<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 30, 1996
COMMISSION FILE NUMBER 1-12246
NATIONAL GOLF PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 95-4549193
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification Number)
1448 15TH STREET, #200
SANTA MONICA, CALIFORNIA 90404
(Address of principal executive offices) (Zip Code)
(310) 260-5500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(A) On July 30, 1996, the Company purchased an undivided 70.32% ownership
interest in twenty golf courses and related assets in exchange for consideration
consisting of the issuance of 1,577,820 shares of common stock of the Company,
valued at approximately $40.8 million. As part of the transaction, National Golf
Operating Partnership, L.P. (the "Partnership") acquired the remaining undivided
29.68% ownership interest in the golf courses and related assets in exchange for
consideration of approximately $17.2 million in cash. The Partnership obtained
such funds by borrowing such amount pursuant to a Credit Agreement with Bank of
America National Trust and Savings Association, dated as of September 29, 1993.
The twenty golf courses include six courses in Texas, two courses in each
of Florida, Kansas, Louisiana, and Oklahoma, and one course in each of Colorado,
Idaho, Ohio, North Carolina, South Carolina and Tennessee. The related assets
consist of personal property used in the operation of the golf courses.
The golf courses and related assets were acquired from Golf Enterprises,
Inc. ("GEI"). Robert H. Williams, the President and Chief Executive Officer of
GEI at the time of the purchase, owned and continues to own 75,003 partnership
units as a limited partner of the Partnership, of which the Company is the
general partner.
Immediately following the acquisition described above, the Company
transferred its undivided ownership interest in the golf courses and related
assets to the Partnership in exchange for consideration consisting of the
issuance of 1,577,820 partnership units of the Partnership, valued at
approximately $40.8 million.
After such transfer, the Partnership leased the golf courses and related
assets to American Golf Corporation ("AGC") pursuant to a triple net lease for
an initial term of fifteen years which provides for a minimum base rent and a
percentage rent feature enabling the Company to participate in revenue growth of
such courses. David G. Price is the principal shareholder and Chairman of the
Board of AGC. Mr. Price is also the Chairman of the Board of the Company, and
prior to the acquisition owned, and currently owns, 6.3% and 5.5%, respectively,
of the outstanding common stock of the Company.
In determining the amount of consideration paid in the acquisition,
transfer and lease of the golf courses and related assets, the Company followed
valuation principles consistent with its past practices.
These transactions are more fully described in the definitive Proxy
Statement of the Company filed on Schedule 14A with the Commission on June 25,
1996, which is herein incorporated by reference.
(B) The golf courses and related assets acquired by the Company were operated
by GEI as golf courses. The Company intends to continue such use. Under the
terms of the lease between the Company and AGC, AGC will operate the golf
courses.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The financial statements required to be filed as part of this report have
been previously filed in the definitive Proxy Statement of the Company filed on
Schedule 14A with the Commission on June 25, 1996, and are herein incorporated
by reference to such Proxy Statement.
(B) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information required to be filed as part of this
report has been previously filed in the definitive Proxy Statement of the
Company filed on Schedule 14A with the Commission on June 25, 1996, and is
herein incorporated by reference to such Proxy Statement.
(C) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1 Asset Purchase Agreement and Agreement and Plan of Merger, dated as of
February 2, 1996, among Golf Enterprises, Inc., National Golf
Properties, Inc. and GEI Acquisition Corporation (including as
exhibits a Stockholder Agreement, dated as of February 2, 1996, by and
among National Golf Properties, Inc., GEI Acquisition Corporation,
Robert H. Williams, Golder, Thoma, Cressey Fund II and Golder, Thoma,
Cressey Fund III Limited Partnership, and a Termination Fee Agreement,
dated as of February 2, 1996, by and among GEI Acquisition
Corporation, Robert H. Williams, Golder, Thoma, Cressey Fund II and
Golder, Thoma, Cressey Fund III Limited Partnership) (incorporated by
reference to Annex I to the Company's definitive Proxy Statement on
Schedule 14A dated June 25, 1996).
2.2 First Amendment to Asset Purchase Agreement and Agreement and Plan of
Merger, dated as of February 16, 1996, among Golf Enterprises, Inc.,
National Golf Properties, Inc. and GEI Acquisition Corporation
(incorporated by reference to Annex II to the Company's definitive
Proxy Statement on Schedule 14A dated June 25, 1996).
2.3 Assignment Agreement, dated as of July 30, 1996, between National Golf
Properties, Inc. and National Golf Operating Partnership, L.P.
2.4 Lease Agreement, dated as of July 30, 1996, between National Golf
Operating Partnership, L.P. and American Golf Corporation.
23.1 Consent of Coopers & Lybrand L.L.P.
</TABLE>
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL GOLF PROPERTIES, INC.
Date: August 13, 1996 By: /s/ Edward R. Sause
-------------------
Edward R. Sause
Executive Vice President and
Chief Financial Officer
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Numbered
Number Description Page
- ------- ----------- --------
<S> <C> <C>
2.1 Asset Purchase Agreement and Agreement and Plan of Merger, dated as of
February 2, 1996, among Golf Enterprises, Inc., National Golf
Properties, Inc. and GEI Acquisition Corporation (including as
exhibits a Stockholder Agreement, dated as of February 2, 1996, by and
among National Golf Properties, Inc., GEI Acquisition Corporation,
Robert H. Williams, Golder, Thoma, Cressey Fund II and Golder, Thoma,
Cressey Fund III Limited Partnership, and a Termination Fee Agreement,
dated as of February 2, 1996, by and among GEI Acquisition
Corporation, Robert H. Williams, Golder, Thoma, Cressey Fund II and
Golder, Thoma, Cressey Fund III Limited Partnership) (incorporated by
reference to Annex I to the Company's definitive Proxy Statement on
Schedule 14A dated June 25, 1996)..........................................
2.2 First Amendment to Asset Purchase Agreement and Agreement and Plan of
Merger, dated as of February 16, 1996, among Golf Enterprises, Inc.,
National Golf Properties, Inc. and GEI Acquisition Corporation
(incorporated by reference to Annex II to the Company's definitive
Proxy Statement on Schedule 14A dated June 25, 1996)......................
2.3 Assignment Agreement, dated as of July 30, 1996, between National Golf
Properties, Inc. and National Golf Operating Partnership, L.P.............
2.4 Lease Agreement, dated as of July 30, 1996, between National Golf
Operating Partnership, L.P. and American Golf
Corporation...............................................................
23.1 Consent of Coopers & Lybrand L.L.P........................................
</TABLE>
5
<PAGE>
EXHIBIT 2.3
ASSIGNMENT AGREEMENT
--------------------
THIS ASSIGNMENT AGREEMENT (this "Agreement") is made and entered into
---------
this 30th day of July, 1996, by and between National Golf Properties, Inc., a
Maryland corporation ("Assignor"), and National Golf Operating Partnership,
--------
L.P., a Delaware limited partnership ("Assignee"). All capitalized terms used
--------
herein but not specifically defined herein shall have the meanings given to them
in that certain Asset Purchase Agreement and Agreement and Plan of Merger, dated
as of February 2, 1996, as amended, by and among Assignor, Golf Enterprises,
Inc., a Kansas corporation, and GEI Acquisition Corporation, a Kansas
corporation (the "Acquisition Agreement").
---------------------
RECITALS
WHEREAS, as a result of the consummation of the Asset Purchase
described in the Acquisition Agreement, Assignor owns an undivided 70.32%
ownership interest in certain parcels of real property, as described in Exhibit
C-1 to C-20 attached to the Acquisition Agreement (collectively, the "Land"),
----
the buildings, structures and other improvements located thereon, and certain
interests in the water and mineral rights related thereto, and appurtenances
belonging to or running therewith, all as are more particularly described in
Section 1.2 of the Acquisition Agreement (collectively, the "Owned Properties");
----------------
WHEREAS, Assignor also owns an undivided 70.32% ownership interest in
certain interests in other property described in Exhibit A attached hereto (the
"Additional Assets");
-----------------
WHEREAS, as a result of the consummation of the Asset Purchase
described in the Acquisition Agreement, Assignee owns an undivided 29.68%
ownership interest in the Owned Properties and the Additional Assets;
WHEREAS, Assignee desires that Assignor sell, convey, transfer, assign
and deliver to Assignee all of its right, title and interest in and to the Owned
Properties and the Additional Assets, thereby providing Assignee the sole
ownership interest in the Owned Properties and the Additional Assets; and
WHEREAS, Assignor is willing to so sell, convey, transfer, assign and
deliver such right, title and interest, in exchange for 1,577,820 Partnership
Units (as defined in that certain Agreement of Limited Partnership of National
Golf Operating Partnership, L.P., dated as of August 18, 1993, by and among
Assignor, as the General Partner, and certain Limited Partners) of Assignee.
NOW, THEREFORE, for and in consideration of the foregoing premises,
and the undertakings set forth below, Assignor and Assignee hereby agree as
follows:
ARTICLE I
ASSIGNMENT OF PROPERTY
Section 1.1 Assignment. Assignor hereby sells, conveys, transfers,
----------
assigns and delivers to Assignee all of its right, title and interest in and to
the following:
(a) the Land;
<PAGE>
(b) all existing buildings, structures and other improvements located
upon the Land, including without limitation all clubhouse buildings, maintenance
facilities, golf courses, driving ranges, practice areas, landscaping
improvements, man-made lakes, irrigation systems (including sprinklers, pipes an
d fittings), lakeliners, pumps, flood control works , paving, walkways, road
improvements, parking facilities, and all other improvements of whatever kind
which have previously been made, installed or erected and are now located on the
Land (collectively, the "Improvements");
-------------
(c) (as they relate to the Owned Properties) all water rights,
riparian rights, appropriative rights, water allocations and water stock, and
all minerals, oil, gas and other hydrocarbons located in or beneath the Land,
along with all rights to surface and subsurface entry (collectively, the "Water
-----
and Mineral Rights");
- ------------------
(d) all appurtenances, hereditaments, easements, reversionary rights,
and all other rights, privileges, and entitlements belonging to or running with
the Land, including all of Assignor's right, title and interest in and to any
and all land laying in the bed of any street, road, cul-de-sac, alley or access
way, open or closed, existing, vacated or proposed, adjoining, adjacent to or
contiguous to the Land, all awards for damage to the Land or taking by eminent
domain or the change in grade of any street adjoining any parcel of real
property constituting the Land, and all zoning and land use entitlements and
development rights pertaining to the Land (collectively, the "Appurtenances");
-------------
and
(e) the Additional Assets.
Section 1.2 Covenants of Assignor. Assignor transfers such assets,
---------------------
properties and rights to Assignee, its successors and assigns, to have and hold
to and for its and their own use and benefit forever. Assignor, for itself and
its heirs and assigns, hereby covenants that, from time to time after delivery
of this instrument, at Assignee's request and without further consideration,
Assignor will execute and deliver or will cause to be executed and delivered,
such other instruments of conveyance and transfer and take such other actions as
Assignee reasonably may require more effectively to vest in Assignee the Land,
Improvements, Water and Mineral Rights, Appurtenances and Additional Assets, and
to put Assignee in possession thereof, and to do all other things and execute
and deliver all other instruments and documents as may be required to effect the
same.
Section 1.3 Appointment as Agent. Assignor hereby appoints Assignee
--------------------
as its agent and attorney, in its own name or in the name of Assignor, to
receive, collect, enforce and sue for any and all of the assets transferred
hereby, and to endorse any checks or other instruments payable to Assignor or
its order received in payment therefor. The powers granted herein are
irrevocable and coupled with an interest.
ARTICLE II
ISSUANCE OF PARTNERSHIP UNITS
Section 2.1 Partnership Units. Assignee hereby agrees to issue to
-----------------
Assignor 1,577,820 Partnership Units represented by Partnership Unit Certificate
No. 54, a copy of which is attached hereto as Exhibit B.
2
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Agreement
as of the date first written above.
"ASSIGNOR"
NATIONAL GOLF PROPERTIES, INC.
By: /s/ Edward R. Sause
-------------------
Edward R. Sause
Executive Vice President
"ASSIGNEE"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc., acting
as General Partner
By: /s/ Edward R. Sause
-------------------
Edward R. Sause
Executive Vice President
3
<PAGE>
EXHIBIT A TO ASSIGNMENT AGREEMENT
---------------------------------
ADDITIONAL ASSETS
(a) All fixtures, trade fixtures, furniture, furnishings, equipment,
machinery, tools, repair parts, goods, supplies, televisions, communications
equipment, kitchen utensils, linen, glassware, china, appliances, goods,
supplies, golf carts, motor vehicles, gasoline and lubricants, fertilizer, seed,
sand, chemicals, irrigation parts and supplies, food and beverage items and
inventory, and professional shop merchandise, goods and inventory in which
Assignor has an undivided ownership interest and located at or on the Owned
Properties;
(b) All other tangible personal property in which Assignor has an
undivided ownership interest and located at or on the Owned Properties;
(c) All architectural and engineering drawings, plans and
specifications, studies, design layouts, surveys, reports, and studies with
respect to the Owned Properties;
(d) All books and records, telephone numbers, and the goodwill of the
golf course business being conducted on the Owned Properties;
(e) All licenses, permits, certificates of occupancy, approvals,
entitlements, dedications, and subdivision maps issued, approved or granted by
any governmental authorities or otherwise in connection with the Owned
Properties; the use of the trade name for the Owned Properties and any other
trade names, trademarks, and logos in which Assignor has an undivided ownership
interest and which relate directly to the operation and identification of the
Owned Properties; all water rights and/or well rights (if any) related to or
used in connection with the Owned Properties and its operation together with all
equipment and fixtures associated therewith; all development rights and other
intangible rights, titles, interests, privileges and appurtenances of Assignor
related to or used in connection with the Owned Properties and its operation;
(f) All financial records maintained by Assignor in connection with
the operation of the Owned Properties; all preliminary and final building plans
and specifications (including "as-built" drawings, if any), irrigation plans,
drainage plans, landscape plans and the like respecting any buildings or golf
course improvements; and all structural reviews, architectural drawings and
engineering, soils, seismic, geologic and architectural reports, studies and
certificates pertaining to the Owned Properties which are within the possession
or control of Assignor and in which Assignor has an undivided ownership
interest.
4
<PAGE>
EXHIBIT B TO ASSIGNMENT AGREEMENT
---------------------------------
CERTIFICATE
Certificate of OP Units
of
National Golf Operating Partnership, L.P.
No. 54 1,557,820 OP UNITS
-------------
National Golf Properties, Inc., as the General Partner of National
Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), hereby certifies that National Golf Properties, Inc. is a
------------------------------
General Partner of the Partnership whose Partnership Interests therein evidenced
by this certificate, as set forth in the Agreement of Limited Partnership of
National Golf Operating Partnership, L.P., as amended or supplemented from time
to time (the "Partnership Agreement"), under which the Partnership is existing
and as filed in the Office of the Secretary of State of Delaware (copies of
which are on file at the Partnership's principal office in Santa Monica,
California), represent 1,557,820 units of limited partnership interest in the
-----------
Partnership (the "OP Units").
The OP Units represented by this certificate or instrument may not be
transferred, sold, assigned, pledged, hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition complies with the provisions of the Partnership Agreement. Except
as otherwise provided in such agreement, no transfer, sale, assignment, pledge,
hypothecation or other disposition of the OP Units represented by this
certificate may be made except (a) pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), or (b) if
the Operating Partnership has been furnished with a satisfactory opinion of
counsel for the holder that such transfer, sale, assignment, pledge,
hypothecation or other disposition is exempt from the provisions of Section 5 of
the Act and the rules and regulations in effect thereunder.
DATED: July 30, 1996 National Golf Properties, Inc.
General Partner of
National Golf Operating Partnership, L.P.
