the Guarantors who are or may
become a party to this Agreement, (iii) the Lenders who are or may become a
party to this Agreement, (iv) NATIONSBANK, N.A. ("NationsBank"), as
Administrative Agent for the Lenders, (v) FIRST UNION NATIONAL BANK, as
Syndication Agent and (vi) BANKBOSTON, N.A., as Documentation Agent.
STATEMENT OF PURPOSE
Pursuant to a Credit Agreement, dated as of February 27, 1998 (as amended
and restated, the "Original Credit Agreement"), among the Borrower, the
Guarantors, the Lenders party thereto (collectively, the "Original Lenders") and
NationsBank, as Administrative Agent and Bank of America National Trust and
Savings Association ("BofA"), as Documentation Agent, the Original Lenders
extended certain credit facilities to the Borrower.
The Guarantors and the Borrower have requested, and the Lenders have
agreed, to amend and restate the provisions of the Original Credit Agreement on
the terms and conditions of this Agreement. All extensions of credit to the
Borrower will inure to the benefit of the Guarantors, directly or indirectly.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this Agreement
shall have the meanings assigned to them below:
"Adjusted Eurodollar Rate" means, with respect to any Eurodollar Loan, for
any Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) mathematically determined by the Administrative Agent to be
equal to the quotient obtained by dividing (a) the Eurodollar Rate for such
Interest Period by (b) 1 minus the Reserve Requirement for such Interest Period.
"Adjusted NOI [EBITDA]" means with respect to any Eligible Property or
prospective Eligible Property, at any date of determination, the "Adjusted NOI
[EBITDA]" for such Eligible Property for the twelve month period ending on or
immediately prior to such date of determination, as set forth in the Borrower's
Form K-1 with respect to such Eligible Property (which shall also equal the
annual lease payment payable to the applicable Credit Party under the related
Participating Lease, exclusive of the applicable capital expenditure reserve),
subject to such adjustments as deemed reasonably appropriate by the
Administrative Agent in its sole discretion.
<PAGE>
"Administrative Agent" means NationsBank in its capacity as the
Administrative Agent under this Agreement, and any successor thereto appointed
pursuant to Section 12.7.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1.
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means (a) the
lawful power to vote five percent (5%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other lawful power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agents" means the collective reference to the Administrative Agent, the
Documentation Agent and the Syndication Agent.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments under this Agreement, as such amount may be increased, reduced or
modified at any time or from time to time pursuant to the terms of this
Agreement. On the Closing Date, the Aggregate Commitment shall be Two Hundred
Million Dollars ($200,000,000).
"Agreement" means this Amended and Restated Credit Agreement, as amended
or modified from time to time.
"Applicable Law" means all applicable provisions of constitutions,
statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all orders and decrees of all courts and arbitrators.
"Applicable Lending Office" means, for each Lender, the "Lending Office"
of such Lender (or of an Affiliate of such Lender) designated on Schedule 1 of
this Agreement or such other office of such Lender (or an Affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
and the Borrower by written notice in accordance with the terms of this
Agreement as the office by which its Loans are to be made and maintained.
"Applicable Margin" has the meaning assigned thereto in Section
3.1(b).
"Application" means an application, in the form specified by the Issuing
Lender from time to time, requesting the Issuing Lender to issue a Letter of
Credit.
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<PAGE>
"Assignment and Acceptance" has the meaning assigned thereto in
Section 13.10 of this Agreement.
"Available Commitment" means, as to any Lender at any time, an amount
equal to the excess, if any, of (a) such Lender's Commitment over (b) such
Lender's Extensions of Credit.
"Base Rate" means, at any time, the higher of (a) the rate per annum equal
to the rate announced by NationsBank as its "prime rate" or (b) the Federal
Funds Rate plus 0.5% for such day. Any change in the Base Rate due to a change
in the prime rate shall be effective on the effective date of such change in the
prime rate.
"Base Rate Loan" means any Loan that bears interest at the Base Rate.
"Borrower" means Golf Trust of America, L.P.
"Bridge Facility" shall have the meaning given to such term in Section
2.3(d).
"Business Day" means (a) for all purposes other than as set forth in
clause (b) immediately below, any day other than a Saturday, Sunday or legal
holiday on which banks in Charlotte, North Carolina and New York, New York, are
open for the conduct of their commercial banking business, and (b) with respect
to all notices and determinations in connection with, and payments of principal
and interest on, any Loan, any day that is a Business Day described in clause
(a) and that is also a day for trading by and between banks in Dollar deposits
in the London interbank market.
"Capital Lease" means, with respect to any Person, any lease of any
property that is, in accordance with GAAP, classified and accounted for as a
capital lease on a Consolidated balance sheet of such Person.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans to or to participate in Letters of Credit for the benefit of the
Borrower under this Agreement in an aggregate principal amount at any time
outstanding not to exceed the amount set forth opposite such Lender's name on
Schedule 1 to this Agreement, or as set forth in any Assignment and Acceptance
relating to any assignment that has become effective pursuant to Section 13.10,
as the same may be reduced or modified at any time or from time to time pursuant
to the terms of this Agreement.
"Commitment Percentage" means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment.
3
<PAGE>
"Consolidated" means, when used with reference to financial statements or
financial statement items of the Credit Parties, such statements or items on a
consolidated basis in accordance with applicable principles of consolidation
under GAAP.
"Contingent Obligation" means, with respect to any Credit Party, without
duplication, any obligation, contingent or otherwise, of such Person pursuant to
which such Person has directly or indirectly guaranteed any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
first Person (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
condition or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part); provided, that the term Contingent Obligation shall not include
endorsements for collection or deposit in the ordinary course of business.
"Convert," "Conversion," and "Converted" shall refer to a conversion
pursuant to Section 3.2, 3.9 or 3.11 of a Eurodollar Loan into a Base Rate Loan
or vice versa.
"Credit Facility" means the revolving credit facility established pursuant
to Article II.
"Credit Parties" means, collectively, the Borrower and the Guarantors.
Notwithstanding Section 8.12, if GTA hereafter creates or acquires any
Subsidiary and the Required Lenders elect not to require such Subsidiary to
become a Guarantor, such Subsidiary shall nonetheless be deemed to be a Credit
Party for purposes of this Agreement.
"Date of Determination" means the effective date on which the purchase
price for any Eligible Property is determined by the Borrower.
"Debt" means, with respect to the Credit Parties at any date and without
duplication, the sum of the following calculated in accordance with GAAP: (a)
all liabilities, obligations and indebtedness including, but not limited to,
obligations evidenced by bonds, debentures, notes or other similar instruments
of any such Person; (b) all obligations to pay the deferred purchase price of
property or services of any such Person, except trade payables arising in the
ordinary course of business not more than one hundred and twenty (120) days past
due; (c) all obligations of any such Person as lessee under Capital Leases; (d)
all Contingent Obligations of any such Person; (e) all obligations, contingent
or otherwise, of any such Person relative to the face amount of letters of
credit, whether or not drawn, and banker's acceptances issued for the account of
any such Person; and (f) all obligations incurred by any such Person pursuant to
Hedging Agreements.
"Debt Service" means, for any fiscal quarter, (a) Interest Expense of the
Credit Parties for such quarter plus (b) all principal payments of Debt of the
Credit Parties scheduled to be made during such quarter.
4
<PAGE>
"Default" means any of the events specified in Section 11.1 which, with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Defaulting Lender" has the meaning assigned thereto in Section 3.6.
"Documentation Agent" means BankBoston, N.A., in its capacity as the
Documentation Agent under this Agreement and any successor thereto appointed
pursuant to Section 12.8.
"Dollars" or "$" means, unless otherwise qualified, lawful currency of the
United States.
"EBITDA" means, with respect to any Person for any period, (a) Net Income
of such Person for such period, excluding any extraordinary gains or other
non-recurring gains or non-cash losses occurring outside the ordinary course of
business including any gains or non-cash losses from the sale or other
disposition of assets other than in the ordinary course of business, plus (b)
the sum of the following for such period to the extent properly deducted in the
determination of Net Income: (i) Interest Expense of such Person; (ii) income
and franchise taxes of such Person; and (iii) amortization, depreciation and
other non-cash charges (including amortization of good will and other intangible
assets) of such Person, minus (c) to the extent included in the determination of
Net Income (x) payments under any Participating Lease (or any mortgage or
promissory note) with respect to which, at the time of determination of EBITDA,
any payment is more than thirty (30) days past due, and (y) that portion of any
payment under (i) any Participating Lease accrued to the Capital Replacement
Fund (as defined under such Participating Lease) or (ii) the Innisbrook Loan
Agreement accrued to the Capital Replacement Reserve (as defined in the
Innisbrook Loan Agreement).
"Eligible Assignee" means (i) a Lender, (ii) an Affiliate of a Lender,
(iii) a financial institution, institutional lender or other entity that is an
"accredited investor" (as defined in Rule 501 under the Securities Act of 1933,
as amended) having (A) total assets of at least $10,000,000,000, (B) a long-term
unsecured debt rating of at least BBB by S&P (or an equivalent rating by another
nationally recognized statistical ratings organization) and (C) an office in the
United States, and (iv) any other Person approved by the Administrative Agent
and, unless an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 13.10, the Borrower, such
approval not to be unreasonably withheld or delayed by the Borrower and such
approval to be deemed given by the Borrower if no objection is received by the
assigning Lender and the Administrative Agent from the Borrower within two
Business Days after written notice of such proposed assignment has been provided
by the assigning Lender to the Borrower; provided, however, that neither the
Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee.
"Eligible Properties" means (i) the Innisbrook Assets, (ii) the Legends of
Virginia Golf Courses and (iii) those certain golf course properties now or
hereafter owned by the Credit Parties which the Administrative Agent deems to
have satisfied each of the following conditions:
(a) Such property is (i) wholly-owned by a Credit Party in fee simple or
(ii) subject to a Qualified Ground Lease exclusively in favor of a Credit Party.
5
<PAGE>
(b) Such property is not subject to (i) any Lien, except Liens permitted
under Section 10.3(a) through (e), inclusive, or (ii) a negative pledge or other
restriction on Liens.
(c) All improvements (including the golf course) to be built on such
property have been substantially completed and the golf course has been in
operation for at least one year.
(d) Such property is located in the United States.
(e) The Borrower shall have delivered to the Administrative Agent all
material financial information used by the Borrower in establishing the purchase
price of the property, including, without limitation, all third party reports,
if any, and the Form K-1 report, substantially in the form of Exhibit I hereto,
with respect to such property and operating history for the golf course for a
minimum of twelve (12) months immediately preceding the Date of Determination,
together with the following:
(i) With respect to any property for which the Purchase Price is
less than $10,000,000, a copy of the federal tax return filed by the owner
and operator of such golf course property or, if available to the
Borrower, financial statements of the owner and operator of the golf
course property (the financial statements of the operator to be with
respect to the property only), audited, reviewed or compiled by a
certified public accounting firm reasonably acceptable to the
Administrative Agent, for the fiscal year immediately preceding the Credit
Party's acquisition of such property;
(ii) With respect to any property for which the Purchase Price is at
least $10,000,000 but less than $40,000,000, if available to the Borrower,
financial statements of the owner and operator of such golf course
property (the financial statements of the operator to be with respect to
the property only), audited or reviewed by a certified public accounting
firm reasonably acceptable to the Administrative Agent, for the fiscal
year immediately preceding the Credit Party's acquisition of such
property, and if not available, a copy of the federal tax return filed by
the owner or operator of such golf course property for the fiscal year
immediately preceding such Credit Party's acquisition of such property;
(iii) With respect to any property for which the Purchase Price is
at least $40,000,000, financial statements of the owner and operator of
such golf course property (the financial statements of the operator to be
with respect to the property only), audited by a certified public
accounting firm reasonably acceptable to the Administrative Agent for the
fiscal year immediately preceding the Credit Party's acquisition of such
property; and
(iv) In each case and to the extent available, monthly financial
statements with respect to the property for the period from the end of the
immediately preceding fiscal year-end to the date of acquisition by any
Credit Party.
(f) No more than fifty percent (50%) of (i) the number of Eligible
Properties and (ii) the Pool Value may consist of properties located (A) within
the same golf market (as determined in the reasonable discretion of the
Administrative Agent) and (B) within seventy (70) miles of any other Eligible
Property.
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(g) The Borrower shall have delivered to the Administrative Agent a
current Phase I Environmental Site Assessment report (an "Environmental
Assessment Report") relating to each Eligible Property. Such Environmental
Assessment Report shall be addressed to the Administrative Agent on behalf of
the Lenders by a qualified environmental consultant, reasonably acceptable to
the Administrative Agent, in form and substance (including a property condition
survey) satisfactory to the Administrative Agent, indicating appropriate inquiry
into the previous ownership and use of the property, which use shall have been
consistent with good commercial practices, and indicating that there are no
material present or potential environmental problems or material hazards on,
under or about such property and confirming material compliance by the property
with all applicable environmental laws; such assessment to include at least the
following: historical research into previous ownership and uses, comprehensive
governmental records review at federal, state and local levels, review of
available aerial photographs and topographical maps, on-site visual
investigation, review of surrounding land uses, and review of operating and
housekeeping practices of any Credit Party (and previous owners) at the
property.
(h) No more than twenty percent (20%) of the Pool Value may consist of
properties subject to a Qualified Ground Lease.
(i) The Credit Party which owns the property shall have an owner's title
insurance policy, or a binding commitment for the issuance of such policy, with
respect to each property wholly owned in fee simple by such Credit Party and a
leasehold policy with respect to each property which is subject to a Qualified
Ground Lease, which policy shall insure such Credit Party's ownership of or a
valid leasehold interest in each such property, free of all Liens except Liens
permitted under Section 10.3(a) through (d), inclusive.
and (iv) with the approval of the Required Lenders, any other golf course
property now or hereafter owned by any Credit Party.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of the Borrower or any current or former ERISA
Affiliate.
"Environmental Assessment Report" has the meaning assigned thereto in
clause (g) of the Eligible Properties definition.
"Environmental Laws" means any and all applicable federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 331 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C.
ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300, et seq.), the
Environmental Protection Agency's regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the rules and regulations promulgated
under each of these statutes, each as amended or supplemented.
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"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to time.
"ERISA Affiliate" means any Person who, together with the Borrower, is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Eurodollar Loan" means any Loan that bears interest at a rate based on
the Adjusted Eurodollar Rate.
"Eurodollar Rate" means for any Eurodollar Loan for any Interest Period,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on the Dow Jones Markets screen as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period. If for any reason such rate
is not available, the term "Eurodollar Rate" shall mean, for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period; provided, however,
if more than one rate is specified on Reuters Screen LIBO Page, the applicable
rate shall be the arithmetic mean of all such rates (rounded upwards, if
necessary, to the nearest 1/100 of 1%).
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an amount
equal to the aggregate principal amount of all Loans made by such Lender and all
participations by such Lender in Letters of Credit then outstanding.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds as quoted by the Administrative Agent and confirmed in Federal
Reserve Board Statistical Release H.15 (519) or any successor or substitute
publication selected by the Administrative Agent. If, for any reason, such rate
is not available, then "Federal Funds Rate" shall mean a daily rate which is
determined, in the opinion of the Administrative Agent, to be the rate at which
federal funds are being offered for sale in the national federal funds market at
9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be the same as
the rate for the most immediate preceding Business Day.
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"Fiscal Year" means with respect to any Credit Party, the fiscal year of
such Credit Party ending on December 31.
"Fixed Charges" means, for any fiscal quarter, (a) Interest Expense of the
Credit Parties for such quarter plus (b) all principal payments of Debt of the
Credit Parties scheduled to be made during such quarter plus (c) all payments of
dividends or other distributions on preferred stock (whether in cash or in kind)
scheduled to made or accrued during such quarter.
"Funds from Operations" means, with respect to the Credit Parties on a
Consolidated basis, Net Income less, to the extent included in the determination
of Net Income, (a) the income (or loss) of any Person (other than a Subsidiary
of a Credit Party) in which such Credit Party has a minority ownership interest,
(b) the income (or loss) arising from the restructuring of any Debt or the
disposition of any asset (other than in the ordinary course of business) plus,
without duplication, real estate depreciation and amortization (but excluding
therefrom any amortization of financing costs), in each case for the Credit
Parties on a Consolidated basis for the relevant period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Credit Parties throughout the period indicated and consistent with
the prior financial practice of the Credit Parties.
"Governmental Approvals" means all required authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" means any applicable nation, province, state or
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Gross Golf Revenues" means, with respect to any operator of an Eligible
Property for any period, all revenues accrued (whether by operator or any
subtenants, assignees, concessionaires or licensees of any Credit Party) from or
by reason of the operation of the golf operations at the Eligible Property to
which such Credit Party is entitled, calculated in accordance with GAAP (but
excluding reasonable reserves for refunds, allowances and bad debts applicable
to such operations), including, without limitation, (i) revenues from membership
initiation fees, to the extent provided in the applicable Participating Lease or
other relevant governing agreement, (ii) periodic membership dues, (iii) greens
fees, (iv) fees to reserve a tee time, (v) guest fees, (vi) golf cart rentals,
(vii) parking lot fees, (viii) locker rentals, (ix) fees for golf club storage,
(x) fees for the use of swim, tennis or other facilities, (xi) charges for range
balls, range fees or other fees for golf practice facilities, (xii) fees or
other charges paid for golf or tennis lessons (except where retained by or paid
to a USTA or a PGA professional in accordance with historical practice at such
Eligible Property), (xiii) fees or other charges for fitness centers, (xiv)
forfeited deposits with respect to any membership application, (xv) transfer
fees imposed on any member in connection with the transfer of any membership
interest, (xvi) fees or other charges paid to such operator by sponsors of golf
tournaments at such Eligible Property, to the extent provided in the applicable
Participating Lease or other relevant governing agreements, (xvii) advertising
or placement fees paid by vendors in exchange for exclusive use or name rights
at such Eligible Property, and (xviii) fees received in connection with any golf
package sponsored by any hotel group, condominium group, golf association,
travel agency, tourist or travel association or similar payments; provided,
however, that Gross Golf Revenues shall not include:
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(a) Any revenue received from or by reason of such Eligible Property
relating to (i) the operation of snack bars, restaurants, bars, catering
functions and banquet operations, (ii) the sale of merchandise and inventory on
such Eligible Property, and (iii) photography services.
(b) The amount of any city, county, state or federal sales, admissions,
usage, or excise tax on any item included in Gross Golf Revenue, which is both
added to or incorporated in the selling price and paid to the taxing authority
by such operator;
(c) Revenues or proceeds from sales or trade-ins of machinery, vehicles,
trade fixtures or personal property owned by such operator used in connection
with the operation of such Eligible Property; and
(d) Any other revenues or proceeds to which the Credit Parties are not
entitled.
"GTA" means Golf Trust of America, Inc., a Maryland corporation.
"GTA GP" means GTA GP, Inc., a Maryland corporation.
"GTA LP" means GTA LP, Inc., a Maryland corporation.
"Guaranteed Obligations" has the meaning assigned thereto in Section
4.1.
"Guarantors" means, collectively, GTA, GTA GP and GTA LP and each such
other person executing this Agreement as a Guarantor, as set forth on the
signature pages hereto, together with any Subsidiaries of GTA that become
Guarantors pursuant to Section 8.12.
"Guaranty" means the Guarantors' obligations set forth in Article IV.
"Hazardous Materials" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
applicable Environmental Law, (b) which are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful
to human health or the environment and are or become regulated by any
Governmental Authority with jurisdiction, (c) the presence of which require
investigation or remediation under any applicable Environmental Law or common
law, (d) the discharge or emission or release of which requires a permit or
license under any Environmental Law or other Governmental Approval, (e) which
are deemed to constitute a nuisance or a trespass or pose a health or safety
hazard to persons or neighboring properties, (f) which are materials consisting
of underground or aboveground storage tanks, whether empty, filled or partially
filled with any toxic substance, or (g) which contain, without limitation,
asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation,
petroleum hydrocarbons, petroleum derived substances or waste, crude oil,
nuclear fuel, natural gas or synthetic gas, excepting, however, any such
materials lawfully operated and/or managed pursuant to applicable Environmental
Laws.
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"Hedging Agreement" means any agreement with respect to an interest rate
swap, collar, cap or floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such hedging agreement, all as amended,
restated or otherwise modified.
"Innisbrook Assets" means all of the Borrower's right, title and interest
in and to: (a) the Promissory Note, dated June 20, 1997, made by Golf Host
Resorts, Inc. ("Golf Host") in favor of the Borrower (the "Innisbrook Note");
(b) the Loan Agreement, dated June 20, 1997, between Golf Host and the Borrower,
as amended by that certain First Amendment dated as of October 1, 1998 (the
"Innisbrook Loan Agreement"); (c) the Mortgage, Security Agreement and Fixture
Filing, dated as of June 20, 1997, between Golf Host and the Borrower (the
"Innisbrook Mortgage"); and (d) each other document executed in connection with
the transactions contemplated by the Innisbrook Loan Agreement, all as amended,
restated or supplemented from time to time.
"Interest Expense" means, with respect to any Person for any period, the
gross interest expense (including, without limitation, capitalized interest and
interest expense attributable to Capital Leases) of such Person, all determined
for such period on a Consolidated basis in accordance with GAAP.
"Interest Period" means each period of thirty (30) days with respect to
which the Eurodollar Rate shall be determined under this Agreement; provided
that:
(a) each Interest Period shall commence on the date of advance of or
Conversion to any Eurodollar Loan and, in the case of immediately successive
Interest Periods, each successive Interest Period shall commence on the date on
which the next preceding Interest Period expires;
(b) if any Interest Period would otherwise expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided, that if any Interest Period would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
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(c) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month at the end of such Interest Period;
(d) no Interest Period shall be permitted to extend beyond the Termination
Date; and
(e) there shall be no more than seven (7) Interest Periods outstanding at
any time.
"Issuing Lender" means NationsBank in its capacity as issuer of any Letter
of Credit, or any successor thereto.
"L/C Commitment" means Ten Million Dollars ($10,000,000).
"L/C Facility" means the letter of credit facility established pursuant to
Article IIA.
"L/C Participants" means, collectively, all Lenders other than the
Issuing Lender.
"Legends of Myrtle Beach Golf Courses" means Heathland, Moorland and
Parkland.
"Legends of Virginia Golf Courses" means Stonehouse Golf Club and
Royal New Kent.
"Lender" means each Person executing this Agreement as a Lender set forth
on the signature pages hereto and each Person that hereafter becomes a party to
this Agreement as a Lender pursuant to Section 13.10.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Lessee" means the operator of a golf course property under a
Participating Lease.
"Letter of Credit Obligations" means, at any time, an amount equal to the
sum of (a) the aggregate undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters of
Credit which have not then been reimbursed pursuant to Section 2A.5.
"Letters of Credit" has the meaning assigned thereto in Section
2A.1(a).
"Leverage Ratio" means the ratio of Total Liabilities to Total Assets.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
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"Loan" means any loan made to the Borrower pursuant to Article II and all
such loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the Notes and each
other document, instrument and agreement executed and delivered by any Credit
Party or on behalf of such entity by its counsel in connection with this
Agreement or otherwise referred to in this Agreement or contemplated hereby, all
as may be amended, restated or otherwise modified.
"Material Adverse Effect" means, with respect to any Credit Party, a
material adverse effect on the properties, business, prospects, operations or
condition (financial or otherwise) of any such Person or the ability of any such
Person to perform its material obligations under the Loan Documents,
Participating Leases or Material Contracts, in each case to which it is a party,
after the applicable notice and cure periods, if any, have elapsed.
"Material Contract" means (a) any contract or other agreement, written or
oral, of any Credit Party involving monetary liability of or to any such Person
in an amount in excess of $250,000 per annum, or (b) any other contract or
agreement, written or oral, of any Credit Party the failure to comply with which
could reasonably be expected to have a Material Adverse Effect.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six years.
"Myrtle Beach Golf Courses" means, collectively, Heathland, Moorland,
Parkland, Heritage Golf Club and Oyster Bay.
"NationsBank" means NationsBank, N.A., a national banking
association, and its successors.
"Net Income" means, with respect to the Credit Parties for any period, the
Consolidated net income (or loss) of the Credit Parties for such period
determined in accordance with GAAP.
"Net Income Before Coverage Ratio" means with respect to any Eligible
Property or prospective Eligible Property, at any date of determination, the
"net income before coverage ratio" for such Eligible Property for the twelve
month period ending on or immediately prior to such date of determination, as
set forth in the Borrower's Form K-1 with respect to such Eligible Property and
after provision for a capital expenditure reserve of at least 3.00%, subject to
such adjustments as deemed reasonably appropriate by the Agent in its sole
discretion.
"Notes" means the separate promissory notes made by the Borrower payable
to the order of each of the Lenders, substantially in the form of Exhibit A
hereto, evidencing the Credit Facility, and any amendments, modifications and
supplements thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "Note" means
any of such Notes.
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"Notice of Repayment" has the meaning assigned thereto in Section
2.3(c).
"Notice of Borrowing" has the meaning assigned thereto in Section
2.2(a).
"Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans; (b) the Letter of
Credit Obligations; (c) all payment and other obligations owing by the Borrower
to any Lender under any Hedging Agreement; and (d) all other fees and
commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by the Borrower to the Lenders or the Agent, of every kind, nature and
description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money under or in
respect of this Agreement, any Note or any of the other Loan Documents.
"Officer's Compliance Certificate" has the meaning assigned thereto
in Section 7.2.
"Original Credit Agreement" has the meaning assigned thereto in the
Statement of Purpose.
"Other Taxes" has the meaning assigned thereto in Section 3.13(b).
"Participating Lease" means each Lease between any Credit Party, as lessor
and the operator of a golf course property, as the lessee.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrower or any ERISA
Affiliates or (b) has at any time within the preceding six years been maintained
for the employees of the Borrower or any of their current or former ERISA
Affiliates.
"Permitted Liens" means any Liens permitted under Section 10.3.
"Person" means an individual, corporation, partnership, association,
trust, business trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or any other
form of entity or group thereof.
"Pool Valuation Certificate" means the Pool Value report to be delivered
by the Borrower, substantially in the form of Exhibit H.
"Pool Value" means the aggregate Property Value of all Eligible Properties
in the Unencumbered Pool.
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"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by NationsBank as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by NationsBank as its Prime Rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"Property Value" means the value of each Eligible Property determined in
accordance with Section 8.10(b).
"Purchase Price," with respect to any golf course property, means the
purchase price paid by any Credit Party, including all assumption of debt and
other consideration, for such golf course property.
"Qualified Ground Lease" means (i) the Oyster Bay lease and (ii) any other
lease (a) which is a direct ground lease (or indirect ground lease, so long as
each ground lease in the chain of title meets the following criteria) granted by
the fee owner of real property, (b) which may be transferred and/or assigned
without the consent of the lessor (or as to which the lease expressly provides
that (i) such lease may be transferred and/or assigned with the consent of the
lessor and (ii) such consent shall not be unreasonably withheld or delayed), (c)
which has a remaining term (including any renewal terms exercisable at the sole
option of the lessee) of at least 25 years, (d) under which no material default
has occurred and is continuing, (e) with respect to which a security interest
may be granted without the consent of the lessor, and (f) which contains lender
protection provisions reasonably acceptable to the Administrative Agent
including, without limitation, provisions to the effect that (A) the lessor
shall notify the Administrative Agent of the occurrence of any default by the
lessee under such lease and shall afford the Administrative Agent the right to
cure such default, and (B) in the event that such lease is terminated, the
Administrative Agent shall have the option to enter into a new lease having
terms substantially identical to those contained in the terminated lease. Upon
the submission to the Administrative Agent of a written request for approval of
the lender protection provisions and other terms of a proposed Qualified Ground
Lease, the Administrative Agent may waive any non-compliances with the foregoing
which it considers in its reasonable judgment not to be material and adverse
with respect to the eligibility of the golf course property subject to the
Qualified Ground Lease, and shall use its best effort to accept or reject such
proposal within five (5) Business Days, and shall accept or reject such proposal
within ten (10) Business Days, in each case following receipt of such request.
"Register" has the meaning assigned thereto in Section 13.10(b).
"Required Lenders" means, at any date, any combination of holders other
than Defaulting Lenders of at least sixty-six and two-thirds percent (66-2/3%)
of the aggregate unpaid principal amount of the Notes exclusive of Notes held by
Defaulting Lenders, or if no amounts are outstanding under the Notes, any
combination of Lenders other than Defaulting Lenders whose Commitment
Percentages would aggregate at least sixty-six and two-thirds percent (66-2/3%)
if the Commitments of each Defaulting Lender were excluded from the Aggregate
Commitment.
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"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 2A.5 for amounts drawn under
Letters of Credit.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any category
of liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Loans. The Adjusted Eurodollar
Rate shall be adjusted automatically on and as of the effective date of any
change in the Reserve Requirement.
"Seasoned Eligible Property" means any Eligible Property (a) that has been
owned by any Credit Party for at least twelve months or (b) with respect to
Eligible Properties owned less than twelve months, for which at least twelve
months of historical financial statements are available in form and substance
reasonably acceptable to the Agent.
"S&P" means Standard and Poors Ratings Group.
"Solvent" means, as to the Credit Parties on a particular date, that any
such Person (a) has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage and is able to
pay its debts as they mature, (b) owns property having a value, both at fair
valuation and at present fair saleable value, greater than the amount required
to pay its probable liabilities (including contingencies), and (c) does not
believe that it will incur debts or liabilities beyond its ability to pay such
debts or liabilities as they mature.
"Stock" means all shares, options, interests or other equivalents
(howsoever designated) of or in a corporation, whether voting or nonvoting,
including, without limitation, common stock, warrants, preferred stock,
convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.
"Subordinated Debt" means all Debt of any Credit Party subordinated in
right and time of payment to the Obligations on terms satisfactory to the
Administrative Agent and Required Lenders.
"Subsidiary" means, as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by or
the management is otherwise controlled by such Person (irrespective of whether,
at the time, capital stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency). Unless otherwise qualified, references to "Subsidiary" or
"Subsidiaries" in this Agreement shall refer to those of GTA.
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"Syndication Agent" means First Union National Bank, in its capacity as
the Syndication Agent under this Agreement and any successor thereto appointed
pursuant to Section 12.8.
"Tangible Net Worth" means, as of any date, Total Assets (but excluding
therefrom capitalized interest, debt discount and expense, goodwill, patents,
trademarks, copyrights, franchises, licenses, amounts due from officers,
directors, stockholders and Affiliates and any other items which would be
treated as intangibles under GAAP), less Total Liabilities.
"Taxes" has the meaning assigned thereto in Section 3.13(a).
"Termination Date" means the earliest of the dates referred to in
Section 2.5.
"Termination Event" means: (a) a "Reportable Event" described in Section
4043 of ERISA; or (b) the withdrawal of the Borrower or any ERISA Affiliate from
a Pension Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; or (c) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA; or (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC; or (e) any other event
or condition which would constitute grounds under Section 4042(a) of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan; or (f) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA; or (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Section 4241 or 4245 of ERISA; or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
"Total Assets" means, as of any date, the aggregate amount of (a) all
assets which would be reflected on a Consolidated balance sheet of the Credit
Parties prepared in accordance with GAAP plus (b) accumulated depreciation in
accordance with GAAP plus (c) an amount equal to $51,403,099, the difference
between (x) the total consideration paid for The Heritage Golf Club, The Legends
Golf Club and Oyster Bay Golf Club and (y) the aggregate book value of such golf
course properties as shown on the Consolidated balance sheet of the Credit
Parties due to downward adjustments required by APB No. 16.
"Total Liabilities" means, as of any date, the sum of (i) the aggregate
amount of all liabilities which would be reflected on a Consolidated balance
sheet of the Credit Parties prepared in accordance with GAAP and (ii) the
aggregate amount of all Contingent Obligations of the Credit Parties.
"UCC" means the Uniform Commercial Code as in effect in the State of
North Carolina.
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"UCP" means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500.
"Unencumbered Pool" has the meaning assigned thereto in Section 8.10.
"United States" means the United States of America.
SECTION 1.2 General. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference in this Agreement to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Loans. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Loans to the Borrower from time to time
from the Closing Date through, but not including, the Termination Date as
requested by the Borrower in accordance with the terms of Section 2.2; provided,
that (a) the aggregate principal amount of all outstanding Loans (after giving
effect to any amount requested) and Letter of Credit Obligations shall not
exceed the Aggregate Commitment, (b) the principal amount of outstanding Loans
from any Lender to the Borrower plus such Lender's Commitment Percentage of the
Letter of Credit Obligations then outstanding shall not at any time exceed such
Lender's Commitment and (c) the Pool Value shall at all times be at least 1.75
times the aggregate amount of all unsecured Debt of the Credit Parties
(including the outstanding Obligations). Each Loan by a Lender shall be in a
principal amount equal to such Lender's Commitment Percentage of the aggregate
principal amount of Loans requested on such occasion. Subject to the terms and
conditions of this Agreement, the Borrower may borrow, repay and reborrow Loans
under this Agreement until the Termination Date.
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SECTION 2.2 Procedure for Advances of Loans.
(a) Requests for Borrowing. The Borrower shall give the Administrative
Agent irrevocable prior written notice in the form attached hereto as Exhibit B
(a "Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) at
least two (2) Business Days before each Base Rate Loan and (ii) at least three
(3) Business Days before each Eurodollar Loan, of its intention to borrow,
specifying (A) the date of such borrowing, which shall be a Business Day, (B)
the amount of such borrowing, which shall be in an aggregate principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof, and (C) whether such
Loan is to be a Eurodollar Loan or a Base Rate Loan. Notices received after
11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day.
The Administrative Agent shall promptly notify the Lenders of each Notice of
Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte time) on
the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage of the Loans to be made on such borrowing
date. The Borrower hereby irrevocably authorizes the Administrative Agent to
disburse the proceeds of each borrowing requested pursuant to this Section 2.2
in immediately available funds by crediting such proceeds to a deposit account
of the Borrower maintained with the Administrative Agent or by wire transfer to
such account as may be agreed upon by the Borrower and the Administrative Agent
from time to time. Unless the Administrative Agent shall have received notice
from a Lender that such Lender will not make available to the Administrative
Agent such Lender's Commitment Percentage of the requested Loan, the
Administrative Agent shall disburse such Lender's Commitment Percentage of the
Loans.
SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full, together with all accrued but
unpaid interest thereon, on the Termination Date.
(b) Mandatory Repayments.
(i) If at any time the outstanding principal amount of all Loans
plus the Letter of Credit Obligations exceeds the Aggregate Commitment or
the Pool Value is less than 1.75 times the aggregate amount of all
unsecured Debt of the Credit Parties (including the amount of the
outstanding Obligations), the Borrower shall repay immediately upon
written notice from the Administrative Agent, by payment to the
Administrative Agent for the account of the Lenders, the Loans in an
amount necessary to bring the Borrower into compliance.
(ii) The Loans shall also be prepaid by any amount required to be
paid under Section 10.6 of this Agreement.
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(iii) Each such repayment under this Section 2.3(b) shall be (i)
accompanied by any amount required to be paid pursuant to Section 3.12 of
this Agreement, together with interest accrued thereon to the date of
repayment and (ii) applied first to the outstanding Base Rate Loans up to
the full amount thereof and second to the outstanding Eurodollar Loans up
to the full amount thereof.
(c) Optional Repayments. The Borrower may, subject to Section 2.3(d), at
any time and from time to time repay the Loans, in whole or in part, by giving
the Administrative Agent irrevocable notice in the form attached hereto as
Exhibit C (a "Notice of Repayment") not later than 11:00 a.m. (Charlotte time)
at least three (3) Business Days before each prepayment of a Loan specifying the
date and amount of repayment, provided, however, that the Borrower may not repay
any Eurodollar Loan on any day other than the last day of the Interest Period
applicable thereto unless such payment is accompanied by any amount required to
be paid pursuant to Section 3.12 of this Agreement. Upon receipt of such notice,
the Administrative Agent shall promptly notify each Lender. If any such notice
is given, the amount specified in such notice shall be due and payable on the
date set forth in such notice. Partial repayments shall be in an aggregate
amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each such
repayment shall be accompanied by any amount required to be paid pursuant to
Section 3.12 of this Agreement.
(d) Restriction on Repayments. The Loans may not be voluntarily repaid
prior to the repayment in full of any loans outstanding under the Credit
Agreement dated as of March 31, 1999 between the Borrower, the Guarantors and
NationsBank, as lender (the "Bridge Facility"). Upon the occurrence and during
the continuance of an Event of Default, this Section 2.3(d) shall not be
applicable and the Obligations of the Borrower under this Agreement and the
obligations of the Borrower under the Bridge Facility shall be pari passu.
SECTION 2.4 Notes. Each Lender's Loans and the obligation of the Borrower
to repay such Loans shall be evidenced by a Note executed by the Borrower
payable to the order of such Lender representing the Borrower's obligation to
pay such Lender's Commitment or, if less, the aggregate unpaid principal amount
of all Loans made and to be made by such Lender to the Borrower under this
Agreement, plus interest and all other fees, charges and other amounts due
thereon as required under this Agreement. Each Note shall bear interest on the
unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 3.1.
SECTION 2.5 Termination of Credit Facility. The Credit Facility shall
terminate on the earlier of (a) the third anniversary of the Closing Date, and
(b) the date of termination by the Administrative Agent on behalf of the Lenders
pursuant to Section 11.2(a).
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SECTION 2.6 Increases in Credit Facility. The Borrower shall have the
right, on ten (10) Business Days' prior written notice to the Administrative
Agent (a copy of which shall be furnished to the Lenders by the Administrative
Agent), so long as no Default or Event of Default shall have occurred and be
continuing, at any time and from time to time prior to the first anniversary of
the Closing Date, to increase the total amount of the Aggregate Commitment by
(a) accepting the offer or offers of any Person or Persons (not then a Lender)
with the consent of the Administrative Agent constituting an Eligible Assignee
to become a new Lender hereto with a Commitment up to the amount of any such
increase and/or (b) accepting the offer of any existing Lender or Lenders to
increase its (or their) Commitment up to the amount of any such increase;
provided, however, that (i) in no event shall any Lender's Commitment be
increased without the consent of such Lender, (ii) if any Loans are outstanding
hereunder on the date that any such increase is to become effective, the
Administrative Agent and Lenders shall make such transfers of funds as are
necessary in order that the outstanding balance of such Loans reflect the
Commitment Percentages of the Lenders after giving effect to any increase
pursuant to this Section 2.6 (iii) each such increase shall be in minimum
amounts of at least Five Million Dollars ($5,000,000), and (iv) in no event
shall any such increase result in the amount of the Aggregate Commitment
exceeding Two Hundred Twenty-five Million Dollars ($225,000,000). Any increase
to the Commitment pursuant to clause (a) of the first sentence of this Section
2.6 shall become effective upon the execution of a supplement in the form of
Exhibit J-1 hereto (a "New Lender Supplement") by the Borrower, Administrative
Agent and the applicable new Lender or Lenders together with a corresponding
Note, and any increase to the Commitment pursuant to clause (b) of the first
sentence of this Section 2.6 shall become effective upon the execution of a
supplement in the form of Exhibit J-2 hereto (a "Commitment Increase
Supplement"), executed by the Borrower, the Administrative Agent and the
applicable increasing Lender or Lenders, together with a replacement Note. The
Administrative Agent shall forward copies of any such supplement to the Lenders
and Credit Parties promptly upon receipt thereof. Increases in the Aggregate
Commitment shall permanently reduce the committed amount under the Bridge
Facility.
SECTION 2.7 Use of Proceeds. The Borrower shall use the proceeds of the
Loans and the Letters of Credit (a) first, to pay in full the existing Debt
under the Original Credit Agreement, (b) then to repay the existing Debt under
the Credit Agreement dated as of July 9, 1998 between the Borrower, certain of
the Guarantors, NationsBank as Administrative Agent and Lender, and Bank of
America as Documentation Agent and Lender, and (c) then to finance the purchase
of golf courses; provided that up to 20% of the Aggregate Commitment may be used
for working capital and general corporate requirements of the Borrower,
including, without limitation, the payment of certain fees and expenses incurred
in connection with this transaction.
ARTICLE IIA
LETTER OF CREDIT FACILITY
SECTION 2A.1 Commitment. Subject to the terms and conditions hereof, the
Issuing Lender, in reliance on the agreements of the other Lenders set forth in
Section 2A.4(a), agrees to issue standby letters of credit ("Letters of Credit")
for the account of the Borrower on any Business Day from the Closing Date
through, but not including, the date which is sixty (60) days prior to the
Termination Date in such form as may be approved from time to time by the
Issuing Lender; provided, that the Issuing Lender shall have no obligation to
(and shall not, without the prior consent of all of the Lenders) issue any
Letter of Credit if, after giving effect to such issuance, (a) the Letter of
Credit Obligations would exceed the L/C Commitment or (b) the sum of the
aggregate principal amount of all outstanding Loans and Letter of Credit
Obligations would exceed the Aggregate Commitment or (c) the Pool Value is less
than 1.75 times the aggregate amount of all unsecured Debt of the Credit Parties
(including the amount of the outstanding Obligations). Each Letter of Credit
shall (i) be denominated in Dollars, (ii) be a standby letter of credit issued
to support obligations of the Borrower, contingent or otherwise, incurred in the
ordinary course of business, (iii) expire on a date not more than one year later
in the case of a standby letter of credit but in no event later than the
Termination Date, and (iv) be subject to the UCP and, to the extent not
inconsistent therewith, the laws of the State of North Carolina. The Issuing
Lender shall not issue any Letter of Credit hereunder if such issuance would
conflict with, or cause the Issuing Lender or any L/C Participant to exceed any
limits imposed by, any Applicable Law. References herein to "issue" and
derivations thereof with respect to Letters of Credit shall also include
extensions, modifications or confirmations of any existing Letters of Credit,
unless the context otherwise requires.
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SECTION 2A.2 Procedure for Issuance of Letters of Credit. The Borrower may
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the reasonable satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may reasonably request. Upon receipt of any Application,
the Issuing Lender shall process such Application and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures and shall, subject to
Section 2A.1 and Article V, promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three (3) Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Lender and the Borrower. The Issuing Lender shall furnish to the Borrower a copy
of such Letter of Credit and furnish to each Lender a copy of such Letter of
Credit and the amount of each Lender's participation therein, determined in
accordance with Section 2A.4(a), all promptly following the issuance of such
Letter of Credit.
SECTION 2A.3 Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for the account of
the Issuing Lender and the L/C Participants, a letter of credit commission on
the face amount of each Letter of Credit in an amount per annum equal to the
then Applicable Margin, determined in accordance with Section 3.1(b). Such
commission shall be payable quarterly in arrears on the last Business Day of
each calendar quarter and on the Termination Date.
(b) In addition to the foregoing commission, the Borrower shall pay the
Issuing Lender an issuance fee of 0.125 percent (0.125%) per annum on the face
amount of each Letter of Credit, payable quarterly in arrears on the last
Business Day of each calendar quarter and on the Termination Date.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all
commissions received by the Administrative Agent in accordance with their
respective Commitment Percentages.
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SECTION 2A.4 L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under and in respect of each Letter
of Credit issued hereunder and the amount of each draft paid by the Issuing
Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees
with the Issuing Lender that, if a draft is paid under any Letter of Credit for
which the Issuing Lender is not reimbursed in full by the Borrower in accordance
with the terms of this Agreement, such L/C Participant shall pay to the
Administrative Agent for the account of the Issuing Lender upon demand, and upon
one (1) Business Day's notice, an amount equal to such L/C Participant's
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed, which payment shall constitute a Base Rate Loan by such L/C
Participant to the Borrower as provided in Section 2A.5.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Administrative Agent for the account of the Issuing Lender
pursuant to Section 2A.4(a) in respect of any unreimbursed portion of any
payment made by the Issuing Lender under any Letter of Credit, the Issuing
Lender shall notify the Administrative Agent who, in turn, shall notify each L/C
Participant of the amount and due date of such required payment and such L/C
Participant shall pay to the Administrative Agent for the account of the Issuing
Lender the amount specified on the applicable due date. If any such amount is
paid to the Administrative Agent for the account of the Issuing Lender after the
date such payment is due, upon one (1) Business Day's notice such L/C
Participant shall pay to the Administrative Agent for the account of the Issuing
Lender, in addition to such amount, the product of (i) such amount, times (ii)
the daily average Federal Funds Rate as determined by the Administrative Agent
during the period from and including the date such payment is due to the date on
which such payment is immediately available to the Issuing Lender, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. A certificate of the Issuing Lender
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error. With respect to payment to the Administrative Agent
for the account of the Issuing Lender of the unreimbursed amounts described in
this Section 2A.4(b), if the L/C Participants receive notice that any such
payment is due, such payment shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment under
any Letter of Credit and has received from any L/C Participant its Commitment
Percentage of such payment in accordance with this Section 2A.4, the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise), or any payment of interest on account thereof,
the Issuing Lender will promptly distribute to such L/C Participant its pro rata
share thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
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SECTION 2A.5 Reimbursement Obligation of the Borrower. The Borrower agrees
to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft paid under any Letter of
Credit for the amount of (a) such draft so paid and (b) any taxes, fees, charges
or other costs or expenses incurred by the Issuing Lender in connection with
such payment. Each such payment shall be made to the Issuing Lender at its
address for notices specified herein in lawful money of the United States and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrower under this Article IIA from the date such
amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue. If the Borrower fails to
timely reimburse the Issuing Lender on the date the Borrower receives the notice
referred to in this Section 2A.5, the Borrower shall be deemed to have timely
given a Notice of Borrowing hereunder to the Administrative Agent requesting the
Lenders to make a Base Rate Loan on such date in an amount equal to the amount
of such drawing and, subject to the satisfaction or waiver of the conditions
precedent specified in Article V, the Lenders shall make Base Rate Loans in such
amount, the proceeds of which shall be applied to reimburse the Issuing Lender
for the amount of the related drawing and costs and expenses.
SECTION 2A.6 Obligations Absolute. The Borrower's obligations under this
Article IIA (including, without limitation, the Reimbursement Obligation) shall
be absolute and unconditional under any and all circumstances and irrespective
of any set-off, counterclaim or defense to payment which the Borrower may have
or have had against the Issuing Lender, any L/C Participant or any beneficiary
of a Letter of Credit. The Borrower also agrees with the Issuing Lender that the
Issuing Lender and L/C Participants shall not be responsible for, and the
Borrower's Reimbursement Obligation under Section 2A.5 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of a Borrower against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
and L/C Participants shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; provided, that the Issuing
Lender shall be responsible for errors or omissions caused by the Issuing
Lender's gross negligence or willful misconduct or breach under this Agreement.
The Borrower agrees that any action taken or omitted by the Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct or breach under
this Agreement and in accordance with the standards of care specified in the UCP
and, to the extent not inconsistent therewith, the UCC shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender or any L/C
Participant to the Borrower. The responsibility of the Issuing Lender to the
Borrower in connection with any draft presented for payment under any Letter of
Credit shall, in addition to any payment obligation expressly provided for in
such Letter of Credit, be limited to determining that the documents (including
each draft) delivered under such Letter of Credit in connection with such
presentment are in conformity with such Letter of Credit.
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SECTION 2A.7 Effect of Application. To the extent that any provision of
any Application related to any Letter of Credit is inconsistent with the
provisions of this Article IIA, the provisions of this Article IIA shall apply.
ARTICLE III
GENERAL LOAN PROVISIONS
SECTION 3.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section 3.1,
at the election of the Borrower in accordance with Article II, the unpaid
principal balance of any Loan shall bear interest at (A) the Base Rate, or (B)
the Adjusted Eurodollar Rate plus the Applicable Margin. The Borrower shall
select the type of interest rate applicable to any Loan at the time a Notice of
Borrowing is given pursuant to Section 2.2(a) or at the time a Notice of
Conversion/Continuation is given pursuant to Section 3.2. Any Loan as to which
the Borrower has not duly specified an interest rate as provided immediately
above shall be deemed a Base Rate Loan.
(b) Applicable Margin. The applicable margin provided for in Section
3.1(a) with respect to the Eurodollar Loans (the "Applicable Margin") shall be
determined by reference to the Leverage Ratio as of the end of each fiscal
quarter, as follows:
Leverage Ratio Applicable Margin Per Annum
-------------- ---------------------------
Greater than or equal to 2.00%
.50 to 1.00
Greater than or equal to 1.75%
.375 to 1.00 but less than
.50 to 1.00
Less than .375 to 1.00 1.50%
Adjustments, if any, in the Applicable Margin based on the Leverage Ratio shall
be made by the Administrative Agent on the tenth (10th) Business Day (each an
"Adjustment Date") after receipt by the Administrative Agent of quarterly
financial statements for GTA and the other Credit Parties and the accompanying
Officer's Compliance Certificate setting forth the Leverage Ratio of GTA and the
other Credit Parties as of the most recent fiscal quarter end. Subject to
Section 3.1(c), in the event such financial statements and certificate of
covenant compliance are not delivered within the time required by Sections 7.1
and 7.2, the Applicable Margin shall be the highest Applicable Margin set forth
above until the Adjustment Date following the delivery of such financial
statements and certificate or evidence of covenant compliance, as applicable.
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Notwithstanding the foregoing, at such time as the Borrower or GTA obtains
an investment-grade senior debt rating by Moody's and S&P (the "Dual Rating")
and for so long as the Borrower or GTA retains such Dual Rating, the Applicable
Margin shall be determined by reference to the lower of Moody's or S&P's ratings
thereof in accordance with the following pricing matrix:
Senior Debt Rating Applicable Margin Per Annum
------------------ ---------------------------
BBB/Baa2 or higher 1.25%
BBB-/Baa3 1.35%
; provided, that, in the event the Borrower or GTA obtains an investment-grade
senior debt rating by either Moody's (Baa3 or higher) or S&P (BBB- or higher)
(the "Senior Rating"), and provided the rating of the other rating agency is not
less than the grade immediately below investment grade (i.e., Ba1 if Moody's and
BB+ if S&P) (the "Junior Rating" and collectively with the Senior Rating, the
"Combined Rating")) and for so long as the Borrower or GTA retains such Combined
Rating, the Applicable Margin shall be 1.50% per annum. In the event the
Borrower or GTA, as applicable, loses (i) the Dual Rating or (ii) the Senior
Rating or the Junior Rating, as applicable, the Applicable Margin shall
thereafter be determined by reference to the Leverage Ratio as provided above
until such time as the Borrower or GTA obtains a Dual Rating or a Combined
Rating.
(c) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request or
Convert to Eurodollar Loans, (ii) all outstanding Eurodollar Loans may at the
option of the Administrative Agent and shall at the direction of the Required
Lenders bear interest at a rate per annum which shall be two percent (2%) in
excess of the rate then applicable to Eurodollar Loans, as applicable, until the
end of the applicable Interest Period and thereafter at a rate equal to two
percent (2%) in excess of the rate then applicable to Base Rate Loans, and (iii)
all outstanding Base Rate Loans shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate then applicable to Base Rate Loans.
Interest shall continue to accrue on the Notes after the filing by or against
the Borrower of any petition seeking any relief in bankruptcy or under any act
or law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
(d) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each month, commencing
April 30, 1999, and on the Termination Date. Interest on each Eurodollar Loan
shall be payable in arrears on the last day of each applicable Interest Period
and on the Termination Date. All interest rates, fees and commissions provided
under this Agreement shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest under this Agreement or under any of
the Notes charged or collected pursuant to the terms of this Agreement or
pursuant to any of the Notes exceed the highest rate permissible under any
Applicable Law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that the Lenders have charged or received interest under this Agreement in
excess of the highest rate permissible under Applicable Law, the rate in effect
under this Agreement shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the Administrative Agent's
option promptly refund to the Borrower any interest received by Lenders in
excess of the maximum rate permitted by Applicable Law or shall apply such
excess to the principal balance of the Obligations if permitted by Applicable
Law (in either event, the Administrative Agent shall advise the Borrower in
writing promptly of its decision). It is the intent of this Agreement that the
Borrower not pay or contract to pay, and that neither the Administrative Agent
nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrower
under Applicable Law.
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SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) Convert at any time all or any portion of
its outstanding Base Rate Loans in a principal amount equal to $500,000 or any
whole multiple of $100,000 in excess thereof into one or more Eurodollar Loans,
and (b) upon the expiration of any Interest Period, (i) Convert all or any part
of its outstanding Eurodollar Loans in a principal amount equal to $500,000 or a
whole multiple of $100,000 in excess thereof into Base Rate Loans, or (ii)
continue such Eurodollar Loans as Eurodollar Loans. Whenever the Borrower
desires to Convert or continue Loans as provided immediately above, the Borrower
shall give the Administrative Agent irrevocable prior written notice in the form
attached as Exhibit D (a "Notice of Conversion/Continuation") not later than
11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a
proposed Conversion or continuation of such Loan is to be effective specifying
(A) the Loans to be Converted or continued, and, in the case of any Eurodollar
Loan to be Converted or continued, the last day of the Interest Period therefor,
(B) the effective date of such Conversion or continuation (which shall be a
Business Day), and (C) the principal amount of such Loans to be Converted or
continued. The Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation.
SECTION 3.3 Fees.
(a) Unused Fee. Commencing on June 30, 1999, the Borrower shall pay to the
Administrative Agent, for the account of the Lenders, a non-refundable fee at a
rate per annum equal to 0.20% on the average daily unused portion of the
Aggregate Commitment exclusive of Letter of Credit Obligations. The commitment
fee shall be payable quarterly in arrears on the last Business Day of each
quarter during the term of this Agreement commencing March 31, 1999, and on the
Termination Date. Such commitment fee shall be distributed by the Administrative
Agent to the Lenders pro rata in accordance with the Lenders' respective
Commitment Percentages.
(b) Administrative Agent's and Other Fees. The Borrower shall pay to the
Administrative Agent, for its account, the fees set forth in the separate fee
letter agreement executed by the Borrower and the Administrative Agent dated
December 21, 1998.
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SECTION 3.4 Payment.
(a) Manner of Payment. Each payment by the Borrower on account of the
principal of or interest on the Loans or of any fee, commission or other amounts
payable to the Lenders under this Agreement or any Note shall be made not later
than 1:00 p.m. (Charlotte time) on the date specified for payment under this
Agreement to the Administrative Agent at the Administrative Agent's Office for
the account of the Lenders (other than as set forth below) pro rata in
accordance with their respective Commitment Percentages, in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for the
purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 2:00
p.m. (Charlotte time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. On the Business Day that each such payment is
deemed made, the Administrative Agent shall distribute to each Lender at its
address for notices set forth in this Agreement its pro rata share of such
payment in accordance with this Section 3.4 such Lender's Commitment Percentage
and shall wire advice of the amount of such credit to each Lender; provided that
if the Administrative Agent fails to distribute such funds on the date on which
any payment is deemed made, the Administrative Agent shall pay interest thereon
at the Federal Funds Rate from the date such payment is received until the date
such funds are distributed by the Administrative Agent. Each payment to the
Administrative Agent of the Administrative Agent's fees or the expenses of the
Administrative Agent or the Issuing Lender shall be made for the account of the
Administrative Agent. Each payment to the Administrative Agent of the Issuing
Lender's fees or L/C Participants' commissions shall be made in like manner, but
for the account of the Issuing Lender or the L/C Participants, as the case may
be. Any amount payable to any Lender under Sections 3.7, 3.8, 3.12 or 13.2 shall
be paid to the Administrative Agent for the account of the applicable Lender.
(b) Crediting of Payments and Proceeds. In the event that the Borrower
shall fail to pay any of the Obligations when due and the Obligations have been
accelerated pursuant to Section 11.2, all payments received by the Lenders upon
the Notes and the other Obligations and all net proceeds from the enforcement of
the Obligations shall be applied first to all expenses then due and payable by
the Borrower under this Agreement, second, to all indemnity obligations then due
and payable by the Borrower under this Agreement, and third, to all
Administrative Agent's fees, all commitment and other fees and commissions then
due and payable by Borrower under this Agreement, accrued and unpaid interest on
the Notes, any termination payments due from Borrower in respect of a Hedging
Agreement with any Lender and the principal amount of the Notes (all such
amounts to be allocated pro rata in accordance with all such amounts due), in
that order.
SECTION 3.5 Right of Set-off; Adjustments.
(a) Upon the occurrence and during the continuance of any Event of
Default, each Lender (and each of its Affiliates) is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender (or any of its Affiliates) to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and the Note held by such Lender, irrespective of
whether such Lender shall have made any demand under this Agreement or such Note
and although such obligations may be unmatured. Each Lender agrees promptly to
notify the Borrower after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender may have.
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(b) If any Lender (a "Benefited Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such Benefited Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from a Lender pursuant to this Section 3.5 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrower in the amount of such
participation.
SECTION 3.6 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
under this Agreement to make the Loans are several and are not joint or joint
and several. Unless the Administrative Agent shall have received notice from a
Lender prior to a proposed borrowing date that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of the
amount to be borrowed on such date (which notice shall not release such Lender
of its obligations under this Agreement), the Administrative Agent may assume
that such Lender has made such portion available to the Administrative Agent on
the proposed borrowing date in accordance with Section 2.2(b) and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If such amount is made
available to the Administrative Agent on a date after such borrowing date, such
Lender shall pay to the Administrative Agent on demand an amount, until paid,
equal to the product of (a) the amount of such Lender's Commitment Percentage of
such borrowing, times (b) the daily average Federal Funds Rate during such
period as determined by the Administrative Agent, times (c) a fraction the
numerator of which is the number of days that elapse from and including such
borrowing date to the date on which such Lender's Commitment Percentage of such
borrowing shall have become immediately available to the Administrative Agent
and the denominator of which is 360. A certificate of the Administrative Agent
with respect to any amounts owing under this Section 3.6 shall be conclusive,
absent manifest error. If such Lender's Commitment Percentage of such borrowing
is not made available to the Administrative Agent by such Lender within three
(3) Business Days of such borrowing date, the Administrative Agent shall be
entitled to recover such amount made available by the Administrative Agent with
interest thereon at the Adjusted Eurodollar Rate, on demand, from the Borrower.
The failure of any Lender (a "Defaulting Lender") to make its Commitment
Percentage of any Loan available shall not relieve it or any other Lender of its
obligation, if any, under this Agreement to make its Commitment Percentage of
such Loan available to Borrower on such borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the applicable borrowing date.
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SECTION 3.7 Indemnity. The Borrower hereby indemnifies each of the Lenders
against any reasonable and actually incurred loss or expense which arises or is
directly attributable to each Lender's obtaining, liquidating or employing
deposits or other funds acquired to effect, fund or maintain any Loan (a) as a
consequence of any failure by the Borrower to make any payment when due of any
amount due under this Agreement in connection with a Loan, (b) due to any
failure of the Borrower to borrow on a date specified therefor in a Notice of
Borrowing, or (c) due to any payment or prepayment of any Loan on a date other
than the date specified for such payment in the applicable Notice of Repayment;
provided, however, the Borrower shall have no such obligation to any Lender who
is a Defaulting Lender. The amount of such reasonable and actually incurred loss
or expense shall be determined, in the applicable Lender's sole reasonable
discretion, based upon the condition that such Lender funded its Commitment
Percentage of the Loans in the London interbank market and using any reasonable
attribution or averaging methods which such Lender deems appropriate and
practical. A certificate of such Lender setting forth the basis for determining
such amount or amounts necessary to compensate such Lender shall be forwarded to
the Borrower through the Administrative Agent and shall be conclusively presumed
to be correct save for manifest error.
SECTION 3.8 Increased Cost and Reduced Return.
(a) If, after the date of this Agreement, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule, or
regulation, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such Governmental Authority, central bank, or
comparable agency; excepting, however, any such change occasioned by such
Lender's default or non-compliance with such applicable rules:
(i) shall subject such Lender (or its Applicable Lending Office) to
any tax, duty, or other charge with respect to any Eurodollar Loans, its
Letters of Credit, its Note, or its obligation to make Eurodollar Loans,
or change the basis of taxation of any amounts payable to such Lender (or
its Applicable Lending Office) under this Agreement or its Note in respect
of any Eurodollar Loans (other than taxes imposed on the overall net
income of such Lender by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
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(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Reserve
Requirement utilized in the determination of the Adjusted Eurodollar Rate)
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, such Lender (or its
Applicable Lending Office), including the Commitment of such Lender under
this Agreement; or
(iii) shall impose on such Lender (or its Applicable Lending Office)
or the London interbank market any other condition affecting this
Agreement or its Note or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making or maintaining any Eurodollar Loans
or to reduce any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or its Note with respect to any Eurodollar
Loans, then the Borrower shall pay to such Lender on demand (and a full written
explanation for the increase) such amount or amounts solely applicable to its
Loan or in relationship of its Loan to other loans of such Lender as will
compensate such Lender for such increased cost or reduction. If any Lender
requests compensation by the Borrower under this Section 3.8, the Borrower may,
in its sole discretion, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender to make or continue
Eurodollar Loans until the event or condition giving rise to such request ceases
to be in effect; provided that such suspension shall not affect the right of
such Lender to receive the compensation so requested, if applicable, subject to
the foregoing conditions and caveats.
(b) If, after the date of this Agreement, any Lender shall have determined
that the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations under this Agreement to a level below that which such
Lender or such corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with respect to
capital adequacy), then from time to time upon demand the Borrower shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such reduction.
(c) Each Lender shall promptly notify the Borrower and the Administrative
Agent in writing of any event of which it has knowledge, occurring after the
date of this Agreement, which will entitle such Lender to compensation pursuant
to this Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise disadvantageous to
it. Any Lender claiming compensation under this Section shall promptly furnish
to the Borrower and the Administrative Agent a written statement setting forth
the additional amount or amounts to be paid to it under this Agreement which
(subject to the terms of this Agreement) shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
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SECTION 3.9 Limitation on Types of Loans. If on or prior to the first day
of any Interest Period the Administrative Agent reasonably determines (which
determination shall be conclusive) that by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, then the Administrative Agent shall
give the Borrower prompt written notice thereof specifying the relevant amounts
or periods, and so long as such condition remains in effect, the Lenders shall
be under no obligation to make additional Eurodollar Loans or continue
Eurodollar Loans, and the Borrower shall, at its election, on the last day(s) of
the then current Interest Period(s) for the outstanding Eurodollar Loans, prepay
such Eurodollar Loans, or Convert such Eurodollar Loans into Base Rate Loans, or
prepay the Obligations in full and terminate this Agreement.
SECTION 3.10 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans under this
Agreement, then such Lender shall promptly notify the Borrower thereof in
writing and such Lender's obligation to make or continue Eurodollar Loans shall
be suspended until such time as such Lender may again make, maintain, and fund
Eurodollar Loans (in which case the provisions of Section 3.11 shall be
applicable).
SECTION 3.11 Treatment of Affected Loans. If the obligation of any Lender
to make or continue Eurodollar Loan shall be suspended pursuant to Section 3.9
or 3.10 and unless such Eurodollar Loans are paid, until such Lender gives prior
written notice to the Borrower as provided below that the circumstances
specified in Section 3.9 or 3.10 no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted into Base Rate Loans, all payments and prepayments of principal that
would otherwise be applied to the Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such Lender as
Eurodollar Loans shall be made or continued instead as Base Rate Loans, and all
Loans of such Lender that would otherwise be Converted into Eurodollar Loans
shall be Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives written notice to the Borrower (with a copy to the
Administrative Agent) that the circumstances specified in Section 3.9 or 3.10 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) such Lender's Base Rate Loans may be Converted to Eurodollar
Loans.
SECTION 3.12 Compensation. Upon the request of any Lender, the Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable, good faith opinion of such Lender) to compensate it for any
reasonable and actually incurred loss, cost, or expense (including loss of
anticipated profits) incurred by it as a result of:
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(a) any payment, prepayment, or Conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the Loans pursuant to
Section 11.2 and any increase in the Aggregate Commitment pursuant to Section
2.6) on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article V to be
satisfied) to borrow or prepay a Eurodollar Loan on the date for such borrowing
or prepayment specified in the relevant Notice of Borrowing or Notice of
Repayment under this Agreement.
SECTION 3.13 Taxes.
(a) Any and all payments by the Borrower to or for the account of any
Lender or the Administrative Agent under this Agreement or under or in respect
of any other Loan Document shall be made free and clear of and without deduction
for any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender (or its Applicable Lending Office) or the Administrative Agent
(as the case may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
under this Agreement or under or in respect of any other Loan Document to any
Lender or the Administrative Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 3.13) such Lender or
the Administrative Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law, and (iv) the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 13.1, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement by the
Borrower or any other Loan Document or from the execution or delivery of, or
otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.13) properly paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
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(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages of this
Agreement and on or prior to the date on which it becomes a Lender in the case
of each other Lender, and from time to time thereafter if requested in writing
by the Borrower or the Administrative Agent (but only so long as such Lender
remains lawfully able to do so), shall provide the Borrower and the
Administrative Agent with (i) Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income tax treaty
to which the United States is a party which reduces the rate of withholding tax
on payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or business
in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and (iii) any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying to the Administrative Agent and the Borrower
that such Lender is entitled to an exemption from or a reduced rate of tax on
payments pursuant to this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide
the Borrower and the Administrative Agent with the appropriate form pursuant to
Section 3.13(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 3.13(a) or 3.13(b) with respect to Taxes imposed by the United
States; provided, however, that should a Lender, which is otherwise exempt from
or subject to a reduced rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required under this Agreement, the Borrower
shall take such reasonable steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 3.13, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower arising in connection with this Agreement, the agreements and
obligations of the Borrower contained in this Section 3.13 shall survive the
termination of the Commitments and the payment in full of the Notes.
SECTION 3.14 REIT Status. GTA has made an election to be treated as a
"real estate investment trust" under Sections 856 through 860 of the Code and
will not hereafter (i) revoke such election, (ii) take or fail to take any
action that will cause such election to be terminated or to cease to be valid at
any time, (iii) incur liability for any excise tax under Section 4981 of the
Code or (iv) incur liability for any prohibited transaction under Section 857(b)
of the Code.
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SECTION 3.15 Senior Debt. The Obligations of the Borrower under this
Agreement and the obligations and indebtedness of the Borrower under the Bridge
Facility constitute senior Debt and shall be pari passu subject only to the
restrictions on prepayment provided for in Section 2.3(d).
ARTICLE IV
GUARANTY
SECTION 4.1 Guaranty of Obligations of the Guarantors. Each of the
Guarantors hereby jointly and severally unconditionally guarantees to the
Administrative Agent for the ratable benefit of the Administrative Agent and the
Lenders, and their permissible respective successors, endorsees, transferees and
assigns, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of all Obligations of the Borrower, whether primary
or secondary (whether by way of endorsement or otherwise), whether now existing
or hereafter arising, whether or not from time to time reduced or extinguished
(except by payment thereof) or hereafter increased or incurred, whether or not
recovery may be or hereafter become barred by the statute of limitations,
whether enforceable or unenforceable as against the Borrower, whether or not
discharged, stayed or otherwise affected by any bankruptcy, insolvency or other
similar law or proceeding, whether created directly with the Administrative
Agent or any Lender or acquired by the Administrative Agent or any Lender
through assignment, endorsement or otherwise as permitted under this Agreement,
whether matured or unmatured, whether joint or several, as and when the same
become due and payable (whether at maturity or earlier, by reason of
acceleration, mandatory repayment or otherwise), in accordance with the terms of
any such instruments evidencing any such obligations, including all renewals,
extensions or modifications thereof (all Obligations of the Borrower to the
Administrative Agent or any Lender, including all of the foregoing, being
hereinafter collectively referred to as the "Guaranteed Obligations").
SECTION 4.2 Nature of Guaranty. Each Guarantor agrees that this Guaranty
is a continuing, unconditional guaranty of payment and performance and not of
collection, and that its obligations under this Agreement shall be primary,
absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement or any other Loan Document or any
other agreement, document or instrument to which the Borrower is or may become a
party;
(b) the absence of any action to enforce this Agreement or any other Loan
Document or the waiver or consent by the Administrative Agent or any Lender with
respect to any of the provisions of this Agreement or any other Loan Document;
(c) the existence, value or condition of, or failure to perfect its Lien
against, any security for or other guaranty of the Guaranteed Obligations or any
action, or the absence of any action, by the Administrative Agent or any Lender
in respect of such security or guaranty (including, without limitation, the
release of any such security or guaranty); or
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(d) any other action or circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor;
it being agreed by each Guarantor that its obligations under this Guaranty shall
not be discharged until the final and indefeasible payment and performance, in
full, of the Guaranteed Obligations and the termination of the Aggregate
Commitment. Each Guarantor expressly waives all rights it may now or in the
future have under any statute (including, without limitation, North Carolina
General Statutes Section 26-7, et seq. or similar law), or at law or in equity,
or otherwise, to compel the Administrative Agent or any Lender to proceed in
respect of the Guaranteed Obligations against the Borrower or any other party or
against any security for or other guaranty of the payment and performance of the
Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, such Guarantor. Each Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the failure of
the Administrative Agent or any Lender to commence an action in respect of the
Guaranteed Obligations against the Borrower, any Guarantor or any other party or
any security for the payment and performance of the Guaranteed Obligations. Each
Guarantor agrees that any notice or directive given at any time to the
Administrative Agent or any Lender which is inconsistent with the waivers in the
preceding two sentences shall be null and void and may be ignored by the
Administrative Agent or Lender, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless the Administrative Agent and the Required Lenders
have specifically agreed otherwise in writing. The foregoing waivers are of the
essence of the transaction contemplated by the Loan Documents and, but for this
Guaranty and such waivers, the Administrative Agent and Lenders would decline to
enter into this Agreement.
SECTION 4.3 Demand by the Administrative Agent. In addition to the terms
set forth in Section 4.2, and in no manner imposing any limitation on such
terms, if all or any portion of the then outstanding Guaranteed Obligations
under this Agreement are declared to be immediately due and payable in
accordance with the terms of this Agreement, then the Guarantors shall, upon
demand in writing therefor by the Administrative Agent to the Guarantors, pay
all or such portion of the outstanding Guaranteed Obligations then declared due
and payable. Payment by the Guarantors shall be made to the Administrative
Agent, to be credited and applied upon the Guaranteed Obligations, in
immediately available federal funds to an account designated by the
Administrative Agent or at the address referenced in this Agreement for the
giving of notice to the Administrative Agent or at any other address that may be
specified in writing from time to time by the Administrative Agent.
SECTION 4.4 Waivers. In addition to the waivers contained in Section 4.2,
each Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshalling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by such Guarantor of its obligations
under, or the enforcement by the Administrative Agent or the Lenders of, this
Guaranty. Each Guarantor further hereby waives diligence, presentment, demand,
protest and notice of whatever kind or nature with respect to any of the
Guaranteed Obligations and waives the benefit of all provisions of law which are
or might be in conflict with the terms of this Guaranty. Each Guarantor
represents, warrants and agrees that its obligations under this Guaranty are not
and shall not be subject to any counterclaims, offsets or defenses of any kind
against the Administrative Agent, the Lenders or the Borrower whether now
existing or which may arise in the future.
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SECTION 4.5 Benefits of Guaranty. The provisions of this Guaranty are for
the benefit of the Administrative Agent and the Lenders and their respective
successors, transferees, endorsees and assigns, and nothing in this Agreement
contained shall impair, as between the Borrower, the Administrative Agent and
the Lenders, the obligations of the Borrower under the Loan Documents. In the
event all or any part of the Guaranteed Obligations are transferred, endorsed or
assigned by the Administrative Agent or any Lender to any Person or Persons, any
reference to any "Administrative Agent" or "Lenders" in this Agreement shall be
deemed to refer equally to such Person or Persons.
SECTION 4.6 Modification of Loan Documents etc. If the Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Guarantors:
(a) change or extend the manner, place or terms of payment of, or renew or
alter all or any portion of, the Guaranteed Obligations;
(b) take any action under or in respect of the Loan Documents in the
exercise of any remedy, power or privilege contained therein or available to it
at law, in equity or otherwise, or waive or refrain from exercising any such
remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan Documents;
(d) extend or waive the time for performance by the Guarantors, the
Borrower or any other Person of, or compliance with, any term, covenant or
agreement (other than this Guaranty) on its part to be performed or observed
under a Loan Document, or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;
(e) take and hold security or collateral for the payment of the Guaranteed
Obligations or sell, exchange, release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which the Administrative Agent or
the Lenders have been granted a Lien, to secure any Debt of any Guarantor or the
Borrower to the Administrative Agent or the Lenders;
(f) release anyone who may be liable in any manner for the payment of any
amounts owed by the Guarantors or the Borrower to the Administrative Agent or
any Lender;
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(g) modify or terminate the terms of any intercreditor or subordination
agreement pursuant to which claims of other creditors of the Guarantors or the
Borrower are subordinated to the claims of the Administrative Agent or any
Lender; or
(h) apply any sums by whomever paid or however realized to any amounts
owing by the Guarantors or the Borrower to the Administrative Agent or any
Lender in such manner as the Administrative Agent or any Lender shall determine
in its discretion;
then neither the Administrative Agent nor any Lender shall incur any liability
to the Guarantors as a result thereof, and no such action shall impair or
release the obligations of the Guarantors under this Agreement.
SECTION 4.7 Reinstatement. Each Guarantor agrees that if any payment made
by the Borrower or any other Person applied to the Obligations is at any time
annulled, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid by the
Administrative Agent or Lender to the Borrower, their estate, trustee, receiver
or any other party, including, without limitation, such Guarantor, under any
Applicable Law or equitable cause, then, to the extent of such payment or
repayment, such Guarantor's liability under this Agreement shall be and remain
in full force and effect, as fully as if such payment had never been made, and,
if prior thereto, this Guaranty shall have been canceled or surrendered, this
Guaranty shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligations of such Guarantor in respect of the amount of
such payment.
SECTION 4.8 Waiver of Subrogation and Contribution. Each Guarantor hereby
irrevocably waives any claims or other rights which it may now or hereafter
acquire against the Borrower that arise from the existence or performance of
such Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim or remedy of the
Administrative Agent or the Lenders against the Borrower security or collateral
which the Administrative Agent or the Lenders now have or may hereafter acquire,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made under this Agreement or otherwise,
including without limitation, the right to take or receive from the Borrower,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights.
SECTION 4.9 Remedies. Upon the occurrence of any Event of Default, the
Administrative Agent may enforce against any Guarantor its obligations and
liabilities under this Agreement and exercise such other rights and remedies as
may be available to the Administrative Agent under this Agreement, the other
Loan Documents or applicable law.
SECTION 4.10 Limit of Liability. The obligations of each Guarantor under
this Agreement shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations under this Agreement subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state law.
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ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P. in Charlotte, North Carolina at
10:00 a.m. on March 31, 1999 or at such other place and on such other date as
the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing and Initial Loan. The obligation of the
Lenders to close this Agreement and to make the initial Loan and of the Issuing
Lender to issue any Letter of Credit is subject to the satisfaction of each of
the following conditions:
(a) Executed Loan Documents. This Agreement and the Notes, in form and
substance satisfactory to the Administrative Agent and each Lender shall have
been duly authorized, executed and delivered by the Borrower and each other
Credit Party, as applicable, shall be in full force and effect, no Default or
Event of Default shall exist, and the Borrower and each other Credit Party, as
applicable, shall have delivered original counterparts thereof to the
Administrative Agent.
(b) Insurance. The Administrative Agent shall have received certificates
of insurance and, if requested, certified copies of insurance policies in the
form required under Section 8.3 and otherwise in form and substance reasonably
satisfactory to the Administrative Agent.
(c) Title Insurance. The Administrative Agent shall have received a copy
of the owner's or leasehold title insurance policy, or a binding commitment for
the issuance of such policy, with respect to each Eligible Property.
(d) Closing Certificates; etc.
(i) Certificate of GTA. The Administrative Agent shall have received
a certificate from the chief executive officer or chief financial officer
of GTA, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that all representations and
warranties of the Credit Parties contained in this Agreement and the other
Loan Documents are true, correct and complete to the best knowledge of
such Person; that to the best knowledge of such Person none of the Credit
Parties is in violation of any of the covenants contained in this
Agreement and the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of
Default has occurred and is continuing; and that to the best knowledge of
such Person the Borrower has satisfied each of the closing conditions.
(ii) Certificate of Secretary of the General Partner. The
Administrative Agent shall have received a certificate of the secretary or
assistant secretary of GTA GP, in its capacity as the Managing General
Partner of the Borrower certifying on behalf of the Borrower that attached
thereto is a true and complete copy of the Certificate of Limited
Partnership of the Borrower and all amendments thereto, certified as of a
recent date by the appropriate Governmental Authority in its jurisdiction
of formation and a true and complete copy of the Agreement of Limited
Partnership of the Borrower and all amendments thereto; that attached
thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of GTA GP authorizing the execution, delivery and
performance of the Loan Documents to which the Borrower is a party; and as
to the incumbency and genuineness of the signature of each officer of GTA
GP executing Loan Documents to which the Borrower is a party.
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(iii) Certificate of Secretary of each Guarantor. The Administrative
Agent shall have received a certificate of the secretary or assistant
secretary of each Guarantor certifying that attached thereto is a true and
complete copy of the articles of incorporation of such Guarantor and all
amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation; that attached
thereto is a true and complete copy of the bylaws of such Guarantor as in
effect on the date of such certification; that attached thereto is a true
and complete copy of resolutions duly adopted by the Board of Directors of
such Guarantor authorizing the borrowings contemplated under this
Agreement and the execution, delivery and performance of this Agreement
and the other Loan Documents to which it is a party; and as to the
incumbency and genuineness of the signature of each officer of such
Guarantor executing Loan Documents to which it is a party.