ATTEST:
By: ___________________ By: ______________________
Edward R. Sause Scott S. Thompson
Secretary Chief Leasing Officer
5
<PAGE>
EXHIBIT 2.4
================================================================================
L E A S E
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
Landlord
and
AMERICAN GOLF CORPORATION
Tenant
Dated as of July 30, 1996
================================================================================
<PAGE>
LEASE
-----
THIS LEASE ("Lease"), dated for reference purposes only July 30, 1996,
-----
is entered into by and between NATIONAL GOLF OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership ("Landlord"), and AMERICAN GOLF CORPORATION, a
--------
California corporation ("Tenant"). This Lease consists of the Basic Lease
------
Provisions, the Detailed Lease Provisions and Exhibits A through H, all of which
--------------------
are incorporated herein by this reference. Capitalized terms used herein have
the meanings assigned to such terms in Exhibit A.
---------
BASIC LEASE PROVISIONS
1. Facility: means each of the golf courses listed on Exhibit "B" attached
-----------
hereto. Each Facility generally consists of an 18-hole golf course,
clubhouse and related facilities located on the respective Land. The term
Facility as used herein may also mean all the Facilities collectively.
Each Facility may also be individually referred to herein as a "Golf
----
Course."
2. Commencement Date: Means July 31, 1996.
3. Initial Term: fifteen (15) years commencing on the Commencement Date.
4. Extended Terms: Two (2) five-year terms (See Section 2.2 of the Detailed
-----------
Lease Provisions) (each, an "Extended Term").
-------------
5. Initial Base Rent: Means $6,005,000.
6. Fiscal Year: Means the 12-month period from January 1 through December 31
of each year of the Term, or the applicable portions of the first and last
Fiscal Years.
7. Annual Base Rent: Means, with respect to the period commencing on the
Commencement Date, the Initial Base Rent. On August 1, 1997, and on August
1 of each following year through and including August 1, 2001, the Annual
Base Rent shall be equal to the Annual Base Rent applicable to the
immediately preceding 12-month period multiplied by the annual percentage
increase in the Consumer Price Index ("CPI") from the immediately preceding
---
12-month period; provided, however, the CPI increase in Annual Base Rent
pursuant to the terms of this Section 7 shall not exceed five percent (5%).
---------
After the August 1, 2001 CPI adjustment, the Annual Base Rent shall remain
unchanged, subject to Section 2.2 of the Detailed Lease Provisions.
-----------
i
<PAGE>
8. Applicable Percentage:
With respect to Course Revenue, means:
17.5% for the period from the Commencement Date through July 31, 1997;
19% for the period from August 1, 1997 through July 31, 1998;
20.75% for the period from August 1, 1998 through July 31, 1999;
21.75% for the period from August 1, 1999 through July 31, 2000; and
22.5% from and after August 1, 2000 through the remainder of the Term.
With respect to Other Revenue, means 5% for each Fiscal Year
throughout the Term.
9. Additional Rent: Means the amount, if any, by which (a) the sum of:
(i) all Course Revenue for any Fiscal Year multiplied by the
Applicable Percentage with respect to Course Revenue (for purposes of
making this calculation, for those Fiscal Years or Fiscal Quarters in
which two Applicable Percentages with respect to Course Revenue apply
to different periods within such Fiscal Years or Fiscal Quarters, the
Course Revenues for each such period shall be multiplied by the
Applicable Percentage for such period as set forth in Section 8 of
---------
these Basic Lease Provisions); plus
(ii) all Other Revenue for any Fiscal Year multiplied by the
Applicable Percentage with respect to Other Revenue
exceeds (b) the Annual Base Rent for such Fiscal Year (for purposes of
making this calculation, for those Fiscal Years or Fiscal Quarters during
which the Annual Base Rent is adjusted pursuant to Section 7 of these Basic
---------
Lease Provisions, the Annual Base Rent shall be prorated for each period of
such Fiscal Year or Fiscal Quarter in which it applies). (See Section 3.3
-----------
of the Detailed Lease Provisions.)
10. Address for Payments:
Landlord:
National Golf Operating Partnership, L.P.
c/o National Golf Properties, Inc.
1448 15th Street, Suite 200
Santa Monica, California 90404
(See Section 3.1 of the Detailed Lease Provisions.)
-----------
ii
<PAGE>
11. Addresses for Notices:
Tenant:
American Golf Corporation
1633 26th Street
Santa Monica, California 90404
Attn: Theodore F. Kahan, Esq.
General Counsel
Landlord:
National Golf Operating Partnership, L.P.
c/o National Golf Properties, Inc.
1448 15th Street, Suite 200
Santa Monica, California 90404
Attn: Scott S. Thompson
General Counsel
(See Section 25.8 of the Detailed Lease Provisions.)
------------
12. Notwithstanding any other provision in this Lease to the contrary, Tenant
shall design, develop and construct the "Initial Capital Improvements" (as
----------------------------
defined in Exhibit "E" of this Lease) in accordance with the time period
-----------
set forth in Exhibit "E." Tenant shall submit to Landlord (a) plans for
------------
the design, development and construction of the Initial Capital
Improvements for Landlord's prior approval thereof (the "Plans") and (b) a
-----
budget to fund such design, development and construction for Landlord's
prior approval thereof (the "Budget"); provided, however, the Budget shall
------
not exceed the amounts set forth in Exhibit "E" and the Budget shall not
-----------
include any overhead fees, general and administrative costs, nor any other
similar fees, costs or charges payable to Tenant or any of its Affiliates
in connection with the design, development or construction of the Initial
Capital Improvements. Upon Tenant submitting to Landlord invoices,
receipts or other documents evidencing costs and expenditures in accordance
with the Budget and accompanied by appropriate waivers or releases of
mechanics' and materialmen's liens, Landlord shall pay to Tenant the amount
of such costs and expenditures. As of the date of such payment by
Landlord, the Annual Base Rent then in effect shall be increased by an
amount equal to ten percent (10%) of the amount of such payment made by
Landlord. Any additional Base Rent owing for the remainder of the month in
which the Annual Base Rent was increased as provided above shall be payable
with the next monthly installment of Base Rent. To the extent not
inconsistent with this Section 12 of the Basic Lease Provisions, the
----------
construction of such Initial Capital Improvements shall be governed by the
provisions of Sections 10.3 and 10.4 of the Detailed Lease Provisions.
----------------------
Tenant may, in the exercise of reasonable discretion, eliminate any
projects included in the Initial Capital Improvements or add
iii
<PAGE>
new projects to the Initial Capital Improvements, upon the prior written
notice to Landlord but without Landlord's prior written approval provided
that such change will not cause the Budget to exceed the total amount set
forth in Exhibit "E" attached hereto. However, any changes or additions to
-----------
the Initial Capital Improvements which, in the aggregate, cause the Budget
for the Initial Capital Improvements to exceed the total amount set forth
in Exhibit "E" attached hereto shall be subject to Landlord's reasonable
-----------
approval; provided that Tenant acknowledges and understands that Landlord's
disapproval of such a proposed change that would cause the Budget to be
exceeded may be based upon Landlord's determination that the investment by
Landlord of additional funds may not be economically acceptable to Landlord
given the expected returns to Landlord under this Lease. If Landlord has
not provided any written disapproval or comments on the proposed changes
within five (5) Business Days after Landlord's receipt of a written notice
from Tenant of such proposed changes, then such changes to the Budget shall
be deemed approved. Notwithstanding the foregoing, Landlord's approval
shall not be required to re-allocate any cost savings from any one project
or line item of the Initial Capital Improvements to another project or line
item of the Initial Capital Improvements (including between projects or
line items at different Golf Courses) where there may be cost overruns,
provided that the total amount set forth on Exhibit "E" attached hereto
-----------
shall not be exceeded and provided that Tenant gives Landlord written
notice of such re-allocation.
13. Title Commitment: Shall mean collectively those certain Pro Forma Title
Insurance Commitments listed on Exhibit "H" attached hereto, to be issued
-----------
by Stewart Title Insurance Company in connection with Landlord's purchase
of the Leased Property from Golf Enterprises, Inc., its affiliates and
subsidiaries (collectively, "Seller").
------
14. The parties acknowledge that Landlord purchased the pro shop inventory and
food and beverage consummables (collectively, the "Pro Shop Inventory and
----------------------
Consummables") as part of Landlord's purchase of the Leased Property from
------------
Seller. The Pro Shop Inventory and Consummables shall be deemed to be part
of the Leased Property and part of Landlord's Personal Property (as defined
in Article 1 of the Detailed Lease Provisions).
---------
15. Landlord and Tenant acknowledge that as of the Commencement Date: (i) the
Leased Property is composed of 20 separate and individual Golf Courses; and
(ii) the Annual Base Rent has been calculated on the basis that Landlord's
total investment in the acquisition of the Leased Property ("Landlord's
----------
Total Investment") is approximately $60,050,000. Upon Tenant's prior
----------------
written consent, which may be granted or withheld in Tenant's sole
discretion, and subject to the following conditions, Landlord may sell,
convey or otherwise transfer
iv
<PAGE>
its interests in one or more of the Golf Courses (each a "Sale"); provided
----
that: (i) Landlord shall pay to Tenant the "Termination Fee" (as defined
---------------
below) with respect to the Golf Course sold; (ii) this Lease shall continue
in effect and be amended such that the description of the Leased Property
shall be revised to reflect that the sold Golf Course is no longer part of
the Leased Property; (iii) the income and expense items with respect to the
operation of the Golf Course shall be prorated in accordance with Section
-------
3.8 of the Detailed Lease Provisions as of the date of the closing of the
---
Sale; and (iv) the Annual Base Rent then in effect shall be decreased by an
amount equal to the "Allocated Rent Percentage" (as defined below) with
-------------------------
respect to such Golf Course multiplied by the then current Annual Base
Rent; and (v) the Applicable Percentages shall be adjusted, if necessary,
to account for the Sale with the intent to approximate as near as possible
Landlord's originally projected returns on investment and Tenant's
originally projected cash flow, which were calculated based upon the
assumption that the Golf Course would remain as part of the Leased Property
throughout the Term. The term "Termination Fee" shall mean: (i) the
---------------
discounted net present value (using a discount rate acceptable to Landlord
and Tenant) of the net cash flow projected to be generated at the Golf
Course to be sold from the date of the Sale through the balance of the
Term, as reasonably determined by Landlord and Tenant; plus (ii) an amount,
as reasonably determined by Landlord and Tenant, equal to the greater of:
(a) the market value at the time of the Sale of all Tenant Improvements and
Tenant's Personal Property located at the Golf Course to be sold or (b) the
net book value (cost less accumulated depreciation) of all Tenant
Improvements and Tenant's Personal Property located at the Golf Course to
be sold. The term "Allocated Rent Percentage" means the percentage
-------------------------
allocated to each of the Golf Courses as reasonably determined by Landlord
and Tenant and based upon the operating history and performance of the Golf
Courses.
16. Landlord agrees to provide the funds necessary to obtain additional water
rights as reasonably required ("Additional Water Rights") for irrigation
-----------------------
and related water usage at the Golf Courses provided that: (i) the Annual
Base Rent then in effect shall be increased by an amount equal to ten
percent (10%) multiplied by the amount of the costs and expenses incurred
by Landlord to obtain the Additional Water Rights (the "Additional Costs");
----------------
and (ii) the Applicable Percentages shall be increased, if appropriate, to
account for the increase in Landlord's investment in the Leased Property as
a result of the Additional Costs with the intent to approximate as near as
possible Landlord's originally projected returns on investment and Tenant's
originally projected cash flow, which were calculated based upon the
assumption that Landlord's investment would not include the payment of
costs and expenses for the Additional Water Rights.
v
<PAGE>
17. Reference is made to certain conditions existing as of the Commencement
Date at a number of the Golf Courses as set forth on Exhibit "G" attached
-----------
hereto (the "Pre-Existing Conditions"). Landlord shall indemnify, protect,
-----------------------
defend and hold harmless Tenant and its owners, officers, directors,
partners, employees and agents from and against all claims, demands,
lawsuits, liabilities, damages, losses, settlements, judgments, costs and
expenses, including reasonable attorneys' fees, in connection with the Pre-
Existing Conditions (collectively, "Claims"); provided that: (i) Landlord's
------
obligations hereunder shall only apply after Tenant has incurred, in the
aggregate, costs and expenses related to all Claims in the total amount of
$100,000; (ii) the Annual Base Rent then in effect shall be increased by an
amount equal to ten percent (10%) multiplied by the amount of the costs and
expenses incurred by Landlord under this Section 17; and (iii) the
----------
Applicable Percentages shall be increased, if appropriate, to account for
the increase in Landlord's investment in the Leased Property as a result of
the costs and expenses incurred by Landlord hereunder with the intent to
approximate as near as possible Landlord's originally projected returns on
investment and Tenant's originally projected cash flow, which were
calculated based upon the assumption that Landlord's investment would not
include the payment of costs and expenses with respect to such Claims.
18. In determining the Initial Base Rent, Annual Base Rent and Applicable
Percentages, Landlord and Tenant have used a preliminary estimate of
$2,050,000 as the amount of the transaction costs incurred by Landlord
("Transaction Costs") in connection with the acquisition of the Leased
-------------------
Property from Seller. Upon the final accounting of the Transaction Costs,
the Initial Base Rent, Annual Base Rent and Applicable Percentages will be
revised to reflect the actual Transaction Costs incurred by Landlord with
the intent to approximate as near as possible Landlord's originally
projected returns on investment and Tenant's originally projected cash
flow, which were calculated based upon the assumption that the Transaction
Costs were $2,050,000.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the date first above written.
NATIONAL GOLF OPERATING AMERICAN GOLF CORPORATION,
PARTNERSHIP, L.P., a California corporation
a Delaware limited partnership
By: NATIONAL GOLF PROPERTIES, INC.,
a Maryland corporation
Its General Partner
vi
<PAGE>
By: /s/ Scott S. Thompson By: /s/ James M. Stanich
--------------------- ------------------------
Its: Chief Leasing Officer Its: Vice President
------------------------- ------------------------
"Landlord" "Tenant"
LIST OF ATTACHMENTS AND EXHIBITS:
- --------------------------------
Detailed Lease Provisions
Exhibit A Defined Terms; Interpretation
Exhibit B List of Golf Courses
Exhibit C Other Leased Properties
Exhibit D Operating Standards
Exhibit E Initial Capital Improvements
Exhibit F Landlord's Personal Property
Exhibit G Pre-Existing Conditions
Exhibit H Title Commitments
1
<PAGE>
DETAILED LEASE PROVISIONS
ARTICLE 1 - LEASED PROPERTY
---------------------------
Upon and subject to the terms and conditions set forth in this Lease,
Landlord leases to Tenant and Tenant rents from Landlord all of Landlord's
rights and interest in and to the following real property, improvements and
related rights (collectively the "Leased Property"):
---------------
(a) the land upon which each Facility described in Exhibit B is
---------
located (collectively, the "Land");
----
(b) all buildings, structures, Fixtures and other improvements of
every kind including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas, roadways, cart paths, bridges, lakes,
irrigation systems, and course markers presently situated upon the
Land, but not including any Tenant Improvements (collectively, the
-----------------
"Leased Improvements");
--------------------
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements (collectively, the "Related Rights"); and
--------------
(d) all personal property, if any, owned by Landlord and located on
the Leased Property, which personal property is described in Exhibit F
---------
attached hereto ("Landlord's Personal Property").
----------------------------
ARTICLE 2 - TERM
----------------
2.1 Term. The Term of this Lease shall commence on the Commencement
----
Date.