(iv) Certificates of Existence. The Administrative Agent shall have
received long-form certificates as of a recent date of the good standing
of the Borrower and each Guarantor under the laws of its jurisdiction of
organization and each other jurisdiction where such Person is qualified to
do business and a certificate of the relevant taxing authorities of such
jurisdictions certifying that such Person has filed required tax returns
and owes no delinquent taxes.
(v) Opinions of Counsel. The Administrative Agent shall have
received favorable opinions of counsel to the Credit Parties addressed to
the Administrative Agent and the Lenders with respect to the Credit
Parties, the Loan Documents and such other matters as the Lenders shall
reasonably request.
(vi) Tax Forms. The Administrative Agent shall have received copies
of the United States Internal Revenue Service forms required by Section
3.13(d) of this Agreement.
(vii) Pool Valuation Certificate. The Administrative Agent shall
have received a Pool Valuation Certificate properly completed and executed
by the Borrower, setting forth the Pool Value, the amount of which shall
be equal to or greater than 1.75 times the aggregate amount of all
unsecured Debt of the Credit Parties (including the amount of the
outstanding Obligations (after giving effect to the Loans to be advanced
to the Borrower and Letters of Credit to be issued on the Closing Date).
(e) Consents; Defaults.
(i) Governmental and Third Party Approvals. All necessary approvals,
authorizations and consents, if any be required, of any Person and of all
Governmental Authorities and courts having jurisdiction with respect to
the transactions contemplated by this Agreement and the other Loan
Documents shall have been obtained.
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(ii) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any Governmental Authority to enjoin, restrain, or
prohibit, or to obtain substantial damages in respect of, or which is
related to or arises out of this Agreement or the other Loan Documents or
the consummation of the transactions contemplated hereby or thereby, or
which, in the Administrative Agent's reasonable discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement
and such other Loan Documents.
(iii) No Event of Default. No Default or Event of Default shall have
occurred and be continuing.
(f) Financial Statements. The Administrative Agent shall have received the
most recent audited Consolidated financial statements of the Credit Parties, all
in form and substance satisfactory to the Administrative Agent.
(g) Payment at Closing; Fee Letter. There shall have been paid by the
Borrower to the Administrative Agent and the Lenders the fees set forth or
referenced in Section 3.3 and any other accrued and unpaid fees or commissions
due under this Agreement (including, without limitation, legal fees and
expenses), and to any other Person such amount as may be due thereto in
connection with the transactions contemplated hereby, including all taxes, fees
and other charges in connection with the execution, delivery, recording, filing
and registration of any of the Loan Documents. The Administrative Agent shall
have received duly authorized and executed copies of the fee letter agreement
referred to in Section 3.3(b).
(h) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing from the Borrower and identification of the
account or accounts into which the proceeds of such Loans are to be
disbursed.
(ii) Proceedings and Documents. All opinions, certificates and other
instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form
and substance to the Lenders. The Lenders shall have received copies of
all other instruments and other evidence as the Lenders may reasonably
request, in form and substance reasonably satisfactory to the Lenders,
with respect to the transactions contemplated by this Agreement and the
taking of all actions in connection therewith.
(iii) Due Diligence and Other Documents. The Borrower shall have
delivered to the Administrative Agent such other documents, certificates
and opinions as the Administrative Agent reasonably requests, certified by
a secretary or assistant secretary of GTA, in its capacity as the
Borrower's managing general partner, as a true and correct copy thereof.
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SECTION 5.3 Conditions to All Loans. The obligation of the Lenders to make
any Loan and the obligation of the Issuing Lender to issue any Letter of Credit
are subject to the satisfaction of the following conditions precedent on the
relevant borrowing or issuance date:
(a) Continuation of Representations and Warranties. The representations
and warranties contained in Article VI shall be true and correct in all material
respects, and shall be deemed to be remade, on and as of such borrowing date
with the same effect as if made on and as of such date.
(b) No Existing Default. No Default or Event of Default shall have
occurred and be continuing under this Agreement (i) on the borrowing date with
respect to such Loan or after giving effect to the Loans to be made on such date
or (ii) on the issue date with respect to any Letter of Credit or after giving
effect to such Letter of Credit on such date.
(c) Officer's Compliance Certificate; Additional Documents. The
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.
(d) Availability. After giving effect to the requested Loan or Letter of
Credit, the outstanding Extensions of Credit will not exceed (i) with respect to
a Loan, the amount available pursuant to Section 2.1 and (ii) with respect to a
Letter of Credit, the amount available pursuant to Section 2A.1.
(e) Pool Valuation Certificate. The Administrative Agent shall have
received a Pool Valuation Certificate properly completed and executed by the
Borrower, setting forth the Pool Value, the amount of which shall be equal to or
greater than 1.75 times the aggregate amount of all unsecured Debt of the Credit
Parties (including the amount of all Obligations outstanding after giving effect
to the requested Loan or Letter of Credit).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 Representations and Warranties. To induce the Administrative
Agent to enter into this Agreement and the Lenders to make the Loans and issue
or participate in the Letters of Credit, the Credit Parties hereby represent and
warrant to the Administrative Agent and the Lenders that:
(a) Organization; Power; Qualification. Each of the Credit Parties is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has the power and authority to
own its properties and to carry on its business as now being and hereafter
proposed to be conducted and is duly qualified and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization and in which the failure
to qualify would have a Material Adverse Effect. The jurisdictions in which the
Credit Parties are qualified to do business are described on Schedule 6.1(a).
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(b) Ownership. The Subsidiaries of the Borrower are set forth on Schedule
6.1(b). GTA owns no Subsidiary other than GTA GP, GTA LP and the Borrower.
Neither GTA GP nor GTA LP owns any Subsidiary other than the Borrower. The
capitalization of the Guarantors is described on Schedule 6.1(b). All
outstanding shares of stock of the Guarantors have been duly authorized and
validly issued and are fully paid and nonassessable.
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of the
Credit Parties has the right, power and authority and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and each of the other Loan Documents to which it is a party and the borrowings
hereunder and the transactions contemplated hereby and thereby, in each case in
accordance with their respective terms. This Agreement and each of the other
Loan Documents have been duly executed and delivered by the duly authorized
officers of each Guarantor and of the duly authorized general partner of the
Borrower, and each such document constitutes the legal, valid and binding
obligation of each of the Credit Parties, to the best of its knowledge,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar state
or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
The execution, delivery and performance by each of the Credit Parties of the
Loan Documents to which such Person is a party, in accordance with their
respective terms, the borrowings under this Agreement and the transactions
contemplated hereby and thereby do not and will not, by the passage of time, the
giving of notice or otherwise, (i) require any Governmental Approval or violate
any Applicable Law relating to any Credit Party, (ii) conflict with, result in a
breach of or constitute a default under the agreement of limited partnership of
the Borrower, the articles of incorporation, bylaws or other organizational
documents of any Guarantor or any indenture, agreement or other instrument to
which any Credit Party is a party or by which any of its properties may be bound
or any Governmental Approval relating to any Credit Party, or (iii) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by any Credit Party other than Liens
arising under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each of the Credit
Parties, to the best of its knowledge, (i) has all material Governmental
Approvals required by any Applicable Law for it to conduct its business, each of
which is in full force and effect, is final and not subject to review on appeal
and is not the subject of any pending or, to the best of its knowledge,
threatened attack by direct or collateral proceeding, and (ii) is in compliance
with each Governmental Approval applicable to it and in compliance with all
other Applicable Laws relating to it or any of its respective properties, to the
extent such failure to comply would have a Material Adverse Effect on the Credit
Parties.
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(f) Tax Returns and Payments. Each of the Credit Parties has duly filed
(or will duly file in accordance with Applicable Laws) or caused (or will cause
in accordance with Applicable Laws) to be filed all federal, state, local and
other tax returns required by Applicable Law (including the provisions of the
Code and the regulations thereunder relating to "real estate investment trusts")
to be filed, and has paid (or will pay in accordance with Applicable Laws), or
made adequate provision for the payment of, all federal, state, local and other
taxes, assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable. No Governmental Authority
has asserted any Lien or other claim against any Credit Party with respect to
unpaid taxes which has not been discharged or resolved. The charges, accruals
and reserves on the books of each of the Credit Parties in respect of federal,
state, local and other taxes for all Fiscal Years and portions thereof since the
organization of each Credit Party are in the judgment of such Person adequate,
and such Person does not anticipate any additional taxes or assessments for any
of such years.
(g) Environmental Matters.
(i) The golf course properties of the Credit Parties do not contain,
and to its knowledge have not previously contained, any Hazardous
Materials in amounts or concentrations which (A) constitute or constituted
a violation of, or (B) could give rise to liability under, applicable
Environmental Laws, except as otherwise set forth in the Environmental
Assessment Reports;
(ii) The golf course properties of the Credit Parties and all
operations conducted in connection therewith are in compliance, and have
been in compliance, with all applicable Environmental Laws, and there is
no contamination at, under or about such golf course properties or such
operations which could interfere with the continued operation of such golf
course properties or impair the fair saleable value thereof, except as
otherwise set forth in the Environmental Assessment Reports;
(iii) No Credit Party has received any notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to
any golf course property or the operations conducted in connection
therewith, nor does any Credit Party have knowledge or reason to believe
that any such notice will be received or is being threatened, except as
otherwise set forth in the Environmental Assessment Reports;
(iv) Hazardous Materials have not been transported or disposed of
from the golf course properties of any Credit Party in violation of, or in
a manner or to a location which could give rise to liability under,
applicable Environmental Laws, nor have any Hazardous Materials been
generated, treated, stored or disposed of at, on or under any of such golf
course properties in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Laws, except as otherwise
set forth in the Environmental Assessment Reports;
(v) No judicial proceedings or governmental or administrative action
is pending, or, to the knowledge of any Credit Party, threatened, under
any applicable Environmental Law to which any Credit Party is or will be
named as a party with respect to such golf course properties or operations
conducted in connection therewith, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
applicable Environmental Law with respect to such golf course properties
or such operations, except as set forth in the Environmental Assessment
Reports; and
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(vi) There has been no release, or to the best of any Credit Party's
knowledge, the threat of release, of Hazardous Materials at or from such
properties, in violation of or in amounts or in a manner that could give
rise to liability under applicable Environmental Laws, except as set forth
in the applicable Environmental Assessment Reports.
(h) ERISA.
(i) Neither the Borrower nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plans
other than those identified on Schedule 6.1(h);
(ii) the Borrower and each ERISA Affiliate is in material compliance
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans
except for any required amendments for which the remedial amendment period
as defined in Section 401(b) of the Code has not yet expired. Each
Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to
be so qualified, and each trust related to such plan has been determined
to be exempt under Section 501(a) of the Code. No liability has been
incurred by the Borrower or any ERISA Affiliate which remains unsatisfied
for any taxes or penalties with respect to any Employee Benefit Plan or
any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor
has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has the Borrower or any
ERISA Affiliate failed to make any contributions or to pay any amounts due
and owing as required by Section 412 of the Code, Section 302 of ERISA or
the terms of any Pension Plan prior to the due dates of such contributions
under Section 412 of the Code or Section 302 of ERISA, nor has there been
any event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a)
of ERISA with respect to any Pension Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has: (A) engaged
in a nonexempt prohibited transaction described in Section 406 of the
ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC
which remains outstanding other than the payment of premiums and there are
no premium payments which are due and unpaid, (C) failed to make a
required contribution or payment to a Multiemployer Plan, or (D) failed to
make a required installment or other required payment under Section 412 of
the Code;
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(v) No Termination Event has occurred or is reasonably expected to
occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is existing
or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined
in Section 3(1) of ERISA) currently maintained or contributed to by the
Borrower or any ERISA Affiliate, (B) Pension Plan, or (C) Multiemployer
Plan.
(i) Eligible Properties. With respect to each Eligible Property as of the
date hereof and as of the date of each Pool Value Certificate:
(i) No portion of any improvements on any such Eligible Property is
located in an area identified on a flood hazard map or flood insurance
rate map issued by the Secretary of Housing and Urban Development or the
Federal Emergency Management Agency, or any successor thereto, as a
special flood hazard area, or, if located within any such area, the
Borrower has obtained and will maintain on such Eligible Property an
appropriate flood insurance policy meeting the requirements of the
National Flood Insurance Program.
(ii) To the Borrower's knowledge, each such Eligible Property and
the development, use and occupancy thereof are in material compliance
with all applicable zoning ordinances (without reliance upon adjoining or
other properties), building codes, land use and Environmental Laws and
other laws regulating the development, use and occupancy of real property
and applicable to such Eligible Property.
(iii) Each such Eligible Property is served by all utilities
required for the current and contemplated uses thereof. All utility
service is provided by public utilities and such Eligible Property has
accepted or is equipped to accept such utility service.
(iv) All public roads and streets necessary for service of and
access to each such Eligible Property for the current or contemplated use
thereof have been completed, are serviceable and all-weather and are
physically and legally open for use by the public.
(v) Each such Eligible Property is served by public water and sewer
systems. All liquid and solid waster disposal, septic and sewer systems
located on each such Eligible Property are in a good and safe condition
and repair and are in compliance with all Applicable Laws with respect to
such systems.
(vi) Each such Eligible Property is free of any patent or, to the
best knowledge of the Credit Parties, latent structural or other material
defect or deficiency. Each Eligible Property is free of damage and waste
that would materially and adversely affect its value, is in good repair
and there is no deferred maintenance other than ordinary wear and tear.
Each such Eligible Property is free from damage caused by fire or other
casualty. There is no pending or, to the best knowledge of the Credit
Parties after due inquiry, threatened condemnation proceedings affecting
any such Eligible Property, or any material part thereof.
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(vii) All improvements on each such Eligible Property lie within the
boundaries and building restrictions of the legal description of record
of such Eligible Property and no such improvements encroach upon any
adjoining property, other than encroachments for which the applicable
Credit Party has obtained a written waiver from the owner of the
adjoining property or permit from the appropriate Governmental Authority,
which permit or waiver is in form and substance satisfactory to the
Administrative Agent. No improvements on adjoining properties encroach
upon such Eligible Property or easements benefiting such Eligible
Property. All amenities, access routes or other items that benefit such
Eligible Property are under direct control of the applicable Credit
Party, constitute permanent or non-terminable easements that benefit all
or part of such Eligible Property or are public property, and such
Eligible Property, by virtue of such easements or otherwise, is
contiguous to a physically open, dedicated all weather public street, and
has the necessary permits for ingress and egress.
(viii) There are no delinquent taxes, ground rents, water charges,
sewer rents, assessments, insurance premiums, leasehold payments, or
other outstanding charges affecting any such Eligible Property, except to
the extent such items are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been provided.
(j) Margin Stock. The Borrower is not engaged principally or as one of its
activities in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" (as each such term is defined or used in
Regulations G and U of the Board of Governors of the Federal Reserve System). No
part of the proceeds of any of the Loans or the Letters of Credit will be used
for purchasing or carrying margin stock or for any purpose which violates, or
which would be inconsistent with, the provisions of Regulation T, U or X of such
Board of Governors.
(k) Government Regulation. The Borrower is not an "investment company" or
a company "controlled" by an "investment company" (as each such term is defined
or used in the Investment Company Act of 1940, as amended) and neither the
Borrower nor any Subsidiary thereof is, or after giving effect to any Extension
of Credit will be, subject to regulation under the Public Utility Holding
Company Act of 1935 or the Interstate Commerce Act, each as amended, or any
other Applicable Law which limits its ability to incur or consummate the
transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and accurate
list of all Material Contracts of the Credit Parties in effect as of the Closing
Date not listed on any other Schedule hereto; other than as set forth in
Schedule 6.1(l), each such Material Contract is, and after giving effect to the
consummation of the transactions contemplated by the Loan Documents will be, to
the best of each Credit Party's knowledge, in full force and effect in
accordance with the terms thereof. The Borrower has delivered to the
Administrative Agent a true and complete copy of each Material Contract required
to be listed on Schedule 6.1(l).
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(m) Financial Statements. The (i) audited Consolidated balance sheet of
the Credit Parties as of December 31, 1997 and the related statements of income
and retained earnings and cash flows for the period then ended and (ii)
unaudited Consolidated balance sheet of the Credit Parties as of September 30,
1998 and related unaudited interim statements of revenue and retained earnings,
copies of which have been furnished to the Administrative Agent and each Lender,
are, and all financial statements hereafter delivered to the Administrative
Agent or any Lender, whether pursuant to Article VII or otherwise, shall be,
complete and correct in all material respects and fairly present the assets,
liabilities (including, without limitation, material contingent liabilities) and
financial position of the Credit Parties as at such dates, and the results of
the operations and changes of financial position for the periods then ended. All
such financial statements, including the related schedules and notes thereto,
have been, or will be, as the case may be, prepared in accordance with GAAP. The
Credit Parties have and shall have no Debt, obligation or other unusual forward
or long-term commitment which is not fairly reflected in the foregoing financial
statements or in the notes thereto.
(n) No Material Adverse Change. Since December 31, 1997 there has been no
material adverse change in the properties, business, operations, prospects, or
condition (financial or otherwise) of the Credit Parties and no event has
occurred or condition arisen that could reasonably be expected to have a
Material Adverse Effect.
(o) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made under this Agreement, each of the Credit Parties will
be Solvent.
(p) Titles to Properties. Each Credit Party has such title to the real
property owned by it as is necessary or desirable to the conduct of its business
and valid and legal title to all of its personal property and assets, including,
but not limited to, those reflected on the Consolidated balance sheet of the
Credit Parties delivered pursuant to Section 6.1(m), except those which have
been disposed of by the Credit Parties subsequent to such date, which
dispositions have been in the ordinary course of business or as otherwise
expressly permitted under this Agreement.
(q) Liens. None of the properties and assets of any Credit Party is
subject to any Lien, except Permitted Liens that are more specifically
identified on Schedule 6.1(q). No financing statement under the Uniform
Commercial Code of any state which names any Credit Party or any of its trade
names or divisions as debtor and which has not been terminated, has been filed
in any state or other jurisdiction and no Credit Party has signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except to perfect those Liens
permitted by Section 10.3.
(r) Debt and Contingent Obligations. Schedule 6.1(r) is a complete and
correct listing of all existing Debt and Contingent Obligations of the Credit
Parties. The Credit Parties have performed and are in compliance with all of the
terms of such Debt and Contingent Obligations and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with notice or lapse of time or both would constitute such a default or
event of default on the part of any Credit Party exists with respect to any such
Debt or Contingent Obligation.
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(s) Litigation. Except as set forth on Schedule 6.1(s), there are no
actions, suits or proceedings pending after service on any of the Credit Parties
nor, to the knowledge of the Credit Parties, threatened against or in any other
way relating adversely to or affecting any of the Credit Parties or any of their
properties in any court or before any arbitrator of any kind or before or by any
Governmental Authority.
(t) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by any Credit Party under any Material Contract or judgment,
decree or order to which any Credit Party is a party or by which such Credit
Party or any of its properties may be bound or which would require such Credit
Party to make any payment thereunder prior to the scheduled maturity date
therefor.
(u) Accuracy and Completeness of Information. All written information,
reports and other papers and data prepared by or on behalf of the Credit Parties
and furnished to the Lenders were, at the time the same were so furnished,
complete and correct in all respects to the extent necessary to give the
recipient a true and accurate knowledge of the subject matter. No such document
furnished or written statement made to the Administrative Agent or the Lenders
by the Credit Parties in connection with the negotiation, preparation or
execution of this Agreement or any of the Loan Documents contains or will
contain any untrue statement of a fact material to the creditworthiness of the
Borrower or omits or will omit to state a material fact necessary in order to
make the statements contained therein not misleading. None of the Credit Parties
is aware of any facts which it has not disclosed in writing to the
Administrative Agent having a Material Adverse Effect, or insofar as such Person
can now foresee, could reasonably be expected to have a Material Adverse Effect.
(v) Judgments. There are no judgments or orders for the payment of money
outstanding against any Credit Party.
(w) Participating Leases/Innisbrook Documents. To the best knowledge of
the Credit Parties, and except with respect to the Osage National Participating
Lease, no monetary default, and no non-monetary default which would have a
material adverse effect on the enforcement thereof, exists under any
Participating Lease or under the Innisbrook Note, the Innisbrook Loan Agreement
or the Innisbrook Mortgage.
SECTION 6.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including, but not limited to, any such representation or warranty
made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date and at and as of the date of each Loan and each
issuance of a Letter of Credit, shall survive the Closing Date and the date of
each such Loan and issuance, and shall not be waived by the execution and
delivery of this Agreement, any investigation made by or on behalf of the
Lenders or any borrowing under this Agreement.
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ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11, the Credit Parties will furnish or cause to be furnished to
the Lenders at their respective addresses as set forth on Schedule 1, or such
other office as may be designated by the Lenders from time to time:
SECTION 7.1 Financial Statements.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter, an
unaudited Consolidated balance sheet of GTA and the other Credit Parties as of
the close of such fiscal quarter and unaudited Consolidated statements of
income, retained earnings and cash flows for the fiscal quarter then ended and
that portion of the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by GTA in accordance with GAAP and,
if applicable, containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting principles
and practices during the period, and certified by the chief financial officer of
GTA to present fairly in all material respects the financial condition of GTA
and the other Credit Parties as of their respective dates and the results of
operations of GTA and the other Credit Parties for the respective periods then
ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any event
within one hundred twenty (120) days after the end of each Fiscal Year, an
audited Consolidated balance sheet of GTA and the other Credit Parties as of the
close of such Fiscal Year and audited Consolidated statements of income,
retained earnings and cash flows for the Fiscal Year then ended, including the
notes thereto, all in reasonable detail setting forth in comparative form the
corresponding figures as of the end of and for the preceding Fiscal Year and
prepared in accordance with GAAP and, if applicable, containing disclosure of
the effect on the financial position or results of operation of any change in
the application of accounting principles and practices during the year, and
accompanied by a report thereon by an independent certified public accounting
firm that is not qualified with respect to scope limitations imposed by GTA and
the other Credit Parties or any of its Subsidiaries or with respect to
accounting principles followed by GTA and the other Credit Parties not in
accordance with GAAP or with respect to the financial impact of, or failure to
take all appropriate steps to successfully address, year 2000 issues.
SECTION 7.2 Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Section 7.1 (a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief financial officer or the treasurer of GTA in the form of Exhibit E
attached hereto (an "Officer's Compliance Certificate").
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SECTION 7.3 Accountants' Certificate. At each time financial statements
are delivered pursuant to Section 7.1(b), a certificate of the Borrower's
independent public accountants certifying such financial statements addressed to
the Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the certification
of such financial statements, they obtained no knowledge of any Default or Event
of Default or, if such is not the case, specifying such Default or Event of
Default and its nature and period of existence;
(b) including the calculations prepared by such independent public
accountants required to establish whether or not the Credit Parties are in
compliance with the financial covenants set forth in Article IX of this
Agreement as at the end of each respective period; and
(c) including a fully executed copy of a letter from such accountants to
GTA expressly authorizing the Lenders to rely on the examination and report of
such independent public accountants with respect to the audited financial
statements of the Credit Parties as of and for such Fiscal Year then ending.
SECTION 7.4 Other Reports.
(a) Within thirty (30) days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Borrower sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which GTA
files with the Securities and Exchange Commission (including each report made on
Form 8-K, 10-Q and 10-K) or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by GTA to the public; and
(b) Such other information regarding the operations, business affairs and
financial condition of the Credit Parties as the Administrative Agent or any
Lender may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no
event later than thirty (30) days after an executive officer of GTA obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all material proceedings and material
investigations by or before any Governmental Authority and all actions and
proceedings in any court or before any arbitrator against or involving any
Credit Party or any of their respective properties, assets or businesses
exceeding $250,000;
(b) any notice of any material violation received by any Credit Party from
any Governmental Authority including, without limitation, any notice of material
violation of Environmental Laws;
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(c) any material labor controversy that has resulted in, or threatens to
result in, a strike or other work action against any Credit Party;
(d) any attachment, judgment, lien, levy or order exceeding $250,000 that
may be assessed against or threatened against any Credit Party;
(e) (i) any Default or Event of Default, or (ii) any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract to which
any Credit Party is a party or by which any Credit Party or any of their
respective properties may be bound;
(f) (i) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all written notices
received by any Credit Party or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (iii) all written notices received by any Credit Party or any
ERISA Affiliate from a Multi-employer Plan sponsor concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of ERISA, and (iv) any
Credit Party obtaining written notice that any Credit Party or any ERISA
Affiliate has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of Section 4041(c)
of ERISA;
(g) promptly after receipt thereof, any written communication from the
Internal Revenue Service which challenges GTA's status as a "real estate
investment trust" within the meaning of Section 856 of the Code;
(h) any event which makes any of the representations set forth in Section
6.1 inaccurate in any material respect; and
(i) any monetary default, or non-monetary default which would have a
material adverse effect on the enforcement thereof, under any Participating
Lease or the Innisbrook Note or Innisbrook Mortgage.
SECTION 7.6 Accuracy of Information. All written information, reports,
statements and other papers and data furnished by or on behalf of any Credit
Party to the Administrative Agent or any Lender (other than financial forecasts)
respecting any Credit Party whether pursuant to this Article VII or any other
provision of this Agreement, or any of the Security Documents, shall be, at the
time the same is so furnished, to the best of such Credit Party's knowledge,
complete and correct in all material respects to the extent necessary to give
the Administrative Agent or any Lender complete, true and accurate knowledge of
the subject matter based on the Credit Party's knowledge thereof.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner provided
for in Section 13.11, each Credit Party will, and will cause each of its
Subsidiaries to:
SECTION 8.1 Preservation of Existence and Related Matters. Preserve and
maintain its separate corporate or partnership existence, as applicable, and all
rights, franchises, licenses and privileges necessary to the conduct of its
business, and qualify and remain qualified as a foreign corporation or
partnership and authorized to do business in each jurisdiction in which the
failure to so qualify would have a Material Adverse Effect.
SECTION 8.2 Maintenance of Property. Protect and preserve all properties
useful in and material to its business, including copyrights, patents, trade
names and trademarks and service marks; maintain in good working order and
condition all buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 8.3 Insurance.
(a) Keep its insurable properties adequately insured at all times;
maintain such other insurance, to such extent and against such risks, including
fire and other risks insured against by extended coverage, as is customary with
similarly-situated companies in the same or similar businesses and maintain such
other insurance as may be required by Applicable Law, in each case with
financially sound and reputable insurers reasonably acceptable to the
Administrative Agent.
(b) Require each lessee, pursuant to the related Participating Lease, and
the Borrower under the Innisbrook Mortgage, to maintain comprehensive public
liability insurance with amounts of coverage of not less than $3,000,000 per
occurrence and in the aggregate.
(c) On the Closing Date and from time to time thereafter deliver to the
Administrative Agent upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts and rates of
the insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
SECTION 8.4 Accounting Methods and Financial Records. Maintain a system of
accounting, and keep such books, records and accounts (which shall be true and
complete in all material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform all
Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that each Credit Party may contest any item described in
this Section 8.5(a) in good faith so long as adequate reserves are maintained
with respect thereto in accordance with GAAP.
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SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the conduct of its business.
SECTION 8.7 Environmental Laws. In addition to and without limiting the
generality of Section 8.6, (i) comply with, and ensure such compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, (ii) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives of
any Governmental Authority regarding Environmental Laws, and (iii) defend,
indemnify and hold harmless the Administrative Agent and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, officers and directors,
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of any Credit Party, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation, reasonable and actually incurred attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing directly result from
the gross negligence or willful misconduct of the party seeking indemnification
therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without limiting the
generality of Section 8.6, (a) comply with all applicable provisions of ERISA
and the regulations and published interpretations thereunder with respect to all
Employee Benefit Plans, (b) not take any action or fail to take action the
result of which could be a liability to the PBGC or to a Multi-employer Plan,
(c) not participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the Code, (d) operate each Employee Benefit
Plan in such a manner that will not incur any tax liability under Section 4980B
of the Code or any liability to any qualified beneficiary as defined in Section
4980B of the Code, and (e) furnish to the Administrative Agent upon the
Administrative Agent's request such additional information about any Employee
Benefit Plan as may be reasonably requested by the Administrative Agent.
SECTION 8.9 Compliance With Agreements. Comply in all respects with each
term, condition and provision of all leases, agreements and other instruments
entered into in the conduct of its business including, without limitation, any
Participating Lease or Material Contract; provided, that each Credit Party may
contest any such lease, agreement or other instrument, including, without
limitation, any Material Contract, in good faith through applicable proceedings
so long as adequate reserves are maintained in accordance with GAAP.
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SECTION 8.10 Unencumbered Pool.
(a) Ownership of Eligible Properties in Unencumbered Pool. The Borrower
will own at all times a minimum of seven (7) Eligible Properties (herein, the
"Unencumbered Pool"). The aggregate Property Value, determined in accordance
with Section 8.10(b), of the Eligible Properties in the Unencumbered Pool shall
at all times equal or exceed an amount equal to 1.75 times the aggregate amount
of unsecured Debt (including the Obligations hereunder) of the Credit Parties.
(b) Determination of Property Value.
(i) Unencumbered Pool. The Unencumbered Pool as of the date of this
Agreement, and the Property Value of each Eligible Property in the
Unencumbered Pool (as of the date of this Agreement) shall be as set forth
on Schedule 8.10(b) hereto.
(ii) Subsequently-Acquired Eligible Properties. The Property Value
of each Eligible Property, other than the Eligible Properties set forth on
Schedule 8.10(b), shall equal the Purchase Price of such Eligible
Property; provided that (A) the Purchase Price is equal to or less than
that amount which would be derived using a capitalization rate of not less
than 9.00% (or conversely, a multiple not in excess of 11.11) based upon
the Adjusted NOI [EBITDA] for such property; and (B) Net Income Before
Coverage Ratio for such Eligible Property is at least 113.5% of the
Adjusted NOI [EBITDA] for such Eligible Property.
(iii) Non-Conforming Eligible Properties. The Property Value of each
Eligible Property which does not conform to the criteria set forth in
subsection (ii) above shall be determined as follows:
(A) The Property Value of any Eligible Property for which the
acquisition cost is determined upon the basis of a capitalization
rate lower than 9.00% (or conversely, a multiple in excess of 11.11)
shall be equal to the Adjusted NOI [EBITDA] for such property times
11.11 (i.e., that value which would be obtained by using a 9.00%
capitalization rate);
(B) The Property Value of any Eligible Property for which Net
Income Before Coverage Ratio is less than 113.5% of Adjusted NOI
[EBITDA], shall be determined by dividing Net Income Before Coverage
Ratio of such property by 113.5% and then dividing the resulting
number by the greater of (1) a capitalization rate of 9.00% or (2)
the actual capitalization rate used by the applicable Credit Party
in determining the acquisition cost of such property; provided,
however, that upon the written request of the Borrower and delivery
to the Administrative Agent of financial statements for a period of
not less than 12 months showing that the Net Income Before Coverage
Ratio (for such period) from such Eligible Property is at least
113.5% of the corresponding Adjusted NOI [EBITDA], the Property
Value of such Eligible Property shall be equal to the lesser of (a)
its acquisition cost or (b) the value that would be determined using
paragraph (A), above; and provided, further, that the Borrower shall
not be entitled to request more than one adjustment to the Property
Value of any such Eligible Property.
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(iv) Legends of Virginia. The aggregate Property Value of the
Legends of Virginia Golf Courses shall be $20,000,000.
(c) Pool Valuation Certificate. The Borrower shall deliver to the
Administrative Agent within forty-five (45) days after the end of each quarter a
Pool Valuation Certificate properly completed and executed by the Borrower,
setting forth the Pool Value as of the most recent quarter-end.
(d) Exclusion of Non-Performing or Delinquent Properties.
(i) Any Eligible Property shall cease to be an Eligible Property and
shall no longer be included in the determination of the Pool Value if (A)
the Gross Golf Revenues for any Seasoned Eligible Property for the
two-quarter period ending on the last day of the quarterly period covered
by any Pool Valuation Certificate are less than eighty-five percent (85%)
of the Gross Golf Revenues for such Seasoned Eligible Property for the
corresponding two-quarter period during the immediately preceding year, or
(B) an insolvency proceeding shall be commenced by or against the lessee
under the Participating Lease for such Eligible Property (or the obligor
under the Innisbrook Note), (C) the lessee under the related Participating
Lease for such Eligible Property (or the obligor under the Innisbrook
Note) shall at any time be more than thirty (30) days delinquent in its
required payments to the applicable Credit Party under such Participating
Lease or Innisbrook Note, as applicable, or (D) any other material default
shall occur under the Participating Lease (or the Innisbrook Note or
Innisbrook Mortgage) and such default shall continue for a period of
ninety (90) days or more. No such property shall be reinstated as an
Eligible Property or included in the determination of the Pool Value
without the prior written consent of the Required Lenders.
(ii) Provided the Sandpiper Golf Course is closed during calendar
year 1999 for a re-design of all or any portion of the golf course, the
Sandpiper Golf Course shall not be required to comply with the quarterly
Gross Golf Revenues requirement set forth in Section 8.10(d)(i) above
until the earlier of (x) the quarter commencing July 1, 2001 or (y) the
second full calendar quarter after the completion of the work and the
reopening of the Sandpiper Golf Course for play. The lessee of the
Sandpiper Golf Course shall continue to make its required payments to the
applicable Credit Party under the related Participating Lease.
(iii) Oyster Bay shall cease to be an Eligible Property unless the
Borrower shall, not later than April 30, 1999, cause the Lessor's Estoppel
Agreement substantially in the form attached hereto as Exhibit K to be
fully executed and delivered to the Administrative Agent. Oyster Bay shall
not thereafter be included as an Eligible Property until such Lessor's
Estoppel Agreement is fully executed and delivered to the Administrative
Agent.
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SECTION 8.11 Visits and Inspections. Upon reasonable prior notice, permit
representatives of the Administrative Agent or any Lender, from time to time
during normal business hours, to visit and inspect its properties; inspect,
audit and make extracts from its books, records and files, including, but not
limited to, management letters prepared by independent accountants; and discuss
with its principal officers, and its independent accountants, its business,
assets, liabilities, financial condition, results of operations and business
prospects.
SECTION 8.12 Subsidiaries. Concurrently with the creation or acquisition
of any Subsidiary (a) cause it to execute and deliver to the Administrative
Agent a supplement to the Guaranty substantially in the form of Exhibit G
hereto, and (b) cause to be delivered to the Administrative Agent such other
documents as the Administrative Agent or Required Lenders shall reasonably
request in connection therewith, including, without limitation, officers'
certificates, financial statements, opinions of counsel, resolutions, charter
documents, certificates of existence and authority to do business and any other
closing certificates and documents described in Section 5.2.
SECTION 8.13 Further Assurances. Perform, make, execute and deliver all
such additional and further acts, things, deeds and instruments as the
Administrative Agent or any Lender may reasonably require to document and
consummate the transactions contemplated hereby and to vest completely in and
insure the Administrative Agent and the Lenders their respective rights under
this Agreement, the Notes, the Letters of Credit and the other Loan Documents.
SECTION 8.14 Line of Business. Continue to have as its primary business
the acquisition but not construction of golf courses and related improvements
(such improvements not to include accommodations) and the leasing of such golf
courses and related improvements to independent lessees; provided that to the
extent the improvements related to any golf course property include a hotel,
motel, condominiums or other lodging (collectively, "accommodations"), such
accommodations shall not constitute a material portion, in the judgment of the
Required Lenders, of the Property Value of the golf course and related
improvements.
SECTION 8.15 Participating Leases. Cause each Participating Lease
hereafter entered into by any Credit Party to include a capital expenditure
reserve of at least two percent (2%) of the annual Gross Golf Revenues from the
relevant golf course property, which reserve amount shall be used by the
relevant lessee solely as set forth in such Participating Lease.
SECTION 8.16 Year 2000 Compliance. Each Credit Party has (i) initiated a
review and assessment of all areas within its business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by Such
Credit Party (or its suppliers and vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Each Credit Party
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to its business and operations will on
a timely basis be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "Year 2000 compliant"),
except to the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Credit Parties. The Borrower will promptly
notify the Agent in the event any Credit Party discovers or determines that any
computer application (including those of its suppliers and vendors) that is
material to its business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect on the Credit Parties.
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ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 of this Agreement, GTA and the other Credit Parties (on a
Consolidated basis) will not:
SECTION 9.1 Minimum Tangible Net Worth. As of the end of any quarter,
permit their Tangible Net Worth of GTA and its Consolidated Subsidiaries to be
less than $250,000,000 plus 80% of the aggregate net cash proceeds of any
issuance or offering of capital stock received by any Credit Party after the
Closing Date.
SECTION 9.2 Liabilities to Assets Ratio. At any time, permit the Leverage
Ratio to exceed 0.55 to 1.00.
SECTION 9.3 Interest Coverage Ratio. As of the end of any quarter, permit
the ratio of (a) EBITDA of GTA and its Consolidated Subsidiaries for such
quarter then ended to (b) Interest Expense of GTA and its Consolidated
Subsidiaries for the quarter then ended to be less than 2.50 to 1.00.
SECTION 9.4 Debt Service Coverage Ratio. As of the end of any quarter,
permit the ratio of (a) EBITDA of GTA and its Consolidated Subsidiaries for the
quarter then ended to (b) Debt Service of GTA and its Consolidated Subsidiaries
for the quarter then ended to be less than 2.00 to 1.00.
SECTION 9.5 Fixed Charge Coverage Ratio. As of the end of any quarter,
permit the ratio of (a) EBITDA of GTA and its Consolidated Subsidiaries for the
quarter then ended to (b) Fixed Charges of GTA and its Consolidated Subsidiaries
for the quarter then ended to be less than 1.50 to 1.00.
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ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 of this Agreement, none of the Credit Parties will:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to exist
any Debt except:
(a) The Obligations;
(b) Other secured Debt of the Credit Parties; provided that (i) there
shall be no recourse to the Borrower or any other Credit Party, directly or
indirectly, for the payment of such Debt and or to any property of the Borrower
or any other Credit Party, for the payment of such Debt (except to the property
securing the Debt); and (ii) the aggregate amount of such Debt outstanding at
any time shall not exceed twenty percent (20%) of the Consolidated tangible
assets of the Credit Parties;
(c) Debt of the Borrower arising under the Bridge Facility in the
principal amount of up to $25,000,000; and
(d) Any other non-revolving, unsecured Debt of the Borrower.
As a condition precedent to the incurrence of or increase in the amount of
any unsecured Debt of the Borrower, the Borrower shall deliver to the
Administrative Agent a properly completed and executed Pool Valuation
Certificate setting forth the Pool Value, which shall be at least 1.75 times the
sum of the aggregate amount of all unsecured Debt of all Credit Parties
(including the Obligations hereunder and Debt under the Credit Agreement
referenced in Section 10.1(c)), after giving effect to the unsecured Debt to be
incurred or increased
SECTION 10.2 Limitations on Contingent Obligations. Create, incur, assume
or suffer to exist any Contingent Obligations except Contingent Obligations in
favor of the Administrative Agent for the benefit of the Administrative Agent
and the Lenders.
SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer to
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of capital stock or other ownership interests), real
or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired;
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(b) The claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than the greater of the applicable contractual period or sixty (60) days or (ii)
which are being contested in good faith and by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation;
(d) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, detract from the value of such property or impair the use thereof in the
ordinary course of business;
(e) Equipment leases; and
(f) Liens securing Debt permitted under Section 10.1(b).
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions.
Purchase, own, invest in or otherwise acquire, directly or indirectly, any
capital stock, interests in any partnership or joint venture (including, without
limitation, the creation or capitalization of any Subsidiary), evidence of Debt
or other obligation or security, substantially all or a portion of the business
or assets of any other Person or any other investment or interest whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person, or enter into, directly or indirectly, any commitment
or option in respect of the foregoing except for the following:
(a) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either S&P or Moody's, (iii)
certificates of deposit maturing no more than 120 days from the date of creation
thereof issued by commercial banks incorporated under the laws of the United
States of America, each having combined capital, surplus and undivided profits
of not less than $500,000,000 and having a rating of "A" or better by a
nationally recognized rating agency, or (iv) time deposits maturing no more than
30 days from the date of creation thereof with commercial banks or savings banks
or savings and loan associations each having membership either in the FDIC or
the deposits of which are insured by the FDIC and in amounts not exceeding the
maximum amounts of insurance thereunder; and repurchase agreements issued by any
Lender having a maturity of less than one year;
(b) loans to officers of GTA, the aggregate amount of which outstanding at
any one time shall not exceed one percent (1%) of Total Assets;
(c) investments in golf course properties and related improvements;
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(d) investments in unconsolidated partnerships and joint ventures; the
aggregate amount of such investment in such partnerships and joint ventures
(including investments existing on the Closing Date) not to exceed five percent
(5%) of Total Assets at any time;
(e) loans to other Persons; provided that:
(i) the proceeds of such loans will be used to construct
improvements that are, or would become (as set forth below), part of a
golf course property owned by the Credit Parties;
(ii) the aggregate outstanding amount of such loans plus the amounts
utilized for the construction of improvements to golf course properties to
the extent permitted under Section 10.11 shall not exceed 10% of Total
Assets at any time;
(iii) the Person receiving such Loan shall have executed a
promissory note in favor of the Borrower, in form and substance
satisfactory to the Administrative Agent;
(iv) the Borrower shall own the property on which the improvements
are to be constructed or have a binding contractual right to purchase such
property.
(f) any other investment or acquisition, with the prior written consent of
the Required Lenders.
SECTION 10.5 Limitations on Mergers and Liquidation. Merge, consolidate or
enter into any similar combination with any other Person or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution) except in cases
where a Credit Party is the surviving party in the merger, consolidation or
combination.
SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests, any sale-leaseback or similar transaction and the forgiveness of any
Debt), whether now owned or hereafter acquired except:
(a) the sale of inventory in the ordinary course of business; and
(b) the sale of obsolete assets no longer used or usable in the business
of the Credit Parties; and
(c) the sale of any golf course property; provided that the proceeds of
such sale, net of ordinary and customary closing costs (including, without
limitation, professional fees), are contemporaneously applied to the prepayment
of the outstanding principal balance of the Credit Facility.
SECTION 10.7 Limitations on Dividends and Distributions. During any Fiscal
Year, declare or pay any dividends upon any of its capital stock, partnership
units or other equity ownership interests; purchase, redeem, retire or otherwise
acquire, directly or indirectly, any of its capital stock, partnership units or
other equity ownership interests, or make any distribution of cash, property or
assets among the holders of its capital stock, partnership units or other equity
ownership interests in an aggregate amount exceeding ninety-five percent (95%)
of the Funds from Operations for such fiscal year, or if any Default shall have
occurred and be continuing or would result from such distribution.
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SECTION 10.8 Transactions with Affiliates. Except as permitted under
Section 10.4, directly or indirectly: (a) make any loan or advance to, or
purchase or assume any note or other obligation to or from, any of its officers,
directors, shareholders or other Affiliates, or to or from any member of the
immediate family of any of its officers, directors, shareholders or other
Affiliates, or subcontract any operations to any of its Affiliates, or (b) enter
into, or be a party to, any transaction with any of its Affiliates, except
pursuant to the reasonable requirements of its business and upon fair and
reasonable terms that are fully disclosed to and approved in writing by the
Required Lenders and are no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.9 Certain Accounting Changes. Change its Fiscal
Year, or make any change in its accounting treatment and reporting
practices except as required by GAAP.
SECTION 10.10 Restrictions on Prepayments. Voluntarily prepay any Debt
(other than Obligations) or amend any instrument evidencing the Debt of any
Credit Party if such amendment would have a Material Adverse Effect.
SECTION 10.11 Limitations on Improvements. Permit more than 10% of Total
Assets less the aggregate outstanding amount of loans permitted under Section
10.4(e) at such time, to be utilized at any one time for the construction of
improvements to golf course properties, provided that compliance by the Credit
Parties with this Section 10.11 shall be determined without regard for funds
used to construct the renovations and improvements to the Sandpiper Golf Course.
SECTION 10.12 Restrictive Agreements. Incur any Debt or enter into any
other agreement on terms which include a negative pledge on any material asset
or any other covenant more restrictive than the provisions of Articles IX and X
hereof.
SECTION 10.13 Amendments. Amend the Innisbrook Note, the Innisbrook Loan
Agreement, the Innisbrook Mortgage, or any Qualified Ground Lease or
Participating Lease with respect to any golf course property included in the
Unencumbered Pool in any manner materially adverse to any Credit Party without
the prior written consent of the Agents (it being understood that any amendment
of a Participating Lease which reduces the rent, shortens the term, releases any
guarantor of or collateral for the obligations of the lessee, amends the capital
expenditure reserve provision or terminates the lease shall be materially
adverse to such Credit Party).
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ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower shall default
in any payment of principal of any Loan or Note when and as due (whether at
maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment when
and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Note or the payment of any other Obligation, and such
default shall continue unremedied for five (5) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to be
made by any Credit Party under this Agreement, any other Loan Document or any
amendment hereto or thereto, shall at any time prove to have been incorrect or
misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. Any Credit Party shall
default in the performance or observance of any covenant or agreement contained
in Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any Credit
Party shall default in the performance or observance of any term, covenant,
condition or agreement contained in this Agreement (other than as specifically
provided for otherwise in this Section 11.1) or any other Loan Document and such
default shall continue for a period of thirty (30) days after written notice
thereof has been given to such Credit Party by the Administrative Agent; or if
such default cannot reasonably be cured within such period, the Borrower does
not within such thirty (30)-day period commence such act or acts as shall be
necessary to remedy the default and shall not cause such default to be cured
within a reasonable time, not to exceed, in any event, one hundred twenty (120)
days.
(f) Hedging Agreement. Any termination payment shall be due by the
Borrower under any Hedging Agreement and such amount is not paid within ten (10)
Business Days of the due date thereof.
(g) Debt Cross-Default. Any Credit Party shall (i) default in the payment
of any Debt (other than the Notes) beyond the period of grace, if any, provided
in the instrument or agreement under which such Debt was created, or (ii) be in
material default in the observance or performance of any other agreement or
condition relating to any Debt (other than the Notes) or contained in any
instrument or agreement evidencing, securing or relating thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
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(h) Other Cross-Defaults. Any Credit Party shall default in the payment
when due, or in the performance or observance, of any obligation or condition of
any Material Contract or any Participating Lease unless, but only as long as,
the existence of any such default is being contested by such Credit Party in
good faith by appropriate proceedings and adequate reserves in respect thereof
have been established on the books of such Credit Party to the extent required
by GAAP.
(i) Change in Control. (A) Any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended)
other than GTA or Larry D. Young, shall obtain ownership or control, directly or
indirectly, in one or more series of transactions of more than thirty percent
(30%) of the partnership interests or other equity interests of the Borrower, or
(B) more than fifty percent (50%) of the board of directors of GTA shall change
during any twelve month period, exclusive of any change of members resulting
from the death or incompetency of board members.
(j) Change of Management. W. Bradley Blair, II shall cease to serve as an
executive officer of the Borrower and is not replaced by an individual
acceptable to the Required Lenders within a period of one hundred twenty (120)
days.
(k) Loss of REIT Status. GTA shall default in the performance of the
covenant contained in Section 3.14 of this Agreement.
(l) Voluntary Bankruptcy Proceeding. Any Credit Party shall (i) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (ii) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts, (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(m) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
commenced against any Credit Party in any court of competent jurisdiction
seeking (i) relief under the federal bankruptcy laws (as now or hereafter in
effect) or under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or adjustment of debts, or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like for any
Credit Party or for all or any substantial part of their respective assets,
domestic or foreign, and such case or proceeding shall continue undismissed or
unstayed for a period of sixty (60) consecutive days, or an order granting the
relief requested in such case or proceeding (including, but not limited to, an
order for relief under such federal bankruptcy laws) shall be entered.
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(n) Failure of Agreements. Any provision of this Agreement or of any other
Loan Document (other than any usury savings clause, waiver or similar provision)
shall for any reason cease to be valid and binding on any Credit Party or any
such Person shall so state in writing, or this Agreement or any other Loan
Document shall for any reason cease to create a valid and perfected first
priority Lien on, or security interest in, any of the collateral purported to be
covered thereby, in each case other than in accordance with the express terms of
this Agreement or thereof.
(o) Termination Event. The occurrence of any of the following events: (i)
the Borrower or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412 of the
Code, the Borrower or any ERISA Affiliate is required to pay as contributions
thereto, (ii) an accumulated funding deficiency in excess of $1,000,000 occurs
or exists, whether or not waived, with respect to any Pension Plan, (iii) a
Termination Event, or (iv) the Borrower or any ERISA Affiliate as employers
under one or more Multi-employer Plan makes a complete or partial withdrawal
from any such Multi-employer Plan and the plan sponsor of such Multi-employer
Plans notifies such withdrawing employer that such employer has incurred a
withdrawal liability requiring payments in an amount exceeding $100,000.
(p) Judgment. A judgment or order for the payment of money which causes
the aggregate amount of all such judgments to exceed $250,000 in any Fiscal Year
shall be entered against any Credit Party by any court and such judgment or
order shall continue undischarged or unstayed for a period of thirty (30) days.
(q) Execution or Attachment. Any writ of execution, attachment or
garnishment for an amount in excess of $250,000 shall be assessed against the
assets of any Credit Party and such writ of execution, attachment or garnishment
shall not be dismissed, discharged, stayed or quashed within thirty (30) days of
issuance.
(r) Default under Bridge Facility. Any Event of Default shall exist under
the Bridge Facility.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal of and
interest on the Loans and the Notes at the time outstanding, and all other
amounts owed to the Lenders and to the Administrative Agent under this Agreement
or any of the other Loan Documents (including, without limitation, all Letter of
Credit Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) and
all other Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or the other Loan Documents to the contrary notwithstanding, and
terminate the Credit Facility and any right of the Borrower to request
borrowings or the issuance of Letters of Credit hereunder; provided, that upon
the occurrence of an Event of Default specified in Section 11.1(l) or (m), the
Credit Facility and the L/C Commitment shall be automatically terminated and all
Obligations shall automatically become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived,
anything in this Agreement or the other Loan Documents to the contrary
notwithstanding.
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(b) Letters of Credit. With respect to all Letters of Credit with respect
to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrower at such
time to deposit in a cash collateral account opened by the Administrative Agent
an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement (including, without limitation,
those provided for in Article IV), the other Loan Documents and Applicable Law,
in order to satisfy all of the Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
under this Agreement or under the other Loan Documents or that may now or
hereafter exist at law or in equity or by suit or otherwise. No delay or failure
to take action on the part of the Administrative Agent or any Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege or shall be construed to be a waiver of any Event of
Default. No course of dealing between the Borrower, the Administrative Agent and
the Lenders or their respective agents or employees shall be effective to
change, modify or discharge any provision of this Agreement or any of the other
Loan Documents or to constitute a waiver of any Event of Default.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment, Powers, and Immunities.
(a) Each Lender hereby irrevocably appoints and authorizes
NationsBank to act as its Administrative Agent under this Agreement and the
other Loan Documents with such powers and discretion as are specifically and
respectively delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto.
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(b) The Administrative Agent shall administer the Credit Facility in the
same manner as if the entire Aggregate Commitment were held by the
Administrative Agent in its own portfolio. The Administrative Agent shall
forward to the Lenders all documents received by the Administrative Agent from
any Credit Party pursuant to the terms of this Agreement, unless such Credit
Party is obligated under this Agreement to make delivery of such documents to
the Lenders.
(c) The Administrative Agent (which term as used in this sentence and in
Section 12.5 and the first sentence of Section 12.6 of this Agreement shall
include its Affiliates and its own and its Affiliates' officers, directors,
employees, and agents): (a) shall not have any duties or responsibilities except
those expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender; (b) shall not be responsible to the Lenders for any
recital, statement, representation, or warranty (whether written or oral) made
in or in connection with any Loan Document or any certificate or other document
referred to or provided for in, or received by any of them under, any Loan
Document, or for the value, validity, effectiveness, genuineness,
enforceability, or sufficiency of any Loan Document, or any other document
referred to or provided for therein or for any failure by any Credit Party or
any other Person to perform any of its obligations under this Agreement; (c)
shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any
Credit Party or the satisfaction of any condition or to inspect the property
(including the books and records) of any Credit Party or any of its Subsidiaries
or Affiliates; (d) shall not be required to initiate or conduct any litigation
or collection proceedings under any Loan Document; and (e) shall not be
responsible for any action taken or omitted to be taken by it under or in
connection with any Loan Document, except for its own gross negligence or
willful misconduct or breach of an express agreement made by the Administrative
Agent to any other Lender contained herein. The Administrative Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 12.2 Reliance by Agent. The Administrative Agent shall be entitled
to rely upon any certification, notice, instrument, writing, or other
communication (including, without limitation, any thereof by telephone or
telecopy) reasonably believed by it to be genuine and correct and to have been
signed, sent or made by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel for any Credit Party),
independent accountants, and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the holder
thereof for all purposes of this Agreement unless and until the Administrative
Agent receives and accepts an Assignment and Acceptance executed in accordance
with Section 13.10. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding on all of the Lenders; provided, however, that the Administrative Agent
shall not be required to take any action that exposes the Administrative Agent
to personal liability or that is contrary to any Loan Document or applicable law
or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
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SECTION 12.3 Defaults. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of a Default or Event of Default
unless the Administrative Agent has received written notice from a Lender or the
Borrower specifying such Default or Event of Default and stating that such
notice is a "Notice of Default". In the event that any Lender receives such a
notice of the occurrence of a Default or Event of Default, such Lender shall
give prompt notice thereof to the Administrative Agent, the other Lenders and
the Borrower. The Administrative Agent shall (subject to Section 12.2 of this
Agreement) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders, provided that, unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
SECTION 12.4 Rights as Lender. With respect to its Commitment and the
Loans made by it, the Administrative Agent (and any successor acting as Agent)
in its capacity as a Lender under this Agreement shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not acting as Administrative Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent (and
any successor acting as Administrative Agent) and its Affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to,
make investments in, provide services to, and generally engage in any kind of
lending, trust, or other business with any Credit Party or Affiliates as if it
were not acting as Administrative Agent, and the Administrative Agent (and any
successor acting as Administrative Agent) and its Affiliates may accept fees and
other consideration from any Credit Party or any of its Subsidiaries or
Affiliates for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
SECTION 12.5 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 3.7, but
without limiting the obligations of the Borrower under such Section) ratably in
accordance with their respective Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Administrative Agent (including by any Lender) in any way relating to or arising
out of any Loan Document or the transactions contemplated thereby or any action
taken or omitted by the Administrative Agent under any Loan Document; provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Person to be indemnified
or from the breach of an express agreement or made by the Administrative Agent
to any Lenders contained herein. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any costs or expenses payable by the Borrower under Section
13.2, to the extent that the Administrative Agent is not promptly reimbursed for
such reasonable and actually incurred costs and expenses by the Borrower. The
agreements contained in this Section shall survive payment in full of the Loans
and all other amounts payable under this Agreement.
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SECTION 12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on the Administrative Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Credit Parties and their
Subsidiaries and decision to enter into this Agreement and to make Loans
hereunder and to issue or participate in Letters of Credit hereunder and that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Loan Documents. Except for notices,
reports, and other documents and information expressly required to be furnished
to the Lenders by the Administrative Agent under this Agreement, the
Administrative Agent shall have no duty or responsibility to provide any Lender
with any credit or other information concerning the affairs, financial
condition, or business of any Credit Party or Affiliates that may come into the
possession of the Administrative Agent or any of their Affiliates.
SECTION 12.7 Resignation; Removal of Agent; Successor Agents.
(a) Resignation of Agent. The Administrative Agent may resign at any time
by giving prior written notice thereof to the Lenders and the Borrower. The
Required Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Required Lenders or such appointee shall not have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be an Eligible
Assignee having total assets of at least $25,000,000,000.
(b) Removal of Administrative Agent. The Lenders may remove the
Administrative Agent hereunder and appoint a successor Administrative Agent upon
not less than thirty (30) days' prior written notice signed by Lenders whose
Commitment Percentages equal sixty six and two thirds percent (66.67%) of the
Aggregate Commitment exclusive of the Administrative Agent's Commitment, if (i)
the Administrative Agent's Commitment is less than twenty million dollars
($20,000,000) and no Event of Default has occurred and is continuing or (ii) the
Administrative Agent is grossly negligent or is guilty of willful misconduct in
the performance of its duties hereunder, as determined in the reasonable
discretion of the Lenders signing the foregoing written notice. If the
Administrative Agent's Commitment is less than twenty million dollars
($20,000,000) and no Event of Default has occurred and is continuing, the
Administrative Agent will tender its resignation as Administrative Agent.
(c) Successor Agents. Upon the acceptance of any appointment as
Administrative Agent under this Agreement by a successor, such successor shall
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges, and duties of the retiring Administrative Agent upon written notice
thereof to Borrower, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement excepting with respect to
its willful misconduct or gross negligence occurring prior to its discharge.
After any retiring Administrative Agent's resignation or removal under this
Agreement as Administrative Agent, the provisions of this Article 12 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
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SECTION 12.8 Documentation Agent and Syndication Agent. The Documentation
Agent and Syndication Agent, in their respective capacities as a documentation
agent and a syndication agent, shall have no duties or responsibilities under
this Agreement or any other Loan Document.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications under this Agreement shall be in
writing, or by telephone subsequently confirmed in writing. Any notice shall be
effective if delivered by hand delivery or sent via telecopy, recognized
overnight courier service or certified mail, return receipt requested, and shall
be presumed to be received by a party hereto (i) on the date of delivery if
delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by
recognized overnight courier service, and (iii) on the third Business Day
following the date sent by certified mail, return receipt requested. A
telephonic notice to the Administrative Agent as understood by the
Administrative Agent will be deemed to be the controlling and proper notice in
the event of a discrepancy with or failure to receive a confirming written
notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Borrower: Golf Trust of America, L.P.
c/o GTA
14 North Adgers Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II and
Scott D. Peters
Telephone No.: 843/723-4653
Telecopy No.: 843/723-0479
With copies to: O'Melveny & Myers LLP
275 Battery Street, 26th Floor
San Francisco, California 94105
Attention: Peter T. Healy, Esq.
Telephone No.: (415) 984-8833
Telecopy No.: (415) 984-8701
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If to any Guarantor: c/o Golf Trust of America, Inc.
14 North Adgers Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II and
Scott D. Peters
Telephone No.: 843/723-4653
Telecopy No.: 843/723-0479
If to NationsBank as NationsBank, N.A.
Administrative Agent Commercial Banking
or as Issuing Lender: 2501 Oak Street, 2nd Floor
Myrtle Beach, South Carolina 29577-0807
Attention: Dale Zeglin
Telephone No.: (843) 946-3259
Telecopy No.: (843) 946-3211
If to any Lender: To the Address set forth on
Schedule 1 hereto
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to in this
Agreement, to which payments due are to be made and at which Loans will be
disbursed and Letters of Credit issued.
SECTION 13.2 Expenses; Indemnification.
(a) The Borrower agrees to pay on demand all reasonably and actually
incurred costs and expenses of the Agents, NationsBanc Montgomery Securities LLC
and the Lenders in connection with the syndication, preparation, execution,
delivery, administration, modification, and amendment of this Agreement, the
other Loan Documents, and the other documents to be delivered under this
Agreement, including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent, NationsBanc Montgomery Securities LLC and
the Lenders (including the cost of internal counsel) with respect thereto and
with respect to advising the Administrative Agent or any Lender as to their
rights and responsibilities under the Loan Documents. The Borrower further
agrees to pay on demand all reasonably and actually incurred costs and expenses
of the Agents and the Lenders, if any (including, without limitation, reasonable
and actually incurred attorneys' fees and expenses and the reasonably and
actually incurred cost of internal counsel), in connection with the enforcement
(whether through negotiations, legal proceedings, or otherwise) of the Loan
Documents and the other documents to be delivered under this Agreement.
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(b) The Borrower agrees to indemnify and hold harmless each Agent and each
Lender and each of their Affiliates (including, without limitation, NationsBanc
Montgomery Securities LLC) and their respective officers, directors, employees,
agents, and advisors (each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities, costs, and expenses (including, without
limitation, reasonable and actually incurred attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation, or proceeding or
preparation of defense in connection therewith) the Loan Documents, any of the
transactions contemplated in this Agreement or the actual or proposed use of the
proceeds of the Loans, except to the extent such claim, damage, loss, liability,
cost, or expense is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct. In the case of an investigation, litigation or
other proceeding to which the indemnity in this Section 13.2 applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by any Credit Party, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any Indemnified Party
is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. The Borrower agrees not to assert any claim against any
Agent, any Lender, any of their Affiliates, or any of their respective
directors, officers, employees, attorneys, agents, and advisers, on any theory
of liability, for special, indirect, consequential, or punitive damages arising
out of or otherwise relating to the Loan Documents, any of the transactions
contemplated in this Agreement or the actual or proposed use of the proceeds of
the Loans.
(c) Without prejudice to the survival of any other agreement of the
Borrower under this Agreement, the agreements and obligations of the Borrower
contained in this Section 13.2 shall survive the payment in full of the Loans
and all other amounts payable under this Agreement.
SECTION 13.3 Set-off. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon and
after the occurrence of any Event of Default and during the continuance thereof,
the Lenders and any assignee or participant of a Lender in accordance with
Section 13.10 are hereby authorized by the Borrower at any time or from time to
time, without notice to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, time or demand, including, but not limited
to, indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the Lenders,
or any such assignee or participant to or for the credit or the account of the
Borrower against and on account of the Obligations irrespective of whether or
not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.
SECTION 13.4 Governing Law. This Agreement, the Notes and the other Loan
Documents, unless otherwise expressly set forth therein, shall be governed by,
and construed and enforced in accordance with, the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 13.5 Consent to Jurisdiction. Each Credit Party hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Notes and the
other Loan Documents, any rights or obligations under this Agreement or
thereunder, or the performance of such rights and obligations. Each Credit Party
hereby irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by either the Agent or any
Lender in connection with this Agreement, the Notes or the other Loan Documents,
any rights or obligations under this Agreement or thereunder, or the performance
of such rights and obligations, on behalf of itself or its property, in the
manner specified in Section 13.1. Nothing in this Section 13.5 shall affect the
right of either the Agent or any Lender to serve legal process in any other
manner permitted by Applicable Law or affect the right of either the Agent or
any Lender to bring any action or proceeding against any Credit Party or its
properties in the courts of any other jurisdictions.
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SECTION 13.6 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, EACH
AGENT, EACH LENDER AND EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE
NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS UNDER THIS
AGREEMENT OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) Each Credit Party recognizes that in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, each Credit Party agrees that the Lenders, at the Lenders' option,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Agents, the Lenders and the Credit Parties hereby agree that no
such Person shall have a remedy of punitive or exemplary damages against any
other party to a Loan Document and each such Person hereby waives any right or
claim to punitive or exemplary damages that they may now have or may arise in
the future in connection with any judicial proceeding, dispute, claim or
controversy arising out of, connected with or relating to the Notes or any other
Loan Documents ("Disputes"), whether such Dispute is resolved through
arbitration or judicially.
(c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
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SECTION 13.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by any
Credit Party to determine compliance with any covenant contained in this
Agreement, shall, except as otherwise expressly contemplated hereby or unless
there is an express written direction by the Administrative Agent to the
contrary agreed to by the Borrower, be performed in accordance with GAAP as in
effect on the Closing Date. In the event that changes in GAAP shall be mandated
by the Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower and the
Lenders shall have amended this Agreement to the extent necessary to reflect any
such changes in the financial covenants and other terms and conditions of this
Agreement.
SECTION 13.10 Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Notes, and its Commitment);
provided, however, that
(i) so long as no Default or Event of Default has occurred and is
continuing, NationsBank's Commitment shall not be less than $20,000,000
and provided, further, that NationsBank shall promptly notify each of the
other Lenders in writing if its Commitment is less than $20,000,000;
(ii) each such assignment shall be to an Eligible Assignee;
(iii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least
equal to $10,000,000 or an integral multiple of $1,000,000 in excess
thereof;
(iv) each such assignment by a Lender shall be of a constant, and
not varying, percentage of all of its rights and obligations under this
Agreement and its Note;
(v) the parties to such assignment shall execute and deliver to the
Administrative Agent for its acceptance an Assignment and Acceptance in
the form of Exhibit F hereto, together with any Note subject to such
assignment and, except in cases of assignment to a Lender or an Affiliate
of a Lender, a processing fee of $3,500; and
(vi) the Borrower shall receive prior written notice thereof.
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Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender under this
Agreement and the assigning Lender shall, to the extent of such assignment,
relinquish its rights and be released from its obligations under this Agreement
excepting with respect to any gross negligence or willful misconduct on the part
of such assigning Lender prior to the date of such assignment. Upon the
consummation of any assignment pursuant to this Section, the assignor, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Borrower and the Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with Section 3.13.
(b) The Administrative Agent shall maintain at its address referred to in
Section 13.1 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to, each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender under this Agreement for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower (or any of its agents or advisors) or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with the Note subject to such assignment and payment
of the processing fee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit F
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt written notice thereof
to the parties thereto and to the Borrower.
(d) Each Lender may sell participations in minimum amounts of $10,000,000
to one or more Persons in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and its Loans);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participant
shall be entitled to the benefit of the yield protection provisions contained in
Article III and the right of set-off contained in Section 3.5, and (iv) the
Borrower shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to its Loans and its Note and to approve any amendment,
modification, or waiver of any provision of this Agreement (other than
amendments, modifications, or waivers increasing or decreasing the amount of
principal of or the rate at which interest is payable on such Loans or Note,
extending the maturity date or any scheduled principal payment date or date
fixed for the payment of interest on such Loans or Note or increasing the
Aggregate Commitment) or modifying the coverage ratio contained in clause (c) of
Section 2.1 or Section 8.10 (or any defined term used therein).
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(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Notes to any Federal Reserve Bank as collateral security pursuant to Regulation
A and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations under this
Agreement.
(f) Any Lender may furnish any information concerning the Credit Parties
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants).
SECTION 13.11 Amendments and Waivers. Any provision of this Agreement or
any other Loan Document may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Lenders
(and, if Article XII or the rights or duties of the Administrative Agent are
affected thereby, by the Administrative Agent); provided that no such amendment
or waiver shall, unless signed by all the Lenders (other than Defaulting
Lenders), (i) increase the Commitments of the Lenders, (ii) extend the time of
the obligation of the Lenders to make Loans or to issue or participate in
Letters of Credit, (iii) reduce the principal of or rate of interest on any Loan
or Reimbursement Obligation or any fees or other amounts payable under this
Agreement, (iv) postpone any date fixed for the payment of any scheduled
installment of principal of or interest on any Loan or Reimbursement Obligation
or any fees or other amounts payable hereunder or for termination of any
Commitment, (v) change the percentage of the Commitments or of the unpaid
principal amount of the Notes, or the number of Lenders, which shall be required
for the Lenders, the Administrative Agent or any of them to take any action
under this Section or any other provision of this Agreement, (vi) release any
Guarantor, (vii) modify any provision of Article IX or Section 8.10 (or any
defined term used therein), (viii) modify the provisions of Section 10.1(d)
including any of the defined terms in Section 10.1(d), or (ix) modify the
provisions of Section 10.3, this Section 13.11, the definition of Required
Lenders, or any provision of any Loan Document which, by its terms, requires the
consent, approval or satisfaction of all Lenders or each Lender, without the
prior written consent of each Lender. In addition, no amendment, waiver or
consent to the provisions of Article IIA shall be made without the written
consent of the Issuing Lender. The Issuing Lender shall not, without the prior
consent of all the Lenders, issue any Letter of Credit if, after giving effect
to such issuance, (a) the Letter of Credit Obligations would exceed the L/C
Commitment or (b) the sum of the aggregate principal amount of all outstanding
Loans and Letter of Credit Obligations would exceed the Aggregate Commitment. No
amendment or waiver of Section 2.3(d) shall be effective without the prior
written consent of NationsBank.
SECTION 13.12 Performance of Duties. Each Credit Party's obligations under
this Agreement and each of the Loan Documents shall be performed by such Credit
Party at its sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of attorney and
other authorizations granted to the Lenders, the Administrative Agent and any
Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or the Credit Facility has not been
terminated.
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SECTION 13.14 Survival of Indemnities. Notwithstanding any termination of
this Agreement, the indemnities to which the Agents and the Lenders are entitled
under the provisions of this Article XIII and any other provision of this
Agreement and the other Loan Documents shall continue in full force and effect
and shall protect the Agents and the Lenders against events arising after such
termination as well as before.
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this Agreement
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions of this Agreement or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 13.17 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 13.18 Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] 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
Its Chief Executive Officer and President
[CORPORATE SEAL] GOLF TRUST OF AMERICA, INC., a Maryland
corporation
By: ________________________________________
W. Bradley Blair, II
Its Chief Executive Officer and President
[CORPORATE SEAL] GTA GP, INC., a Maryland corporation
By: ________________________________________
W. Bradley Blair, II
Its Chief Executive Officer and President
[CORPORATE SEAL] GTA LP, INC., a Maryland corporation
By: ________________________________________
W. Bradley Blair, II
Its Chief Executive Officer and President
<PAGE>
SANDPIPER--GOLF TRUST, LLC, a Delaware
limited liability company
By: Golf Trust of America, L.P., as Manager
By: GTA GP, Inc., its General Partner
By: ________________________________________
Name: __________________________________
Title:_________________________________
[CORPORATE SEAL] SANDPIPER GTA DEVELOPMENT, INC.
By: ________________________________________
Name: __________________________________
Title:_________________________________
<PAGE>
NATIONSBANK, N.A., as Administrative Agent
and Lender
By: ________________________________________
Name: __________________________________
Title:_________________________________
<PAGE>
BANKBOSTON, N.A., as Documentation Agent and
Lender
By: ________________________________________
Name: __________________________________
Title:_________________________________
<PAGE>
FIRST UNION NATIONAL BANK, as Syndication
Agent and Lender
By: ________________________________________
Name: __________________________________
Title:_________________________________
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as Lender
By: ________________________________________
Name: __________________________________
Title:_________________________________
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY, as Lender
By: ________________________________________
Name: __________________________________
Title:_________________________________
<PAGE>
SCHEDULE 1: LENDERS AND COMMITMENTS
<TABLE>
<CAPTION>
COMMITMENT
AND COMMITMENT
LENDER PERCENTAGE
- ------ ----------
<S> <C>
NationsBank N.A. $75,000,000
2501 Oak Street, 2nd Floor 37.5%
Myrtle Beach, South Carolina 29577-0807
Attention: Dale Zeglin
Telephone No.: (803) 946-3259
Telecopy No.: (803) 946-3211
First Union National Bank $40,000,000
301 South College Street NC0166 20.0%
Charlotte, North Carolina 28288
Attention: Cindy Bean
Telephone No.: (704) 383-7534
BankBoston, N.A. $40,000,000
115 Perimeter Center Place, N.E. 20.0%
Suite 500
Atlanta, Georgia 30346
Attention: Michael Doss
Assistant Vice President
Telephone No.: (770) 390-6541
Credit Lyonnais New York Branch $25,000,000
1301 Avenue of the Americas 12.5%
18th Floor
New York, New York 10019-6022
Attention: Jan Hazelton
Vice President
Telephone No.: (212) 261-3723
Societe Generale, Southwest Agency $20,000,000
2001 Ross Avenue 10.0%
Suite 4900
Dallas, Texas 75201
Attention: Craig Sayers
Associate
Telephone No.: (214) 979-2731
</TABLE>
<PAGE>
================================================================================
CREDIT AGREEMENT
dated as of March 31, 1999
by and among
GOLF TRUST OF AMERICA, L.P.,
as Borrower,
the Guarantors referred to in this Agreement,
the Lenders referred to in this Agreement,
and
NATIONSBANK, N.A.,
as Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................1
SECTION 1.1 Definitions....................................................1
SECTION 1.2 Amended and Restated Credit Agreement..........................6
SECTION 1.3 General........................................................6
SECTION 1.4 Other Definitions and Provisions...............................6
ARTICLE II CREDIT FACILITY..................................................6
SECTION 2.1 Loans..........................................................6
SECTION 2.2 Procedure for Advances of Loans................................7
SECTION 2.3 Repayment of Loans.............................................7
SECTION 2.4 Notes..........................................................8
SECTION 2.5 Permanent Reduction of the Aggregate Commitment................8
SECTION 2.6 Termination of Credit Facility.................................9
SECTION 2.7 Use of Proceeds................................................9
ARTICLE III GENERAL LOAN PROVISIONS.........................................9
SECTION 3.1 Interest.......................................................9
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans......11
SECTION 3.3 Unused Fee....................................................11
SECTION 3.4 Payment.......................................................12
SECTION 3.5 Right of Set-off; Adjustments.................................12
SECTION 3.6 Nature of Obligations of Lenders Regarding Loans; Assumption
by the Administrative Agent..................................13
SECTION 3.7 Indemnity.....................................................14
SECTION 3.8 Increased Cost and Reduced Return.............................14
SECTION 3.9 Limitation on Types of Loans..................................16
SECTION 3.10 Illegality....................................................16
SECTION 3.11 Treatment of Affected Loans...................................16
SECTION 3.12 Compensation..................................................16
SECTION 3.13 Taxes.........................................................17
SECTION 3.14 Senior Debt...................................................18
ARTICLE IV GUARANTY........................................................19
SECTION 4.1 Guaranty of Obligations of Guarantors.........................19
SECTION 4.2 Nature of Guaranty............................................19
SECTION 4.3 Demand by the Administrative Agent............................20
SECTION 4.4 Waivers.......................................................20
SECTION 4.5 Benefits of Guaranty..........................................21
SECTION 4.6 Modification of Loan Documents etc............................21
SECTION 4.7 Reinstatement.................................................22
SECTION 4.8 Waiver of Subrogation and Contribution........................22
SECTION 4.9 Remedies......................................................22
SECTION 4.10 Limit of Liability............................................22
<PAGE>
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING.....................22
SECTION 5.1 Closing.......................................................22
SECTION 5.2 Conditions to Closing and Initial Loan........................23
SECTION 5.3 Conditions to All Loans.......................................25
ARTICLE VI REPRESENTATIONS AND WARRANTIES..................................26
SECTION 6.1 Reaffirmation of Representations and Warranties...............26
SECTION 6.2 No Material Adverse Change....................................26
ARTICLE VII FINANCIAL INFORMATION AND NOTICES..............................27
ARTICLE VIII AFFIRMATIVE COVENANTS.........................................27
ARTICLE IX FINANCIAL COVENANTS.............................................27
ARTICLE X NEGATIVE COVENANTS...............................................28
ARTICLE XI DEFAULT AND REMEDIES............................................28
SECTION 11.1 Events of Default.............................................28
SECTION 11.2 Remedies......................................................29
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc...............29
ARTICLE XII THE ADMINISTRATIVE AGENT.......................................30
SECTION 12.1 Appointment, Powers, and Immunities...........................30
SECTION 12.2 Reliance by Administrative Agent..............................30
SECTION 12.3 Defaults......................................................31
SECTION 12.4 Rights as Lender..............................................31
SECTION 12.5 Indemnification...............................................31
SECTION 12.6 Non-Reliance on Agent and Other Lenders.......................32
SECTION 12.7 Resignation; Removal of Agents; Successor Agents..............32
ARTICLE XIII MISCELLANEOUS.................................................33
SECTION 13.1 Notices.......................................................33
SECTION 13.2 Expenses; Indemnification.....................................34
SECTION 13.3 Set-off.......................................................35
SECTION 13.4 Governing Law.................................................35
SECTION 13.5 Consent to Jurisdiction.......................................35
SECTION 13.6 Waiver of Jury Trial..........................................36
SECTION 13.7 Reversal of Payments..........................................36
SECTION 13.8 Injunctive Relief; Punitive Damages...........................36
SECTION 13.9 Accounting Matters............................................37
SECTION 13.10 Assignments and Participations................................37
SECTION 13.11 Amendments and Waivers........................................39
SECTION 13.12 Performance of Duties.........................................39
SECTION 13.13 All Powers Coupled with Interest..............................39
SECTION 13.14 Survival of Indemnities.......................................39
SECTION 13.15 Titles and Captions...........................................39
SECTION 13.16 Severability of Provisions....................................39
SECTION 13.17 Counterparts..................................................40
SECTION 13.18 Term of Agreement.............................................40
<PAGE>
SCHEDULES
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1 - Lenders and Commitments
EXHIBITS
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A - Form of Note
B - Form of Notice of Borrowing
C - Form of Notice of Repayment
D - Form of Notice of Conversion/Continuation
E - Form of Officer's Compliance Certificate
F - Form of Assignment and Acceptance
G - Form of Guaranty Supplement
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of the 31st day of March, 1999, by and among
(i) GOLF TRUST OF AMERICA, L.P., a limited partnership formed under the laws of
Delaware (the "Borrower"), (ii) the Guarantors (as hereinafter defined), (iii)
the Lenders who are or may become a party to this Agreement and (iv)
NATIONSBANK, N.A. ("NationsBank"), as Administrative Agent for the Lenders.
STATEMENT OF PURPOSE
The Guarantors and the Borrower have requested, and the Lenders have
agreed, to extend a revolving credit facility to the Borrower on the terms and
conditions of this Credit Agreement. All extensions of credit to the Borrower
will inure to the benefit of the Guarantors, directly or indirectly.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this
Agreement shall have the meanings assigned to them below
"Adjusted Eurodollar Rate" means, with respect to any Eurodollar Loan, for
any Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) mathematically determined by the Administrative Agent to be
equal to the quotient obtained by dividing (a) the Eurodollar Rate for such
Interest Period by (b) 1 minus the Reserve Requirement for such Interest Period.