2.2 Extended Term. Landlord grants to Tenant the right to extend the
-------------
Term of this Lease for the Extended Terms provided for in Section 4 of the Basic
---------
Lease Provisions commencing upon the expiration of the Initial Term or the
applicable Extended Term. Tenant may exercise such right solely by giving
written notice to Landlord of such extension at least 270 days prior to the
termination of the then current Term. The exercise of such right shall be valid
only if at the time of the giving of such notice and at the time of the
commencement of the applicable Extended Term no Event of Default shall have
occurred and be continuing. During each Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect, as the same
may be amended, supplemented or modified; provided, however, the Annual Base
Rent during each Extended Term shall be increased (but not decreased) at the
commencement of each Extended Term to an amount equal to eighty percent (80%) of
the following sum: (a) the aggregate Base Rent plus the Additional Rent payable
under this Lease for the twenty-four (24) complete calendar months immediately
2
<PAGE>
prior to the commencement of the respective Extended Term, divided by (b) two
(2).
ARTICLE 3 - RENT
----------------
3.1 Rent. Tenant will pay to Landlord in lawful money of the United
----
States of America the Base Rent and Additional Rent during the Term. Payments
of Base Rent and Additional Rent shall be paid at Landlord's address set forth
in the Basic Lease Provisions or at such other place or to such other Person as
Landlord from time to time may designate in writing. If any payment owing
hereunder shall otherwise be due on a day that is not a Business Day, such
payment shall be due on the next succeeding Business Day.
3.2 Base Rent. Tenant shall pay Base Rent to Landlord in advance on
---------
the first day of each calendar month; provided, however, that the first monthly
-----------------
installment shall be payable on the Commencement Date and the first and last
month's payments shall be prorated as to any partial month.
3.3 Additional Rent. In addition to the Base Rent, Tenant shall pay
---------------
to Landlord Additional Rent in quarterly installments as provided in Section
-------
3.3.1.
- -----
3.3.1 Quarterly Calculation and Payment of Additional Rent.
----------------------------------------------------
Tenant shall calculate and pay Additional Rent for each Fiscal Quarter. The
amount of the Additional Rent for the Second, Third and Fourth Fiscal
Quarters shall account for any interim reconciliations made with respect to
prior Fiscal Quarters in such Fiscal Year as certified by Tenant to
Landlord as provided by this Section 3.3.1, but subject to a final
-------------
reconciliation as provided by Section 3.3.2. Such Additional Rent shall be
-------------
paid to Landlord, together with an Officer's Certificate setting forth the
calculation thereof, within 30 days after the end of each Fiscal Quarter.
3.3.2 Annual Reconciliation. Within 60 days after the end of
---------------------
each Fiscal Year, or after the expiration or termination of the Lease,
Tenant shall deliver to Landlord an Officer's Certificate setting forth (i)
the Course Revenue and the Other Revenue for the Fiscal Year just ended,
and (ii) a comparison of the amount of Additional Rent actually paid during
such Fiscal Year versus the amount of Additional Rent actually owing on the
basis of the annual calculation of the Course Revenue and the Other
Revenue. If the Additional Rent for such Fiscal Year exceeds the sum of
the quarterly payments previously paid by Tenant, Tenant shall pay such
deficiency to Landlord along with such Officer's Certificate. If the
Additional Rent for such Fiscal Year is less than the amount previously
paid by Tenant, Landlord shall, at Landlord's option, either (i) remit to
Tenant its check in an amount equal to such difference, or (ii) grant
Tenant a credit against the payment of Additional Rent next coming due.
The
3
<PAGE>
amount of the reconciliation payment, whether in favor of Landlord or
Tenant, shall bear interest at a rate equal to the rate payable on 90-day
U.S. Treasury Bills as of January 1 of the year following the close of such
Fiscal Year until the amount of such difference shall be paid or otherwise
discharged.
3.3.3 Record-keeping. Tenant shall utilize an accounting system
--------------
for the Leased Property in accordance with its usual and customary
practices and in accordance with cash basis accounting principles (applied
on a basis consistent with the Other Leased Properties) which will
accurately record all Course Revenue and Other Revenue. Tenant shall
retain reasonably adequate records for each Fiscal Year conforming to such
accounting system until at least five years after the expiration of such
Fiscal Year (and in any event until the reconciliation described in Section
-------
3.3.2 above for such Fiscal Year has been made).
-----
3.3.4 Audits. Landlord, at its own expense except as provided
------
hereinbelow, shall have the right from time to time directly or through its
accountants to audit the information set forth in the Officer's Certificate
referred to in Section 3.3.2 and in connection with such audits to examine
-------------
Tenant's books and records with respect thereto (including supporting data,
sales tax returns and Tenant's work papers). If any such audit discloses a
deficiency in the payment of Additional Rent, Tenant shall forthwith pay to
Landlord the amount of the deficiency, as finally agreed or determined,
together with interest at the Overdue Rate from the date when said payment
should have been made to the date of payment thereof; provided, however,
-----------------
that as to any audit that is commenced more than 12 months after the date
Course Revenue or Other Revenue for any Fiscal Year is reported by Tenant
to Landlord, the deficiency, if any, with respect to such Course Revenue or
Other Revenue shall bear interest as permitted herein only from the date
such determination of deficiency is made unless such deficiency is the
result of gross negligence or willful misconduct on the part of Tenant. If
any such audit discloses that the Course Revenue or Other Revenue actually
received by Tenant for any Fiscal Year exceeds the Course Revenue or Other
Revenue reported by Tenant by more than five percent, Tenant shall pay the
reasonable cost of such audit and examination.
3.4 Additional Charges. In addition to the Base Rent and Additional
------------------
Rent, (1) Tenant shall also pay and discharge when due and payable all other
amounts, liabilities, obligations and Impositions which Tenant assumes or agrees
to pay under this Lease, and (2) in the event of any failure on the part of
Tenant to pay any of those items referred to in clause (1) above, Tenant shall
also pay and discharge every fine, penalty, interest and cost which may be added
for non-payment or late payment of such items (the items referred to in clauses
(1) and (2) above being referred to herein collectively as the "Additional
----------
Charges"). Except as
- -------
4
<PAGE>
otherwise provided in this Lease, all Additional Charges shall be due and
payable 30 days after either Landlord or the applicable third party who may be
billing Tenant therefor shall deliver an invoice to Tenant therefor. To the
extent that Tenant pays any Additional Charges to Landlord pursuant to any
requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Charges to the entity to which they would otherwise be due.
3.5 Late Payment of Rent. Tenant hereby acknowledges that late
--------------------
payment by Tenant to Landlord of Base Rent, Additional Rent or Additional
Charges will cause Landlord to incur costs not contemplated under the terms of
this Lease, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting
charges and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Leased Property and other expenses of a
similar or dissimilar nature. Accordingly, if any installment of Base Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within five Business
Days after its due date, Tenant will pay Landlord on demand, as Additional
Charges, a late charge equal to the lesser of five percent of such installment
or $1,000. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. In addition, if any installment of Base Rent, Additional
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Landlord) shall not be paid on its due date, the amount
unpaid shall bear interest, from the due date of such installment to the date of
payment thereof, computed at the Overdue Rate on the amount of such installment,
and Tenant will pay such interest to Landlord on demand, as Additional Charges.
The payment of said late charge or such interest shall not constitute a waiver,
nor excuse or cure, of any default under this Lease, nor prevent Landlord from
exercising any other rights and remedies available to Landlord.
3.6 Net Lease. The Rent shall be paid absolutely net to Landlord
---------
and, except as expressly provided in Section 4.7, Article 14 and Article 15,
----------- ---------- ----------
without notice or demand and without set-off, counterclaim, recoupment,
abatement, suspension, determent, deduction or defense, so that this Lease shall
yield to Landlord the full amount of the installments of Base Rent, Additional
Rent and Additional Charges throughout the Term, all as more fully set forth in
Article 5.
- ---------
3.7 Marketing Programs. Subject to Landlord's prior written approval
------------------
thereof and the provisions of this Section 3.7, Tenant may involve the Leased
-----------
Property in regional or national membership clubs or marketing programs that
Tenant may sponsor from time to time. If the club or marketing programs involve
courses or activities of Tenant other than solely the Leased Property and the
Other Leased Properties, then, unless Landlord has approved in writing the club
or marketing program, Tenant shall account for
5
<PAGE>
Course Revenue and Other Revenue resulting from any use of the Leased Property
by participants in such club or marketing program as though such participants
had paid full value for the use of the Leased Property without regard to any
discount or complimentary arrangement provided to such participants. Landlord
agrees that it will consider proposals made by Tenant for membership clubs or
marketing programs that involve the Leased Property and will not unreasonably
withhold or delay its consent to such programs if Tenant demonstrates to
Landlord's reasonable satisfaction that such programs would neither adversely
affect the Rent Landlord would be entitled to receive under this Lease nor
otherwise adversely affect the Leased Property.
3.8 Income/Expense Prorations. Income and expense items (such as
-------------------------
prepaid membership dues and other charges) received or paid with respect to the
period in which the Term commences or terminates shall be adjusted and prorated
between Landlord and Tenant as of the Commencement Date and as of the date the
Term terminates. If a Golf Course is sold, conveyed or otherwise transferred by
Landlord pursuant to Section 15 of the Basic Lease Provisions, the income and
----------
expense items with respect to such Golf Course shall be prorated between
Landlord and Tenant as if the Term hereunder had expired as of the date such
Golf Course is sold.
ARTICLE 4 - IMPOSITIONS
-----------------------
4.1 Payment of Impositions. Subject to Section 4.7 and Section
---------------------- ----------- -------
16.10, Tenant will pay, or cause to be paid, all Impositions before any fine,
- -----
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible. All payments of Impositions
shall be subject to Tenant's right of contest pursuant to the provisions of
Article 12. Upon request, Tenant shall promptly furnish to Landlord copies of
- ----------
official receipts, if available, or other satisfactory proof evidencing such
payments, such as cancelled checks.
4.2 Information and Reporting. Landlord shall give prompt notice to
-------------------------
Tenant of all Impositions payable by Tenant hereunder of which Landlord at any
time has knowledge, but Landlord's failure to give any such notice shall in no
way diminish Tenant's obligations hereunder to pay such Impositions. Landlord
and Tenant shall, upon request of the other, provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports. In the event any
applicable governmental authorities classify any property covered by this Lease
as personal property, Tenant shall file all personal property tax returns in
such jurisdictions where it must legally so file. Each party, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property.
4.3 Assessment Challenges. In addition to Tenant's rights under
---------------------
Article 12, Tenant may, upon notice to Landlord, at
- ----------
6
<PAGE>
Tenant's option and at Tenant's sole cost and expense, protest, appeal, or
institute such other proceedings as Tenant may deem appropriate to effect a
reduction of real estate or personal property assessments and Landlord, at
Tenant's expense as aforesaid, shall fully cooperate with Tenant in such
protest, appeal, or other action.
4.4 Prorations. Impositions imposed in respect of the tax-fiscal
----------
period during which the Term commences or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such termination, and Tenant's obligation to pay its prorated
share thereof shall survive such termination. If any Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Tenant may
elect to pay in installments, in which event Tenant shall pay all installments
(and any accrued interest on the unpaid balance of the Imposition) that are due
during the Term hereof before any fine, penalty, premium, further interest or
cost may be added thereto.
4.5 Refunds. If any refund shall be due from any taxing authority in
-------
respect of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Landlord due to an Event of Default
shall be applied as provided in Article 16.
----------
4.6 Utility Charges. Tenant shall pay or cause to be paid prior to
---------------
delinquency charges for all utilities and services, including, without
limitation, electricity, telephone, trash disposal, gas, oil, water, sewer,
communication and all other utilities used in the Leased Property during the
Term.
4.7 Reassessments Upon Transfer. Notwithstanding any other provision
---------------------------
in this Lease to the contrary, Landlord shall pay all incremental increases in
the Impositions under this Lease arising solely from (a) Landlord's sale,
disposition or other transfer of the Leased Property after the date of this
Lease or (b) a change of control in Landlord after the date of this Lease.
4.8 Assessment Districts. Neither party shall voluntarily consent to
--------------------
or agree in writing to (i) any special assessment or (ii) the inclusion of any
material portion of the Leased Premises into a special assessment district or
other taxing jurisdiction unless the other party shall have consented thereto,
which consent shall not be unreasonably withheld.
ARTICLE 5 - TENANT WAIVERS
--------------------------
5.1 No Termination, Abatement, Etc. Except as otherwise specifically
-------------------------------
provided in this Lease, and except for those causes resulting solely from the
actions, negligence or intentional misconduct of Landlord or any Person (other
than Tenant) whose claim arose under Landlord, (i) Tenant, to the extent
permitted by
7
<PAGE>
law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent by reason of, and (ii) the
respective obligations of Landlord and Tenant shall not be otherwise affected by
reason of:
(a) any damage to, or destruction of, any Leased Property or any
portion thereof caused by the actions, negligence or intentional
misconduct of Tenant;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use or occupancy of the Leased Property, or any portion
thereof, caused by the actions, negligence or intentional misconduct
of Tenant; or
(c) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of
Landlord.
Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (ii) to entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.
5.2 Condition of the Leased Property. Tenant acknowledges receipt
--------------------------------
and delivery of possession of the Leased Property and that Tenant has examined
or otherwise has knowledge of the condition of the Leased Property prior to the
execution and delivery of this Lease. Regardless, however, of any inspection
made by Tenant of the Leased Property and whether or not any patent or latent
defect or condition was revealed or discovered thereby, Tenant is leasing the
Leased Property "as is" in its present condition. Tenant waives and releases
any claim or action against Landlord in respect of the condition of the Leased
Property including any defects or adverse conditions latent or patent, matured
or unmatured, known or unknown by Tenant or Landlord as of the date hereof.
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN
ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED
TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT
TO THE LEASED PROPERTY, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS
FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE,
8
<PAGE>
(ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF
ANY DEFECT, LATENT OR PATENT, (iv) VALUE, (v) COMPLIANCE WITH SPECIFICATIONS,
(vi) LOCATION, (vii) USE, (viii) CONDITION, (ix) MERCHANTABILITY, (xii) QUALITY,
(xiii) DESCRIPTION, (xiv) DURABILITY, (xv) OPERATION, (xvi) THE EXISTENCE OF ANY
HAZARDOUS MATERIAL OR (xvii) COMPLIANCE OF THE LEASED PROPERTY WITH ANY LAW
(INCLUDING ENVIRONMENTAL LAWS) OR LEGAL REQUIREMENTS. TENANT ACKNOWLEDGES THAT
THE LEASED PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN
THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE LEASED PROPERTY OF ANY NATURE,
WHETHER LATENT OR PATENT, AS BETWEEN LANDLORD AND TENANT, LANDLORD SHALL NOT
HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL
OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS
OF THIS SECTION 5.2 HAVE BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE
-----------
EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH
RESPECT TO THE LEASED PROPERTY, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE
OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.
ARTICLE 6 - OWNERSHIP OF PROPERTY
---------------------------------
6.1 Leased Property. Tenant acknowledges that the Leased Property is
---------------
the property of Landlord and that Tenant has only the right to the exclusive
possession and use of the Leased Property during the Term of and upon the terms
and conditions of this Lease. Subject to the provisions of Article 24 below,
----------
Landlord hereby represents and warrants to Tenant that as of the Commencement
Date, Landlord has good and marketable title to the Leased Property free and
clear of all liens and encumbrances, except with respect to those encumbrances
referenced on Schedule B to the Title Commitment or as otherwise set forth in
writing to Tenant as of the Commencement Date.
6.2 Landlord's Personal Property. If Landlord has provided any
----------------------------
Landlord's Personal Property, Tenant shall maintain such Property in the same
manner as Tenant maintains Tenant's Personal Property. Upon the loss,
destruction, or obsolescence of any of the Landlord's Personal Property, Tenant
shall replace such property with Tenant's Personal Property, which such property
shall be owned by Tenant. Upon the expiration or sooner termination of this
Lease, Tenant shall be obligated to leave at the Facility at no cost to Landlord
and free of any liens or encumbrances: (i) any Landlord's Personal Property; and
(ii) any replacements of Landlord's Personal Property, provided that the
condition of the replacements shall be substantially comparable to the
condition, age and quality of the replaced Landlord's Personal Property as of
the Commencement Date.