"Administrative Agent" means NationsBank in its capacity as the
Administrative Agent under this Agreement, and any successor thereto appointed
pursuant to Section 12.7.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments under this Agreement, as such amount may be reduced or modified at
any time or from time to time pursuant to the terms of this Agreement. On the
Closing Date, the Aggregate Commitment shall be Twenty Five Million Dollars
($25,000,000).
"Agreement" means this Credit Agreement, as amended or modified from time
to time.
<PAGE>
"Amended and Restated Credit Agreement" shall have the meaning assigned
thereto in Section 1.2.
"Applicable Lending Office" means, for each Lender, the "Lending Office"
of such Lender (or of an Affiliate of such Lender) designated on Schedule 1 of
this Agreement or such other office of such Lender (or an Affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
and the Borrower by written notice in accordance with the terms of this
Agreement as the office by which its Loans are to be made and maintained.
"Available Commitment" means, as to any Lender at any time, an amount
equal to the excess, if any, of (a) such Lender's Commitment over (b) such
Lender's Loans.
"Base Rate" means, at any time, the higher of (a) the rate per annum equal
to the rate announced by NationsBank as its "prime rate" or (b) the Federal
Funds Rate plus 0.5% for such day. Any change in the Base Rate due to a change
in the prime rate shall be effective on the effective date of such change in the
prime rate.
"Base Rate Loan" means any Loan that bears interest at the Base Rate.
"Borrower" means Golf Trust of America, L.P. in its capacity as
borrower under this Agreement.
"Closing Date" means the date of this Agreement or such later Business Day
upon which each condition described in Article V shall be satisfied or waived in
all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans to the Borrower under this Agreement in an aggregate principal amount
at any time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1 to this Agreement, or as set forth in any Assignment
and Acceptance relating to any assignment that has become effective pursuant to
Section 13.10, as the same may be reduced or modified at any time or from time
to time pursuant to the terms of this Agreement.
"Commitment Percentage" means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment.
"Convert," "Conversion," and "Converted" shall refer to a conversion
pursuant to Section 3.2, 3.9 or 3.11 of a Eurodollar Loan into a Base Rate Loan
or vice versa.
"Credit Facility" means the non-revolving credit facility established
pursuant to Article II of this Agreement.
"Credit Parties" means, collectively, the Borrower and the Guarantors.
Notwithstanding Section 8.13 of the Amended and Restated Credit Agreement, if
Golf Trust of America hereafter creates or acquires any Subsidiary and the
Required Lenders elect not to require such Subsidiary to become a Guarantor,
such Subsidiary shall nonetheless be deemed to be a Credit Party for purposes of
this Agreement.
2
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"Default" means any of the events specified in Section 11.1 which with the
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.
"Defaulting Lender" shall have the meaning assigned thereto in
Section 3.6.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Eurodollar Loan" means any Loan that bears interest at a rate based on
the Adjusted Eurodollar Rate.
"Eurodollar Rate" means for any Eurodollar Loan for any Interest Period,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period. If for any
reason such rate is not available, the term "Eurodollar Rate" shall mean, for
any Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Existing Facility" means the Credit Agreement dated as of July 9, 1998 by
and among the Borrower GTA, GTA GP and GTA LP, as guarantors, the lenders
referred to therein, NationsBank, as administrative agent and Bank of America
National Trust and Savings Association, as documentation agent.
"GTA" means Golf Trust of America, Inc., a Maryland corporation.
"GTA GP" means GTA GP, Inc., a Maryland corporation.
"GTA LP" means GTA LP, Inc., a Maryland corporation.
"Guaranteed Obligations" shall have the meaning assigned thereto in
Section 4.1.
"Guarantors" means, collectively, GTA, GTA GP, GTA LP, Sandpiper LLC and
Sandpiper GTA, together with any Subsidiaries of GTA that become Guarantors
pursuant to Section 8.3.
"Guaranty" means the Guarantors' obligations set forth in Article IV.
3
<PAGE>
"Interest Period" means each period of thirty (30) days, under this
Agreement, with respect to which the Eurodollar Rate shall be determined;
provided that:
(a) each Interest Period shall commence on the date of advance of or
Conversion to any Eurodollar Loan and, in the case of immediately successive
Interest Periods, each successive Interest Period shall commence on the date on
which the next preceding Interest Period expires;
(b) if any Interest Period would otherwise expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided, that if any Interest Period would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(c) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month at the end of such Interest Period;
(d) no Interest Period shall be permitted to extend beyond the Termination
Date; and
(e) there shall be no more than seven (7) Interest Periods outstanding at
any time.
"Lender" means each Person executing this Agreement as a Lender set forth
on the signature pages hereto and each Person that hereafter becomes a party to
this Agreement as a Lender pursuant to Section 13.10.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Leverage Ratio" means the ratio of Total Liabilities to Total Assets.
"Loan" means any revolving credit loan made to the Borrower pursuant to
Article II and all such revolving credit loans collectively as the context
requires.
"Loan Documents" means, collectively, this Agreement, the Notes and each
other document, instrument and agreement executed and delivered by any Credit
Party or on behalf of such entity by its counsel in connection with this
Agreement or otherwise referred to in this Agreement or contemplated hereby, all
as may be amended, restated or otherwise modified.
"NationsBank" means NationsBank, N.A., a national banking
association, and its successors.
"Notes" means the separate Notes made by the Borrower payable to the order
of each of the Lenders, substantially in the form of Exhibit A hereto,
evidencing the Credit Facility, and any amendments, modifications and
supplements thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "Note" means
any of such Notes.
4
<PAGE>
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Repayment" shall have the meaning assigned thereto in
Section 2.3(c).
"Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans, (b) all payment and
other obligations owing by the Borrower to any Lender under any Hedging
Agreement and (c) all other fees and commissions (including attorney's fees),
charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by the Borrower to the Lenders or the
Administrative Agent, of every kind, nature and description, direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note, and
whether or not for the payment of money under or in respect of this Agreement,
any Note or any of the other Loan Documents.
"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by NationsBank as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by NationsBank as its Prime Rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"Register" shall have the meaning assigned thereto in Section 13.10.
"Required Lenders" means, at any date, any combination of holders other
than Defaulting Lenders of at least sixty-six and two-thirds percent (66-2/3%)
of the aggregate unpaid principal amount of the Notes exclusive of Notes held by
Defaulting Lenders, or if no amounts are outstanding under the Notes, any
combination of Lenders other than Defaulting Lenders whose Commitment
Percentages would aggregate at least sixty-six and two-thirds percent (66-2/3%)
if the Commitments of each Defaulting Lender were excluded from the Aggregate
Commitment.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any category
of liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Loans. The Adjusted Eurodollar
Rate shall be adjusted automatically on and as of the effective date of any
change in the Reserve Requirement.
5
<PAGE>
"Sandpiper LLC" means Sandpiper-Golf Trust, LLC, a Delaware limited
liability company.
"Sandpiper GTA" means Sandpiper GTA Development, Inc., a California
corporation.
"Termination Date" shall have the meaning assigned thereto in Section
2.6.
SECTION 1.2 Amended and Restated Credit Agreement. All terms used in this
Agreement and not defined herein shall have the meanings assigned to them in the
Amended and Restated Credit Agreement dated as of the 31st day of March, 1999 by
and among the Borrower, the Guarantors, the Lenders party thereto and
NationsBank, N.A., as Administrative Agent for the Lenders.
SECTION 1.3 General. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference in this Agreement to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.4 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Subject to Section 1.2, unless otherwise
defined therein, all capitalized terms defined in this Agreement shall have the
defined meanings when used in this Agreement, the Notes and the other Loan
Documents or any certificate, report or other document made or delivered
pursuant to this Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
ARTICLE II
CREDIT FACILITY
SECTION 2.1 Loans. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Loans to the Borrower from time to time
from the Closing Date through, but not including, the Termination Date as
requested by the Borrower in accordance with the terms of Section 2.2; provided,
that (a) the aggregate principal amount of all outstanding Loans (after giving
effect to any amount requested) shall not exceed the Aggregate Commitment, (b)
the principal amount of outstanding Loans from any Lender to the Borrower shall
not at any time exceed such Lender's Commitment and (c) the Pool Value shall at
all times be at least 1.75 times the aggregate amount of all unsecured Debt of
(including the outstanding Obligations). Each Loan by a Lender shall be in a
principal amount equal to such Lender's Commitment Percentage of the aggregate
principal amount of Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Loans hereunder
until the Termination Date.
6
<PAGE>
SECTION 2.2 Procedure for Advances of Loans.
(a) Requests for Borrowing. The Borrower shall give the Administrative
Agent irrevocable prior written notice in the form attached hereto as Exhibit B
(a "Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) at
least two (2) Business Days before each Base Rate Loan and (ii) at least three
(3) Business Days before each Eurodollar Loan, of its intention to borrow,
specifying (A) the date of such borrowing, which shall be a Business Day, (B)
the amount of such borrowing, which shall be in an aggregate principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof, and (C) whether such
Loan is to be a Eurodollar Loan or a Base Rate Loan. Notices received after
11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day.
The Administrative Agent shall promptly notify the Lenders of each Notice of
Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte time) on
the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage of the Loans to be made on such borrowing
date. The Borrower hereby irrevocably authorizes the Administrative Agent to
disburse the proceeds of each borrowing requested pursuant to this Section 2.2
in immediately available funds by crediting such proceeds to a deposit account
of the Borrower maintained with the Administrative Agent or by wire transfer to
such account as may be agreed upon by the Borrower and the Administrative Agent
from time to time. Unless the Administrative Agent shall have received notice
from a Lender that such Lender will not make available to the Administrative
Agent such Lender's Commitment Percentage of the requested Loan, the
Administrative Agent shall disburse such Lender's Commitment Percentage of the
Loans.
SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full, together with all accrued but
unpaid interest thereon, on the Termination Date.
(b) Mandatory Repayments.
(i) If at any time the outstanding principal amount of all Loans
exceeds the Aggregate Commitment or the Pool Value is less than 1.75 times
the aggregate amount of all unsecured Debt of the Credit Parties
(including the outstanding Obligations), the Borrower shall repay
immediately upon written notice from the Administrative Agent, by payment
to the Administrative Agent for the account of the Lenders, the Loans in
an amount necessary to bring the Borrower into compliance
(ii) Each such repayment under this Section 2.3(b) shall be (x)
accompanied by any amount required to be paid pursuant to Section 3.12 of
this Agreement, together with interest accrued thereon to the date of
repayment and (y) applied first to the outstanding Base Rate Loans up to
the full amount thereof and second to the outstanding Eurodollar Loans up
to the full amount thereof.
7
<PAGE>
(c) Optional Repayments. The Borrower may at any time and from time to
time repay the Loans, in whole or in part, by giving the Administrative Agent
irrevocable notice in the form attached hereto as Exhibit C (a "Notice of
Repayment") not later than 11:00 a.m. (Charlotte time) at least three (3)
Business Days before each repayment of a Loan specifying the date and amount of
repayment, provided, however, that the Borrower may not repay any Eurodollar
Loan on any day other than the last day of the Interest Period applicable
thereto unless such payment is accompanied by any amount required to be paid
pursuant to Section 3.12 of this Agreement. Upon receipt of such notice, the
Administrative Agent shall promptly notify each Lender. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
set forth in such notice. Partial repayments shall be in an aggregate amount of
$500,000 or a whole multiple of $100,000 in excess thereof. Each such repayment
shall be accompanied by any amount required to be paid pursuant to Sections 3.7
and 3.12 of this Agreement.
SECTION 2.4 Notes. Each Lender's Loans and the obligation of the Borrower
to repay such Loans shall be evidenced by a Note executed by the Borrower
payable to the order of such Lender representing the Borrower's obligation to
pay such Lender's Commitment or, if less, the aggregate unpaid principal amount
of all Loans made and to be made by such Lender to the Borrower under this
Agreement, plus interest and all other fees, charges and other amounts due
thereon as required under this Agreement. Each Note shall bear interest on the
unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 3.1.
SECTION 2.5 Permanent Reduction of the Aggregate Commitment.
(a) Voluntary Reduction. The Borrower shall have the right at any time and
from time to time, upon at least five (5) Business Days prior written notice to
the Administrative Agent, to permanently reduce, without premium or penalty, (i)
the entire Aggregate Commitment at any time or (ii) portions of the Aggregate
Commitment, from time to time, in an aggregate principal amount not less than
$3,000,000 or any whole multiple of $1,000,000 in excess thereof. The amount of
each partial permanent reduction shall be applied pro rata to reduce the
remaining mandatory reduction amounts required under Section 2.6(b).
(b) Mandatory Reduction.
(i) Increase of Committed Amount under Amended and Restated Credit
Agreement. The Aggregate Commitment shall be permanently reduced by an amount
equal to any increase in the committed amount under the Amended and Restated
Credit Agreement in excess of Two Hundred Million Dollars ($200,000,000).
(ii) Debt Proceeds. The Aggregate Commitment shall be permanently
reduced by one hundred percent (100%) of the net cash proceeds from the
placement of any Debt by the Borrower.
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<PAGE>
(c) Each permanent reduction permitted or required pursuant to this
Section 2.5 shall be accompanied by a payment of principal sufficient to reduce
the aggregate outstanding Loans of the Lenders after such reduction to the
Aggregate Commitment as so reduced. Any reduction of the Aggregate Commitment to
zero shall be accompanied by payment of all outstanding Obligations and shall
result in the termination of the Commitments and Credit Facility. If the
reduction of the Aggregate Commitment requires the repayment of any Eurodollar
Loan such repayment shall be accompanied by any amount required to be paid
pursuant to Sections 3.7 and 3.12 of this Agreement.
SECTION 2.6 Termination of Credit Facility. The Credit Facility shall
terminate upon the earlier of (a) March 31, 2000, (b) the date of termination by
the Borrower pursuant to Section 2.5(a) hereof and (c) the date of termination
by the Administrative Agent on behalf of the Lenders pursuant to Section
11.2(a).
SECTION 2.7 Use of Proceeds. The Borrower shall use the proceeds of the
Loans for the purposes provided in Section 2.7 of the Amended and Restated
Credit Agreement.
ARTICLE III
GENERAL LOAN PROVISIONS
SECTION 3.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section 3.1,
at the election of the Borrower in accordance with Article II, the unpaid
principal balance of any Loan shall bear interest at (A) the Base Rate, or (B)
the Adjusted Eurodollar Rate plus the Applicable Margin. The Borrower shall
select the type of interest rate applicable to any Loan at the time a Notice of
Borrowing is given pursuant to Section 2.2(a) or at the time a Notice of
Conversion/Continuation is given pursuant to Section 3.2. Any Loan as to which
the Borrower has not duly specified an interest rate as provided immediately
above shall be deemed a Base Rate Loan.
(b) Applicable Margin. The Applicable Margin provided for in Section
3.1(a) with respect to the Eurodollar Loans (the "Applicable Margin") shall be
determined by reference to the Leverage Ratio as of the end of each fiscal
quarter, as follows:
Leverage Ratio Applicable Margin Per Annum
-------------- ---------------------------
Greater than or equal to 2.00%
.50 to 1.00
Greater than or equal to 1.75%
.375 to 1.00 but less than
.50 to 1.00
Less than .375 to 1.00 1.50%
9
<PAGE>
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the tenth (10th) Business Day (each an "Adjustment
Date") after receipt by the Administrative Agent of quarterly financial
statements for GTA and the other Credit Parties and the accompanying Officer's
Compliance Certificate setting forth the Leverage Ratio of GTA and the other
Credit Parties as of the most recent fiscal quarter end. Subject to Section
3.1(d), in the event such financial statements and certificate of covenant
compliance are not delivered within the time required by Sections 7.1 and 7.2 of
the Amended and Restated Credit Agreement, the Applicable Margin shall be the
highest Applicable Margin set forth above until the Adjustment Date following
the delivery of such financial statements and certificate or evidence of
covenant compliance, as applicable.
Notwithstanding the foregoing, at such time as the Borrower or GTA obtains
an investment-grade senior debt rating by Moody's and S&P (the "Dual Rating")
and for so long as the Borrower or GTA retains such Dual Rating, the Applicable
Margin shall be determined by reference to the lower of Moody's or S&P's ratings
thereof in accordance with the following pricing matrix:
Senior Debt Rating Applicable Margin Per Annum
------------------ ---------------------------
BBB/Baa2 or higher 1.25%
BBB-/Baa3 1.35%
; provided, that, in the event the Borrower or GTA obtains an investment-grade
senior debt rating by either Moody's (Baa3 or higher) or S&P (BBB- or higher)
(the "Senior Rating"), and provided the rating of the other rating agency is not
less than the grade immediately below investment grade (i.e., Ba1 if Moody's and
BB+ if S&P) (the "Junior Rating" and collectively with the Senior Rating, the
"Combined Rating")) and for so long as the Borrower or GTA retains such Combined
Rating, the Applicable Margin shall be 1.50% per annum. In the event the
Borrower or GTA, as applicable, loses (i) the Dual Rating or (ii) the Senior
Rating or the Junior Rating, as applicable, the Applicable Margin shall
thereafter be determined by reference to the Leverage Ratio as provided above
until such time as the Borrower or GTA obtains a Dual Rating or a Combined
Rating.
(c) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request or
Convert to Eurodollar Loans, (ii) all outstanding Eurodollar Loans may at the
option of the Administrative Agent and shall at the direction of the Required
Lenders bear interest at a rate per annum which shall be two percent (2%) in
excess of the rate then applicable to Eurodollar Loans, as applicable, until the
end of the applicable Interest Period and thereafter at a rate equal to two
percent (2%) in excess of the rate then applicable to Base Rate Loans, and (iii)
all outstanding Base Rate Loans shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate then applicable to Base Rate Loans.
Interest shall continue to accrue on the Notes after the filing by or against
the Borrower of any petition seeking any relief in bankruptcy or under any act
or law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
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(d) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each month, commencing
April 30, 1999, and on the Termination Date. Interest on each Eurodollar Loan
shall be payable in arrears on the last day of each applicable Interest Period
and on the Termination Date. All interest rates, fees and commissions provided
under this Agreement shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest under this Agreement or under any of
the Notes charged or collected pursuant to the terms of this Agreement or
pursuant to any of the Notes exceed the highest rate permissible under any
Applicable Law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that the Lenders have charged or received interest under this Agreement in
excess of the highest rate permissible under Applicable Law, the rate in effect
under this Agreement shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the Administrative Agent's
option promptly refund to the Borrower any interest received by Lenders in
excess of the maximum rate permitted by Applicable Law or shall apply such
excess to the principal balance of the Obligations if permitted by Applicable
Law (in either event, the Administrative Agent shall advise Borrower in writing
promptly of its decision). It is the intent of this Agreement that the Borrower
not pay or contract to pay, and that neither the Administrative Agent nor any
Lender receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by the Borrower under
Applicable Law.
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) Convert at any time all or any portion of
its outstanding Base Rate Loans in a principal amount equal to $500,000 or any
whole multiple of $100,000 in excess thereof into one or more Eurodollar Loans,
and (b) upon the expiration of any Interest Period, (i) Convert all or any part
of its outstanding Eurodollar Loans in a principal amount equal to $500,000 or a
whole multiple of $100,000 in excess thereof into Base Rate Loans, or (ii)
continue such Eurodollar Loans as Eurodollar Loans. Whenever the Borrower
desires to Convert or continue Loans as provided immediately above, the Borrower
shall give the Administrative Agent irrevocable prior written notice in the form
attached as Exhibit D (a "Notice of Conversion/Continuation") not later than
11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a
proposed Conversion or continuation of such Loan is to be effective specifying
(A) the Loans to be Converted or continued, and, in the case of any Eurodollar
Loan to be Converted or continued, the last day of the Interest Period therefor,
(B) the effective date of such Conversion or continuation (which shall be a
Business Day), and (C) the principal amount of such Loans to be Converted or
continued. The Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation.
SECTION 3.3 Unused Fee. Commencing on the Closing Date, the Borrower shall
pay to the Administrative Agent, for the account of the Lenders, a
non-refundable unused fee at a rate per annum equal to 0.20% on the average
daily unused portion of the Aggregate Commitment. The unused fee shall be
payable in arrears on the last Business Day of each calendar quarter during the
term of this Agreement commencing June 30, 1999, and on the Termination Date.
Such unused fee shall be distributed by the Administrative Agent to the Lenders
pro rata in accordance with the Lenders' respective Commitment Percentages.
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SECTION 3.4 Payment.
(a) Manner of Payment. Each payment by the Borrower on account of the
principal of or interest on the Loans or of any fee, commission or other amounts
payable to the Lenders under this Agreement or any Note shall be made not later
than 1:00 p.m. (Charlotte time) on the date specified for payment under this
Agreement to the Administrative Agent at the Administrative Agent's Office for
the account of the Lenders (other than as set forth below) pro rata in
accordance with their respective Commitment Percentages, in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for the
purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 2:00
p.m. (Charlotte time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. On the Business Day that each such payment is
deemed made, the Administrative Agent shall distribute to each Lender at its
address for notices set forth in this Agreement its pro rata share of such
payment in accordance with this Section 3.4 such Lender's Commitment Percentage
and shall wire advice of the amount of such credit to each Lender; provided that
if the Administrative Agent fails to distribute such funds on the date on which
any payment is deemed made, the Administrative Agent shall pay interest thereon
at the Federal Funds Rate from the date such payment is received until the date
such funds are distributed by the Administrative Agent. Each payment to the
Administrative Agent of the Administrative Agent's fees or the expenses of the
Administrative Agent shall be made for the account of the Administrative Agent.
Any amount payable to any Lender under Sections 3.7, 3.8, 3.12 or 13.2 shall be
paid to the Administrative Agent for the account of the applicable Lender.
(b) Crediting of Payments and Proceeds. In the event that the Borrower
shall fail to pay any of the Obligations when due and the Obligations have been
accelerated pursuant to Section 11.2, all payments received by the Lenders upon
the Notes and the other Obligations and all net proceeds from the enforcement of
the Obligations shall be applied first to all expenses then due and payable by
the Borrower under this Agreement, then to all indemnity obligations then due
and payable by the Borrower under this Agreement, then to all Administrative
Agent's fees then due and payable by Borrower under this Agreement, then to all
commitment and other fees and commissions then due and payable by Borrower under
this Agreement, then to accrued and unpaid interest on the Notes, and any
termination payments due from Borrower in respect of a Hedging Agreement with
any Lender (pro rata in accordance with all such amounts due), and then to the
principal amount of the Notes, in that order.
SECTION 3.5 Right of Set-off; Adjustments. (a) Upon the occurrence and
during the continuance of any Event of Default, each Lender (and each of its
Affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final)
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at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter existing under
this Agreement and the Note held by such Lender, irrespective of whether such
Lender shall have made any demand under this Agreement or such Note and although
such obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender may have.
(b) If any Lender (a "Benefited Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such Benefited Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from a Lender pursuant to this Section 3.5 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrower in the amount of such
participation.
SECTION 3.6 Nature of Obligations of Lenders Regarding Loans; Assumption
by the Administrative Agent. The obligations of the Lenders under this Agreement
to make the Loans are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
under this Agreement), the Administrative Agent may assume that such Lender has
made such portion available to the Administrative Agent on the proposed
borrowing date in accordance with Section 2.2(b) and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If such amount is made available to the
Administrative Agent on a date after such borrowing date, such Lender shall pay
to the Administrative Agent on demand an amount, until paid, equal to the
product of (a) the amount of such Lender's Commitment Percentage of such
borrowing, times (b) the daily average Federal Funds Rate during such period as
determined by the Administrative Agent, times (c) a fraction the numerator of
which is the number of days that elapse from and including such borrowing date
to the date on which such Lender's Commitment Percentage of such borrowing shall
have become immediately available to the Administrative Agent and the
denominator of which is 360. A certificate of the Administrative Agent with
respect to any amounts owing under this Section 3.6 shall be conclusive, absent
manifest error. If such Lender's Commitment Percentage of such borrowing is not
made available to the Administrative Agent by such Lender within three (3)
Business Days of such borrowing date, the Administrative Agent shall be entitled
to recover such amount made available by the Administrative Agent with interest
thereon at the Adjusted Eurodollar Rate, on demand, from the Borrower. The
failure of any Lender (a "Defaulting Lender") to make its Commitment Percentage
of any Loan available shall not relieve it or any other Lender of its
obligation, if any, under this Agreement to make its Commitment Percentage of
such Loan available to Borrower on such borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the borrowing date.
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SECTION 3.7 Indemnity. The Borrower hereby indemnifies each of the Lenders
against any reasonable and actually incurred loss or expense which arises or is
directly attributable to each Lender's obtaining, liquidating or employing
deposits or other funds acquired to effect, fund or maintain any Eurodollar Loan
(a) as a consequence of any failure by the Borrower to make any payment when due
of any amount due under this Agreement in connection with a Eurodollar Loan, (b)
due to any failure of the Borrower to borrow on a date specified therefor in a
Notice of Borrowing, or (c) due to any payment or prepayment of any Eurodollar
Loan on a date other than the date specified for such payment in the applicable
Notice of Repayment; provided, however, the Borrower shall have no such
obligation to any Lender who is a Defaulting Lender. The amount of such
reasonable and actually incurred loss or expense shall be determined, in the
applicable Lender's sole reasonable discretion, based upon the condition that
such Lender funded its Commitment Percentage of the Eurodollar Loans in the
London interbank market and using any reasonable attribution or averaging
methods which such Lender deems appropriate and practical. A certificate of such
Lender setting forth the basis for determining such amount or amounts necessary
to compensate such Lender shall be forwarded to the Borrower through the
Administrative Agent and shall be conclusively presumed to be correct save for
manifest error.
SECTION 3.8 Increased Cost and Reduced Return.
(a) If, after the date of this Agreement, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule, or
regulation, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such Governmental Authority, central bank, or
comparable agency; excepting, however, any such change occasioned by such
Lender's default or non-compliance with such applicable rules:
(i) shall subject such Lender (or its Applicable Lending Office) to
any tax, duty, or other charge with respect to any Eurodollar Loans, its
Note, or its obligation to make Eurodollar Loans, or change the basis of
taxation of any amounts payable to such Lender (or its Applicable Lending
Office) under this Agreement or its Note in respect of any Eurodollar
Loans (other than taxes imposed on the overall net income of such Lender
by the jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
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(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Reserve
Requirement utilized in the determination of the Adjusted Eurodollar Rate)
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, such Lender (or its
Applicable Lending Office), including the Commitment of such Lender under
this Agreement; or
(iii) shall impose on such Lender (or its Applicable Lending Office)
or the London interbank market any other condition affecting this
Agreement or its Note or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making or maintaining any Eurodollar Loans
or to reduce any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or its Note with respect to any Eurodollar
Loans, then the Borrower shall pay to such Lender on demand (and a full written
explanation for the increase) such amount or amounts solely applicable to its
Loan or in relationship of its Loan to other loans of such Lender as will
compensate such Lender for such increased cost or reduction. If any Lender
requests compensation by the Borrower under this Section 3.8, the Borrower may,
in its sole discretion, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender to make or continue
Eurodollar Loans until the event or condition giving rise to such request ceases
to be in effect; provided that such suspension shall not affect the right of
such Lender to receive the compensation so requested, if applicable, subject to
the foregoing conditions and caveats.
(b) If, after the date of this Agreement, any Lender shall have determined
that the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations under this Agreement to a level below that which such
Lender or such corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with respect to
capital adequacy), then from time to time upon demand the Borrower shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such reduction.
(c) Each Lender shall promptly notify the Borrower and the Administrative
Agent in writing of any event of which it has knowledge, occurring after the
date of this Agreement, which will entitle such Lender to compensation pursuant
to this Section 3.8 and will designate a different Applicable Lending Office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this Section 3.8
shall promptly furnish to the Borrower and the Administrative Agent a written
statement setting forth the additional amount or amounts to be paid to it under
this Agreement which (subject to the terms of this Agreement) shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
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SECTION 3.9 Limitation on Types of Loans. If on or prior to the first day
of any Interest Period the Administrative Agent reasonably determines (which
determination shall be conclusive) that by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period then the Administrative Agent shall
give the Borrower prompt written notice thereof specifying the relevant amounts
or periods, and so long as such condition remains in effect, the Lenders shall
be under no obligation to make additional Eurodollar Loans or continue
Eurodollar Loans, and the Borrower shall, at its election, on the last day(s) of
the then current Interest Period(s) for the outstanding Eurodollar Loans, prepay
such Eurodollar Loans, or Convert such Eurodollar Loans into Base Rate Loans, or
prepay the Obligations in full and terminate this Agreement.
SECTION 3.10 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans under this
Agreement, then such Lender shall promptly notify the Borrower thereof in
writing and such Lender's obligation to make or continue Eurodollar Loans shall
be suspended until such time as such Lender may again make, maintain, and fund
Eurodollar Loans (in which case the provisions of Section 3.11 shall be
applicable).
SECTION 3.11 Treatment of Affected Loans. If the obligation of any Lender
to make or continue Eurodollar Loan shall be suspended pursuant to Section 3.9
or 3.10 of this Agreement and unless such Eurodollar Loans are paid, until such
Lender gives prior written notice to the Borrower as provided below that the
circumstances specified in Section 3.9 or 3.10 of this Agreement no longer
exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted into Base Rate Loans, all payments and prepayments of principal
that would otherwise be applied to the Eurodollar Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such
Lender as Eurodollar Loans shall be made or continued instead as Base Rate
Loans, and all Loans of such Lender that would otherwise be Converted into
Eurodollar Loans shall be Converted instead into (or shall remain as) Base
Rate Loans.
If such Lender gives written notice to the Borrower (with a copy to the
Administrative Agent) that the circumstances specified in Section 3.9 or 3.10 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) such Lender's Base Rate Loans may be Converted to Eurodollar
Loans.
SECTION 3.12 Compensation. Upon the request of any Lender, the Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable, good faith opinion of such Lender) to compensate it for any
reasonable and actually incurred loss, cost, or expense (including loss of
anticipated profits) incurred by it as a result of:
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(a) any payment, prepayment, or Conversion of a Eurodollar Loan for
any reason (including, without limitation, the acceleration of the Loans
pursuant to Section 11.2) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article V
to be satisfied) to borrow or prepay a Eurodollar Loan on the date for
such borrowing or prepayment specified in the relevant Notice of Borrowing
or Notice of Repayment under this Agreement.
SECTION 3.13 Taxes. (a) Any and all payments by the Borrower to or for the
account of any Lender or the Administrative Agent under this Agreement or under
any other Loan Document shall be made free and clear of and without deduction
for any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender (or its Applicable Lending Office) or the Administrative Agent
(as the case may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other Loan Document to any Lender or the
Administrative Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.13) such Lender or the
Administrative Agent receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (iv) the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 13.1, the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement by the
Borrower or any other Loan Document or from the execution or delivery of, or
otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.13) properly paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
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(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages of this
Agreement and on or prior to the date on which it becomes a Lender in the case
of each other Lender, and from time to time thereafter if requested in writing
by the Borrower or the Administrative Agent (but only so long as such Lender
remains lawfully able to do so), shall provide the Borrower and the
Administrative Agent with (i) Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income tax treaty
to which the United States is a party which reduces the rate of withholding tax
on payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or business
in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and (iii) any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying to the Administrative Agent and the Borrower
that such Lender is entitled to an exemption from or a reduced rate of tax on
payments pursuant to this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide
the Borrower and the Administrative Agent with the appropriate form pursuant to
Section 3.13(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 3.13(a) or 3.13(b) with respect to Taxes imposed by the United
States; provided, however, that should a Lender, which is otherwise exempt from
or subject to a reduced rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required under this Agreement, the Borrower
shall take such reasonable steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 3.13, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower arising in connection with this Agreement, the agreements and
obligations of the Borrower contained in this Section 3.13 shall survive the
termination of the Commitments and the payment in full of the Notes.
SECTION 3.14 Senior Debt. The Obligations of the Borrower under this
Agreement and the obligations and indebtedness of the Borrower under the Amended
and Restated Credit Agreement constitute senior Debt and shall be pari passu
subject only to the restrictions on prepayment provided for in Section 2.3(d) of
the Amended and Restated Credit Agreement.
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ARTICLE IV
GUARANTY
SECTION 4.1 Guaranty of Obligations of Guarantors. Each Guarantor hereby
jointly and severally unconditionally guaranties to the Administrative Agent for
the ratable benefit of the Administrative Agent and the Lenders, and their
permissible respective successors, endorsees, transferees and assigns, the
prompt payment (whether at stated maturity, by acceleration or otherwise) and
performance of all Obligations of the Borrower, whether primary or secondary
(whether by way of endorsement or otherwise), whether now existing or hereafter
arising, whether or not from time to time reduced or extinguished (except by
payment thereof) or hereafter increased or incurred, whether or not recovery may
be or hereafter become barred by the statute of limitations, whether enforceable
or unenforceable as against the Borrower, whether or not discharged, stayed or
otherwise affected by any bankruptcy, insolvency or other similar law or
proceeding, whether created directly with the Administrative Agent or any Lender
or acquired by the Administrative Agent or any Lender through assignment,
endorsement or otherwise as permitted under this Agreement, whether matured or
unmatured, whether joint or several, as and when the same become due and payable
(whether at maturity or earlier, by reason of acceleration, mandatory repayment
or otherwise), in accordance with the terms of any such instruments evidencing
any such obligations, including all renewals, extensions or modifications
thereof (all Obligations of the Borrower to the Administrative Agent or any
Lender, including all of the foregoing, being hereinafter collectively referred
to as the "Guaranteed Obligations").
SECTION 4.2 Nature of Guaranty. Each Guarantor agrees that this Guaranty
is a continuing, unconditional guaranty of payment and performance and not of
collection, and that its obligations under this Agreement shall be primary,
absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement or any other Loan
Document or any other agreement, document or instrument to which the
Borrower is or may become a party;
(b) the absence of any action to enforce this Agreement or any other
Loan Document or the waiver or consent by the Administrative Agent or any
Lender with respect to any of the provisions of this Agreement or any
other Loan Document;
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for or other guaranty of the Guaranteed
Obligations or any action, or the absence of any action, by the
Administrative Agent or any Lender in respect of such security or guaranty
(including, without limitation, the release of any such security or
guaranty); or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor;
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it being agreed by each Guarantor that its obligations under this Guaranty shall
not be discharged until the final and indefeasible payment and performance, in
full, of the Guaranteed Obligations and the termination of the Aggregate
Commitment. Each Guarantor expressly waives all rights it may now or in the
future have under any statute (including, without limitation, North Carolina
General Statutes Section 26-7, et seq. or similar law), or at law or in equity,
or otherwise, to compel the Administrative Agent or any Lender to proceed in
respect of the Guaranteed Obligations against the Borrower or any other party or
against any security for or other guaranty of the payment and performance of the
Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, such Guarantor. Each Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the failure of
the Administrative Agent or any Lender to commence an action in respect of the
Guaranteed Obligations against the Borrower, any Guarantor or any other party or
any security for the payment and performance of the Guaranteed Obligations. Each
Guarantor agrees that any notice or directive given at any time to the
Administrative Agent or any Lender which is inconsistent with the waivers in the
preceding two sentences shall be null and void and may be ignored by the
Administrative Agent or Lender, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless the Administrative Agent and the Required Lenders
have specifically agreed otherwise in writing. The foregoing waivers are of the
essence of the transaction contemplated by the Loan Documents and, but for this
Guaranty and such waivers, the Administrative Agent and Lenders would decline to
enter into this Agreement.
SECTION 4.3 Demand by the Administrative Agent. In addition to the terms
set forth in Section 4.2, and in no manner imposing any limitation on such
terms, if all or any portion of the then outstanding Guaranteed Obligations
under this Agreement are declared to be immediately due and payable in
accordance with the terms of this Agreement, then the Guarantors shall, upon
demand in writing therefor by the Administrative Agent to the Guarantors, pay
all or such portion of the outstanding Guaranteed Obligations then declared due
and payable. Payment by the Guarantors shall be made to the Administrative
Agent, to be credited and applied upon the Guaranteed Obligations, in
immediately available federal funds to an account designated by the
Administrative Agent or at the address referenced in this Agreement for the
giving of notice to the Administrative Agent or at any other address that may be
specified in writing from time to time by the Administrative Agent.
SECTION 4.4 Waivers. In addition to the waivers contained in Section 4.2,
each Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshalling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by such Guarantor of its obligations
under, or the enforcement by the Administrative Agent or the Lenders of, this
Guaranty. Each Guarantor further hereby waives diligence, presentment, demand,
protest and notice of whatever kind or nature with respect to any of the
Guaranteed Obligations and waives the benefit of all provisions of law which are
or might be in conflict with the terms of this Guaranty. Each Guarantor
represents, warrants and agrees that its obligations under this Guaranty are not
and shall not be subject to any counterclaims, offsets or defenses of any kind
against the Administrative Agent, the Lenders or the Borrower whether now
existing or which may arise in the future.
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SECTION 4.5 Benefits of Guaranty. The provisions of this Guaranty are for
the benefit of the Administrative Agent and the Lenders and their respective
successors, transferees, endorsees and assigns, and nothing in this Agreement
contained shall impair, as between the Borrower, the Administrative Agent and
the Lenders, the obligations of the Borrower under the Loan Documents. In the
event all or any part of the Guaranteed Obligations are transferred, endorsed or
assigned by the Administrative Agent or any Lender to any Person or Persons, any
reference to any "Administrative Agent" or "Lenders" in this Agreement shall be
deemed to refer equally to such Person or Persons.
SECTION 4.6 Modification of Loan Documents etc. If the Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Guarantors:
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Guaranteed Obligations;
(b) take any action under or in respect of the Loan Documents in the
exercise of any remedy, power or privilege contained therein or available
to it at law, in equity or otherwise, or waive or refrain from exercising
any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan Documents;
(d) extend or waive the time for performance by the Guarantors, the
Borrower or any other Person of, or compliance with, any term, covenant or
agreement (other than this Guaranty) on its part to be performed or
observed under a Loan Document, or waive such performance or compliance or
consent to a failure of, or departure from, such performance or
compliance;
(e) take and hold security or collateral for the payment of the
Guaranteed Obligations or sell, exchange, release, dispose of, or
otherwise deal with, any property pledged, mortgaged or conveyed, or in
which the Administrative Agent or the Lenders have been granted a Lien, to
secure any Debt of any Guarantor or the Borrower to the Administrative
Agent or the Lenders;
(f) release anyone who may be liable in any manner for the payment
of any amounts owed by the Guarantors or the Borrower to the
Administrative Agent or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of the
Guarantors or the Borrower are subordinated to the claims of the
Administrative Agent or any Lender; or
(h) apply any sums by whomever paid or however realized to any
amounts owing by the Guarantors or the Borrower to the Administrative
Agent or any Lender in such manner as the Administrative Agent or any
Lender shall determine in its discretion;
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then neither the Administrative Agent nor any Lender shall incur any
liability to the Guarantors as a result thereof, and no such action shall
impair or release the obligations of the Guarantors under this Guaranty.
SECTION 4.7 Reinstatement. Each Guarantor agrees that, if any payment made
by the Borrower or any other Person applied to the Obligations is at any time
annulled, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid by the
Administrative Agent or Lender to the Borrower, their estate, trustee, receiver
or any other party, including, without limitation, such Guarantor, under any
Applicable Law or equitable cause, then, to the extent of such payment or
repayment, such Guarantor's liability under this Agreement shall be and remain
in full force and effect, as fully as if such payment had never been made, and,
if prior thereto, this Guaranty shall have been canceled or surrendered, this
Guaranty shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligations of such Guarantor in respect of the amount of
such payment.
SECTION 4.8 Waiver of Subrogation and Contribution. Each Guarantor hereby
irrevocably waives any claims or other rights which it may now or hereafter
acquire against the Borrower that arise from the existence or performance of
such Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim or remedy of the
Administrative Agent or the Lenders against the Borrower security or collateral
which the Administrative Agent or the Lenders now have or may hereafter acquire,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made under this Agreement or otherwise,
including without limitation, the right to take or receive from the Borrower,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights.
SECTION 4.9 Remedies. Upon the occurrence of any Event of Default, the
Administrative Agent may enforce against any Guarantor its obligations and
liabilities under this Agreement and exercise such other rights and remedies as
may be available to the Administrative Agent under this Agreement, under the
Loan Documents or Applicable Law.
SECTION 4.10 Limit of Liability. The obligations of each Guarantor under
this Agreement shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations under this Agreement subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state law.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P. in Charlotte, North Carolina at
10:00 a.m. on March 31, 1999 or at such other place and on such other date as
the parties hereto shall mutually agree.
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SECTION 5.2 Conditions to Closing and Initial Loan. The obligation of the
Lenders to close this Agreement and to make the initial Loan is subject to the
satisfaction of each of the following conditions:
(a) Executed Loan Documents. This Agreement and the Notes, in form
and substance satisfactory to the Administrative Agent and each Lender
shall have been duly authorized, executed and delivered by the Borrower
and each other Credit Party, as applicable, shall be in full force and
effect and no Default or Event of Default shall exist thereunder, and the
Borrower and each other Credit Party, as applicable, shall have delivered
original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Certificate of GTA GP. The Administrative Agent shall have
received a certificate from the chief executive officer or chief
financial officer of GTA GP, the managing general partner of the
Borrower, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that all representations and
warranties of the Credit Parties contained in this Agreement and the
other Loan Documents are true, correct and complete to the best
knowledge of such Person; that to the best knowledge of such Person
none of the Credit Parties is in violation of any of the covenants
contained in this Agreement and the other Loan Documents; that,
after giving effect to the transactions contemplated by this
Agreement, no Default or Event of Default has occurred and is
continuing; and that to the best knowledge of such Person the
Borrower has satisfied each of the closing conditions.
(ii) Certificate of Secretary of the General Partner. The
Administrative Agent shall have received a certificate of the
secretary or assistant secretary of GTA GP, in its capacity as the
Managing General Partner of the Borrower certifying on behalf of the
Borrower that attached thereto is a true and complete copy of the
Certificate of Limited Partnership of the Borrower and all
amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of formation; that
attached thereto is the Agreement of Limited Partnership of the
Borrower and all amendments thereto; that attached thereto is a true
and complete copy of resolutions duly adopted by the Board of
Directors of GTA GP authorizing the execution, delivery and
performance of the Loan Documents to which the Borrower is a party;
that there has been no change in any of the items delivered
previously to the Administrative Agent pursuant to Articles V and VI
of the Amended and Restated Credit Agreement and that the Lenders
may rely on such prior deliveries in making any Loan under this
Agreement; and as to the incumbency and genuineness of the signature
of each officer of GTA GP executing Loan Documents to which the
Borrower is a party.
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(iii) Certificate of Secretary of each Guarantor. The
Administrative Agent shall have received a certificate of the
secretary or assistant secretary of each Guarantor certifying that
attached thereto is a true and complete copy of the articles of
incorporation or articles of organization, as applicable of such
Guarantor and all amendments thereto, certified as of a recent date
by the appropriate Governmental Authority in its jurisdiction of
incorporation; that attached thereto is a true and complete copy of
the bylaws or operating agreement, as applicable of such Guarantor
as in effect on the date of such certification; that attached
thereto is a true and complete copy of resolutions duly adopted by
the Board of Directors of such Guarantor or consents duly adopted by
the members of such limited liability company Guarantor, as
applicable authorizing the borrowings contemplated under this
Agreement and the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party; that
there has been no change in any of the items delivered previously to
the Administrative Agent pursuant to Articles V and VI of the
Amended and Restated Credit Agreement and that the Lenders may rely
upon such prior deliveries in making any Loan under this Agreement;
and as to the incumbency and genuineness of the signature of each
officer of such Guarantor executing Loan Documents to which it is a
party.
(iv) Pool Valuation Certificate. The Administrative Agent
shall have received a Pool Valuation Certificate properly completed
and executed by the Borrower, setting forth the Pool Value, the
amount of which shall be equal to or greater than 1.75 times the
aggregate amount of all unsecured Debt of the Credit Parties
(including the outstanding Obligations).
(v) Opinions of Counsel. The Administrative Agent shall have
received favorable opinions of counsel to the Credit Parties
addressed to the Administrative Agent and the Lenders with respect
to the Credit Parties, the Loan Documents and such other matters as
the Lenders shall reasonably request.
(c) Consents; Defaults.
(i) Governmental and Third Party Approvals. All necessary
approvals, authorizations and consents, if any be required, of any
Person and of all Governmental Authorities and courts having
jurisdiction with respect to the transactions contemplated by this
Agreement and the other Loan Documents shall have been obtained.
(ii) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any Governmental Authority to enjoin, restrain, or
prohibit, or to obtain substantial damages in respect of, or which
is related to or arises out of this Agreement or the other Loan
Documents or the consummation of the transactions contemplated
hereby or thereby, or which, in the Administrative Agent's
reasonable discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement and such other Loan
Documents.
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(iii) No Event of Default. No Default or Event of Default
shall have occurred and be continuing.
(d) Payment of Fees. There shall have been paid by the Borrower to
the Administrative Agent and the Lenders the fees set forth or referenced
in Section 3.3 and any other accrued and unpaid fees or commissions due
under this Agreement (including, without limitation, legal fees and
expenses), and to any other Person such amount as may be due thereto in
connection with the transactions contemplated hereby, including all taxes,
fees and other charges in connection with the execution, delivery,
recording, filing and registration of any of the Loan Documents.
(e) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing from the Borrower and identification
of the account or accounts into which the proceeds of such Loans are
to be disbursed.
(ii) Proceedings and Documents. All opinions, certificates and
other instruments and all proceedings in connection with the
transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to the Lenders. The Lenders shall
have received copies of all other instruments and other evidence as
the Lenders may reasonably request, in form and substance reasonably
satisfactory to the Lenders, with respect to the transactions
contemplated by this Agreement and the taking of all actions in
connection therewith.
(iii) Existing Facility. The Existing Facility shall be repaid
in full and terminated.
(iv) Amended and Restated Credit Agreement. The Amended and
Restated Credit Agreement shall have closed.
(v) Due Diligence and Other Documents. The Borrower shall have
delivered to the Administrative Agent such other documents,
certificates and opinions as the Administrative Agent reasonably
requests, certified by a secretary or assistant secretary of GTA GP,
in its capacity as the Borrower's managing general partner as a true
and correct copy thereof.
SECTION 5.3 Conditions to All Loans. The obligation of the Lenders to make
any Loan is subject to the satisfaction of the following conditions precedent on
the relevant borrowing date:
(a) Unavailability Under Amended and Restated Credit Agreement. All
amounts available to the Borrower under the Amended and Restated Credit
Agreement shall be fully drawn.
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(b) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and
correct in all material respects, and shall be deemed to be remade, on and
as of such borrowing date with the same effect as if made on and as of
such date (except for those which expressly relate to an earlier date).
(c) No Existing Default. No Default or Event of Default shall have
occurred and be continuing under this Agreement on the borrowing date with
respect to such Loan or after giving effect to the Loans to be made on
such date.
(d) Officer's Compliance Certificate; Additional Documents. The
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or
other item of information reasonably requested by it.
(e) Availability. After giving effect to the requested Loan, the
outstanding Loans will not exceed the amount available pursuant to Section
2.1.
(f) Pool Valuation Certificate. The Administrative Agent shall have
received a Pool Valuation Certificate properly completed and executed by
the Borrower, setting forth the Pool Value, the amount of which shall be
equal to or greater than 1.75 times the aggregate amount of all unsecured
Debt of the Credit Parties (including the amount of all Obligations
outstanding after giving effect to the requested Loan).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 Reaffirmation of Representations and Warranties. The
representations and warranties contained in Article VI of the Amended and
Restated Credit Agreement are true and correct in all material respects and are
incorporated herein by this reference and deemed to be remade, on and as of the
date of this Agreement with the same effect as if made on and as of such date
(except for those which expressly relate to an earlier date) and set forth
herein in full.
SECTION 6.2 No Material Adverse Change. Since the date of the Amended and
Restated Credit Agreement there has been no material adverse change in the
properties, business, operations, prospects or condition (financial or
otherwise) of the Credit Parties, and no event has occurred or condition arisen
that could reasonably be expected to have a Material Adverse Effect.
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ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 of this Agreement, the Credit Parties will furnish or cause to
be furnished to the Lenders at their respective addresses as set forth on
Schedule 1, or such other office as may be designated by the Lenders from time
to time all of the financial statements and projections required to be delivered
pursuant to the terms of Article VII of the Amended and Restated Credit
Agreement.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner provided
for in Section 13.11, each Credit Party will, and will cause each of its
Subsidiaries to:
SECTION 8.1 Compliance with Amended and Restated Credit Agreement. Comply
in all respects in a timely manner with all of the affirmative covenants set
forth in Section 3.14 and Article VIII of the Amended and Restated Credit
Agreement.
SECTION 8.2 Supplemental Guarantors. Concurrently with the creation or
acquisition of any Subsidiary (a) cause it to execute and deliver to the
Administrative Agent a supplement to the Guaranty substantially in the form of
Exhibit G hereto, and (b) cause to be delivered to the Administrative Agent such
other documents as the Administrative Agent or Required Lenders shall reasonably
request in connection therewith, including, without limitation, officers'
certificates, financial statements, opinions of counsel, resolutions, charter
documents, certificates of existence and authority to do business and any other
closing certificates and documents described in Section 5.2.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 of this Agreement, GTA and the other Credit Parties (on a
Consolidated basis) will comply in all respects in a timely manner with all of
the financial covenants set forth in Article IX of the Amended and Restated
Credit Agreement.
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ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 of this Agreement, the Credit Parties will comply in all
respects in a timely manner with all of the negative covenants set forth in
Article X of the Amended and Restated Credit Agreement.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower shall
default in any payment of principal of any Loan or Note when and as due
(whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or
otherwise) of interest on any Loan or Note or the payment of any other
Obligation, and such default shall continue unremedied for five (5)
Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by any Credit Party under this Agreement, any Loan Document or
any amendment hereto or thereto, shall at any time prove to have been
incorrect or misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. Any Credit Party
shall default in the performance or observance of any covenant or
agreement contained in Article VIII or IX of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any
Credit Party shall default in the performance or observance of any term,
covenant, condition or agreement contained in this Agreement (other than
as specifically provided for otherwise in this Section 11.1) or any other
Loan Document and such default shall continue for a period of thirty (30)
days after written notice thereof has been given to such Credit Party by
the Administrative Agent; or if such default cannot reasonably be cured
within such period, such Credit Party does not within such thirty (30)-day
period commence such act or acts as shall be necessary to remedy the
default and shall not cause such default to be cured within a reasonable
time, not to exceed, in any event, one hundred twenty (120) days.
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(f) Cross-Default. Any Event of Default shall exist under the
Amended and Restated Credit Agreement.
(g) Termination of Commitments under Amended and Restated Credit
Agreement. The commitments of the lenders under the Amended and Restated
Credit Agreement shall be terminated for any reason.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal
of and interest on the Loans and the Notes at the time outstanding, and
all other amounts owed to the Lenders and to the Administrative Agent
under this Agreement or any of the other Loan Documents and all other
Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in
this Agreement or the other Loan Documents to the contrary
notwithstanding, and terminate the Credit Facility and any right of the
Borrower to request borrowings hereunder; provided, that upon the
occurrence of an Event of Default specified in Section 11.1(l) or (m) of
the Amended and Restated Credit Agreement, the Credit Facility shall be
automatically terminated and all Obligations shall automatically become
due and payable.
(b) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement (including, without
limitation, the Guaranty), the other Loan Documents and Applicable Law, in
order to satisfy all of the Borrower's Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
under this Agreement or under the Loan Documents or that may now or hereafter
exist in law or in equity or by suit or otherwise. No delay or failure to take
action on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Borrower, the Administrative Agent and the Lenders
or their respective agents or employees shall be effective to change, modify or
discharge any provision of this Agreement or any of the other Loan Documents or
to constitute a waiver of any Event of Default.
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ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment, Powers, and Immunities.
(a) Each Lender hereby irrevocably appoints and authorizes NationsBank to
act as its Administrative Agent under this Agreement and the other Loan
Documents with such powers and discretion as are specifically and respectively
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto.
(b) The Administrative Agent shall administer the Credit Facility in the
same manner as if the entire Aggregate Commitment were held by the
Administrative Agent in its own portfolio. The Administrative Agent shall
forward to the Lenders all documents received by such Administrative Agent from
any Credit Party pursuant to the terms of this Agreement, unless such Credit
Party is obligated under this Agreement to make delivery of such documents to
the Lenders.
(c) The Administrative Agent (which term as used in this sentence and in
Section 12.5 and the first sentence of Section 12.6 shall include its Affiliates
and its own and its Affiliates' officers, directors, employees, and agents): (a)
shall not have any duties or responsibilities except those expressly set forth
in this Agreement and shall not be a trustee or fiduciary for any Lender; (b)
shall not be responsible to the Lenders for any recital, statement,
representation, or warranty (whether written or oral) made in or in connection
with any Loan Document or any certificate or other document referred to or
provided for in, or received by any of them under, any Loan Document, or for the
value, validity, effectiveness, genuineness, enforceability, or sufficiency of
any Loan Document, or any other document referred to or provided for therein or
for any failure by any Credit Party or any other Person to perform any of its
obligations under this Agreement; (c) shall not be responsible for or have any
duty to ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Credit Party or the satisfaction of any condition
or to inspect the property (including the books and records) of any Credit Party
or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Loan Document; and
(e) shall be responsible for any action taken or omitted to be taken by it under
or in connection with any Loan Document, except for its own gross negligence or
willful misconduct or breach of an express agreement made by such Administrative
Agent to any other Lenders contained herein. The Administrative Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 12.2 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice, instrument, writing,
or other communication (including, without limitation, any thereof by telephone
or telecopy) reasonably believed by it to be genuine and correct and to have
been signed, sent or made by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (including counsel for any Credit
Party), independent accountants, and other experts selected by such
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the holder thereof for all purposes of this Agreement unless and
until the Administrative Agent receives and accepts an Assignment and Acceptance
executed in accordance with Section 13.10. As to any matters not expressly
provided for by this Agreement, the Administrative Agent shall not be required
to exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding on all of the Lenders; provided, however, that
Administrative Agent shall not be required to take any action that exposes such
Administrative Agent to personal liability or that is contrary to any Loan
Document or applicable law or unless it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking any such action.
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SECTION 12.3 Defaults. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of a Default or Event of Default
unless such Administrative Agent has received written notice from a Lender or
the Borrower specifying such Default or Event of Default and stating that such
notice is a "Notice of Default". In the event that any Lender receives such a
notice of the occurrence of a Default or Event of Default, such Lender shall
give prompt notice thereof to the Administrative Agent, the other Lenders and
the Borrower. The Administrative Agent shall (subject to Section 12.2 of this
Agreement) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders, provided that, unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
SECTION 12.4 Rights as Lender. With respect to its Commitment and the
Loans made by it, the Administrative Agent (and any successor acting as
Administrative Agent) in its capacity as a Lender under this Agreement shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not acting as Agent, and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent (and
any successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make investments
in, provide services to, and generally engage in any kind of lending, trust, or
other business with any Credit Party or Affiliates as if it were not acting as
Administrative Agent, and the Administrative Agent (and any successor acting as
Agent) and its Affiliates may accept fees and other consideration from any
Credit Party or any of its Subsidiaries or Affiliates for services in connection
with this Agreement or otherwise without having to account for the same to the
Lenders.
SECTION 12.5 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 3.7, but
without limiting the obligations of the Borrower under such Section) ratably in
accordance with their respective Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Administrative Agent (including by any Lender) in any way relating to or arising
out of any Loan Document or the transactions contemplated thereby or any action
taken or omitted by the Administrative Agent under any Loan Document; provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Person to be indemnified
or from the breach of an express agreement or made by the Administrative Agent
to any Lenders contained herein. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any costs or expenses payable by the Borrower under Section
13.2, to the extent that the Administrative Agent is not promptly reimbursed for
such reasonable and actually incurred costs and expenses by the Borrower. The
agreements contained in this Section shall survive payment in full of the Loans
and all other amounts payable under this Agreement.
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SECTION 12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on the Administrative Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Credit Parties and their
Subsidiaries and decision to enter into this Agreement and to make Loans
hereunder and to issue or participate in Letters of Credit hereunder and that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Loan Documents. Except for notices,
reports, and other documents and information expressly required to be furnished
to the Lenders by the Administrative Agent under this Agreement, the
Administrative Agent shall have no duty or responsibility to provide any Lender
with any credit or other information concerning the affairs, financial
condition, or business of any Credit Party or Affiliates that may come into the
possession of the Administrative Agent or any of its Affiliates.
SECTION 12.7 Resignation; Removal of Agents; Successor Agents.
(a) Resignation of Agent. Subject to the appointment and acceptance of a
successor as provided below, the Administrative Agent may resign at any time by
giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Administrative Agent, which successor shall be an Eligible Assignee having total
assets of at least $25,000,000,000. If no successor Administrative Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the Administrative Agent's giving of
notice of resignation, then the Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which successor shall be an
Eligible Assignee having total assets of at least $25,000,000,000.
(b) Removal of Administrative Agent. The Lenders may remove the
Administrative Agent hereunder and appoint a successor Administrative Agent upon
not less than thirty (30) days' prior written notice signed by Lenders whose
Commitment Percentages equal sixty six and two thirds percent (66.67%) of the
Aggregate Commitment exclusive of the Administrative Agent's Commitment, if the
Administrative Agent is grossly negligent or is guilty of willful misconduct in
the performance of its duties hereunder, as determined in the reasonable
discretion of the Lenders signing the foregoing written notice.
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(c) Successor Agents. Upon the acceptance of any appointment as
Administrative Agent under this Agreement by a successor, such successor shall
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges, and duties of the retiring Administrative Agent upon written notice
thereof to Borrower, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement excepting with respect to
its willful misconduct or gross negligence occurring prior to its discharge.
After any retiring Administrative Agent's resignation or removal under this
Agreement as Administrative Agent, the provisions of this Article 12 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications under this Agreement shall be in
writing, or by telephone subsequently confirmed in writing. Any notice shall be
effective if delivered by hand delivery or sent via telecopy, recognized
overnight courier service or certified mail, return receipt requested, and shall
be presumed to be received by a party hereto (i) on the date of delivery if
delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by
recognized overnight courier service, and (iii) on the third Business Day
following the date sent by certified mail, return receipt requested. A
telephonic notice to the Administrative Agent as understood by the
Administrative Agent will be deemed to be the controlling and proper notice in
the event of a discrepancy with or failure to receive a confirming written
notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Borrower: Golf Trust of America, L.P.
c/o GTA
14 North Adgers Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II and
Scott D. Peters
Telephone No.: 803/723-4653
Telecopy No.: 803/723-0479
With copies to: O'Melveny & Myers LLP
275 Battery Street, 26th Floor
San Francisco, California 94105
Attention: Peter T. Healy, Esq.
Telephone No.: (415) 984-8833
Telecopy No.: (415) 984-8701
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<PAGE>
If to the Guarantors: Golf Trust of America, Inc.
c/o GTA
14 North Adgers Wharf
Charleston, South Carolina 29401
Attention: W. Bradley Blair, II and
Scott D. Peters
Telephone No.: 843/723-4653
Telecopy No.: 843/723-0479
If to NationsBank as NationsBank, N.A.
Administrative Agent Commercial Banking
or as Issuing Lender: 2501 Oak Street, 2nd Floor
Myrtle Beach, South Carolina 29577-0807
Attention: Dale Zeglin
Telephone No.: (843) 946-3259
Telecopy No.: (843) 946-3211
If to any Lender: To the Address set forth on
Schedule 1 hereto
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to in this
Agreement, to which payments due are to be made and at which Loans will be
disbursed.
SECTION 13.2 Expenses; Indemnification. (a) The Borrower agrees to pay on
demand all reasonably and actually incurred costs and expenses of the
Administrative Agent, NationsBanc Montgomery Securities LLC and the Lenders in
connection with the syndication, preparation, execution, delivery,
administration, modification, and amendment of this Agreement, the other Loan
Documents, and the other documents to be delivered under this Agreement,
including, without limitation, the reasonable fees and expenses of counsel for
the Administrative Agent, NationsBanc Montgomery Securities LLC and the Lenders
(including the cost of internal counsel) with respect thereto and with respect
to advising the Administrative Agent or any Lender as to their rights and
responsibilities under the Loan Documents. The Borrower further agrees to pay on
demand all reasonably and actually incurred costs and expenses of the
Administrative Agent and the Lenders, if any (including, without limitation,
reasonable and actually incurred attorneys' fees and expenses and the reasonably
and actually incurred cost of internal counsel), in connection with the
enforcement (whether through negotiations, legal proceedings, or otherwise) of
the Loan Documents and the other documents to be delivered under this Agreement.
(b) The Borrower agrees to indemnify and hold harmless the Administrative
Agent and each Lender and each of their Affiliates and their respective
officers, directors, employees, agents, and advisors (each, an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities,
costs, and expenses (including, without limitation, reasonable and actually
incurred attorneys' fees) that may be incurred by or asserted or awarded against
any Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation, or proceeding or preparation of defense in connection therewith) the
Loan Documents, any of the transactions contemplated in this Agreement or the
actual or proposed use of the proceeds of the Loans, except to the extent such
claim, damage, loss, liability, cost, or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 13.2 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by any Credit Party, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrower agrees not to
assert any claim against the Administrative Agent, any Lender, any of their
Affiliates, or any of their respective directors, officers, employees,
attorneys, agents, and advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Loan Documents, any of the transactions contemplated in this
Agreement or the actual or proposed use of the proceeds of the Loans.
34
<PAGE>
(c) Without prejudice to the survival of any other agreement of the
Borrower under this Agreement, the agreements and obligations of the Borrower
contained in this Section 13.2 shall survive the payment in full of the Loans
and all other amounts payable under this Agreement.
SECTION 13.3 Set-off. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon and
after the occurrence of any Event of Default and during the continuance thereof,
the Lenders and any assignee or participant of a Lender in accordance with
Section 13.10 are hereby authorized by the Borrower at any time or from time to
time, without notice to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, time or demand, including, but not limited
to, indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the Lenders,
or any such assignee or participant to or for the credit or the account of the
Borrower against and on account of the Obligations irrespective of whether or
not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.
SECTION 13.4 Governing Law. This Agreement, the Notes and the other Loan
Documents, unless otherwise expressly set forth therein, shall be governed by,
construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 13.5 Consent to Jurisdiction. Each Credit Party hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Notes and the
other Loan Documents, any rights or obligations under this Agreement or
thereunder, or the performance of such rights and obligations. Each Credit Party
hereby irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by either the Administrative
Agent or any Lender in connection with this Agreement, the Notes or the other
Loan Documents, any rights or obligations under this Agreement or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 13.1. Nothing in this Section 13.5
shall affect the right of either the Administrative Agent or any Lender to serve
legal process in any other manner permitted by Applicable Law or affect the
right of either the Administrative Agent or any Lender to bring any action or
proceeding against any Credit Party or its properties in the courts of any other
jurisdictions.
35
<PAGE>
SECTION 13.6 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT, EACH LENDER AND EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS UNDER THIS
AGREEMENT OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) Each Credit Party recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, each Credit Party agrees that the Lenders, at the Lenders' option,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Administrative Agent, the Lenders and each Credit Party hereby
agree that no such Person shall have a remedy of punitive or exemplary damages
against any other party to a Loan Document and each such Person hereby waives
any right or claim to punitive or exemplary damages that they may now have or
may arise in the future in connection with any judicial proceeding, dispute,
claim or controversy arising out of, connected with or relating to the Notes or
any other Loan Documents ("Disputes"), whether such Dispute is resolved through
arbitration or judicially.
36
<PAGE>
SECTION 13.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by any
Credit Party to determine compliance with any covenant contained in this
Agreement, shall, except as otherwise expressly contemplated hereby or unless
there is an express written direction by the Administrative Agent to the
contrary agreed to by the Borrower, be performed in accordance with GAAP as in
effect on the Closing Date. In the event that changes in GAAP shall be mandated
by the Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower and the
Lenders shall have amended this Agreement to the extent necessary to reflect any
such changes in the financial covenants and other terms and conditions of this
Agreement.
SECTION 13.10 Assignments and Participations. (a) Each Lender may assign
to one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Loans, its Note, and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least
equal to $5,000,000 or an integral multiple of $1,000,000 in excess
thereof;
(iii) each such assignment by a Lender shall be of a constant, and
not varying, percentage of all of its rights and obligations under this
Agreement and the Note;
(iv) the parties to such assignment shall execute and deliver to the
Administrative Agent for its acceptance an Assignment and Acceptance in
the form of Exhibit F hereto, together with any Note subject to such
assignment and, except in cases of assignment to a Lender or an Affiliate
of a Lender a processing fee of $3,500; and
(v) Borrower shall receive prior written notice thereof.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender under this
Agreement and the assigning Lender shall, to the extent of such assignment,
relinquish its rights and be released from its obligations under this Agreement
excepting with respect to any gross negligence or willful misconduct on the part
of such assigning Lender prior to the date of such assignment. Upon the
consummation of any assignment pursuant to this Section, the assignor, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Borrower and the Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with Section 3.13.
37
<PAGE>
(b) The Administrative Agent shall maintain at its address referred to in
Section 13.1 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to, each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender under this Agreement for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower (or any of its Administrative Agents or advisors) or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit F
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt written notice thereof
to the parties thereto and to the Borrower.
(d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and its Loans), any such partial participation shall
be in an amount at least equal to $5,000,000 or an integral multiple of
$1,000,000 in excess thereof; provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participant shall be entitled to the benefit of the
yield protection provisions contained in Article III and the right of set-off
contained in Section 3.5, and (iv) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to its Loans and its Note and
to approve any amendment, modification, or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Loans or
Note, extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Note or increasing the Aggregate
Commitment.
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations under this
Agreement.
(f) Any Lender may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
38
<PAGE>
SECTION 13.11 Amendments and Waivers. Any provision of this Agreement or
any other Loan Document may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Lenders
(and, if Article XII or the rights or duties of the Administrative Agent is
affected thereby, by the Administrative Agent); provided that no such amendment
or waiver shall, unless signed by all the Lenders (other than Defaulting
Lenders), (i) increase the Commitments of the Lenders, (ii) extend the time of
the obligation of the Lenders to make Loans, (iii) reduce the principal of or
rate of interest on any Loan or any fees or other amounts payable under this
Agreement, (iv) postpone any date fixed for the payment of any scheduled
installment of principal of or interest on any Loan or any fees or other amounts
payable hereunder or for termination of any Commitment, (v) change the
percentage of the Commitments or of the unpaid principal amount of the Notes, or
the number of Lenders, which shall be required for the Lenders, the
Administrative Agent or any of them to take any action under this Section or any
other provision of this Agreement, (vi) release any Guarantor, (vii) modify any
provision of Article IX, (viii) modify the provisions of Section 10.1 of the
Amended and Restated Credit Agreement or (ix) modify the provisions of Section
10.3 of the Amended and Restated Credit Agreement, this Section 13.11, the
definition of Required Lenders or any provision of any Loan Document which, by
its terms, requires the consent, approval or satisfaction of all Lenders or each
Lender, without the prior written consent of each Lender.
SECTION 13.12 Performance of Duties. Each Credit Party's obligations under
this Agreement and each of the Loan Documents shall be performed by such Credit
Party at its sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of attorney and
other authorizations granted to the Lenders, the Administrative Agent and any
Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or the Credit Facility has not been
terminated.
SECTION 13.14 Survival of Indemnities. Notwithstanding any termination of
this Agreement, the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of this Article XIII and any other
provision of this Agreement and the Loan Documents shall continue in full force
and effect and shall protect the Administrative Agent and the Lenders against
events arising after such termination as well as before.
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this Agreement
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions of this Agreement or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
39
<PAGE>
SECTION 13.17 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 13.18 Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
40
<PAGE>
[Credit Agreement]
[Credit Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] 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
Its Chief Executive Officer and President
[CORPORATE SEAL] GOLF TRUST OF AMERICA, INC., a Maryland
corporation
By:______________________________________
W. Bradley Blair, II
Its Chief Executive Officer and President
[CORPORATE SEAL] GTA GP, INC., a Maryland corporation
By:______________________________________
W. Bradley Blair, II
Its Chief Executive Officer and President
[CORPORATE SEAL] GTA LP, INC., a Maryland corporation
By:______________________________________
W. Bradley Blair, II
Its Chief Executive Officer and President
<PAGE>
[CORPORATE SEAL] SANDPIPER GTA DEVELOPMENT, INC.
By:_________________________________
Name: __________________________
Title:__________________________
[CORPORATE SEAL] SANDPIPER-GOLF TRUST, LLC
By: Golf Trust of America, L.P., its sole member
By: GTA, GP, Inc., its general partner
By:_________________________________
Name: __________________________
Title:__________________________
<PAGE>
NATIONSBANK, N.A., as Administrative Agent
and Lender
By:_________________________________
Name: __________________________
Title:__________________________
<PAGE>
SCHEDULE 1: LENDERS AND COMMITMENTS
COMMITMENT
AND COMMITMENT
LENDER PERCENTAGE
NationsBank N.A. $25,000,000
2501 Oak Street, 2nd Floor 100%
Myrtle Beach, South Carolina 29577-0807
Attention: Dale Zeglin
Telephone No.: (803) 946-3259
Telecopy No.: (803) 946-3211
<PAGE>
EXHIBIT A
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF NOTE
$25,000,000
March __, 1999
FOR VALUE RECEIVED, the undersigned, GOLF TRUST OF AMERICA, L.P., a
Delaware limited partnership (the "Borrower"), hereby promises to pay to the
order of NATIONSBANK, N.A. (the "Bank"), at the times, at the place and in the
manner provided in the Credit Agreement hereinafter referred to, the principal
sum of up to Twenty Five Million Dollars ($25,000,000), or, if less, the
aggregate unpaid principal amount of all Loans disbursed by the Bank under the
Credit Agreement referred to below, together with interest at the rates as in
effect from time to time with respect to each portion of the principal amount
hereof, determined and payable as provided in Article III of the Credit
Agreement. Capitalized terms not otherwise defined herein shall have the meaning
assigned thereto in the Credit Agreement.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement dated as of March 31, 1999 (as amended,
restated or otherwise modified, the "Credit Agreement"), by and among the
Borrower, the Guarantors party thereto, the lenders (including the Bank) who are
or may become party thereto (collectively, the "Lenders") and NationsBank, N.A.,
as Administrative Agent for the Lenders. The Credit Agreement contains, among
other things, provisions for the time, place and manner of payment of this Note,
the determination of the interest rate borne by and fees payable in respect of
this Note, acceleration of the payment of this Note upon the happening of
certain stated events and the mandatory repayment of this Note under certain
circumstances.
The Borrower agrees to pay on demand, in accordance with the terms of the
Credit Agreement, all costs of collection, including reasonable attorneys' fees,
if any part of this Note, principal or interest, is collected after maturity
with the aid of an attorney.
<PAGE>
Presentment for payment, notice of dishonor, protest and notice of protest
are hereby waived.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA AND SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NORTH
CAROLINA.
The Debt evidenced by this Note is senior in right of payment to all
Subordinated Debt referred to in the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under
seal by a duly authorized officer of its General Partner, all as of the day and
year first above written.
GOLF TRUST OF AMERICA, L.P.
[CORPORATE SEAL] By: GTA GP, Inc., its General Partner
By: ____________________________
W. Bradley Blair, II
Chief Executive Officer
and President
<PAGE>
EXHIBIT B
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF NOTICE OF BORROWING
NationsBank, N.A., as Administrative Agent
Commercial Banking
2501 Oak Street, 2nd Floor
Myrtle Beach, South Carolina 29577-0807
Attention: Dale C. Zeglin
Ladies and Gentlemen:
This irrevocable Notice of Borrowing is delivered to you by Golf Trust of
America, L.P. (the "Borrower") under Section 2.2(a) of the Credit Agreement,
dated as of March 31, 1999 (as amended, restated or otherwise modified, the
"Credit Agreement"), by and among the Borrower, the Guarantors party thereto,
the lenders who are or may become party thereto (collectively, the "Lenders")
and NationsBank, N.A., as Administrative Agent for the Lenders.
1. The Borrower hereby requests that the Lenders make a [Eurodollar] [Base
Rate] Loan in the aggregate principal amount of ___________________ (the
"Loan").(1)
2. The Borrower hereby requests that the Loan be made on the following
Business Day: _____________________.(2)
3. $________________ of the Loan shall be used to finance the purchase of
golf courses and $________________ of the Loan proceeds shall be used for
working capital and general corporate requirements.
- --------
1 Complete with an amount in compliance with Section 2.2(a) of the Credit
Agreement.
2 This date should be no earlier than two (2) Business Days after delivery
of this Notice for a Base Rate Loan and no earlier than three (3) Business
Days after delivery of this Notice for a Eurodollar Loan.
<PAGE>
4. The principal amount of all Loans outstanding as of the date hereof
(including the requested Loan) does not exceed the maximum amount permitted to
be outstanding pursuant to the terms of the Credit Agreement.
5. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.
6. All capitalized undefined terms used herein have the meanings assigned
thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Borrowing
this ____ day of ______________, ______.
GOLF TRUST OF AMERICA, L.P.
By: GTA GP, Inc., its General Partner
By: ___________________________
W. Bradley Blair, II
Chief Executive Officer
and President
<PAGE>
EXHIBIT C
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF NOTICE OF REPAYMENT
NationsBank, N.A., as Administrative Agent
Commercial Banking
2501 Oak Street, 2nd Floor
Myrtle Beach, South Carolina 29577-0807
Attention: Dale C. Zeglin
Ladies and Gentlemen:
This irrevocable Notice of Repayment is delivered to you by Golf Trust of
America, L.P. (the "Borrower"), under Section 2.3(c) of the Credit Agreement,
dated as of March 31, 1999 (as amended, restated or otherwise modified, the
"Credit Agreement"), by and among the Borrower, the Guarantors party thereto,
the lenders who are or may become party thereto (collectively, the "Lenders")
and NationsBank, N.A., as Administrative Agent for the Lenders (the
"Administrative Agent").
1. The Borrower hereby provides notice to the Administrative Agent that
the Borrower shall repay the Loans in the following amount:
- ------------------.
2. Such Loan(s) to be repaid are [Base Rate] [Eurodollar] Loan(s).
3. The Borrower shall repay such Loan(s) on the following Business Day:
_______________.(1)
4. All capitalized undefined terms used herein have the meanings assigned
thereto in the Credit Agreement.
- ----------
1 This date should be no earlier than three (3) Business Days after the
delivery of this Notice.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment
this ____ day of , .
GOLF TRUST OF AMERICA, L.P.
By: GTA GP, Inc., its General Partner
By: ____________________________
W. Bradley Blair, II
Chief Executive Officer
and President
<PAGE>
EXHIBIT D
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF NOTICE OF CONVERSION/CONTINUATION
NationsBank, N.A., as Agent
Commercial Banking
2501 Oak Street, 2nd Floor
Myrtle Beach, South Carolina 29577-0807
Attention: Dale C. Zeglin
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation (the "Notice") is
delivered to you by Golf Trust of America, L.P. (the "Borrower") under Section
3.2 of the Credit Agreement, dated as of March 31, 1999 (as amended, restated or
otherwise modified, the "Credit Agreement"), by and among the Borrower, the
Guarantors party thereto, the lenders referred to therein (collectively, the
"Lenders") and NationsBank, N.A., as Administrative Agent for the Lenders.
1. This Notice of Conversion/Continuation is submitted for the purpose of:
(Complete applicable information.)
(a) [Converting] [continuing] a ___________ Loan [into] [as]
a ____________ Loan.1
(b) The aggregate outstanding principal balance of such Loan is
$_______________.
- ----------
1 Delete the bracketed language and insert "Base Rate", or "Eurodollar", as
applicable, in each blank.
<PAGE>
(c) The last day of the current Interest Period for such Loan is
___________.2
(d) The principal amount of such Loan to be [converted]
[continued] is $_______________.3
(e) The requested effective date of the [conversion]
[continuation] of such Loan is _______________.4
2. No Default or Event of Default exists, and none will exist upon the
conversion or continuation of the Loan requested herein.
3. All capitalized undefined terms used herein have the meanings assigned
thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Conversion/Continuation this ____ day of , .
GOLF TRUST OF AMERICA, L.P.
By: GTA GP, Inc., its General Partner
By: _________________________
W. Bradley Blair, II
Chief Executive Officer
and President
- ----------
2 Insert applicable date for any Eurodollar Loan being converted or
continued
3 Complete with an amount in compliance with Section 3.2 of the Credit
Agreement
4 This date should be at least three (3) Business Days after the delivery of
this Notice.