6.3 Tenant's Personal Property. Tenant may (and shall as provided
--------------------------
below), at its expense, install, affix or assemble or place on any parcels of
the Land or in any of the Leased Improvements, any items of Tenant's Personal
Property, and Tenant may, subject to the conditions set forth below, remove the
same upon the expiration or any prior termination of the Term. Tenant shall
provide and maintain during the entire Lease Term all such
9
<PAGE>
Tenant's Personal Property as shall be necessary in order to operate the
Facility in compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use and in accordance with its past practices.
6.4 Purchase of Tenant's Personal Property. Upon the expiration or
--------------------------------------
sooner termination of this Lease, Landlord shall have the right (but not the
obligation) to purchase from Tenant all or any portion of tangible Tenant's
Personal Property (which shall not include software):
(i) if owned by Tenant and not subject to any secured financing, at
the fair market value thereof (subject to Section 6.2);
-----------
(ii) if owned by Tenant, but subject to a secured financing, at the
greater of the fair market value thereof or the amount of the debt
owing under such financing (subject to Section 6.2); and
-----------
(iii) if leased by Tenant and the applicable lease provides for
termination of the lease as to such Property upon the payment of a
given sum, at the greater of the fair market value thereof or the
amount of the payment so provided; provided, however, that at Tenant's
------------------
option and if the lessor will permit Landlord to assume the
obligations under the applicable lease with respect to such Property
(separate from the obligations under a master lease if in effect),
Tenant shall, upon the request of Landlord, assign the applicable
lease (or portion thereof) to Landlord;
provided, further, however, that if Landlord's purchase right arises
--------------------------
because of a termination of this Lease as a result of an Event of Default, the
fair market value under clauses (i) through (iii) above shall be deemed to be
the depreciated net book value of Tenant's Personal Property. Landlord may elect
to purchase Tenant's Personal Property by giving notice to Tenant not later
than, as the case may be, 60 days prior to the expiration of this Lease or 60
days after the termination of this Lease upon any Event of Default. Tenant shall
transfer title to such Property by a bill of sale without warranty (except as to
ownership) upon concurrent payment in cash by Landlord; provided, however, if
------------------
Landlord has any unpaid damages resulting from any Event of Default, Landlord
may make payment by delivery of a receipt for an offset against such damages.
6.5 Removal of Personal Property. All items of Tenant's Personal
----------------------------
Property not removed by Tenant within 14 days following the expiration or
earlier termination of this Lease shall be considered abandoned by Tenant and
may, at Landlord's discretion and without any obligation, be appropriated, sold,
destroyed or otherwise disposed of by Landlord without first giving notice
thereof to Tenant and without any payment to Tenant and without any
10
<PAGE>
obligation to account therefor. Tenant shall, at its expense, restore the
Leased Property to the condition required by Section 9.1, including repair of
-----------
all damage to the Leased Property caused by the removal of Tenant's Personal
Property, whether effected by Tenant or Landlord. Landlord shall not be
responsible for any loss or damage to Tenant's Personal Property, or any other
property of Tenant, by virtue of Landlord's removal thereof at any time
subsequent to the 14-day period provided for herein.
6.6 Landlord's Waivers. Any lessor of Tenant's Personal Property
------------------
may, upon notice to Landlord and during reasonable hours, enter the Facility and
take possession of any of Tenant's Personal Property without liability for
trespass or conversion. Landlord shall, upon the request of Tenant, execute and
deliver to Tenant "landlord's waivers" as may be reasonable and customary in
connection with the financing or leasing of personal property. Such "landlord's
waiver" shall limit to 30 days the amount of time the lessor or lender has to
enter upon the Leased Premises after notice from Landlord that the Term has
expired or otherwise terminated. If Tenant requests a "landlord's waiver,"
Tenant shall attempt to secure from any financing source or lessor the right on
the part of Landlord to cure the defaults of Tenant and to use any such Property
upon providing such cure.
6.7 Water Rights. As a general matter, Landlord owns the Water
------------
Rights associated with the Leased Property. Landlord agrees to make such Water
Rights available to Tenant at Landlord's cost for Tenant to fulfill its
obligations hereunder. Landlord makes no assurances whatsoever as to the
quantity, priority or price of any Water Rights owned by Landlord. To the
extent as of the Commencement Date, Tenant owns any rights for the supply or
transportation of water to the Leased Property (the "Tenant's Original Water
-----------------------
Rights"), Tenant shall, through the Term and subject to the provisions of this
- ------
Section 6.7, maintain and hold Tenant's Original Water Rights on a first
- -----------
priority basis for the benefit of the Leased Property. If and solely to the
extent that Tenant's Original Water Rights provide resources in excess of what
is needed to properly serve the Leased Property, Tenant may use Tenant's
Original Water Rights for other purposes as it determines consistent with any
restrictions under applicable law or the terms of Tenant's Original Water
Rights. During the Term, Tenant may sell or exchange Tenant's Original Water
Rights if, prior to doing so, Tenant secures Replacement Water Rights. Upon the
expiration or sooner termination of this Lease, Tenant shall, within 10 days
after request made by Landlord, transfer to Landlord or its designee for no
consideration Tenant's Original Water Rights (to the extent still owned by
Tenant) and all Replacement Water Rights. Upon the expiration or sooner
termination of this Lease, to the extent Tenant had sold or exchanged Tenant's
Original Water Rights during the Term, Tenant shall deliver to Landlord or its
designee Replacement Water Rights that are not less favorable in any material
respect to the holder of such Water Rights than the quantity, price and priority
of Tenant's Original Water Rights.
11
<PAGE>
ARTICLE 7 - USE OF LEASED PROPERTY
----------------------------------
7.1 Use. After the Commencement Date and during the Term, Tenant
---
shall use or cause to be used the Leased Property and the improvements thereon
for its Primary Intended Use and for such other uses as may be necessary or
incidental to such use. Tenant shall not use the Leased Property or any portion
thereof for any other use without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. No use shall be made or permitted
to be made of the Leased Property, and no acts shall be done, which will cause
the cancellation of any insurance policy covering the Leased Property or any
part thereof, nor shall Tenant sell or otherwise provide to patrons, or permit
to be kept, used or sold in or about the Leased Property any article which may
be prohibited by law or by the standard form of fire insurance policies, or any
other insurance policies required to be carried hereunder, or fire underwriters
regulations. Tenant shall, at its sole cost, comply with all of the
requirements pertaining to the Leased Property or other improvements of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Leased Property and
Tenant's Personal Property.
7.2 Specific Prohibited Uses. Tenant shall not use or occupy or
------------------------
permit the Leased Property to be used or occupied, nor do or permit anything to
be done in or on the Leased Property, in a manner which would (i) violate or
fail to comply with any law, rule or regulation or Legal Requirement, (ii)
subject to Article 10, cause structural injury to any of the Improvements or
----------
(iii) constitute a public or private nuisance or waste. Tenant shall not allow
any Hazardous Material to be located in, on or under the Leased Property, or any
adjacent property, or incorporated in the Facility or any improvements thereon
except in compliance with applicable law (including any Environmental Law).
Tenant shall not allow the Leased Property to be used as a landfill or a waste
disposal site, or a manufacturing, distribution or disposal facility for any
Hazardous Materials. Tenant shall neither suffer nor permit the Leased Property
or any portion thereof, including Tenant's Personal Property, to be used in such
a manner as (i) might reasonably tend to impair Landlord's title thereto or to
any portion thereof, or (ii) may reasonably make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or of implied
dedication of the Leased Property or any portion thereof, or (iii) is in
material violation of any applicable Environmental Law.
7.3 Membership Matters, Fees and Charges. Tenant shall have the
------------------------------------
right to determine all matters relating to the sale and classification of
memberships, including the right to set initiation fees, dues, and other
charges, the number of memberships sold, and the rules, regulations, policies,
and procedures pertaining to memberships, provided that Tenant shall not
exercise such right in a manner that would be detrimental in any material
respect to Landlord or Landlord's interest herein. Tenant shall have the right
to determine all fees, rates and other charges
12
<PAGE>
relating to the goods and services provided by Tenant at the Leased Premises and
the use of the Leased Premises by patrons, customers and members, provided that
Tenant shall not exercise such right in a manner that would be detrimental in
any material respect to Landlord or Landlord's interest herein.
7.4 Landlord to Grant Easements, Etc. Landlord shall, from time to
---------------------------------
time so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed): (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Leased Property; (iii) dedicate or transfer unimproved portions
of the Leased Property for road, highway or other public purposes; (iv) execute
petitions to have the Leased Property annexed to any municipal corporation or
utility district; (v) execute amendments to any covenants and restrictions
affecting the Leased Property; and (vi) execute and deliver to any Person any
instrument appropriate to confirm or effect such grants, releases, dedications
and transfers (to the extent of its interest in the Leased Property), but only
upon delivery to Landlord of an Officer's Certificate (which Certificate, if
contested by Landlord, shall not be binding on Landlord) stating that such
grant, release, dedication, transfer, petition or amendment is not detrimental
to the proper conduct of the business of Tenant on the Leased Property and does
not reduce its value or usefulness for the Primary Intended Use. Landlord shall
not grant, release, dedicate or execute any of the foregoing items in this
Section 7.4 without obtaining Tenant's approval, which approval shall not be
- -----------
unreasonably withheld or delayed.
ARTICLE 8 - HAZARDOUS MATERIALS
-------------------------------
8.1 Remediation. Except as provided in Section 8.5 and the last
----------- -----------
sentence of Section 8.2, if Tenant becomes aware of the presence of any
-----------
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the Leased Property or if Tenant,
Landlord, or the Leased Property becomes subject to any order of any federal,
state or local agency to investigate, remove, remediate, repair, close,
detoxify, decontaminate or otherwise clean up the Leased Property, Tenant shall,
at its sole expense, carry out and complete any required investigation, removal,
remediation, repair, closure, detoxification, decontamination or other cleanup
of the Leased Property. If Tenant fails to implement and diligently pursue any
such repair, closure, detoxification, decontamination or other cleanup of the
Leased Property in a timely manner, Landlord shall have the right, but not the
obligation, to carry out such action and to recover all of the reasonable costs
and expenses from Tenant as Additional Charges.
8.2 Tenant's Indemnification of Landlord. Except as provided in
------------------------------------
Section 8.5 and the last sentence of this Section 8.2, Tenant shall pay,
- ----------- -----------
protect, indemnify, save, hold harmless and
13
<PAGE>
defend Landlord and any Facility Mortgagee from and against all liabilities,
obligations, claims, damages (including punitive damages), penalties, causes of
action, demands, judgments, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against Landlord or the Leased Property by reason of any
Environmental Law (irrespective of whether there has occurred any violation of
any Environmental Law) in respect of the Leased Property howsoever arising,
without regard to fault on the part of Tenant, including (a) liability for
response costs and for costs of removal and remedial action incurred by the
United States Government, any state or local governmental unit or any other
Person, or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to any Environmental Law, (b) liability for costs and expenses
of abatement, investigation, removal, remediation, correction or clean-up,
fines, damages, response costs or penalties which arise from the provisions of
any Environmental Law, or (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying on
of a dangerous activity. Notwithstanding the foregoing or any other provision
of this Lease (including, without limitation, Section 5.2, Section 8.4 and
----------- -----------
Article 21), Tenant shall not be liable or responsible for, or otherwise be
- ----------
required to indemnify, defend or hold harmless Landlord and any Facility
Mortgagee from and against any matters, conditions or events that arose, existed
or occurred: (i) prior to the Commencement Date; or (ii) through no act or
omission on the part of Tenant nor through any breach by Tenant of any of the
terms of this Lease.
8.3 Survival of Indemnification Obligations. Tenant's and Landlord's
---------------------------------------
obligations and/or liability under this Article 8 arising during the Term hereof
---------
shall survive any termination of this Lease.
8.4 Environmental Violations at Expiration or Termination of Lease.
--------------------------------------------------------------
Notwithstanding any other provision of this Lease (except Section 8.5 and the
-----------
last sentence of Section 8.2), if, at a time when the Term would otherwise
-----------
terminate or expire, a violation of any Environmental Law has been asserted by
Landlord and has not been resolved in a manner reasonably satisfactory to
Landlord, or has been acknowledged by Tenant to exist or has been found to exist
at the Leased Property or has been asserted by any governmental authority and
failure to have completed all action required to correct, abate or remediate
such a violation of any Environmental Law materially impairs the leasability of
the Leased Property upon the expiration of the Term, then, at the option of
Landlord, the Term shall be automatically extended with respect to the Leased
Property beyond the date of termination or expiration and this Lease shall
remain in full force and effect under the same terms and conditions until the
earlier to occur of (i) the completion of all remedial action in accordance with
applicable Environmental Laws or (ii) 12 months beyond such expiration or
14
<PAGE>
termination date; provided, that Tenant may, upon any such extension of the
--------
Term, terminate the Term by paying to the Landlord such amount as is necessary
in the reasonable judgment of Landlord to complete or perform such remedial
action.
8.5 Landlord's Indemnification of Tenant. Landlord shall pay, protect,
-------------------------------------
indemnify, save, hold harmless and defend Tenant from and against all
liabilities, obligations, claims, damages (including punitive damages),
penalties, causes of action, demands, judgments, costs and expenses (including
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Tenant or the Leased Property by
reason of any Environmental Law (irrespective of whether there has occurred any
violation of any Environmental Law) in respect of any matter, condition, or
event that arose, existed or occurred prior to the Commencement Date, without
regard to fault on the part of Landlord, including (a) liability for response
costs and for costs of removal and remedial action incurred by the United States
Government, any state or local governmental unit or any other Person, or damages
from injury to or destruction or loss of natural resources, including the
reasonable costs of assessing such injury, destruction or loss, incurred
pursuant to any Environmental Law, (b) liability for costs and expenses of
abatement, investigation, removal, remediation, correction or clean-up, fines,
damages, response costs or penalties which arise from the provisions of any
Environmental Law, or (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying on
of a dangerous activity.
ARTICLE 9 - MAINTENANCE AND REPAIR
----------------------------------
9.1 Tenant's Sole Obligation. Tenant, at its expense, will keep the
------------------------
Leased Property and Tenant's Personal Property in good order, repair and
appearance (whether or not the need for such repairs occurs as a result of
Tenant's use, any prior use, the elements or the age of the Leased Property, or
any portion thereof) and maintain the Leased Property in accordance with any
applicable Legal Requirements, and, except as otherwise provided in Article 14,
----------
with reasonable promptness, make all necessary and appropriate repairs thereto
of every kind and nature, whether interior or exterior, structural or non-
structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term of this
Lease (concealed or otherwise). Tenant shall maintain the Leased Premises in
accordance with the Operating Standards set forth in Exhibit D; provided,
--------- ---------
however, that Tenant may make such modifications to such Operating Standards as
- --------
Tenant may reasonably determine to be appropriate for the prudent management of
the Leased Property, which modifications, to the extent they are material to the
operating results of the Leased Property, shall be subject to the approval of
Landlord; provided further, however, that Tenant shall make such changes to the
-------------------------
Operating Standards as may be appropriate to comply with Legal Requirements.
Tenant will not take or omit to take any action the taking or omission of which
15
<PAGE>
could reasonably be expected to impair the value or the usefulness of the Leased
Property or any part thereof for its Primary Intended Use. Nothing in this
Article 9 shall obligate Tenant to make any capital improvements or replacements
- ---------
to the Leased Property if the Leased Property can be repaired to the standard
required by this Section 9.1.
-----------
9.2 Waiver of Statutory Obligations. Landlord shall not under any
-------------------------------
circumstances be required to build or rebuild any improvements on the Leased
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the 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 this
Lease, or to maintain the Leased Property in any way. Tenant hereby waives, to
the extent permitted by law, the right to make repairs at the expense of
Landlord pursuant to any law in effect at the time of the execution of this
Lease or hereafter enacted.
9.3 Mechanics' Liens. Nothing contained in this Lease and no action
----------------
or inaction by Landlord shall be construed as (i) constituting the consent or
request of Landlord expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Leased
Property or any part thereof; or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property, in either case, in such
fashion as would permit the making of any claim against Landlord in respect
thereof or to make any agreement that may create, or in any way be the basis
for, any right, title, interest, lien, claim or other encumbrance upon the
estate of Landlord in the Leased Property, or any portion thereof.
9.4 Surrender of Leased Property. Unless the Lease shall have been
----------------------------
terminated pursuant to the provisions of Article 14, Tenant shall, upon the
----------
expiration or prior termination of the Term, vacate and surrender the Leased
Property to Landlord in the condition in which the Leased Property was
originally received from Landlord, except as repaired, rebuilt, restored,
altered or added to as permitted or required by the provisions of this Lease and
except for ordinary wear and tear (subject to the obligation of Tenant to
maintain the Leased Property in good order and repair during the entire Term of
the Lease).
ARTICLE 10 - TENANT'S IMPROVEMENTS
----------------------------------
10.1 Tenant's Right to Construct. During the Term of this Lease,
---------------------------
Tenant may make alterations, additions, changes and/or improvements to the
Leased Property (individually, a "Tenant Improvement," and collectively, "Tenant
------------------ ------
Improvements"). Except as otherwise agreed to by Landlord in writing, any such
- ------------
Tenant Improvement shall be made at Tenant's sole expense and shall become
16
<PAGE>
the property of Landlord upon termination of this Lease. Unless made on an
emergency basis to prevent injury to Person or property, Tenant will submit
plans for any Tenant Improvement with a value of more than $500,000 in the first
Fiscal Year and increased by four percent per annum for each subsequent Fiscal
Year to Landlord for Landlord's prior approval, such approval not to be
unreasonably withheld or delayed.
10.2 Scope of Right. Subject to Section 10.1, at Tenant's cost and
-------------- ------------
expense, Tenant shall have the right to:
(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that
Tenant requires to construct any Tenant Improvement;
(b) demolish, remove or otherwise dispose of any of the Leased
Improvements;
(c) erect upon the Leased Property such Tenant Improvements as Tenant
deems desirable;
(d) make additions, alterations, changes and improvements in any
Tenant Improvement so erected;
(e) raze and demolish any Tenant Improvement together with the right
to salvage therefrom; and
(f) engage in any other lawful activities that Tenant determines are
necessary or desirable for the development of the Leased Property in
accordance with its Primary Intended Use;
provided, however, Tenant shall not make any Tenant Improvement
-----------------
which would, in Landlord's reasonable judgment, impair the value or Primary
Intended Use of the Leased Property without Landlord's prior written consent.
10.3 Cooperation of Landlord. Landlord shall cooperate with Tenant
-----------------------
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement within 10 Business Days following the later of (a) the date Landlord
receives Tenant's request, or (b) the date of delivery of any such application
or document to Landlord, so long as the taking of such action, including the
execution of said applications or documents, shall be without cost to Landlord
(or if there is a cost to Landlord, such cost shall be reimbursed by Tenant),
and will not cause Landlord to be in violation of any law, ordinance or
regulation.
17
<PAGE>
10.4 Commencement of Construction. Tenant agrees that:
----------------------------
(a) Tenant shall diligently seek all governmental approvals relating
to the construction of any Tenant Improvement;
(b) Once Tenant begins the construction of any Tenant Improvement,
Tenant shall diligently prosecute any such construction to completion
in accordance with applicable insurance requirements and the laws,
rules and regulations of all governmental bodies or agencies having
jurisdiction over the Leased Property;
(c) Landlord shall have the right at any time and from time to time to
post and maintain upon the Leased Property such notices as may be
necessary to protect Landlord's interest from mechanics' liens,
materialmen's liens or liens of a similar nature;
(d) Tenant shall not suffer or permit any mechanics' liens or any
other claims or demands arising from the work of construction of any
Tenant Improvement to be enforced against the Leased Property or any
part thereof, and Tenant agrees to hold Landlord and said Leased
Property free and harmless from all liability from any such liens,
claims or demands, together with all costs and expenses in connection
therewith; and
(e) All work shall be performed in a good and workmanlike manner.
10.5 Rights in Tenant Improvements. Notwithstanding anything to the
-----------------------------
contrary in this Lease, all Tenant Improvements constructed pursuant to Section
-------
10.1, and any and all subsequent additions thereto and alterations and
- ----
replacements thereof, shall be the sole and absolute property of Tenant during
the Term of this Lease. Upon the expiration or early termination of this Lease,
all such Tenant Improvements shall become the property of Landlord. Without
limiting the generality of the foregoing, Tenant shall be entitled to all
federal and state income tax benefits associated with any Tenant Improvement
during the Term of this Lease.
ARTICLE 11 - LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS
---------------------------------------------------------
11.1 Liens. Subject to the provisions of Article 12 relating to
----- ----------
permitted contests, Tenant will not directly or indirectly create or allow to
remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however:
18
<PAGE>
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date;
(c) restrictions, liens and other encumbrances which are consented to
in writing by Landlord, or any easements granted pursuant to the
provisions of Section 7.4 of this Lease;
-----------
(d) liens for those taxes of Landlord which Tenant is not required to
pay hereunder;
(e) subleases permitted by Article 22;
----------
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or
are payable without the addition of any fine or penalty or (2) such
liens are in the process of being contested as permitted by Article
-------
12;
--
(g) liens of mechanics, laborers, materialmen, suppliers or vendors
for sums either disputed (provided that such liens are in the process
-------------
of being contested as permitted by Article 12) or not yet due; and
----------
(h) any liens which are the responsibility of Landlord pursuant to the
provisions of Article 24.
----------
11.2 Encroachments and Other Title Matters. Excepting any matters
-------------------------------------
granted or created by Landlord or any predecessor-in-interest with respect to
the Leased Premises, if any of the Leased Improvements shall, at any time,
encroach upon any property, street or right-of-way adjacent to the Leased
Property, or shall violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting the Leased Property, or any
part thereof, or shall impair the rights of others under any easement or right-
of-way to which the Leased Property is subject, or the use of the Leased
Property is impaired, limited or interfered with by reason of the exercise of
the right of surface entry or any other rights under a lease or reservation of
any oil, gas, water or other minerals, then promptly upon the request of
Landlord or at the behest of any Person affected by any such encroachment,
violation or impairment, Tenant, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Landlord from
and against all losses, liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees and
expenses) based on or arising by reason of any such encroachment, violation or
impairment and in such case, in the event of an adverse final determination,
either (i) obtain valid and effective waivers or settlements of all claims,
liabilities and damages resulting from each such encroachment, violation or
19
<PAGE>
impairment, whether the same shall affect Landlord or Tenant; or (ii) make such
changes in the Leased Improvements, and take such other actions, as Tenant in
the good faith exercise of its judgment deems reasonably practicable, to remove
such encroachment, and to end such violation or impairment, including, if
necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased Improvements were operated prior to
the assertion of such violation or encroachment. Tenant's obligations under
this Section 11.2 shall be in addition to and shall in no way discharge or
------------
diminish any obligation of any insurer under any policy of title or other
insurance and Tenant shall be entitled to a credit for any sums recovered by
Landlord under any such policy of title or other insurance. Notwithstanding any
other provision of this Lease, the obligations of Tenant set forth in this
Section 11.2 shall not apply to any such encroachments, violations or
- ------------
impairments existing as of the Commencement Date.
ARTICLE 12 - PERMITTED CONTESTS
-------------------------------
Tenant, on its own or on Landlord's behalf (or in Landlord's name) but
at Tenant's expense, may contest, by appropriate legal proceedings conducted in
good faith and with due diligence, the amount or validity or application, in
whole or in part, of any Imposition or any Legal Requirement or Insurance
Requirement or any lien, attachment, levy, encumbrance, charge or claim not
otherwise permitted by Section 11.1, provided that:
------------ -------------
(a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of
such proceedings shall suspend the collection thereof from Landlord
and from the Leased Property, and neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in
any danger of being sold, forfeited, attached or lost pending the
outcome of such proceedings;
(b) in the case of a Legal Requirement, Landlord would not be subject
to criminal or material civil liability for failure to comply
therewith pending the outcome of such proceedings. Nothing in this
Section 12(b), however, shall permit Tenant to delay compliance with
-------------
any requirement of an Environmental Law to the extent such non-
compliance poses an immediate threat of injury to any Person or to the
public health or safety or of material damage to any real or personal
property;
(c) in the case of a Legal Requirement and/or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security, if
any, as may be demanded by Landlord to insure ultimate payment of the
same and to prevent any sale or forfeiture of the affected Leased
Property or the Rent by reason of such non-payment or
20
<PAGE>
noncompliance, provided, however, the provisions of this Article 12
----------------- ----------
shall not be construed to permit Tenant to contest the payment of Rent
(except as to contests concerning the method of computation or the
basis of levy of any Imposition or the basis for the assertion of any
other claim) or any other sums payable by Tenant to Landlord
hereunder;
(d) no such contest shall interfere in any material respect with the
use or occupancy of the Leased Property;
(e) in the case of an Insurance Requirement, the coverage required by
Article 13 shall be maintained; and
----------
(f) if such contest be finally resolved against Landlord or Tenant,
Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
Landlord, at Tenant's expense, shall execute and deliver to Tenant such
authorizations and other documents as may reasonably be required in any such
contest, and, if reasonably requested by Tenant or if Landlord so desires,
Landlord shall join as a party therein. Tenant shall indemnify and save
Landlord harmless against any liability, cost or expense of any kind that may be
imposed upon Landlord in connection with any such contest and any loss resulting
therefrom.
ARTICLE 13 - INSURANCE
----------------------
13.1 General Insurance Requirements. During the Term of this Lease,
------------------------------
Tenant shall at all times keep the Leased Property, and all property located in
or on the Leased Property, including all Landlord's Personal Property, Tenant's
Personal Property and any Tenant Improvements, insured with the kinds and
amounts of insurance described below. This insurance shall be written by
companies authorized to do insurance business in the State in which the Leased
Property is located. The policies must name Landlord as an "Additional
Insured." Losses shall be payable to Landlord and/or Tenant as provided in
Article 14. In addition, the policies shall name as an additional insured the
- ----------
holder of any mortgage, deed of trust or other security agreement securing any
indebtedness or any other Landlord's Encumbrance placed on the Leased Property
in accordance with the provisions of Article 24 ("Facility Mortgage") by way of
---------- -----------------
a standard form of mortgagee's loss payable endorsement. Any loss adjustment
shall require the written consent of Landlord, Tenant, and each Facility
Mortgagee. Evidence of insurance shall be deposited with Landlord and, if
requested, with any Facility Mortgagee(s). The policies on the Leased Property,
including the Leased Improvements, Fixtures, Tenant's Personal Property and any
Tenant Improvements, shall insure against the following risks:
21
<PAGE>
13.1.1 All Risk. Loss or damage by all risks perils including
--------
but not limited to, fire, vandalism, malicious mischief and extended
coverages, including but not limited to, sprinkler leakage, in an amount
not less than 100% of the then Full Replacement Cost thereof.
13.1.2 Liability. Claims for personal injury or property damage
---------
under a policy of comprehensive general liability insurance with amounts
not less than $10,000,000 per occurrence and in the aggregate.
13.1.3 Flood. Flood (when the Leased Property is located in
-----
whole or in material part in a designated flood plain area) and such other
hazards and in such amounts as may be customary for comparable properties
in the area; provided however, that Tenant shall not be required to
----------------
participate in the National Flood Insurance Program.
13.1.4 Worker's Compensation. Adequate worker's compensation
---------------------
insurance coverage for all Persons employed by Tenant on the Leased
Property in accordance with the requirements of applicable federal, state
and local laws.
13.1.5 Other Insurance. Such other insurance on or in
---------------
connection with any of the Leased Property as Landlord or any Facility
Mortgagee may reasonably require, which at the time is usual and commonly
obtained in connection with properties similar in type of building size and
use to the Leased Property and located in the geographic area where the
Leased Property is located; provided however, that Landlord shall bear the
-------- -------
cost of any such coverage requested under this Section 13.1.5.
--------------
13.2 Replacement Cost. In the event either party believes that the
----------------
Full Replacement Cost of the insured property has increased or decreased at any
time during the Lease Term, it shall have the right to have such Full
Replacement Cost redetermined by the fire insurance company which is then
carrying the largest amount of fire insurance carried on the Leased Property
(the "Impartial Appraiser"). The party desiring to have the Full Replacement
-------------------
Cost so redetermined shall forthwith, on receipt of such determination by such
Impartial Appraiser, give written notice thereof to the other party hereto. The
determination of such Impartial Appraiser shall be final and binding on the
parties hereto, and Tenant shall forthwith increase, or may decrease, the amount
of the insurance carried pursuant to this Section 13.2, as the case may be, to
------------
the amount so determined by the Impartial Appraiser. Each party shall pay one-
half of the fee, if any, of the Impartial Appraiser.
13.3 Waiver of Subrogation. Landlord and Tenant waive their
---------------------
respective right of recovery against the other to the extent damage or liability
is insured against under a policy or policies of insurance. All insurance
policies carried by either party covering the Leased Property including
contents, fire and casualty
22
<PAGE>
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Facility Mortgagee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
13.4 Form Satisfactory, Etc. All of the policies of insurance
-----------------------
referred to in Section 13.1 shall be written in a form reasonably satisfactory
------------
to Landlord and by insurance companies rated not less than A-X by A.M. Best's
Insurance Guide. In addition, all insurance carried by Tenant hereunder shall
have deductible amounts which are reasonably acceptable to Landlord. Tenant
shall pay all premiums for the policies of insurance referred to in Section 13.1
------------
and shall deliver certificates thereof to Landlord prior to their effective date
(and with respect to any renewal policy, at least 10 days prior to the
expiration of the existing policy). In the event Tenant fails to satisfy its
obligations under this Section 13.4, Landlord shall be entitled, but shall have
------------
no obligation, to effect such insurance and pay the premiums therefor, which
premiums shall be repayable to Landlord upon written demand as Additional
Charges. Each insurer mentioned in Section 13.1 shall agree, by endorsement on
------------
the policy or policies issued by it, or by independent instrument furnished to
Landlord, that it will give to Landlord 30 days' written notice before the
policy or policies in question shall be altered, allowed to expire or cancelled.
Each such policy shall also provide that any loss otherwise payable thereunder
shall be payable notwithstanding (i) any act or omission of Landlord or Tenant
which might, absent such provision, result in a forfeiture of all or a part of
such insurance payment, (ii) the occupation or use of the Leased Property for
purposes more hazardous than those permitted by the provisions of such policy,
(iii) any foreclosure or other action or proceeding taken by any Facility
Mortgagee pursuant to any provision of a mortgage, note, assignment or other
document evidencing or securing a loan upon the happening of an event of default
therein or (iv) any change in title to or ownership of the Leased Property.
13.5 Change in Limits. In the event that Landlord shall at any time
----------------
reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Tenant pursuant to Section 13.1.2 is either
--------------
excessive or insufficient (but only if the liability insurance limit is not less
than $3,000,000 per person or per occurrence), the parties shall endeavor to
agree on the proper and reasonable limits for such insurance to be carried; and
such insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Section 13.5.
------------
Notwithstanding the foregoing, the deductibles for such insurance or the amount
of such insurance which is self-retained by Tenant shall be as reasonably
determined by Tenant so long as Tenant can reasonably demonstrate its ability to
satisfy such deductible or amount of such self-retained insurance.