<PAGE>
EXHIBIT E
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of GOLF TRUST OF AMERICA, L.P., a Delaware
limited partnership (the "Borrower"), and GOLF TRUST OF AMERICA, INC., a
Maryland corporation, GTA GP, INC., a Maryland corporation, GTA LP, INC., a
Maryland corporation, SANDPIPER GTA DEVELOPMENT, INC., a California corporation
and SANDPIPER-GOLF TRUST, LLC, a Delaware limited liability company (each a
"Guarantor" and, together with the Borrower, the "Credit Parties"), hereby
certify to the Administrative Agent and Lenders as follows:
1. This Officer's Compliance Certificate is delivered to you pursuant to
Article VII of the Credit Agreement, dated as of March 31, 1999 (as amended,
restated or otherwise modified, the "Credit Agreement"), by and among the
Borrower, the Guarantors, the lenders who are or may become party thereto
(collectively, the "Lenders"), and NATIONSBANK, N.A., as the Administrative
Agent for the Lenders. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
2. Each of the undersigned has reviewed the financial statements of the
Credit Parties dated as of , 199 and for the fiscal quarter then ended (the
"Reference Date") and such statements fairly present the financial condition of
the Credit Parties as of the dates indicated and the results of its operations
and cash flows for the period indicated.
3. Each of the undersigned has reviewed the terms of the Credit Agreement,
the Notes and the related Loan Documents and has made, or caused to be made
under his or her supervision, a review in reasonable detail of the transactions
and the condition of the Credit Parties during the accounting period covered by
the financial statements referred to in Paragraph 2 above. Such review has not
disclosed the existence during or at the end of such accounting period of any
condition or event that constitutes a Default or an Event of Default, nor does
any of the undersigned have any knowledge of the existence of any such condition
or event as at the date of this Certificate.
<PAGE>
4. The Applicable Margin is ____% as shown on Schedule 1.
5. The Credit Parties are in compliance with the covenants contained in
Article IX of the Credit Agreement as shown on Schedule 1 and the Credit Parties
are in compliance with the other covenants and restrictions contained in
Articles VIII and X of the Credit Agreement.
6. The Gross Golf Revenues of each Eligible Property for the two-quarter
period ending on the Reference Date are at least 85% of the Gross Golf Revenues
of such Eligible Property for the same two-quarter period during the immediately
preceding year, as shown on Schedule 2.
7. No operator of any Eligible Property is more than thirty (30) days
delinquent in its required payments to the Borrower under the related
Participating Lease or any other relevant agreement between such operator and
the Borrower.
8. The aggregate outstanding amount of loans permitted under Section
10.4(e) of the Amended and restated Credit Agreement plus other funds of
Borrower utilized at any one time for the construction of improvements to golf
course properties as permitted under Section 10.11 of the Amended and Restated
Credit Agreement, exclusive of funds used to construct the renovations and
improvements to the Sandpiper Golf Course, is $_______________, which amount
does not exceed 10% of Total Assets.
WITNESS the following signatures as of __________________, 1999.
GOLF TRUST OF AMERICA, L.P.
By: GTA, GP, Inc., its general partner
By: ______________________________________
W. Bradley Blair, II
Chief Executive Officer and President
GOLF TRUST OF AMERICA, INC.
By: ______________________________________
W. Bradley Blair, II
Chief Executive Officer and President
<PAGE>
GTA GP, INC.
By: ______________________________________
W. Bradley Blair, II
Chief Executive Officer and President
GTA LP, INC.
By: ______________________________________
W. Bradley Blair, II
Chief Executive Officer and President
SANDPIPER GTA DEVELOPMENT, INC.
By:_______________________________________
Name:__________________________________
Title: ________________________________
SANDPIPER-GOLF TRUST, LLC
By: Golf Trust of America, L.P., its sole member
By: GTA, GP, Inc., its general partner
By:_______________________________________
Name:__________________________________
Title: ________________________________
<PAGE>
Schedule 1
To
Officer's Compliance Certificate
DETERMINATION OF APPLICABLE MARGIN
Senior Debt Rating
1. Moody's Rating: ___________
2. S&P Rating: ___________
3. Lower of S&P and Moody's: ___________
If line 3 is BBB/Baa2 or higher, Applicable Margin = 1.25%
If line 3 is BBB-/Baa3, Applicable Margin = 1.35%
If line 3 is below BBB-/Baa3, or if rating exists,
Applicable Margin shall be determined by reference
to the Leverage Ratio as of each fiscal quarter end, as
follows:
Leverage Ratio Applicable Margin Per Annum
-------------- ---------------------------
Greater than or equal to 2.00%
.50 to 1.00
Greater than or equal to .375 to 1.75%
1.00 but less than .50 to 1.00
Less than .375 to 1.00 1.50%
<PAGE>
Schedule 2
to
Officer's Compliance Certificate
DETERMINATION OF COMPLIANCE WITH
FINANCIAL COVENANTS
A. Minimum Tangible Net Worth
1. The sum of the following as of the immediately preceding fiscal
quarter end:
a. $250,000,000 $250,000,000
b. plus 80% of aggregate net cash proceeds
from the issuance of or offering of
capital stock after the Closing Date
of the Amended and Restated Credit
Agreement $_________________
c. Minimum Tangible Net Worth
(add lines 1.a and 1.b) $_________________
2. Actual Tangible Net Worth
as of such date $_________________
B. Leverage Ratio
1. Total Liabilities as of the immediately
preceding fiscal quarter end $_________________
2. Total Assets as of the immediately
preceding fiscal quarter end $_________________
3. Ratio of Total Liabilities to Total Assets
(divide line 1 by line 2) ________________
4. Maximum Permitted Ratio 0.55 to 1.00
<PAGE>
C. Minimum Interest Coverage Ratio
1. EBITDA for the immediately preceding quarter $_________________
2. Interest Expense for
such quarter $_________________
3. Interest Coverage Ratio
(divide line 1 by line 2)
_____________
4. Minimum Interest Coverage Ratio 2.50 to 1.00
D. Minimum Debt Service Coverage Ratio
1. EBITDA for the immediately preceding quarter $_________________
2. Debt Service for such quarter
a. Interest Expense for
such quarter $_________________
b. plus, principal payments of Debt
for such quarter $_________________
c. Debt Service (add lines 2.a and 2.b) $_________________
3. Debt Service Coverage Ratio
(divide line 1 by line 2.c) ____________
4. Minimum Debt Service Coverage Ratio 2.00 to 1.00
E. Minimum Fixed Charge Coverage Ratio
1. EBITDA for the immediately preceding quarter $_________________
2. Fixed Charges for such quarter $_________________
3. Fixed Charge Coverage Ratio
(divide line 1 by line 2) ____________
4. Minimum Fixed Charge Coverage Ratio 1.50 to 1.00
<PAGE>
Schedule 3
To
Officer's Compliance Certificate
DETERMINATION OF COMPLIANCE WITH
GROSS GOLF REVENUE STANDARD
Gross Golf Revenues for Gross Golf Revenues for
Eligible Property Current 2-Quarter Period Period From Prior Year % Change
----------------- ------------------------ ---------------------- --------
<PAGE>
EXHIBIT F
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF ASSIGNMENT AND ACCEPTANCE
---------------------------------
Reference is made to the Credit Agreement dated as of March 31, 1999 (as
amended, restated or otherwise modified, the "Credit Agreement") among Golf
Trust of America, L.P., a Delaware limited partnership (the "Borrower"), the
Guarantors party thereto, the Lenders (as defined in the Credit Agreement) and
NationsBank, N.A., as Administrative Agent for the Lenders (the "Administrative
Agent"). Terms defined in the Credit Agreement are used herein with the same
meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without recourse
and without representation or warranty except as expressly set forth herein, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement and the
other Loan Documents as of the date hereof equal to the percentage interest
specified on Schedule 1 of all outstanding rights and obligations of Assignor
under the Credit Agreement and the other Loan Documents. After giving effect to
such sale and assignment, the Assignee's Commitment and the amount of the Loans
owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under the
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Note held by the Assignor and requests that the
Administrative Agent exchange such Note for new Notes payable to the order of
the Assignee in an amount equal to the Commitment assumed by the Assignee
pursuant hereto and to the Assignor in an amount equal to the Commitment
retained by the Assignor, if any, as specified on Schedule 1.
<PAGE>
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Article VII thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Credit Agreement
as are delegated to the Administrative Agent by the terms thereof, together with
such powers and discretion as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a
Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms
required under Section 3.13 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance and recording by the
Administrative Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by the Administrative
Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the Credit Agreement and the Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1
to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: %
Assignee's Commitment: $_____________________
Aggregate outstanding principal amount
of Loans assigned: $_____________________
Principal amount of Note payable to Assignee: $_____________________
Principal amount of Note payable to Assignor: $_____________________
Effective Date (if other than date
of acceptance by Agent): ______________________, _________(1)
[NAME OF ASSIGNOR], as Assignor
By: _____________________
Title:___________________
Dated:__________________ , 19 ___
[NAME OF ASSIGNEE], as Assignee
By: _____________________
Title:___________________
Domestic Lending Office: _______________
Eurodollar Lending Office: _____________
Accepted and Approved
this ___ day of _____________, __________
NATIONSBANK ,N.A., as Administrative Agent
By: _____________________
Title:___________________
- ----------
1 This date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to the Administrative Agent.
<PAGE>
EXHIBIT G
to
Credit Agreement
Dated as of March 31, 1999
by and among
Golf Trust of America, L.P.,
as Borrower,
the Guarantors party thereto,
the Lenders party thereto,
and
NationsBank, N.A.,
as Administrative Agent for the Lenders
FORM OF GUARANTY SUPPLEMENT
GUARANTY SUPPLEMENT, dated as of __________, (the "Supplement"), made by
[INSERT NAME OF NEW GUARANTOR], a ____________________ (the "New Guarantor"), in
favor of NATIONSBANK, N.A., as Administrative Agent under the Credit Agreement
(as defined below) for the ratable benefit of themselves and the Lenders.
1. Reference is hereby made to the Guaranty (as amended, restated, or
otherwise modified, the "Guaranty") set forth in Article IV of the Credit
Agreement (as amended, restated or otherwise modified, the "Credit Agreement")
dated as of March 31, 1999, between Golf Trust of America, L.P., the Guarantors
party thereto, in favor of the Administrative Agent, on behalf of the Lenders.
This Supplement supplements the Guaranty, forms a part thereof and is subject to
the terms thereof. Capitalized terms used and not defined herein shall have the
meanings given thereto or referenced in the Credit Agreement.
2. The New Guarantor hereby agrees to unconditionally guarantee to the
Administrative Agent for the ratable benefit of itself, the Lenders and their
respective successors, endorsees, transferees and assigns, the prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
all Guaranteed Obligations to the same extent and upon the same terms and
conditions as are contained in the Guaranty.
3. The New Guarantor hereby agrees that it is a party to the Credit
Agreement and the Guaranty as if a signatory thereto on the Closing Date of the
Credit Agreement, and the New Guarantor shall comply with all of the terms,
covenants, conditions and agreements and hereby makes each representation and
warranty, in each case set forth therein. The New Guarantor agrees that the
"Guaranty" as used therein or in any other Loan Documents shall mean the
Guaranty as supplemented hereby.
4. The New Guarantor hereby acknowledges it has received a copy of the
Credit Agreement and that it has read and understands the terms thereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby causes this Supplement to be
executed and delivered as of the date first above written.
[CORPORATE SEAL] [INSERT NAME OF NEW GUARANTOR]
By: _____________________
Title:___________________
Name: ___________________
<PAGE>
EXHIBIT B
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(W. Bradley Blair, II)
November 7, 1999
THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
dated as of November 7, 1999, between Golf Trust of America, Inc., a Maryland
corporation, having its principal place of business at 14 North Adger's Wharf,
Charleston, South Carolina 29401 (the "Company"), and W. Bradley Blair, II, an
individual residing at the address set forth below his name on the signature
page hereof (the "Executive").
COMPANY AND EXECUTIVE ENTER THIS AGREEMENT on the basis of the following
facts, understandings and intentions:
A. the Executive has been an executive of the Company employed under that
certain Employment Agreement dated as of February 7, 1997 (the "Original
Agreement"), which employment commenced on the date of the closing of the
Company's initial public offering, February 12, 1997 (the "Commencement Date");
B. the Executive desires to remain in the employ of the Company;
C. the Company values Executive's knowledge and familiarity with the
business of the Company and desires to assure itself of the continued services
of Executive; and
D. Company and Executive desire to amend and restate the Original Agreement
as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Executive agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The employment of the Executive by the Company as provided in
Section 1 above will commence on the date set forth above (the "Commencement
Date"), and will terminate on February 7, 2004 (such term being the "Original
Term"), unless earlier terminated pursuant to the provisions of Section 5 of
this Agreement. On the final day of the Original Term and on each one (1) year
anniversary thereafter (each an "Extension Date"), the term of this Agreement
shall be extended automatically to commence on the Extension Date and terminate
on the three (3) year anniversary of the Extension Date (each such period being
a "Renewal Term"), unless written notice that this Agreement will not be so
extended is given by either party to the other at least three (3) years prior to
the Extension Date. The Original Term and any Renewal Terms, in their full
duration, are herein individually referred to as "Employment Terms," and the
period of the Executive's employment under this Agreement consisting of the
Original Term and all Renewal Terms, except as may be terminated early pursuant
to Section 5, is herein referred to as the "Employment Period."
<PAGE>
3. Position.
(a) Title and Position. During the Employment Period, the Executive shall
be employed as an executive officer of the Company with the title of President
and Chief Executive Officer or in such other executive position as the Board of
Directors of the Company (the "Board") may from time to time determine with the
consent of the Executive. In addition, for so long as the Executive is an
employee of the Company and is elected by the Company's shareholders, the
Executive hereby agrees to serve as a member of the Board. The Executive
understands that his position as a member of the Board is subject to the
nomination by the Company; provided that the Executive shall be a member of the
Board with a three (3) year term prior to the time the Company consummates any
public offering of securities and the Company agrees to use permissible
commercially reasonable efforts (subject to the exercise of its fiduciary
duties) to cause the nomination and election of the Executive to the Board
following any such public offering, subject to the terms and conditions of this
Agreement. In the performance of his duties as an officer, the Executive shall
be subject to the direction of the Board, and shall not be required to take
direction from or report to any other person. Executive's duties and authority
shall be commensurate with his title and position with the Company.
(b) Place of Employment. During the term of this Agreement, the Executive
shall perform the services required by this Agreement at the Company's place of
business in Charleston, South Carolina; provided, however, that the Company may
require the Executive to travel to other locations on the Company's business.
(c) Duties. The Executive shall devote commercially reasonable efforts and
substantially full working time and attention to the promotion and advancement
of the Company and its welfare. The Executive shall serve the Company faithfully
and to the best of his ability, and shall perform such services and duties in
connection with the business, affairs and operations of the Company as may be
assigned or delegated to him from time to time by or under, and in accordance
with, the authority and direction of the Board. The Company shall retain the
right to direct and control the means and methods by which the Executive
performs the above services.
(d) Other Activities. Except with the prior written approval of the Board
(which the Board may grant or withhold in its sole and absolute discretion) and
except as may be set forth in Section 9 of this Agreement, the Executive, during
the Employment Period, will not (i) accept any other employment, or (ii) engage,
directly or indirectly, in any other business activity (whether or not pursued
for pecuniary advantage) that is or may be competitive with, or that might place
him in a competing position to, that of the Company or any of its affiliates.
Notwithstanding the foregoing, the Company agrees that the Executive (or
affiliates of the Executive) shall be permitted (i) to undertake the activities
set forth in Section 9, and (ii) to make any other passive personal investment
that is not in a business activity competitive with the Company.
4. Compensation and Related Matters.
(a) Base Salary. The Company shall pay the Executive a base salary at a
rate of Two Hundred Fifty Thousand Dollars ($250,000) per year during the first
full calendar year of the Original Term. The Executive's base salary for each
succeeding year shall, at a minimum, be increased over the prior year by a
factor measured by the increase, if any, in the Consumer Price Index for Wage
Earners and Clerical Workers (as published by the Bureau of Labor Statistics).
The base salary may further be increased, but not decreased, in succeeding years
by an amount determined by the Compensation Committee of the Board. All salary
shall be paid according to the standard payroll practices of the Company
(regarding, e.g., timing of payments, standard employee deductions, income tax
withholdings, social security deductions, and etc.) as in place from time to
time.
2
<PAGE>
(b) Business and Professional Expenses. The Company shall reimburse the
Executive for (i) personal expenditures incurred by the Executive in connection
with the conduct of the Company's business including, without limitation, a
prospectively paid automobile allowance, and (ii) reasonable expenditures
incurred by the Executive in connection with maintaining his professional
standing including, without limitation, bar association dues and fees and
continuing legal education expenses, in every case upon presentation of
sufficient evidence of such expenditures as may be required by the Company's
policies as in place from time to time.
(c) Benefit Plan Eligibility. During the Employment Period, the Executive
shall be entitled to participate in any benefit plans that are made generally
available to executive officers of the Company from time to time, including,
without limitation, any deferred compensation, health, dental, life insurance,
long-term disability insurance, retirement, pension or 401(k) savings plan.
Nothing in this Section 4(c) is intended, or shall be construed, to require the
Company to institute or to continue any, or any particular, plan or benefit.
(d) Performance Bonus. The Compensation Committee of the Board may
establish and administer a performance bonus program for the Executive to
provide for payment of a (cash and/or non-cash consideration) bonus to the
Executive upon the achievement of certain performance objectives to be
established by the Compensation Committee for the Executive. If such a program
is established, the Compensation Committee of the Board shall monitor, review
and modify the program from time to time as necessary to reflect the Executive's
contributions to the Company.
(e) Stock Incentive Plan. The Compensation Committee of the Board shall
establish and administer one or more stock-based incentive plans in which the
Executive shall be eligible to participate according to their terms; provided,
however, that the Board of Directors shall approve, prior to the completion of
the Company's initial public offering, a grant of options to the Executive to
purchase up to one hundred fifty thousand (150,000) shares of the Company's
common stock, which options shall become exercisable in three (3) equal
installments commencing upon the first anniversary of the date of grant and each
of the two (2) years thereafter, and shall be exercisable for ten (10) years
from the date of grant at the fair market value of the common stock on the date
of grant.
(f) Fringe Benefits. The Executive will be entitled to fringe benefits as
may be determined or granted from time-to-time under the authority of the Board;
provided, however, that the Company shall provide the fringe benefits authorized
by the Board on April 25, 1997 (which resolution is attached to this Agreement
as Exhibit A) and shall not reduce or modify those benefits in a manner adverse
to the Executive without the written consent of the Executive.
3
<PAGE>
(g) Vacation and Holidays. The Executive shall be entitled to four (4)
weeks (twenty (20) business days) of paid vacation time in each calendar year on
a pro-rated basis. The Executive shall be entitled to all paid Company holidays.
(h) Directors and Officers Insurance and Indemnification. The Company shall
maintain insurance to insure the Executive against any claim arising out of an
alleged wrongful act by the Executive while acting as a director or officer of
the Company. The Company shall further indemnify and exculpate from money
damages the Executive to the fullest extent permitted under applicable law.
(i) Performance Reviews. At the end of each fiscal year, the Board or the
Compensation Committee thereof will review the Executive's job performance and
will provide the Executive a written review of the Executive's job performance
during the prior year and implement any Board authorized revisions to the
Executive's position, compensation and duties at the Company; provided, however,
that the provisions set forth in this Agreement with respect to the Executive's
compensation, and other terms and conditions of the Executive's employment at
the Company shall not be modified by the Board in a manner which would result in
less favorable or less beneficial terms or conditions thereof being imposed on
the Executive without the Executive's full concurrence and consent.
5. Termination. The Executive's employment hereunder shall be, or may be,
as the case may be, terminated under the following circumstances:
(a) Death. The Executive's employment under this Agreement shall terminate
upon his death.
(b) Disability. The Executive's employment under this Agreement shall
terminate upon the Executive's physical or mental disability or infirmity which,
in the opinion of a competent physician selected by the Board, renders the
Executive unable to perform his duties under this Agreement for more than one
hundred twenty (120) days during any one hundred eighty (180) day period.
(c) Employment-At-Will; Termination by Company for Any Reason. The
Executive's employment hereunder is "at will" and may be terminated by the
Company at any time with or without Good Reason (as defined in Section 7(c)
below), by a majority vote of all of the members of the Board of Directors upon
written Notice of Termination (as defined below) to Executive, subject only to
the severance provisions specifically set forth in Section 7 below.
(d) Voluntary Resignation. The Executive may voluntarily resign his
position and terminate his employment with the Company at any time by delivery
of a written notice of resignation to the Company (the "Notice of Resignation").
The Notice of Resignation shall set forth the date such resignation shall become
effective (the "Date of Resignation"), which date shall in any event, be at
least ten (10) days and no more than thirty (30) days from the date the Notice
of Resignation is delivered to the Company. The Notice of Resignation shall be
sufficient notice under Section 2 above to prevent the automatic extension of
this Agreement, if timely given according to the terms of Section 2.
4
<PAGE>
(e) Notice. Any termination of the Executive's employment by the Company
shall be communicated by written Notice of Termination to the Executive. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice that
indicates the specific termination provision in this Agreement relied upon and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. The Notice of Termination shall be sufficient notice under Section 2
above to prevent the automatic extension of this Agreement, if timely given
according to the terms of Section 2.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death; (ii)
if the Executive's employment is terminated by reason of his disability, the
date of the opinion of the physician referred to in Section 5(b), above; (iii)
if the Executive's employment is terminated by the Company for Good Reason or
without Good Reason by the Company pursuant to Section 5(c) above, the date
specified in the Notice of Termination; and (iv) if the Executive voluntarily
resigns pursuant to Section 5(d) above, the Date of Resignation set forth in the
Notice of Resignation.
6. Obligations Upon Termination.
(a) Return of Property. The Executive hereby acknowledges and agrees that
all personal property and equipment furnished to or prepared by the Executive in
the course of or incident to his employment belongs to the Company and shall be
promptly returned to the Company upon termination of the Employment Period.
(b) Complete Resignation. Upon the expiration of the Employment Period or
any termination of employment under Section 5 above, the Executive shall be
deemed to have resigned from all offices and directorships then held with the
Company or any of its subsidiaries.
(c) Survival of Representations, Warranties, Covenants and Other
Provisions. The representations and warranties contained in this Agreement and
the parties' obligations under this Section 6 and Sections 7 through 9 and 16
through 18, inclusively, shall survive termination of the Employment Period and
the expiration of this Agreement.
(d) Release. In exchange for the Company entering into this Agreement, the
Executive agrees that, at the time of his resignation or termination from the
Company, he will resign from the Board and will execute a release acceptable to
the Company of all liability of the Company and its officers, shareholders,
employees and directors to the Executive in connection with or arising out of
his employment with the Company, except with respect to (i) any then-vested
rights under any of the Company's stock incentive plans or in connection with
other stock-based compensation; (ii) any deferred compensation held in trust
under the Company's Deferred Compensation Plan; (iii) any Severance Payments or
benefits which may be payable to him under Section 7 or other provisions of this
Agreement; and (iv) any continuation of health or other benefit plans in
accordance with this Agreement or as may be required by law.
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7. Compensation Upon Termination. The Executive shall be entitled to the
following post-termination payments:
(a) Death. If the Executive's employment is terminated by reason of death
pursuant to Section 5(a), the Company shall pay the Executive his base salary
payable under Section 4(a) as in effect on the Date of Termination plus the
greater of (1) the average value of the cash and non-cash consideration received
by Executive as a performance bonus in years 1997, 1998 and 1999 or (2) the
value of the then-most-recent calendar year's annual cash and non-cash
consideration received by Executive as a performance bonus (the "Severance
Payments"), paid in semi-monthly installments for the greater of (i) three (3)
years following the Date of Termination, or (ii) the time period beginning on
the Date of Termination and ending on the final day of the final Employment Term
determined according to Section 2, above. In addition, immediately prior to the
Date of Termination the vesting of all stock-related compensation previously
granted to the Executive shall be accelerated such that none of such
compensation is subject to forfeiture and such that any stock options or similar
rights previously granted to the Executive shall become immediately vested and
exercisable; provided, however, that all stock-related compensation shall be
subject to the plan under which it was granted, if any, as such plan may be
amended from time to time in accordance with its terms. In addition, during the
greater of the time periods in the preceding clauses (i) and (ii), the
Executive, his estate and dependents shall continue to participate, at their
option, in all benefit plans described in Section 4(c) and shall continue to
receive all fringe benefits described in Section 4(f) in each case substantially
comparable to those in effect on the day before the Date of Termination.
Thereafter, at their own expense, the Executive's dependents shall be entitled
to any continuation of health insurance coverage rights required by any
applicable law.
(b) Disability. If the Executive's employment is terminated by reason of
disability pursuant to Section 5(b), the Executive shall receive Severance
Payments for the greater of (i) three (3) years following the Date of
Termination, or (ii) the time period beginning on the Date of Termination and
ending on the final day of the final Employment Term determined according to
Section 2, above; provided, however, that Severance Payments otherwise payable
to the Executive under this Section 7(b) shall be reduced by the sum of the
amounts, if any, payable to the Executive at or prior to the time of any such
Severance Payment under any disability benefit plan of the Company. In addition,
immediately prior to the Date of Termination the vesting of all stock-related
compensation previously granted to the Executive shall be accelerated such that
none of such compensation is subject to forfeiture and such that any stock
options or similar rights previously granted to the Executive shall become
immediately vested and exercisable; provided, however, that all stock-related
compensation shall be subject to the plan under which it was granted, if any, as
such plan may be amended from time to time in accordance with its terms. In
addition, during the greater of the time periods in the preceding clauses (i)
and (ii), the Executive shall continue to participate, at his option, in all
benefit plans described in Section 4(c) and shall continue to receive all fringe
benefits described in Section 4(f) in each case substantially comparable to
those in effect on the day before the Date of Termination. Thereafter, at the
Executive's own expense, the Executive and his dependents shall be entitled to
any continuation of health insurance coverage rights required by any applicable
law.
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(c) Termination by Company.
(i) For Good Reason. If the Executive's employment is terminated by
the Company pursuant to Section 5(c) for Good Reason (as defined below), the
Company shall pay the Executive his base salary and any bonus due and payable
pursuant to Section 4(d) through the Date of Termination. In addition, the
Executive shall be entitled to retain such stock-based compensation (including,
without limitation, shares of restricted stock and/or options to purchase
securities of the Company granted or sold to the Executive pursuant to the terms
and conditions of any of the Company's stock incentive plans or otherwise) as
has vested as of the Date of Termination. At the Executive's own expense, the
Executive and his dependents shall also be entitled to any continuation of
health insurance coverage rights required by any applicable law.
(ii) Without Good Reason. If the Executive's employment is terminated
by the Company pursuant to Section 5(c) without any Good Reason, the Company
shall pay the Executive the Severance Payment for the greater of (A) three (3)
years following the Date of Termination, or (B) the time period beginning on the
Date of Termination and ending on the final day of the final Employment Term
determined according to Section 2, above. In addition, immediately prior to the
Date of Termination the vesting of all stock-related compensation previously
granted to the Executive shall be accelerated such that none of such
compensation is subject to forfeiture and such that any stock options or similar
rights previously granted to the Executive shall become immediately vested and
exercisable; provided, however, that all stock-related compensation shall be
subject to the plan under which it was granted, if any, as such plan may be
amended from time to time in accordance with its terms. In addition, during the
greater of the time periods in the preceding clauses (A) and (B), the Executive
shall continue to participate, at his option, in all benefit plans described in
Section 4(c) and shall continue to receive all fringe benefits described in
Section 4(f) in each case substantially comparable to those in effect on the day
before the Date of Termination. Thereafter, at the Executive's own expense, the
Executive and his dependents shall be entitled to any continuation of health
insurance coverage rights required by any applicable law.
(iii) "Good Reason" means a finding by the Board that (A) the
Executive materially breached any of the material terms of this Agreement; or
(B) the Executive acted with gross negligence, willful misconduct or
fraudulently in the performance of his duties hereunder.
(d) Voluntary Resignation.
(i) For Good Cause. If the Executive terminates his employment with
the Company pursuant to Section 5(d) for Good Cause (as defined below), the
Company shall pay the Executive the Severance Payment for the greater of (A)
three (3) years following the Date of Termination, or (B) the time period
beginning on the Date of Termination and ending on the final day of the final
Employment Term determined according to Section 2, above. In addition,
immediately prior to the Date of Termination the vesting of all stock-related
compensation previously granted to the Executive shall be accelerated such that
none of such compensation is subject to forfeiture and such that any stock
options or similar rights previously granted to the Executive shall become
immediately vested and exercisable; provided, however, that all stock-related
compensation shall be subject to the plan under which it was granted, if any, as
such plan may be amended from time to time in accordance with its terms. In
addition, during the greater of the time periods in the preceding clauses (A)
and (B), the Executive shall continue to participate, at his option, in all
benefit plans described in Section 4(c) and shall continue to receive all fringe
benefits described in Section 4(f) in each case substantially comparable to
those in effect on the day before the Date of Termination. Thereafter, at the
Executive's own expense, the Executive and his dependents shall be entitled to
any continuation of health insurance coverage rights required by any applicable
law.
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(ii) Without Good Cause. If the Executive terminates his employment
with the Company pursuant to Section 5(g) without Good Cause, the Company shall
have no obligation to compensate the Executive following the Date of
Resignation. However, the Executive shall be entitled to retain such stock-based
compensation (including, without limitation, shares of restricted stock and/or
options to purchase securities of the Company granted or sold to the Executive
pursuant to the terms and conditions of any of the Company's stock incentive
plans or otherwise) as has vested as of the Date of Termination. In any event,
at the Executive's own expense, the Executive and his dependents shall be
entitled to any continuation of health insurance coverage rights required by any
applicable law.
(iii) "Good Cause" means the occurrence, without the express written
consent of the Executive, of any of the following events, unless such event is
substantially corrected within ninety (90) days following written notification
by Executive to the Company that he intends to terminate his employment under
this Agreement because of such event:
(A) any reduction or diminution in the compensation, benefits or
responsibilities of the Executive without his written consent;
(B) any material breach or material default by the Company under any
material provision of this Agreement;
(C) any relocation of the Company's principal place of business from
Charleston County, South Carolina; or
(D) any Change in Control (as defined below).
(iv) "Change in Control" means the occurrence of any of the following
events after the effective date of the first initial public offering of the
Company's common stock:
(A) the Board adopts a plan relating to the liquidation or dissolution or
merger of the Company;
(B) a Person (as defined below) directly or indirectly becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Securities Exchange Act of 1934) of more than
twenty-five percent (25%) of the total voting power of the total
outstanding voting securities of the Company on a fully diluted basis;
provided, however, that beneficial ownership of partnership units in
Golf Trust of America, L.P. shall not be considered beneficial
ownership of voting securities of the Company;
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(C) a Person directly or indirectly acquires or agrees to acquire all or
substantially all of the assets and business of the Company;
(D) for any reason during any period of two (2) consecutive years (not
including any period prior to the date of this Agreement) a majority
of the Board is constituted by individuals other than (1) individuals
who were directors immediately prior to the beginning of such period,
and (2) new directors whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors immediately prior to the beginning of the period
or whose election or nomination for election was previously so
approved.
(v) For purposes of this Section 7(d), "Person" means any natural
person, corporation, or any other entity; provided, however, that the term
"Person" shall not include any shareholder or employee of the company on the
date immediately prior to the initial public offering of the Company's common
stock or any estate or member of the immediate family of such a shareholder or
employee.
(e) Any Severance Payments made pursuant to this Section 7 shall be payable
in equal semi-monthly installments over the required duration set forth herein.
(f) If, in spite of the provisions above entitling the Executive to
benefits under any benefit plan, such benefits are not payable or provideable
under any such plan to the Executive, or to the Executive's dependents,
beneficiaries or estate, because the Executive is no longer deemed to be an
employee of the Company, then the Company shall independently pay or provide for
payment of such benefits for the remainder of the Employment Term.
(g) The continuing obligation of the Company to make any Severance Payment
to the Executive is expressly conditioned upon the Executive complying and
continuing to comply with his obligations and covenants under Sections 6, 8 and
9 of this Agreement following termination of his employment with the Company.
(h) In the event that any payment by or on behalf of the Company or Golf
Trust of America, L.P. to Executive (whether or not such payment is required
under this Agreement) qualifies as an "excess parachute payment" under Section
280G or Section 4999 of the Internal Revenue Code of 1986, as amended (the "Tax
Code"), the Company shall make additional payments in cash to Executive (so
called "gross-up payments") so that the Executive is put in the same after-tax
position as he would have been in had no excise tax been imposed by Section 4999
of the Tax Code (or any successor or similar provision).
8. Covenant of Confidentiality. In addition to the agreements set forth in
Section 6, the Executive hereby agrees that the Executive will not, during the
Employment Period or for one (1) year thereafter directly or indirectly disclose
or make available to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, any Confidential Information. As used in
this Agreement, "Confidential Information" means: non-public information
disclosed to the Executive or known by the Executive as a consequence of or
through his relationship with the Company, about the Company's subsidiaries,
affiliates and partners thereof, owners, customers, employees, business methods,
public relations methods, organization, procedures or finances, including,
without limitation, information of or relating to properties that the Company or
any of its affiliates, subsidiaries or partners thereof owns or may be
considering acquiring an interest in; provided, however, that the Executive
shall not be obligated to treat as confidential, or return to the Company copies
of, any Confidential Information that (i) was publicly known at the time of
disclosure to the Executive, (ii) becomes publicly known or available thereafter
other than by any means in violation of this Agreement or any other duty owed to
the Company by any person or entity, or (iii) the Executive is required by law
to disclose to a third party.
9. Covenant Not to Compete.
(a) The Executive agrees that during the Employment Period he will devote
substantially his full working time to the business of the Company and will not
engage in any competitive business. Subject to such full-time requirement and
the other restrictions set forth in this Section 9 and Section 3(d) above, the
Executive shall be permitted to continue his existing business investments and
activities and may pursue additional business investments. Without limiting the
foregoing, the Executive specifically covenants that during and after his
employment with the company he shall not:
(i) compete directly with the Company in a business similar to that of
the Company;
(ii) compete directly or indirectly with the Company, its subsidiaries
and/or partners thereof with respect to any acquisition or development of any
real estate project undertaken or being considered by the Company, its
subsidiaries and/or partners thereof at the end of Executive's Employment
Period;
(iii) lend or allow his name or reputation to be used by or in
connection with any business competitive with the Company, its subsidiaries
and/or partners thereof; or
(iv) intentionally interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company, its subsidiaries
and/or partners thereof, and any lessee, tenant, supplier, contractor, lender,
employee or governmental agency or authority.
(b) Notwithstanding anything to the contrary in this Section 9 or elsewhere
in this Agreement, the Executive shall be permitted, at his option, to invest in
residential real estate developments and resort operations in which Larry D.
Young or his affiliates now or hereafter participate.
(c) The provisions of this Section 9 shall survive for one (1) year and no
longer following the termination of the Employment Period regardless of whether
such termination is for Good Cause or without Good Reason or otherwise;
provided, however, that if the Executive resigns or is terminated during the
twelve months following a Change in Control (as defined in Section 7(d)) then
the provisions of this Section 9 shall not survive the Executive's resignation
or termination.
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10. Injunctive Relief and Enforcement. In the event of breach by the
Executive of the terms of Sections 6, 8 or 9, the Company shall be entitled to
institute legal proceedings to enforce the specific performance of this
Agreement by the Executive and to enjoin the Executive from any further
violation of Sections 6, 8 or 9 and to exercise such remedies cumulatively or in
conjunction with all other rights and remedies provided by law and not otherwise
limited by this Agreement. The Executive acknowledges, however, that the
remedies at law for any breach by him of the provisions of Sections 6, 8 or 9
may be inadequate. In addition, in the event the agreements set forth in
Sections 6, 8 or 9 shall be determined by any court of competent jurisdiction to
be unenforceable by reason of extending for too great a period of time or over
too great a geographical area or by reason of being too extensive in any other
respect, each such agreement shall be interpreted to extend over the maximum
period of time for which it may be enforceable and to the maximum extent in all
other respects as to which it may be enforceable, and enforced as so
interpreted, all as determined by such court in such action.
11. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered, when
transmitted by telecopy with receipt confirmed, or one day after delivery to an
overnight air courier guaranteeing next day delivery, addressed as follows:
If to the Executive: W. Bradley Blair, II
3554 Bohicket Road
Johns Island, South Carolina 29455
If to the Company: Golf Trust of America, Inc.
14 North Adger's Wharf
Charleston, South Carolina 29401
telecopy: (843) 723-0479
With a copy to: Peter T. Healy, Esq.
O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
telecopy: (415) 984-8701
or to such other address as either party may furnish to the other from time to
time in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
12. Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect; provided, however, that if any one or more of the terms contained in
Sections 6, 8 or 9 hereto shall for any reason be held to be excessively broad
with regard to time, duration, geographic scope or activity, that term shall not
be deleted but shall be reformed and constructed in a manner to enable it to be
enforced to the extent compatible with applicable law.
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13. Assignment. This Agreement may not be assigned by the Executive, but
may be assigned by the Company to any successor to its business and will inure
to the benefit and be binding upon any such successor.
14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
15. Headings. The headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
16. Choice of Law and Consent to Jurisdiction. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of South Carolina (without reference to the choice of
law provisions of the State of South Carolina), except with respect to matters
of law concerning the internal corporate affairs of any corporate entity which
is a party to or the subject of this Agreement, and as to those matters the law
of the jurisdiction under which the respective entity derives its powers shall
govern. All judicial proceedings in connection with this Agreement may be
brought in any state or federal court of competent jurisdiction in Charlotte
City, South Carolina, and each party hereby accepts the non-exclusive
jurisdiction and venue of such courts.
17. LIMITATION ON LIABILITIES. IF EITHER THE EXECUTIVE OR THE COMPANY IS
AWARDED ANY DAMAGES AS COMPENSATION FOR ANY BREACH OR ACTION RELATED TO THIS
AGREEMENT, A BREACH OF ANY COVENANT CONTAINED IN THIS AGREEMENT (WHETHER EXPRESS
OR IMPLIED BY EITHER LAW OR FACT), OR ANY OTHER CAUSE OF ACTION BASED IN WHOLE
OR IN PART ON ANY BREACH OF ANY PROVISION OF THIS AGREEMENT, SUCH DAMAGES SHALL
BE LIMITED TO CONTRACTUAL DAMAGES AND SHALL EXCLUDE (I) PUNITIVE DAMAGES, AND
(II) CONSEQUENTIAL AND/OR INCIDENTAL DAMAGES (E.G., LOST PROFITS AND OTHER
INDIRECT OR SPECULATIVE DAMAGES). THE MAXIMUM AMOUNT OF DAMAGES THAT THE
EXECUTIVE MAY RECOVER FOR ANY REASON SHALL BE THE AMOUNT EQUAL TO ALL AMOUNTS
OWED (BUT NOT YET PAID) TO THE EXECUTIVE PURSUANT TO THIS AGREEMENT THROUGH ITS
NATURAL TERM OR THROUGH ANY SEVERANCE PERIOD, PLUS INTEREST ON ANY DELAYED
PAYMENT AT THE MAXIMUM RATE PER ANNUM ALLOWABLE BY APPLICABLE LAW FROM AND AFTER
THE DATE(S) THAT SUCH PAYMENTS WERE DUE.