23
<PAGE>
13.6 Blanket Policy. Notwithstanding anything to the contrary
--------------
contained in this Article 13, Tenant's obligations to carry the insurance
----------
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; provided,
---------
however, that the coverage afforded Landlord will not be reduced or diminished
- -------
or otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 13 are otherwise satisfied. The amount of the total insurance shall be
- ----------
specified either (i) in each such "blanket" or umbrella policy or (ii) in a
written statement, which Tenant shall deliver to Landlord and Facility
Mortgagee, from the insurer thereunder. A certificate of each such "blanket" or
umbrella policy shall promptly be delivered to Landlord and Facility Mortgagee.
If requested by Landlord, Tenant shall provide Landlord with a certified copy of
the "blanket" or umbrella insurance policy.
ARTICLE 14 - APPLICATION OF INSURANCE PROCEEDS
----------------------------------------------
14.1 Insurance Proceeds. All proceeds of insurance payable by reason
------------------
of any loss or damage to the Leased Property, or any portion thereof, and
insured under any policy of insurance required by Article 13 shall (i) if
----------
greater than $500,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the Leased Property, or any
portion thereof.
14.1.1 Disbursement of Proceeds. Any proceeds held by Landlord
------------------------
or Tenant shall be paid out by Landlord or Tenant from time to time for the
reasonable costs of such reconstruction or repair; provided, however, that
-------- -------
Landlord shall disburse proceeds subject to the following requirements:
(i) prior to commencement of restoration, (A) the architects,
contracts, contractors, plans and specifications for the restoration
shall have been approved by Landlord, which approval shall not be
unreasonably withheld or delayed and (B) appropriate waivers of
mechanics' and materialmen's liens shall have been filed;
(ii) at the time of any disbursement, subject to Article 12, no
----------
mechanics' or materialmen's liens shall have been filed against any of
the Leased Property and remain undischarged, unless a satisfactory
bond shall have been posted in accordance with the laws of the State;
(iii) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement,
upon receipt of (A) satisfactory evidence, of the stage of completion,
the
24
<PAGE>
estimated total cost of completion and performance of the work to date
in a good and workmanlike manner in accordance with the contracts,
plans and specifications, (B) waivers of liens, (C) a satisfactory
bringdown of title insurance and (D) other evidence of cost and
payment so that Landlord and Facility Mortgagee can verify that the
amounts disbursed from time to time are represented by work that is
completed, in place and free and clear of mechanics' and materialmen's
lien claims;
(iv) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by the president or a vice president of
Tenant, describing the work for which payment is requested, stating
the cost incurred in connection therewith, stating that Tenant has not
previously received payment for such work and, upon completion of the
work, also stating that the work has been fully completed and complies
with the applicable requirements of this Lease;
(v) to the extent actually held by Landlord and not by a Facility
Mortgagee, (1) the proceeds shall be held in a separate account and
shall not be commingled with Landlord's other funds, and (2) interest
shall accrue on funds so held at the money market rate of interest and
such interest shall constitute part of the proceeds; and
(vi) such other reasonable conditions as Landlord or Facility
Mortgagee may reasonably impose, including, without limitation,
payment by Tenant of reasonable costs of administration imposed by or
on behalf of Facility Mortgagee should the proceeds be held by
Facility Mortgagee.
14.1.2 Excess Proceeds. Any excess proceeds of insurance
---------------
remaining after the completion of the restoration or reconstruction of the
Leased Property (or in the event neither Landlord nor Tenant is required or
elects to repair and restore) shall be paid to Landlord and Tenant in like
proportions to the value of Landlord's interests in the Leased Property and
Tenant's interest in Tenant's Personal Property and the Tenant
Improvements, or any portion thereof, as determined under Article 13, upon
----------
completion of any such repair and restoration except as otherwise
specifically provided below in this Article 14. All salvage resulting from
----------
any risk covered by insurance shall belong to Landlord.
14.2 Reconstruction Covered by Insurance.
-----------------------------------
14.2.1 Destruction Rendering Facility Unsuitable for its Primary
---------------------------------------------------------
Use. If during the Term the Leased Property is totally or partially
---
destroyed from a risk covered by the insurance described in Article 13 and
----------
the Facility thereby is rendered Unsuitable For Its Primary Intended Use,
Tenant shall diligently restore the Facility to substantially the same
25
<PAGE>
condition as existed immediately before the damage or destruction;
provided, however, if the Facility cannot be fully repaired or restored
within a 12-month period from the date of the damage or destruction to
substantially the same condition as existed immediately before the damage
or destruction, then Tenant may terminate this Lease by giving Landlord
written notice of such termination within 60 days after the date of such
damage or destruction, and the effective date of such termination shall be
30 days following such notice of termination; provided, however, if
Landlord notifies Tenant in writing within fifteen (15) days of Landlord's
receipt of Tenant's notice of termination that Landlord intends to restore
the Facility to substantially the same condition as existed immediately
before the damage and destruction and Landlord diligently commences and
prosecutes such restoration and completes such restoration within twelve
(12) months after the date of the damage or destruction, then Tenant's
election to terminate the Lease shall be deemed rescinded and the Lease
shall remain in full force and effect. Notwithstanding Section 14.4 below,
------------
in the event Landlord elects to restore the Facility as provided in the
immediately preceding sentence, during the period from the date of Tenant's
notice of termination through the date the restoration of the Facility is
completed, the Base Rent shall be deemed to be zero and Tenant's payment of
Rent shall consist only of the payment of Additional Rent in accordance
with Section 9 of the Basic Lease Provisions and the Additional Charges as
---------
required by the Detailed Lease Provisions. Upon any such termination of
the Lease by Tenant or upon Landlord's election to restore the Facility as
provided in this section, Landlord shall be entitled to retain all
insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention; provided, further, that Tenant shall be
entitled to retain or receive all insurance proceeds relating to Tenant's
Personal Property and the Tenant Improvements.
14.2.2 Destruction Not Rendering Facility Unsuitable for its
-----------------------------------------------------
Primary Use. If during the Term, the Leased Property is totally or
------------
partially destroyed from a risk covered by the insurance described in
Article 13, but the Facility is not thereby rendered Unsuitable For Its
----------
Primary Intended Use, Tenant shall diligently restore the Facility to
substantially the same condition as existed immediately before the damage
or destruction; provided, however, Tenant shall not be required to restore
-----------------
Tenant's Personal Property and/or any Tenant Improvements if failure to do
so does not adversely affect the amount of Additional Rent payable
hereunder. Such damage or destruction shall not terminate this Lease;
provided further, however, if Tenant and Landlord cannot within 12 months
-------------------------
after said damage obtain all necessary governmental approvals, including
building permits, licenses, conditional use permits and any certificates of
need, after diligent efforts to do so in order to be able to perform all
required repair and restoration work and to operate the Facility for
26
<PAGE>
its Primary Intended Use in substantially the same manner as immediately
prior to such damage or destruction, Tenant may terminate this Lease upon
30 days prior written notice to Landlord; provided further, however, if
-------------------------
Landlord notifies Tenant in writing within fifteen (15) days of Landlord's
receipt of Tenant's notice of termination that Landlord intends to restore
the Facility to substantially the same condition as existed immediately
before the damage and destruction and Landlord diligently commences and
prosecutes such restoration and completes such restoration within ninety
(90) days after the date of Tenant's notice of termination, then Tenant's
election to terminate the Lease shall be deemed rescinded and the Lease
shall remain in full force and effect. Notwithstanding Section 14.4 below,
------------
in the event Landlord elects to restore the Facility as provided in the
immediately preceding sentence, during the period from the date of Tenant's
notice of termination through the date the restoration of the Facility is
completed, the Base Rent shall be deemed to be zero and Tenant's payment of
Rent shall consist only of the payment of Additional Rent in accordance
with Section 9 of the Basic Lease Provisions and the Additional Charges as
---------
required by the Detailed Lease Provisions. Upon any such termination of the
Lease by Tenant or upon Landlord's election to restore the Facility as
provided in this section, Landlord shall be entitled to retain all
insurance proceeds, grossed up by Tenant to account for the deductible or
any self-insured retention; provided, further, that Tenant shall be
entitled to retain or receive all insurance proceeds relating to Tenant's
Personal Property and the Tenant Improvements.
14.2.3 Costs of Repair. If Tenant restores the Facility as
---------------
provided in Sections 14.2.1 and 14.2.2 above and the cost of the repair or
--------------- ------
restoration exceeds the amount of proceeds received by Landlord or Tenant
from the insurance required under Article 13, Tenant shall pay for such
----------
excess cost of repair or restoration. If Landlord restores the Facility as
provided in Sections 14.2.1 and 14.2.2 above and the cost of the repair or
--------------- ------
restoration exceeds the amount of proceeds received by Landlord as provided
in those sections, Landlord shall pay for such excess cost of repair or
restoration.
14.3 Reconstruction Not Covered by Insurance. If during the Term,
---------------------------------------
the Facility is totally or materially destroyed from a risk not covered by the
insurance described in Article 13, whether or not such damage or destruction
----------
renders the Facility Unsuitable For Its Primary Intended Use, Tenant shall
either (A) restore the Facility, at Tenant's cost, to substantially the same
condition as existed immediately before the damage or destruction, or (B) elect
to terminate this Lease upon 60 days prior written notice to Landlord; provided,
however, if Landlord notifies Tenant in writing within fifteen (15) days of
Landlord's receipt of Tenant's notice of termination that Landlord intends to
restore the Facility, at Landlord's cost, to substantially the same condition as
existed
27
<PAGE>
immediately before the damage and destruction and Landlord diligently commences
and prosecutes such restoration and completes such restoration within ninety
(90) days after the date of Tenant's notice of termination, then Tenant's
election to terminate the Lease shall be deemed rescinded and the Lease shall
remain in full force and effect. In the event Landlord elects to restore the
Facility as provided in the immediately preceding sentence, during the period
from the date of Tenant's notice of termination through the date the restoration
of the Facility is completed, the Base Rent shall be deemed to be zero and
Tenant's payment of Rent shall consist only of the payment of Additional Rent in
accordance with Section 9 of the Basic Lease Provisions and the Additional
---------
Charges as required by the Detailed Lease Provisions.
14.4 No Abatement of Rent. Except as otherwise provided in Sections
-------------------- --------
14.2 and 14.3 above, this Lease shall remain in full force and effect and
- ---- ----
Tenant's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated during the period required for
repair and restoration; provided, however, that if there is no Event of Default,
-----------------
Tenant shall be entitled to retain any proceeds of rental value or business
interruption insurance coverage.
14.5 Waiver. Tenant hereby waives any statutory rights of
------
termination which may arise by reason of any damage or destruction of the
Facility which Landlord or Tenant is obligated to restore or may restore under
any of the provisions of this Lease.
14.6 Damage Near End of Term. Notwithstanding any other provision to
-----------------------
the contrary in this Article 14, if damage to or destruction of the Leased
----------
Property occurs during the last 24 months of the Term of this Lease, and if such
damage or destruction cannot reasonably be expected to be fully repaired or
restored prior to the date that is 12 months prior to the end of the then-
applicable Term, then Tenant shall have the right to terminate the Lease on 30
days' prior notice to Landlord by giving notice thereof to Landlord within 60
days after the date of such damage or destruction. Upon any such termination,
Landlord shall be entitled to retain all insurance proceeds, grossed up by
Tenant to account for the deductible or any self-insured retention; provided
--------
however, that Tenant shall be entitled to retain or receive all insurance
- -------
proceeds relating to Tenant's Personal Property and Tenant Improvements.
ARTICLE 15 - CONDEMNATION
-------------------------
15.1 Total Taking. If at any time during the Term the Leased
------------
Property is totally and permanently taken by Condemnation, this Lease shall
terminate on the Date of Taking and Tenant shall promptly pay all outstanding
rent and other charges through the date of termination.
28
<PAGE>
15.2 Partial Taking. If a portion of the Leased Property is taken by
--------------
Condemnation, this Lease shall remain in effect if the Facility is not thereby
rendered Unsuitable For Its Primary Intended Use, but if the Facility is thereby
rendered Unsuitable For Its Primary Intended Use, this Lease shall terminate on
the Date of Taking.
15.3 Restoration. If there is a partial taking of the Leased
-----------
Property and this Lease remains in full force and effect pursuant to Section
-------
15.2, Landlord at its cost shall accomplish all necessary restoration up to but
- ----
not exceeding the amount of the Award payable to Landlord, as provided herein.
If Tenant receives an Award under Section 15.4, Tenant shall repair or restore
------------
any Tenant Improvements up to but not exceeding the amount of the Award payable
to Tenant therefor.
15.4 Award-Distribution. The entire Award shall belong to and be
------------------
paid to Landlord, except that, subject to the rights of the Facility Mortgagee,
Tenant shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such items, a sum attributable to the value, if any,
of: (i) any Tenant Improvements and (ii) the leasehold interest of Tenant under
this Lease; provided, however, that if the amount received by Landlord and the
------------------
Facility Mortgagee is less than the Condemnation Threshold, then the amount of
the Award otherwise payable to Tenant for the value of its leasehold interest
under this Lease (and not any other funds of Tenant) shall instead be paid over
to Landlord up to the amount of the shortfall.
15.5 Temporary Taking. The taking of the Leased Property, or any
----------------
part thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six months. During any such six month period, which
shall be a temporary taking, all the provisions of this Lease shall remain in
full force and effect with no abatement of rent payable by Tenant hereunder. In
the event of any such temporary taking, the entire amount of any such Award made
for such temporary taking allocable to the Term of this Lease, whether paid by
way of damages, rent or otherwise, shall be paid to Tenant.
ARTICLE 16 - EVENTS OF DEFAULT
------------------------------
16.1 Events of Default. If any one or more of the following events
-----------------
(individually, an "Event of Default") shall occur:
----------------
(a) if Tenant shall fail to make payment of the Rent payable by
Tenant under this Lease when the same becomes due and payable and such
failure is not cured by Tenant within a period of three (3) days after
receipt by Tenant of notice thereof from Landlord; provided, however,
-----------------
that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
29
<PAGE>
(b) [Intentionally Deleted];
(c) if, other than as a result of Unavoidable Delays, Tenant shall
fail to observe or perform any material term, covenant or condition of
this Lease and such failure is not cured by Tenant within a period of
thirty (30) days after receipt by Tenant of notice thereof from
Landlord, unless such failure cannot with due diligence be cured
within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing
thereof; provided, however, that such notice shall be in lieu of and
-----------------
not in addition to any notice required under applicable law; provided
--------
further, however, that the cure period shall not extend beyond 30 days
----------------
as otherwise provided by this Section 16.1(c) if the facts or
---------------
circumstances giving rise to the default are creating a further harm
to Landlord or the Leased Property and Landlord makes a good faith
determination that Tenant is not undertaking remedial steps that
Landlord would cause to be taken if this Lease were then to terminate.
(d) if Tenant shall:
(i) admit in writing its inability to pay its debts generally as
they become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) be unable to pay its debts as they mature,
(v) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
state thereof;
(e) if Tenant shall, on a petition in bankruptcy filed against it, be
adjudicated as bankrupt or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of Tenant, a
receiver of Tenant or of the whole or substantially all of its
property, or approving a petition filed against it seeking
reorganization or arrangement of Tenant under the federal bankruptcy
laws or any other applicable law or statute of the United States of
America or any state
30
<PAGE>
thereof, and such judgment, order or decree shall not be vacated or
set aside or stayed within 60 days from the date of the entry thereof;
(f) if Tenant shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution;
(g) if the estate or interest of Tenant in the Leased Property or any
part thereof shall be levied upon or attached in any proceeding and
the same shall not be vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt
by Tenant of notice thereof from Landlord (unless Tenant shall be
contesting such lien or attachment in accordance with Article 12);
----------
provided, however, that such notice shall be in lieu of and not in
-----------------
addition to any notice required under applicable law;
(h) if, except as a result of damage, destruction or a partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Leased Property for a period in excess of
forty-five (45) consecutive days;
(i) any representation or warranty made by Tenant herein or in any
certificate, demand or request made pursuant hereto proves to be
incorrect, now or hereafter, in any material respect and any adverse
effect on Landlord of any such misrepresentation or breach of warranty
has not been corrected to Landlord's satisfaction within twenty (20)
days after Tenant becomes aware of, or is notified by Landlord of the
fact of, such misrepresentation or breach of warranty;
(j) if an Event of Default under any of the Other Property Leases
occurs, provided, however, that if such Event of Default (other than
-----------------
for the failure to pay money or post a Letter of Credit if required
hereunder) arose from occurrences beyond the reasonable control of
Tenant, such Event of Default shall not constitute an Event of Default
under this Section 16.1(j);
---------------
(k) with respect to eight or more of the Other Property Leases,
either an Event of Default has occurred and is continuing or such
leases have been terminated by reason of an Event of Default;
(l) a default by Tenant in any payment of principal or interest on any
obligations for borrowed money having a principal balance of
$5,000,000 or more in the aggregate (excluding obligations which are
limited in recourse to specific property of Tenant provided that such
property is not a substantial portion of the assets of Tenant), or in
the performance of any other provision contained in any instrument
under which any such obligation is created
31
<PAGE>
or secured (including the breach of any covenant thereunder), if an
effect of such default is that the holder(s) of such obligation cause
such obligation to become due prior to its stated maturity; or
(m) a final, non-appealable judgment or judgments for the payment of
money in excess of $3,000,000 in the aggregate not fully covered
(excluding deductibles) by insurance shall be rendered against Tenant
and the same shall remain undischarged, unvacated, unbonded, or
unstayed for a period of sixty (60) consecutive days;
THEN, Landlord may terminate this Lease by giving Tenant not less than
10 days' notice (or no notice for clauses (d), (f) and (g)) of such termination
and upon the expiration of the time fixed in such notice, the Term shall
terminate and all rights of Tenant under this Lease shall cease. Landlord shall
have all rights at law and in equity available to Landlord as a result of
Tenant's breach of this Lease.
16.2 Payment of Costs. Tenant shall, to the extent permitted by law,
----------------
pay as Additional Charges all costs and expenses incurred by or on behalf of
Landlord, including reasonable attorneys' fees and expenses, as a result of any
Event of Default hereunder.
16.3 Exceptions. No Event of Default (other than a failure to make
----------
payment of money or post a Letter of Credit, if required hereunder) shall be
deemed to exist under clause (c) or clause (j) of Section 16.1 during any time
------------
the curing thereof is prevented by an Unavoidable Delay; provided that, upon the
-------------
cessation of such Unavoidable Delay, Tenant shall remedy such default without
further delay.
16.4 Certain Remedies. If an Event of Default shall have occurred
----------------
(and the event giving rise to such Event of Default has not been cured within
the curative period relating thereto as set forth in Section 16.1) and be
------------
continuing, whether or not this Lease has been terminated pursuant to Section
-------
16.1, Tenant shall, to the extent permitted by law, if required by Landlord so
- ----
to do, immediately surrender to Landlord the Leased Property pursuant to the
provisions of Section 16.1 and quit the same and Landlord may enter upon and
------------
repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Tenant and all other Persons and any and
all Tenant's Personal Property from the Leased Property subject to any
requirement of law.
16.5 Damages. None of (a) the termination of this Lease pursuant to
-------
Section 16.1, (b) the repossession of the Leased Property, (c) the failure of
- ------------
Landlord, notwithstanding reasonable good faith efforts, to relet the Leased
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Landlord to collect or receive any rentals due upon any such reletting, shall
relieve Tenant of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or
32
<PAGE>
reletting. In the event of any such termination, Tenant shall forthwith pay to
Landlord all Rent due and payable with respect to the Leased Property to, and
including, the date of such termination. Thereafter, Tenant shall forthwith pay
to Landlord, at Landlord's option, as and for liquidated and agreed current
damages for Tenant's default, either:
(a) the sum of:
(i) the worth at the time of award of the unpaid Rent which had
been earned at the time of termination,
(ii) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which the
unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such rental loss that Tenant proves could
be reasonably avoided, and
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course
of things would be likely to result therefrom.
In making the above determinations, the worth at the time of the award
shall be determined by the court having jurisdiction thereof using the
San Francisco Federal Funds Rate plus one percent and the Additional
Rent shall be deemed to be the same as for the then-current Fiscal
Year or, if not determinable, the immediately preceding Fiscal Year,
for the remainder of the Term, or such other amount as either party
shall prove reasonably could have been earned during the remainder of
the Term or any portion thereof; or
(b) without termination of Tenant's right to possession of the Leased
Property, each installment of said Rent and other sums payable by
Tenant to Landlord under the Lease as the same becomes due and
payable, which Rent and other sums shall bear interest at the Overdue
Rate from the date when due until paid, and Landlord may enforce, by
action or otherwise, any other term or covenant of this Lease.
16.6 Additional Remedies. Landlord has all other remedies that may
-------------------
be available under applicable law.
33
<PAGE>
16.7 Appointment of Receiver. Upon the occurrence of an Event of
-----------------------
Default, and upon filing of a suit or other commencement of judicial proceedings
to enforce the rights of Landlord hereunder, Landlord shall be entitled, as a
matter of right, to the appointment of a receiver or receivers acceptable to
Landlord of the Leased Property and the Facility and of the revenues, earnings,
income, products and profits thereof, pending such proceedings, with such powers
as the court making such appointment shall confer.
16.8 Waiver. If this Lease is terminated pursuant to Section 16.1,
------ ------------
Tenant waives, to the extent permitted by applicable law (a) any right of
redemption, re-entry or repossession and (b) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
-------
16.
- --
16.9 Application of Funds. Any payments received by Landlord under
--------------------
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and such payment is made to Landlord rather than Tenant due to
the existence of an Event of Default) shall be applied to Tenant's obligations
in the order which Landlord may determine or as may be prescribed by the laws of
the State.
16.10 Impounds. Landlord shall have the right during the continuance
--------
of an Event of Default to require Tenant to pay to Landlord an additional
monthly sum (each an "Impound Payment") sufficient to pay the Impound Charges
---------------
(as hereinafter defined) as they become due. As used herein, "Impound Charges"
---------------
shall mean real estate taxes on the Leased Property or payments in lieu thereof
and premiums on any insurance required by this Lease. Landlord shall determine
the amount of the Impound Charges and of each Impound Payment. The Impound
Payments shall be held in a separate account and shall not be commingled with
other funds of Landlord and interest thereon shall be held for the account of
Tenant. Landlord shall apply the Impound Payments to the payment of the Impound
Charges in such order or priority as Landlord shall determine or as required by
law. If at any time the Impound Payments theretofore paid to Landlord shall be
insufficient for the payment of the Impound Charges, Tenant, within 10 days
after Landlord's demand therefor, shall pay the amount of the deficiency to
Landlord.
ARTICLE 17 - LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
------------------------------------------------------
If Tenant shall fail to make any payment or to perform any act
required to be made or performed under this Lease, and to cure the same within
the relevant time periods provided in Section 16.1, Landlord, after notice to
------------
and demand upon Tenant, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Tenant.
Landlord may, to the extent permitted by law, enter upon the Leased Property for
such purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and expenses (including
34
<PAGE>
reasonable attorneys' fees and expenses, to the extent permitted by law) so
incurred, together with a late charge thereon at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article 17 shall survive the expiration or earlier
----------
termination of this Lease.
ARTICLE 18 - LEGAL REQUIREMENTS
-------------------------------
Subject to Article 12 regarding permitted contests, Tenant, at its
----------
expense, shall promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not compliance therewith shall
require structural changes in any of the Leased Improvements or interfere with
the use and enjoyment of the Leased Property; and (b) procure, maintain and
comply with all licenses and other authorizations required for any use of the
Leased Property then being made, and for the proper erection, installation,
operation and maintenance of the Leased Property or any part thereof.
ARTICLE 19 - HOLDING OVER
-------------------------
If Tenant shall for any reason remain in possession of the Leased
Property after the expiration of the Term or earlier termination of the Term
hereof, such possession shall be as a month-to-month tenant during which time
Tenant shall pay as rental each month, 125% of the aggregate of (i) one-twelfth
of the aggregate Base Rent and Additional Rent payable with respect to the last
Fiscal Year of the preceding Term; (ii) all Additional Charges accruing during
the month; and (iii) all other sums, if any, payable by Tenant pursuant to the
provisions of this Lease with respect to the Leased Property. During such
period of month-to-month tenancy, Tenant shall be obligated to perform and
observe all of the terms, covenants and conditions of this Lease, but shall have
no rights hereunder other than the right, to the extent given by law to month-
to-month tenancies, to continue its occupancy and use of the Leased Property.
Nothing contained herein shall constitute the consent, express or implied, of
Landlord to the holding over of Tenant after the expiration or earlier
termination of this Lease.
ARTICLE 20 - RISK OF LOSS
-------------------------
20.1 Risk of Loss. During the Term of this Lease, the risk of loss or
------------
of decrease in the enjoyment and beneficial use of the Leased Property as a
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
attachments, levies or executions (other than by Landlord and those claiming
from, through or under Landlord) is assumed by Tenant. In the absence of gross
negligence, willful misconduct or breach of this Lease by Landlord pursuant to
Section 24.3, Landlord shall in no event be answerable or accountable therefor
- ------------
nor shall any of the events
35
<PAGE>
mentioned in this Article 20 entitle Tenant to any abatement of Rent (except as
----------
provided in Section 20.2).
------------
20.2 Unavoidable Events. If at any time during the Term of this
------------------
Lease, the Facility is rendered Unsuitable For Its Primary
Intended Use for a period in excess of 180 consecutive days by reason of one or
more of the following events (each, an "Unavoidable Event"):
-----------------
(a) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Leased Property or any portion thereof, including without
limitation any such prohibition or restriction resulting from Legal Requirements
(excepting any such prohibition or restriction caused by the actions, negligence
or intentional misconduct of Tenant);
(b) the interference with Tenant's use of the Leased Property or any
portion thereof by any Person having a paramount right, title or interest in the
Leased Property (excepting any such interference caused by the actions,
negligence or intentional misconduct of Tenant);
(c) declared or undeclared war, sabotage, riot or other acts of civil
disobedience, or the acts or omissions by governmental agencies; or
(d) the interference with Tenant's use of the Leased Property or any
portion thereof caused by the actions, negligence or intentional misconduct of
Landlord or caused by the default or breach of any of Landlord's representations
or warranties hereunder;
then Tenant shall have the right to terminate this Lease by giving Landlord
written notice of such termination. The effective date of such termination
shall be 90 days after Landlord's receipt of said written notice of termination;
provided, however, if Landlord elects to remedy or remove the restrictions or
interferences referenced above or otherwise correct or restore the Facility and
within said 90 day period the Facility is made suitable for its Primary Intended
Use, Tenant's election to terminate the Lease shall be deemed rescinded and the
Lease shall remain in full force and effect. During the period in which the
Facility is rendered Unsuitable For Its Primary Intended Use as a result of an
Unavoidable Event, the Base Rent shall be deemed to be zero and Tenant's payment
of Rent shall consist only of the payment of Additional Rent in accordance with
Section 9 of the Basic Lease Provisions and Additional Charges as required by
- ---------
the Detailed Lease Provisions. This Article 20 shall not limit or restrict
----------
Tenant's rights or obligations under Article 14 of this Lease.
----------
ARTICLE 21 - INDEMNIFICATION
----------------------------
21.1 Tenant's Indemnification of Landlord. Except as otherwise
------------------------------------
provided in Sections 8.5 and 21.2 and the last sentence of Section 8.2 and
------------ ---- -----------
notwithstanding the existence of any insurance
36
<PAGE>
provided for in Article 13, and without regard to the policy limits of any such
----------
insurance, Tenant will protect, indemnify, save harmless and defend Landlord
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Landlord by reason of:
(a) any accident, injury to or death of Persons or loss of or damage
to property occurring on or about the Leased Property or adjoining
sidewalks during the Term of this Lease, including, but not limited
to, any accident, injury to or death of Person or loss of or damage to
property resulting from golf balls, golf clubs, golf shoes, lawn
mowers or other gardening devices, golf carts, tractors or other
motorized vehicles present on or adjacent to the Leased Property;
(b) any use, misuse, non-use, condition, maintenance or repair by
Tenant of the Leased Property;
(c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease);
(d) any failure on the part of Tenant to perform or comply with any of
the terms of this Lease;
(e) the non-performance of any of the terms and provisions of any and
all existing and future subleases of the Leased Property to be
performed by the landlord (Tenant) thereunder; and
(f) any liability Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 12.
----------
21.2 Landlord's Indemnification of Tenant. Landlord shall protect,
------------------------------------
indemnify, save harmless and defend Tenant from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees) imposed upon or incurred by or asserted
against Tenant as a result of Landlord's active negligence or willful
misconduct.
21.3 Mechanics of Indemnification. As soon as reasonably practicable
----------------------------
after receipt by the indemnified party of notice of any liability or claim
incurred by or asserted against the indemnified party that is subject to
indemnification under this Article 21, the indemnified party shall give notice
----------
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article 21 as soon as a claim has been threatened by
----------
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the
37
<PAGE>
indemnified party may be liable for, or otherwise incur, a loss as a result
thereof and shall give notice of such determination to the indemnifying party.
The indemnified party shall permit the indemnifying party, at its option and
expense, to assume the defense of any such claim by counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party, and to
settle or otherwise dispose of the same; provided, however, that the indemnified
-------- -------
party may at all times participate in such defense at its expense; and provided
--------
further, however, that the indemnifying party shall not, in defense of any such
- ------- -------
claim, except with the prior written consent of the indemnified party, consent
to the entry of any judgment or to enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
in question to the indemnified party and its affiliates a release of all
liabilities in respect of such claims, or that does not result only in the
payment of money damages by the indemnifying party. If the indemnifying party
shall fail to undertake such defense within 30 days after such notice, or within
such shorter time as may be reasonable under the circumstances, then the
indemnified party shall have the right to undertake the defense, compromise or
settlement of such liability or claim on behalf of and for the account of the
indemnifying party.
21.4 Survival of Indemnification Obligations. Tenant's or Landlord's
---------------------------------------
liability for a breach of the provisions of this Article 21 arising during the
----------
Term hereof shall survive any termination of this Lease.
ARTICLE 22 - SUBLETTING AND ASSIGNMENT
--------------------------------------
22.1 Prohibition Against Subletting and Assignment. Subject to
---------------------------------------------
Section 22.3, Tenant shall not, without the prior written consent of Landlord
- ------------
(which consent Landlord may grant or withhold in its sole and absolute
discretion), assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant) the Lease or any interest therein,
all or any part of the Leased Property or suffer or permit the Lease or the
leasehold estate created hereby or thereby or any other rights arising under the
Lease to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law. For purposes of this Section 22.1, an assignment of the Lease
------------
shall be deemed to include any Change of Control of Tenant, as if such Change of
Control were an assignment of the Lease.