18. WAIVER OF JURY TRIAL. TO THE EXTENT APPLICABLE, EACH OF THE PARTIES TO
THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
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19. Entire Agreement. This Agreement contains the entire agreement and
understanding between the Company and the Executive with respect to the
employment of the Executive by the Company as contemplated hereby and no
representations promises agreements or understandings written or oral, not
herein contained or referenced shall be of any force or effect. This Agreement
shall not be changed unless in writing and signed by both the Executive and the
Board of Directors of the Company.
20. Executive's Acknowledgment. The Executive acknowledges (a) that he has
had the opportunity to consult with independent counsel of his own choice
concerning this Agreement, and (b) that he has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the date and year first written above.
"COMPANY"
GOLF TRUST OF AMERICA, INC.,
a Maryland corporation
By:_______________________________
Scott D. Peters
Senior Vice President
"EXECUTIVE"
__________________________________
W. Bradley Blair, II
Residing at:
3554 Bohicket Road
Johns Island, South Carolina 29455
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EXHIBIT A
Board Minutes of April 25, 1997
14. Compensation Committee Matters
Mr. Chapman, Chairman of the Compensation Committee, led a discussion of
compensation matters.
a. Approval of Benefit Plans
After discussion, upon motion duly made, seconded and unanimously
carried, the following recitals and resolutions were adopted by the
Board:
WHEREAS, the employment agreements between the Company and W. Bradley
Blair, II, David J. Dick and Scott D. Peters (collectively the
"Executives") contemplate but do not require that the Company will
establish certain benefit plans for its Executives;
WHEREAS, this Board of Directors deems it advisable and in the best
interest of the Company and its shareholders to make certain benefit
plans available to the Executives; and
WHEREAS, this Board of Directors deems it appropriate to direct the
provision of certain employee benefits and the adoption of certain
benefit plans;
NOW, THEREFORE, BE IT RESOLVED, that the Company shall offer the
following benefits to each of the Executives:
1. Financial planning, tax compliance assistance and related
services (to be provided initially by the Company's accountant,
and thereafter by such provider as the President shall select);
2. Accidental death and dismemberment insurance plan;
3. Long-term disability insurance (at 50% of employee's salary);
4. Payment of, or reimbursement for, professional association dues,
professional licensing fees, continuing education tuition and
associated expenses.
RESOLVED FURTHER, that the Company shall provide the following
benefits to each of the Executives with the frequency or in the
amounts indicated:
1. Full health exam and medical testing available on the following
basis:
Blair: Annually
Dick: Bi-Annually
Peters: Bi-Annually
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2. Automobile allowances in the following amounts or, at the
Compensation Committee's option and on such terms and conditions
as the Compensation Committee shall specify, use of Company
automobiles:
Blair: $1000/month
Dick: $800/month
Peters: $600/month
RESOLVED FURTHER, that the enumeration of benefits in these
resolutions is non-exclusive and shall not be construed to limit the
availability of other benefits for which the Executives or any of them
are otherwise eligible.
RESOLVED FURTHER, that W. Bradley Blair, II and such other officers as
he may from time to time designate be, and hereby are, authorized and
empowered on behalf of and by the Company and in its name to enter
into contracts with providers of the above benefit packages as each
shall deem advisable to accomplish the purposes of these resolutions.
RESOLVED FURTHER, that each of the officers of this Company be, and
hereby is, authorized and empowered on behalf of this Company and in
its name to execute any applications, certificates, agreements, or any
other instruments or documents or amendments or supplements thereto,
or to do and to cause to be done any and all other acts and things as
such officers may in their discretion deem necessary or appropriate to
carry out the purposes of each of the foregoing resolutions, the
execution and delivery of such documents and the taking of such
actions to be conclusive evidence of the necessity or appropriateness
thereof.
RESOLVED FURTHER, that any and all actions heretofore or hereafter
taken by any appropriate officer or authorized representative of this
Company within the terms or intent of any of the foregoing resolutions
be, and hereby are, ratified and confirmed as the act and deed of this
Company.
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EXHIBIT C
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Scott D. Peters)
November 7, 1999
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
dated as of November 7, 1999, between Golf Trust of America, Inc., a Maryland
corporation, having its principal place of business at 14 North Adger's Wharf,
Charleston, South Carolina 29401 (the "Company"), and Scott D. Peters, an
individual residing at the address set forth below his name on the signature
page hereof (the "Executive").
COMPANY AND EXECUTIVE ENTER THIS AGREEMENT on the basis of the following
facts, understandings and intentions:
A. the Executive has been an executive of the Company employed under that
certain Employment Agreement dated as of February 7, 1997 and amended and
restated as of July 25, 1997 (the "Original Agreement"), which employment
commenced on the date of the closing of the Company's initial public offering,
February 12, 1997 (the "Commencement Date");
B. the Executive desires to remain in the employ of the Company;
C. the Company values Executive's knowledge and familiarity with the
business of the Company and desires to assure itself of the continued services
of Executive; and
D. Company and Executive desire to amend and restate the Original Agreement
as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and Executive agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The employment of the Executive by the Company as provided in
Section 1 above will commence on the Commencement Date, and will terminate on
February 7, 2003 (such term being the "Original Term"), unless earlier
terminated pursuant to the provisions of Section 5 of this Agreement. On the
final day of the Original Term and on each one (1) year anniversary thereafter
(each an "Extension Date"), the term of this Agreement shall be extended
automatically to commence on the Extension Date and terminate on the two (2)
year anniversary of the Extension Date (each such period being a "Renewal
Term"), unless written notice that this Agreement will not be so extended is
given by either party to the other at least two (2) years prior to the Extension
Date. The Original Term and any Renewal Terms, in their full duration, are
herein individually referred to as "Employment Terms," and the period of the
Executive's employment under this Agreement consisting of the Original Term and
all Renewal Terms, except as may be terminated early pursuant to Section 5, is
herein referred to as the "Employment Period."
<PAGE>
3. Position.
(a) Title and Position. During the Employment Period, the Executive
shall be employed as an executive officer of the Company with the title of
Senior Vice President and Chief Financial Officer or in such other executive
position as the Board of Directors of the Company (the "Board") may from time to
time determine with the consent of the Executive. In the performance of his
duties as an officer, the Executive shall be subject to the direction of the
Board and the President and shall not be required to take direction from or
report to any other person unless otherwise directed by the Board or the
President. The Executive's duties and authority shall be commensurate with his
title and position with the Company.
(b) Place of Employment. During the term of this Agreement, the
Executive shall perform the services required by this Agreement at the Company's
place of business in Charleston, South Carolina; provided, however, that the
Company may require the Executive to travel to other locations on the Company's
business.
(c) Duties. The Executive shall devote commercially reasonable efforts
and substantially full working time and attention to the promotion and
advancement of the Company and its welfare. The Executive shall serve the
Company faithfully and to the best of his ability, and shall perform such
services and duties in connection with the business, affairs and operations of
the Company as may be assigned or delegated to him from time to time by or
under, and in accordance with, the authority and direction of the Board. The
Company shall retain the right to direct and control the means and methods by
which the Executive performs the above services.
(d) Other Activities. Except with the prior written approval of the
Board (which the Board may grant or withhold in its sole and absolute
discretion) and except as may be set forth in Section 9 of this Agreement, the
Executive, during the Employment Period, will not (i) accept any other
employment, or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage) that is or may be
competitive with, or that might place him in a competing position to, that of
the Company or any of its affiliates. Notwithstanding the foregoing, the Company
agrees that the Executive (or affiliates of the Executive) shall be permitted
(i) to undertake the activities set forth in Section 9, and (ii) to make any
other passive personal investment that is not in a business activity competitive
with the Company.
4. Compensation and Related Matters.
(a) Base Salary. Prior to July 1, 1997, the Company shall pay the
Executive a base salary at a rate of one hundred twenty-five thousand dollars
($125,000) per year. Beginning July 1, 1997, the Company shall pay the Executive
a base salary at a rate of one hundred fifty thousand dollars ($150,000) per
year through the end of the first calendar year of the Original Term. The
Executive's base salary for each succeeding calendar year shall, at a minimum,
be increased over the salary in effect at the end of the immediately preceding
year by a factor measured by the increase, if any, in the Consumer Price Index
for Wage Earners and Clerical Workers (as published by the Bureau of Labor
Statistics). The base salary may further be increased, but not decreased, in
succeeding years by an amount determined by the Compensation Committee of the
Board. All salary shall be paid according to the standard payroll practices of
the Company (regarding, e.g., timing of payments, standard employee deductions,
income tax withholdings, social security deductions, and etc.) as in place from
time to time.
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(b) Business Expenses. The Company shall reimburse the Executive for
personal expenditures incurred in connection with the conduct of the Company's
business upon presentation of sufficient evidence of such expenditures as may be
required by the Company's policies as in place from time to time.
(c) Benefit Plan Eligibility. During the Employment Period, the
Executive shall be entitled to participate in any benefit plans that are made
generally available to executive officers of the Company from time to time,
including, without limitation, any deferred compensation, health, dental, life
insurance, long-term disability insurance, retirement, pension or 401(k) savings
plan. Nothing in this Section 4(c) is intended, or shall be construed, to
require the Company to institute or to continue any, or any particular, plan or
benefit.
(d) Performance Bonus. The Compensation Committee of the Board may
establish and administer a performance bonus program for the Executive to
provide for payment of a (cash and/or non-cash consideration) bonus to the
Executive upon the achievement of certain performance objectives to be
established by the Compensation Committee for the Executive. If such a program
is established, the Compensation Committee of the Board shall monitor, review
and modify the program from time to time as necessary to reflect the Executive's
contributions to the Company.
(e) Stock Incentive Plan. The Compensation Committee of the Board
shall establish and administer one or more stock-based incentive plans in which
the Executive shall be eligible to participate according to their terms;
provided, however, that the Board of Directors shall approve, prior to the
completion of the Company's initial public offering, a grant of options to the
Executive to purchase up to forty thousand (40,000) shares of the Company's
common stock, which options shall vest in three (3) equal installments
commencing upon the first anniversary of the date of grant and each of the two
(2) years thereafter, and shall be exercisable for ten (10) years from the date
of grant at the fair market value of the common stock on the date of grant.
(f) Fringe Benefits. The Executive will be entitled to fringe benefits
as may be determined or granted from time-to-time by the Board or by the
President acting under the authority of the Board; provided, however, that the
Company shall provide the fringe benefits authorized by the Board on April 25,
1997 (which resolution is attached to this Agreement as Exhibit A) and shall not
reduce or modify those benefits in a manner adverse to the Executive without the
written consent of the Executive.
(g) Vacation and Holidays. The Executive shall be entitled to four (4)
weeks (twenty (20) business days) of paid vacation time in each calendar year on
a pro-rated basis. The Executive shall be entitled to all paid Company holidays.
(h) Directors and Officers Insurance and Indemnification. The Company
shall maintain insurance to insure the Executive against any claim arising out
of an alleged wrongful act by the Executive while acting as a director or
officer of the Company. The Company shall further indemnify and exculpate from
money damages the Executive to the fullest extent permitted under applicable
law.
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(i) Performance Reviews. At the end of each fiscal year, the Board or
the Compensation Committee thereof will review the Executive's job performance
and will provide the Executive a written review of the Executive's job
performance during the prior year and implement any Board authorized revisions
to the Executive's position, compensation and duties at the Company; provided,
however, that the provisions set forth in this Agreement with respect to the
Executive's compensation, and other terms and conditions of the Executive's
employment at the Company shall not be modified by the Board in a manner which
would result in less favorable or less beneficial terms or conditions thereof
being imposed on the Executive without the Executive's full concurrence and
consent.
(j) Moving and Temporary Living Expenses. The Company shall reimburse
the Executive for reasonable personal expenditures incurred in connection with
the move of his household goods from Los Angeles, California to Charleston,
South Carolina, including two trips by the Executive's wife to visit Charleston
for relocation purposes, upon presentation of sufficient evidence of such
expenditures as may reasonably be required by the Company. Employee will be paid
an additional allowance of One Thousand Five Hundred Dollars ($1500.00) per
month for temporary living expenses from the Commencement Date through the
earlier of (i) June 30, 1997 or (ii) the date on which Executive acquires
permanent housing in the Charleston, South Carolina area.
5. Termination. The Executive's employment hereunder shall be, or may be,
as the case may be, terminated under the following circumstances:
(a) Death. The Executive's employment under this Agreement shall
terminate upon his death.
(b) Disability. The Executive's employment under this Agreement shall
terminate upon the Executive's physical or mental disability or infirmity which,
in the opinion of a competent physician selected by the Board, renders the
Executive unable to perform his duties under this Agreement for more than one
hundred twenty (120) days during any one hundred eighty (180) day period.
(c) Employment-At-Will; Termination by Company for Any Reason. The
Executive's employment hereunder is "at will" and may be terminated by the
Company at any time with or without Good Reason (as defined in Section 7(c)
below), by the President or a majority vote of all of the members of the Board
of Directors upon written Notice of Termination (as defined below) to Employee,
subject only to the severance provisions specifically set forth in Section 7
below.
(d) Voluntary Resignation. The Executive may voluntarily resign his
position and terminate his employment with the Company at any time by delivery
of a written notice of resignation to the Company (the "Notice of Resignation").
The Notice of Resignation shall set forth the date such resignation shall become
effective (the "Date of Resignation"), which date shall in any event, be at
least ten (10) days and no more than thirty (30) days from the date the Notice
of Resignation is delivered to the Company. The Notice of Resignation shall be
sufficient notice under Section 2 above to prevent the automatic extension of
this Agreement, if timely given according to the terms of Section 2.
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(e) Notice. Any termination of the Executive's employment by the
Company shall be communicated by written Notice of Termination to the Executive.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
that indicates the specific termination provision in this Agreement relied upon
and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. The Notice of Termination shall be sufficient notice
under Section 2 above to prevent the automatic extension of this Agreement, if
timely given according to the terms of Section 2.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death; (ii)
if the Executive's employment is terminated by reason of his disability, the
date of the opinion of the physician referred to in Section 5(b), above; (iii)
if the Executive's employment is terminated by the Company for Good Reason or
without Good Reason by the Company pursuant to Section 5(c) above, the date
specified in the Notice of Termination; and (iv) if the Executive voluntarily
resigns pursuant to Section 5(d) above, the Date of Resignation set forth in the
Notice of Resignation.
6. Obligations Upon Termination.
(a) Return of Property. The Executive hereby acknowledges and agrees
that all personal property and equipment furnished to or prepared by the
Executive in the course of or incident to his employment belongs to the Company
and shall be promptly returned to the Company upon termination of the Employment
Period.
(b) Complete Resignation. Upon the expiration of the Employment Period
or any termination of employment under Section 5 above, the Executive shall be
deemed to have resigned from all offices and directorships then held with the
Company or any of its subsidiaries.
(c) Survival of Representations, Warranties, Covenants and Other
Provisions. The representations and warranties contained in this Agreement and
the parties' obligations under this Section 6 and Sections 7 through 9 and 16
through 18, inclusively, shall survive termination of the Employment Period and
the expiration of this Agreement.
(d) Release. In exchange for the Company entering into this Agreement,
the Executive agrees that, at the time of his resignation or termination from
the Company, he will resign from the Board and will execute a release acceptable
to the Company of all liability of the Company and its officers, shareholders,
employees and directors to the Executive in connection with or arising out of
his employment with the Company, except with respect to (i) any then-vested
rights under any of the Company's stock incentive plans or in connection with
other stock-based compensation; (ii) any deferred compensation held in trust
under the Company's Deferred Compensation Plan; (iii) any Severance Payments or
benefits which may be payable to him under Section 7 or other provisions of this
Agreement; and (iv) any continuation of health or other benefit plans in
accordance with this Agreement or as may be required by law.
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7. Compensation Upon Termination. The Executive shall be entitled to the
following post-termination payments and no others:
(a) Death. If the Executive's employment is terminated by reason of
death pursuant to Section 5(a), the Company shall pay the Executive his base
salary payable under Section 4(a) as in effect on the Date of Termination plus
the greater of (1) the average value of the cash and non-cash consideration
received by Executive as a performance bonus in years 1997, 1998 and 1999 or (2)
the value of the most recent year's annual cash and non-cash consideration
received by Executive as a performance bonus (the "Severance Payments"), paid in
semi-monthly installments for the greater of (i) three (3) years following the
Date of Termination, or (ii) the time period beginning on the Date of
Termination and ending on the final day of the final Employment Term determined
according to Section 2, above. In addition, immediately prior to the Date of
Termination the vesting of all stock-related compensation previously granted to
the Executive shall be accelerated such that none of such compensation is
subject to forfeiture and such that any stock options or similar rights
previously granted to the Executive shall become immediately vested and
exercisable; provided, however, that all stock-related compensation shall be
subject to the plan under which it was granted, if any, as such plan may be
amended from time to time in accordance with its terms. In addition, during the
greater of the time periods in the preceding clauses (i) and (ii), the
Executive, his estate and dependents shall continue to participate, at their
option, in all benefit plans described in Section 4(c) and shall continue to
receive all fringe benefits described in Section 4(f) in each case substantially
comparable to those in effect on the day before the Date of Termination.
Thereafter, at their own expense, the Executive's dependents shall be entitled
to any continuation of health insurance coverage rights required by any
applicable law.
(b) Disability. If the Executive's employment is terminated by reason
of disability pursuant to Section 5(b), the Executive shall receive Severance
Payments paid in semi-monthly installments for the greater of (i) three (3)
years following the Date of Termination, or (ii) the time period beginning on
the Date of Termination and ending on the final day of the final Employment Term
determined according to Section 2, above; provided, however, that Severance
Payments otherwise payable to the Executive under this Section 7(b) shall be
reduced by the sum of the amounts, if any, payable to the Executive at or prior
to the time of any such Severance Payment under any disability benefit plan of
the Company. In addition, immediately prior to the Date of Termination the
vesting of all stock-related compensation previously granted to the Executive
shall be accelerated such that none of such compensation is subject to
forfeiture and such that any stock options or similar rights previously granted
to the Executive shall become immediately vested and exercisable; provided,
however, that all stock-related compensation shall be subject to the plan under
which it was granted, if any, as such plan may be amended from time to time in
accordance with its terms. In addition, during the greater of the time periods
in the preceding clauses (i) and (ii), the Executive shall continue to
participate, at his option, in all benefit plans described in Section 4(c) and
shall continue to receive all fringe benefits described in Section 4(f) in each
case substantially comparable to those in effect on the day before the Date of
Termination. Thereafter, at the Executive's own expense, the Executive and his
dependents shall be entitled to any continuation of health insurance coverage
rights required by any applicable law.
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(c) Termination by Company.
(i) For Good Reason. If the Executive's employment is terminated
by the Company pursuant to Section 5(c) for Good Reason (as defined below), the
Company shall pay the Executive his base salary and any bonus due and payable
pursuant to Section 4(d) through the Date of Termination. In addition, the
Executive shall be entitled to retain such stock-based compensation (including,
without limitation, shares of restricted stock and/or options to purchase
securities of the Company granted or sold to the Executive pursuant to the terms
and conditions of any of the Company's stock incentive plans or otherwise) as
has vested as of the Date of Termination. At the Executive's own expense, the
Executive and his dependents shall also be entitled to any continuation of
health insurance coverage rights required by any applicable law.
(ii) Without Good Reason. If the Executive's employment is
terminated by the Company pursuant to Section 5(c) without any Good Reason, the
Company shall pay to the Executive the Severance Payments in semi-monthly
installments for the greater of (A) three (3) years following the Date of
Termination, or (B) the time period beginning on the Date of Termination and
ending on the final day of the final Employment Term determined according to
Section 2, above. In addition, immediately prior to the Date of Termination the
vesting of all stock-related compensation previously granted to the Executive
shall be accelerated such that none of such compensation is subject to
forfeiture and such that any stock options or similar rights previously granted
to the Executive shall become immediately vested and exercisable; provided,
however, that all stock-related compensation shall be subject to the plan under
which it was granted, if any, as such plan may be amended from time to time in
accordance with its terms. In addition, during the greater of the time periods
in the preceding clauses (A) and (B), the Executive shall continue to
participate, at his option, in all benefit plans described in Section 4(c) and
shall continue to receive all fringe benefits described in Section 4(f) in each
case substantially comparable to those in effect on the day before the Date of
Termination. Thereafter, at the Executive's own expense, the Executive and his
dependents shall be entitled to any continuation of health insurance coverage
rights required by any applicable law.
(iii) "Good Reason" means a finding by the Board that (A) the
Executive materially breached any of the material terms of this Agreement; or
(B) the Executive acted with gross negligence, willful misconduct or
fraudulently in the performance of his duties hereunder.
(d) Voluntary Resignation.
(i) For Good Cause. If the Executive terminates his employment
with the Company pursuant to Section 5(d) for Good Cause (as defined below), the
Company shall pay the Executive the Severance Payments in semi-monthly
installments for the greater of (A) three (3) years following the Date of
Termination, or (B) the time period beginning on the Date of Termination and
ending on the final day of the final Employment Term determined according to
Section 2, above.. In addition, immediately prior to the Date of Termination the
vesting of all stock-related compensation previously granted to the Executive
shall be accelerated such that none of such compensation is subject to
forfeiture and such that any stock options or similar rights previously granted
to the Executive shall become immediately vested and exercisable; provided,
however, that all stock-related compensation shall be subject to the plan under
which it was granted, if any, as such plan may be amended from time to time in
accordance with its terms. In addition, during the greater of the time periods
in the preceding clauses (A) and (B), the Executive shall continue to
participate, at his option, in all benefit plans described in Section 4(c) and
pursuant thereto shall receive benefits substantially comparable to those in
effect on the day before the Date of Resignation. Thereafter, at the Executive's
own expense, the Executive and his dependents shall be entitled to any
continuation of health insurance coverage rights required by any applicable law.
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(ii) Without Good Cause. If the Executive terminates his
employment with the Company pursuant to Section 5(g) without Good Cause, the
Company shall have no obligation to compensate the Executive following the Date
of Resignation. However, the Executive shall be entitled to retain such
stock-based compensation (including, without limitation, shares of restricted
stock and/or options to purchase securities of the Company granted or sold to
the Executive pursuant to the terms and conditions of any of the Company's stock
incentive plans or otherwise) as has vested as of the Date of Termination. In
any event, at the Executive's own expense, the Executive and his dependents
shall be entitled to any continuation of health insurance coverage rights
required by any applicable law.
(iii) "Good Cause" means the occurrence, without the express
written consent of the Executive, of any of the following events, unless such
event is substantially corrected within ninety (90) days following written
notification by Executive to the Company that he intends to terminate his
employment under this Agreement because of such event:
(A) any reduction or diminution in the compensation, benefits or
responsibilities of the Executive;
(B) any material breach or material default by the Company under any
material provision of this Agreement;
(C) any relocation of the Company's principal place of business from
Charleston County, South Carolina; or
(D) any Change in Control (as defined below).
(iv) "Change in Control" means the occurrence of any of the
following events after the effective date of the first initial public offering
of the Company's common stock:
(A) the Board adopts a plan relating to the liquidation or dissolution or
merger of the Company;
(B) a Person (as defined below) directly or indirectly becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Securities Exchange Act of 1934) of more than
twenty-five percent (25%) of the total voting power of the total
outstanding voting securities of the Company on a fully diluted basis;
provided, however, that beneficial ownership of partnership units in
Golf Trust of America, L.P. shall not be considered beneficial
ownership of voting securities of the Company;
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(C) a Person directly or indirectly acquires or agrees to acquire all or
substantially all of the assets and business of the Company;
(D) for any reason during any period of two (2) consecutive years (not
including any period prior to the date of this Agreement) a majority
of the Board is constituted by individuals other than (1) individuals
who were directors immediately prior to the beginning of such period,
and (2) new directors whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors immediately prior to the beginning of the period
or whose election or nomination for election was previously so
approved.
(v) For purposes of this Section 7(d), "Person" means any natural
person, corporation, or any other entity; provided, however, that the term
"Person" shall not include any shareholder or employee of the company on the
date immediately prior to the initial public offering of the Company's common
stock or any estate or member of the immediate family of such a shareholder or
employee.
(e) In the event of any termination pursuant to Section 5, the
Executive shall be entitled to retain any and all options to purchase securities
of the Company granted to the Executive pursuant to the terms and conditions of
any of the Company's stock incentive plans or otherwise that have vested as of
the date of such termination.
(f) Any Severance Payments made pursuant to this Section 7 shall be
payable in equal semi-monthly installments over the required duration set forth
herein.
(g) If, in spite of the provisions above entitling the Executive to
benefits under any benefit plan, such benefits are not payable or provideable
under any such plan to the Executive, or to the Executive's dependents,
beneficiaries or estate, because the Executive is no longer deemed to be an
employee of the Company, then the Company shall independently pay or provide for
payment of such benefits for the remainder of the Employment Term.
(h) The continuing obligation of the Company to make any Severance
Payment to the Executive is expressly conditioned upon the Executive complying
and continuing to comply with his obligations and covenants under Sections 6, 8
and 9 of this Agreement following termination of his employment with the
Company.
(i) In the event that any payment by or on behalf of the Company or
Golf Trust of America, L.P. to Executive (whether or not such payment is
required under this Agreement) qualifies as an "excess parachute payment" under
Section 280G or Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Tax Code"), the Company shall make additional payments in cash to
Executive (so called "gross-up payments") so that the Executive is put in the
same after-tax position as he would have been in had no excise tax been imposed
by Section 4999 of the Tax Code (or any successor or similar provision).
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8. Covenant of Confidentiality. In addition to the agreements set forth in
Section 6, the Executive hereby agrees that the Executive will not, during the
Employment Period or for one (1) year thereafter directly or indirectly disclose
or make available to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, any Confidential Information. As used in
this Agreement, "Confidential Information" means: non-public information
disclosed to the Executive or known by the Executive as a consequence of or
through his relationship with the Company, about the Company's subsidiaries,
affiliates and partners thereof, owners, customers, employees, business methods,
public relations methods, organization, procedures or finances, including,
without limitation, information of or relating to properties that the Company or
any of its affiliates, subsidiaries or partners thereof owns or may be
considering acquiring an interest in; provided, however, that the Executive
shall not be obligated to treat as confidential, or return to the Company copies
of, any Confidential Information that (i) was publicly known at the time of
disclosure to the Executive, (ii) becomes publicly known or available thereafter
other than by any means in violation of this Agreement or any other duty owed to
the Company by any person or entity, or (iii) the Executive is required by law
to disclose to a third party.
9. Covenant Not to Compete.
(a) The Executive agrees that during the Employment Period he will
devote substantially his full working time to the business of the Company and
will not engage in any competitive business. Subject to such full-time
requirement and the other restrictions set forth in this Section 9 and Section
3(d) above, the Executive shall be permitted to continue his existing business
investments and activities and may pursue additional business investments.
Without limiting the foregoing, the Executive specifically covenants that during
and after his employment with the company he shall not:
(i) compete directly with the Company in a business similar to
that of the Company;
(ii) compete directly or indirectly with the Company, its
subsidiaries and/or partners thereof with respect to any acquisition or
development of any real estate project undertaken or being considered by the
Company, its subsidiaries and/or partners thereof at the end of Executive's
Employment Period;
(iii) lend or allow his name or reputation to be used by or in
connection with any business competitive with the Company, its subsidiaries
and/or partners thereof; or
(iv) intentionally interfere with, disrupt or attempt to disrupt
the relationship, contractual or otherwise, between the Company, its
subsidiaries and/or partners thereof, and any lessee, tenant, supplier,
contractor, lender, employee or governmental agency or authority.
(b) The provisions of this Section 9 shall survive for one year and no
longer following the termination of the Employment Period regardless of whether
such termination is for Good Cause or without Good Reason or otherwise;
provided, however, that if the Executive resigns or is terminated during the
twelve months following a Change in Control (as defined in Section 7(d)) then
the provisions of this Section 9 shall not survive the Executive's resignation
or termination.
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10. Injunctive Relief and Enforcement. In the event of breach by the
Executive of the terms of Sections 6, 8 or 9, the Company shall be entitled to
institute legal proceedings to enforce the specific performance of this
Agreement by the Executive and to enjoin the Executive from any further
violation of Sections 6, 8 or 9 and to exercise such remedies cumulatively or in
conjunction with all other rights and remedies provided by law and not otherwise
limited by this Agreement. The Executive acknowledges, however, that the
remedies at law for any breach by him of the provisions of Sections 6, 8 or 9
may be inadequate. In addition, in the event the agreements set forth in
Sections 6, 8 or 9 shall be determined by any court of competent jurisdiction to
be unenforceable by reason of extending for too great a period of time or over
too great a geographical area or by reason of being too extensive in any other
respect, each such agreement shall be interpreted to extend over the maximum
period of time for which it may be enforceable and to the maximum extent in all
other respects as to which it may be enforceable, and enforced as so
interpreted, all as determined by such court in such action.
11. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered, when
transmitted by telecopy with receipt confirmed, or one day after delivery to an
overnight air courier guaranteeing next day delivery, addressed as follows:
If to the Executive: Scott D. Peters
2758 Christ Church Court
Mt. Pleasant, South Carolina 29464
telecopy: (843) 971-7487
If to the Company: Golf Trust of America, Inc.
14 North Adger's Wharf
Charleston, South Carolina 29401
telecopy: (843) 723-0479
With a copy to: O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
Attention: Peter T. Healy, Esq.
telecopy: (415) 984-8701
or to such other address as any such party may furnish to the others from time
to time in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
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12. Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect; provided, however, that if any one or more of the terms contained in
Sections 6, 8 or 9 hereto shall for any reason be held to be excessively broad
with regard to time, duration, geographic scope or activity, that term shall not
be deleted but shall be reformed and constructed in a manner to enable it to be
enforced to the extent compatible with applicable law.
13. Assignment. This Agreement may not be assigned by the Executive, but
may be assigned by the Company to any successor to its business and will inure
to the benefit and be binding upon any such successor.
14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
15. Headings. The headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
16. Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
South Carolina (without reference to the choice of law provisions of the State
of South Carolina), except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction
under which the respective entity derives its powers shall govern.
17. LIMITATION ON LIABILITIES. IF EITHER THE EXECUTIVE OR THE COMPANY IS
AWARDED ANY DAMAGES AS COMPENSATION FOR ANY BREACH OR ACTION RELATED TO THIS
AGREEMENT, A BREACH OF ANY COVENANT CONTAINED IN THIS AGREEMENT (WHETHER EXPRESS
OR IMPLIED BY EITHER LAW OR FACT), OR ANY OTHER CAUSE OF ACTION BASED IN WHOLE
OR IN PART ON ANY BREACH OF ANY PROVISION OF THIS AGREEMENT, SUCH DAMAGES SHALL
BE LIMITED TO CONTRACTUAL DAMAGES AND SHALL EXCLUDE (I) PUNITIVE DAMAGES, AND
(II) CONSEQUENTIAL AND/OR INCIDENTAL DAMAGES (E.G., LOST PROFITS AND OTHER
INDIRECT OR SPECULATIVE DAMAGES). THE MAXIMUM AMOUNT OF DAMAGES THAT THE
EXECUTIVE MAY RECOVER FOR ANY REASON SHALL BE THE AMOUNT EQUAL TO ALL AMOUNTS
OWED (BUT NOT YET PAID) TO THE EXECUTIVE PURSUANT TO THIS AGREEMENT THROUGH ITS
NATURAL TERM OR THROUGH ANY SEVERANCE PERIOD, PLUS INTEREST ON ANY DELAYED
PAYMENT AT THE MAXIMUM RATE PER ANNUM ALLOWABLE BY APPLICABLE LAW FROM AND AFTER
THE DATE(S) THAT SUCH PAYMENTS WERE DUE.
18. WAIVER OF JURY TRIAL. TO THE EXTENT APPLICABLE, EACH OF THE PARTIES TO
THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
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19. Entire Agreement. This Agreement contains the entire agreement and
understanding between the Company and the Executive with respect to the
employment of the Executive by the Company as contemplated hereby and no
representations promises agreements or understandings written or oral, not
herein contained shall be of any force or effect. This Agreement shall not be
changed unless in writing and signed by both the Executive and the Board of
Directors of the Company.
20. Executive's Acknowledgment. The Executive acknowledges (a) that he has
had the opportunity to consult with independent counsel of his own choice
concerning this Agreement, and (b) that he has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the date and year first written above.
"COMPANY"
GOLF TRUST OF AMERICA, INC., a Maryland
corporation
By:______________________________________
W. Bradley Blair, II
President and Chief Executive Officer
"EXECUTIVE"
_________________________________________
SCOTT D. PETERS
Residing at:
____________________________________
____________________________________
____________________________________
13
<PAGE>
EXHIBIT A
Board Minutes of April 25, 1997
14. Compensation Committee Matters
Mr. Chapman, Chairman of the Compensation Committee, led a discussion of
compensation matters.
a. Approval of Benefit Plans
After discussion, upon motion duly made, seconded and unanimously
carried, the following recitals and resolutions were adopted by the
Board:
WHEREAS, the employment agreements between the Company and W. Bradley
Blair, II, David J. Dick and Scott D. Peters (collectively the
"Executives") contemplate but do not require that the Company will
establish certain benefit plans for its Executives;
WHEREAS, this Board of Directors deems it advisable and in the best
interest of the Company and its shareholders to make certain benefit
plans available to the Executives; and
WHEREAS, this Board of Directors deems it appropriate to direct the
provision of certain employee benefits and the adoption of certain
benefit plans;
NOW, THEREFORE, BE IT RESOLVED, that the Company shall offer the
following benefits to each of the Executives:
1. Financial planning, tax compliance assistance and related
services (to be provided initially by the Company's accountant,
and thereafter by such provider as the President shall select);
2. Accidental death and dismemberment insurance plan;
3. Long-term disability insurance (at 50% of employee's salary);
4. Payment of, or reimbursement for, professional association dues,
professional licensing fees, continuing education tuition and
associated expenses.
RESOLVED FURTHER, that the Company shall provide the following
benefits to each of the Executives with the frequency or in the
amounts indicated:
1. Full health exam and medical testing available on the following
basis:
Blair: Annually
Dick: Bi-Annually
Peters: Bi-Annually
14
<PAGE>
2. Automobile allowances in the following amounts or, at the
Compensation Committee's option and on such terms and conditions
as the Compensation Committee shall specify, use of Company
automobiles:
Blair: $1000/month
Dick: $800/month
Peters: $600/month
RESOLVED FURTHER, that the enumeration of benefits in these
resolutions is non-exclusive and shall not be construed to limit the
availability of other benefits for which the Executives or any of them
are otherwise eligible.
RESOLVED FURTHER, that W. Bradley Blair, II and such other officers as
he may from time to time designate be, and hereby are, authorized and
empowered on behalf of and by the Company and in its name to enter
into contracts with providers of the above benefit packages as each
shall deem advisable to accomplish the purposes of these resolutions.
RESOLVED FURTHER, that each of the officers of this Company be, and
hereby is, authorized and empowered on behalf of this Company and in
its name to execute any applications, certificates, agreements, or any
other instruments or documents or amendments or supplements thereto,
or to do and to cause to be done any and all other acts and things as
such officers may in their discretion deem necessary or appropriate to
carry out the purposes of each of the foregoing resolutions, the
execution and delivery of such documents and the taking of such
actions to be conclusive evidence of the necessity or appropriateness
thereof.
RESOLVED FURTHER, that any and all actions heretofore or hereafter
taken by any appropriate officer or authorized representative of this
Company within the terms or intent of any of the foregoing resolutions
be, and hereby are, ratified and confirmed as the act and deed of this
Company.
15
<PAGE>
EXHIBIT 12.1
GOLF TRUST OF AMERICA, INC.
CALCULATION OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Period from
February 12
Year ended Year ended though
December 31, December 31, December 31,
------------ ------------ ------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pre-tax Income before Minority Interest 18,257 17,736 11,767
Fixed charges
Interest expense 15,603 9,673 1,879
Loan Cost Amortization 958 588 280
------- ------- -------
Total fixed charges before preferred stock
dividends 16,561 10,261 2,159
Preferred stock dividends 1,382
Total fixed charges 17,943 10,261 2,159
Earnings available for fixed charges:
Earnings 18,257 17,736 11,767
Add: Fixed charges before preferred stock
dividends 16,561 10,261 2,159
------- ------- -------
Total earnings available for
fixed charges 34,818 27,997 13,926
======= ======= =======
Ratio of earnings to fixed charges (1) 1.94 2.73 6.45
</TABLE>
(1) The ratio of earnings to fixed charges has been computed based on the
Company's continuing operations by dividing total earnings available for
fixed charges, excluding preferred stock dividends, by total fixed charges.
Fixed charges consist of interest expense and preferred stock dividends.
F-1
<PAGE>
EXHIBIT 21.1
GOLF TRUST OF AMERICA, INC.
LIST OF SUBSIDIARIES
MARCH 20, 2000
GTA GP, Inc., a Maryland corporation
GTA LP, Inc., a Maryland corporation
Golf Trust of America, L.P., a Delaware limited partnership in which GTA GP,
Inc. is the sole general partner.
Sandpiper-Golf Trust, LLC, a California limited liability company
GTA Tierra Del Sol, LLC, a New Mexico limited liability company
GTA Osage, LLC, a Michigan limited liability company
Sandpiper GTA Development, Inc. (dissolved effective 12/31/99)
F-2
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements No.
333-46657 and No. 333-46659 on Form S-8 and Registration Statement No. 333-56251
on Form S-3 of our reports dated February 4, 2000, appearing in this Annual
Report on Form 10-K of Golf Trust of America, Inc. for the year ended December
31, 1999.
BDO Seidman, LLP
Charlotte, North Carolina
March 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF GOLF TRUST OF AMERICA, INC. AND SUBSIDIARIES AS
OF 12/31/99, THE RELATED CONSOLIDATED STATEMENTS OF INCOME, STOCKHOLDERS EQUITY
AND CASH FLOWS FOR THE FISCAL YEAR ENDED 12/31/99 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,905
<SECURITIES> 0
<RECEIVABLES> 102,305
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 370,703
<DEPRECIATION> 43,001
<TOTAL-ASSETS> 433,912
<CURRENT-LIABILITIES> 10,796<F1>
<BONDS> 223,085
0
20,000
<COMMON> 78
<OTHER-SE> 179,953
<TOTAL-LIABILITY-AND-EQUITY> 433,912
<SALES> 0
<TOTAL-REVENUES> 55,777
<CGS> 0
<TOTAL-COSTS> 23,397
<OTHER-EXPENSES> (1,480)<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,603
<INCOME-PRETAX> 18,257
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,231<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,848<F3>
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.27
<FN>
<F1>As a REIT we do have a classified Balance Sheet
<F2>Interest Income
<F3>Net Income after Minority Interest and Preferred Dividend
<F4>Net Income after Minority Interest
</FN>
</TABLE>