22.2 Changes of Control. A Change of Control requiring the consent
------------------
of Landlord shall mean:
(a) the issuance and/or sale by Tenant or the sale by any stockholder
of Tenant of a Controlling interest in Tenant to a Person other than
an Affiliate of Tenant, other than in either case a distribution to
the public pursuant to an effective registration statement under the
Securities Act of 1933, as amended (a "Registered Offering");
-------------------
38
<PAGE>
(b) the sale, conveyance or other transfer of all or substantially all
of the assets of Tenant (whether by operation of law or otherwise);
(c) any other transaction, or series of transactions, which results in
the Affiliates of Tenant no longer having Control of Tenant (other
than through a Registered Offering); or
(d) any transaction pursuant to which Tenant is merged with or
consolidated into another entity (other than an entity owned and
Controlled by an Affiliate of Tenant), and Tenant is not the surviving
entity;
provided, however, that notwithstanding the foregoing any such
-----------------
transaction shall not be deemed a Change of Control if each of the following
conditions are met:
22.2.1 Financial Covenants. Unless a Letter of Credit in an
-------------------
amount equal to 200% of the Letter of Credit Amount is posted by Tenant
concurrently with any such consolidation, merger, sale or conveyance, the
Person formed by or surviving such transaction shall have (i) a Tangible
Net Worth not less than $30,000,000 increased by four percent per annum
compounded annually from the Commencement Date to the date of the Change of
Control and (ii) a Fixed Charge Coverage Ratio of not less than 1.5 to 1.0
for two consecutive Fiscal Quarters.
22.2.2 Operating Standards. The surviving entity shall operate
-------------------
the Leased Property at a standard at least as high in the reasonable
judgment of Landlord as that operated by Tenant prior to the Change of
Control.
22.2.3 Commitment to the Golf Industry. Immediately after such
-------------------------------
consolidation, merger, sale or conveyance, the surviving entity and its
Affiliates shall have not less than 80 total golf courses (or less if
acceptable to Landlord) under management or lease, which number shall be
maintained for not less than three years after the Change of Control.
22.3 Subleases.
---------
22.3.1 Permitted Subleases. Tenant shall, without Landlord's
-------------------
prior approval, be permitted to sublease portions of the Leased Property to
concessionaires or licensees to:
(a) operate golf professionals' shops;
(b) operate golf driving ranges;
(c) provide golf lessons;
(d) operate restaurants;
39
<PAGE>
(e) operate bars; and
(f) operate any other portions (but not the entirety) of the Leased
Property customarily associated with or incidental to the operation of
the Golf Course.
22.3.2 Terms of Sublease. Each sublease of any of the Leased
-----------------
Property shall be subject and subordinate to the provisions of this Lease.
No sublease made as permitted by Section 22.3.1 shall affect or reduce any
--------------
of the obligations of Tenant hereunder, and all such obligations shall
continue in full force and effect as if no sublease had been made. No
sublease shall impose any additional obligations on Landlord under this
Lease.
22.3.3 Copies. Tenant shall, within 10 days after the execution
------
and delivery of any sublease permitted by Section 22.3.1, deliver a
--------------
duplicate original thereof to Landlord.
22.3.4 Assignment of Rights in Subleases. As security for
---------------------------------
performance of its obligations under this Lease, Tenant hereby grants,
conveys and assigns to Landlord all right, title and interest of Tenant in
and to all subleases now in existence or hereinafter entered into for any
or all of the Leased Property, and all extensions, modifications and
renewals thereof and all rents, issues and profits therefrom. Landlord
hereby grants to Tenant a license to collect and enjoy all rents and other
sums of money payable under any sublease of any of the Leased Property;
provided, however, that Landlord shall have the absolute right at any time
after the occurrence and continuance of an Event of Default upon notice to
Tenant and any subtenants to revoke said license and to collect such rents
and sums of money and to retain the same. Tenant shall not (i) after the
occurrence and continuance of an Event of Default, consent to, cause or
allow any material modification or alteration of any of the terms,
conditions or covenants of any of the subleases or the termination thereof,
without the prior written approval of Landlord nor (ii) accept any rents
(other than customary security deposits) more than 90 days in advance of
the accrual thereof nor permit anything to be done, the doing of which, nor
omit or refrain from doing anything, the omission of which, will or could
be a breach of or default in the terms of any of the subleases.
22.3.5 Licenses, Etc. For purposes of Sections 22.1, 22.3 and
------------- -----------------------
22.5, subleases shall be deemed to include any licenses, concession
----
arrangements, management contracts or other arrangements relating to the
possession or use of all or any part of the Leased Property.
22.4 Assignment. No assignment shall in any way impair the
----------
continuing primary liability of Tenant hereunder, and no consent to any
assignment in a particular instance shall be deemed
40
<PAGE>
to be a waiver of the prohibition set forth in Article 22. Any assignment shall
----------
be solely of Tenant's entire interest in this Lease. Any assignment or other
transfer of all or any portion of Tenant's interest in the Lease in
contravention of Article 22 shall be voidable at Landlord's option.
----------
22.5 REIT Limitations. Anything contained in this Lease to the
----------------
contrary notwithstanding, Tenant shall not (i) sublet or assign the Leased
Property or this Lease on any basis such that the rental or other amounts to be
paid by the sublessee or assignee thereunder would be based, in whole or in
part, on the income or profits derived by the business activities of the
sublessee or assignee; (ii) sublet or assign the Leased Property or this Lease
to any person that Landlord owns, directly or indirectly (by applying
constructive ownership rules set forth in Section 856(d)(5) of the Code), a 10%
or greater interest in; or (iii) sublet or assign the Leased Property or this
Lease in any other manner or otherwise derive any income which could cause any
portion of the amounts received by Landlord pursuant to this Lease or any
sublease to fail to qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, or which could cause any other income received by
Landlord to fail to qualify as income described in Section 856(c)(2) of the
Code. The requirements of this Section 22.5 shall likewise apply to any further
------------
subleasing by any subtenant.
ARTICLE 23 - OFFICER'S CERTIFICATES AND OTHER STATEMENTS
--------------------------------------------------------
23.1 Officer's Certificates. At any time, and from time to time upon
----------------------
Tenant's receipt of not less than 10 days' prior written request by Landlord,
Tenant will furnish to Landlord an Officer's Certificate certifying that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth
the modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of
which Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against
Tenant before or by any court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
41
<PAGE>
Tenant's failure to deliver such statement within such time shall
constitute an acknowledgment by Tenant that this Lease is unmodified and in full
force and effect except as may be represented to the contrary by Landlord,
Landlord is not in default in the performance of any covenant, agreement or
condition contained in this Lease and the other matters set forth in such
request, if any, are true and correct. Any such certificate furnished pursuant
to this Section 23.1 may be relied upon by Landlord.
------------
23.2 Annual Financial Statements of Tenant. Tenant will furnish to
-------------------------------------
Landlord, within 60 days after the end of Tenant's fiscal year, a copy of its
audited consolidated balance sheet as of the end of such fiscal year, and
related audited consolidated statement of income and statement of cash flows for
such fiscal year (each with footnotes), prepared by a nationally recognized
accounting firm in accordance with generally accepted accounting principles
applied on a basis consistently maintained throughout the period involved. All
annual financial statements shall be accompanied by a certificate of an officer
and the chief accounting officer of Tenant delivered with such statements,
stating (i) that the officers know of no Event of Default, or event which, upon
notice or the passage of time or both, would become an Event of Default, which
has occurred and is continuing under this Lease or, if any such event has
occurred or is continuing, specifying the nature and period of existence thereof
and what action Tenant has taken or proposes to take with respect thereto, and
(ii) except as otherwise specified in such certificate, that to the best of such
officers' knowledge, Tenant has fulfilled all of its obligations under this
Lease which are required to be fulfilled on a prior date to such certificate.
23.3 Environmental Statements. Immediately upon Tenant's learning,
------------------------
or having reasonable cause to believe, that any Hazardous Material in a quantity
sufficient to require remediation or reporting under applicable law is located
in, on or under the Leased Property or any adjacent property, Tenant shall
notify Landlord in writing of (a) any enforcement, cleanup, removal, or other
governmental or regulatory action instituted, completed or threatened; (b) any
claim made or threatened by any Person against Tenant or the Leased Property
relating to damage, contribution, cost recovery, compensation, loss, or injury
resulting from or claimed to result from any Hazardous Material; and (c) any
reports made to any federal, state or local environmental agency arising out of
or in connection with any Hazardous Material in or removed from the Leased
Property, including any complaints, notices, warnings or asserted violations in
connection therewith.
ARTICLE 24 - LANDLORD MORTGAGES
-------------------------------
24.1 Landlord May Grant Liens. Subject to Section 24.2, without the
------------------------ ------------
consent of Tenant, Landlord may, from time to time, directly or indirectly,
create or otherwise cause to exist any lien, encumbrance or title retention
agreement ("Landlord's Encumbrance") upon the Leased Property, or any portion
----------------------
thereof or
42
<PAGE>
interest therein, whether to secure any borrowing or other means of financing or
refinancing. This Lease is and at all times shall be subject and subordinate to
any ground or underlying leases, mortgages, trust deeds or like encumbrances,
which may now or hereafter affect the Leased Property and to all renewals,
modifications, consolidations, replacements and extensions of any such lease,
mortgage, trust deed or like encumbrance. This clause shall be self-operative
and no further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee or beneficiary, affecting any lease or the
Leased Property. In confirmation of such subordination, Tenant shall execute
promptly any certificate that Landlord may request for such purposes.
24.2 Tenant's Non-Disturbance Rights. So long as Tenant shall pay
-------------------------------
all Rent as the same becomes due and shall fully comply with all of the terms of
this Lease and fully perform its obligations hereunder, none of Tenant's rights
under this Lease shall be disturbed by the holder of any Landlord's Encumbrance
which is created or otherwise comes into existence after the Commencement Date.
24.3 Breach by Landlord. It shall be a breach of this Lease if
------------------
Landlord shall fail to observe or perform any material term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of 30 days after notice thereof from Tenant, unless such
failure cannot with due diligence be cured within a period of 30 days, in which
case such failure shall not be deemed to continue if Landlord, within said 30-
day period, proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof. The time within which Landlord shall
be obligated to cure any such failure shall also be subject to extension of time
due to the occurrence of any Unavoidable Delay.
24.4 Facility Mortgage Protection. Tenant agrees that the holder of
----------------------------
any Landlord Encumbrance shall have no duty, liability or obligation to perform
any of the obligations of Landlord under this Lease, but that in the event of
Landlord's default with respect to any such obligation, Tenant will give any
such holder whose name and address have been furnished to Tenant in writing for
such purpose notice of Landlord's default and allow such holder thirty (30) days
following receipt of such notice for the cure of said default before invoking
any remedies Tenant may have by reason thereof.
ARTICLE 25 - MISCELLANEOUS
--------------------------
25.1 Landlord's Right to Inspect. Tenant shall permit Landlord and
---------------------------
its authorized representatives to inspect the Leased Property during usual
business hours subject to any security, health, safety or confidentiality
requirements of Tenant or any governmental agency or insurance requirement
relating to the Leased Property, or imposed by law or applicable regulations.
Landlord shall indemnify Tenant for all liabilities, obligations, losses,
43
<PAGE>
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Tenant by reason of Landlord's inspection pursuant to this
Section 25.1.
- ------------
25.2 No Waiver. No failure by Landlord to insist upon the strict
---------
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
25.3 Remedies Cumulative. To the extent permitted by law, each
-------------------
legal, equitable or contractual right, power and remedy of Landlord now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy. The exercise or beginning of the exercise by Landlord of any one or
more of such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord of any or all of such other rights, powers and
remedies.
25.4 Acceptance of Surrender. No surrender to Landlord of this Lease
-----------------------
or of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
25.5 No Merger of Title. There shall be no merger of this Lease or
------------------
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
25.6 Conveyance by Landlord. If Landlord shall convey the Leased
----------------------
Property in accordance with the terms hereof other than as security for a debt,
Landlord shall, upon the written assumption by the transferee of the Leased
Property of all liabilities and obligations of the Lease be released from all
future liabilities and obligations under this Lease arising or accruing from and
after the date of such conveyance or other transfer as to the Leased Property.
All such future liabilities and obligations shall thereupon be binding upon the
new owner.
25.7 Quiet Enjoyment. So long as Tenant shall pay all Rent as the
---------------
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Tenant shall peaceably and quietly
have, hold and enjoy the Leased Property for the Term hereof, free of any claim
or other action by
44
<PAGE>
Landlord or anyone claiming by, through or under Landlord, but subject to all
liens and encumbrances of record as of the date hereof or any Landlord's
Encumbrances.
25.8 Notices. All notices, demands, requests, consents, approvals
-------
and other communications hereunder shall be in writing and delivered or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as provided in the Basic Lease Provisions.
25.9 Survival of Claims. Anything contained in this Lease to the
------------------
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination of this Lease shall survive
such termination.
25.10 Invalidity of Terms or Provisions. If any term or provision of
---------------------------------
this Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term or provision
shall not be affected thereby.
25.11 Prohibition Against Usury. If any late charges provided for in
-------------------------
any provision of this Lease are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
25.12 Amendments to Lease. Neither this Lease nor any provision
-------------------
hereof may be changed, waived, discharged or terminated except by an instrument
in writing and in recordable form signed by Landlord and Tenant.
25.13 Successors and Assigns. All the terms and provisions of this
----------------------
Lease shall be binding upon and inure to the benefit of the parties hereto. All
permitted assignees or sublessees shall be subject to the terms and provisions
of this Lease.
25.14 Titles. The headings in this Lease are for convenience of
------
reference only and shall not limit or otherwise affect the meaning hereof.
25.15 Governing Law. This Lease shall be governed by and construed
-------------
in accordance with the laws of the State of California (but not including its
conflict of laws rules), except for those certain procedural laws which must be
governed by the laws of the location of the Leased Property.
25.16 Memorandum of Lease. Landlord and Tenant shall, promptly upon
-------------------
the request of either, enter into a short form memorandum of this Lease, in form
and substance satisfactory to Landlord and suitable for recording under the
State, in which reference to this Lease, and all options contained herein, shall
be made. Tenant shall pay all costs and expenses of recording such Memorandum
of Lease.
45
<PAGE>
25.17 Attorneys' Fees. In the event of any dispute between the
---------------
parties hereto involving the covenants or conditions contained in this Lease or
arising out of the subject matter of this Lease, the prevailing party shall be
entitled to recover against the other party reasonable attorneys' fees and court
costs.
25.18 Non-Recourse as to Landlord. Anything contained herein to the
---------------------------
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Leased Property and
not against any other assets, properties or funds of (a) Landlord, (b) any
director, officer, general partner, limited partner, employee or agent of
Landlord, or with respect to any general partner of Landlord, any of their
respective general partners or stockholders (or any legal representative, heir,
estate, successor or assign of any thereof), (c) any predecessor or successor
partnership or corporation (or other entity) of Landlord, or any of their
respective general partners, either directly or through either Landlord or their
respective general partners or any predecessor or successor partnership or
corporation or their stockholders, officers, directors, employees or agents (or
other entity), or (d) any other Person affiliated with any of the foregoing, or
any director, officer, employee or agent of any thereof.
25.19 No Relationship. Landlord shall in no event be construed for
---------------
any purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to the
Leased Property or any of the Other Leased Properties or otherwise in the
conduct of their respective businesses.
25.20 Signs; Reletting. If Tenant exercises its option not to extend
----------------
or further extend the Term under Section 2.2 or if an Event of Default occurs,
-----------
then Landlord shall have the right during the remainder of the Term then in
effect (i) to advertise the availability of the Leased Property for sale or
reletting and to erect upon the Leased Property signs indicating such
availability and (ii) to show the Leased Property to prospective purchasers or
tenants or their agents at such reasonable times as Landlord may elect.
25.21 Golf Course Name. The Leased Property shall be known by such
----------------
trade name and/or trademark or logo as may from time to time be determined by
Landlord. Tenant may identify the Leased Property as a golf course managed and
operated by Tenant and may use the name "American Golf Corporation" or the
initials "AGC" or the Tenant's logo alone or in conjunction with other words or
names or designs owned by Tenant or any of its Affiliates. Landlord recognizes
that the name "American Golf Corporation" and the initials "AGC," together with
any other names, logos or designs owned by Tenant or any of its Affiliates and
used in the management and operation of the Leased Property (including without
limitation any such names, logos or designs used in connection with the
restaurant, banquet rooms and meeting rooms in and about the Leased Property),
together with appurtenant goodwill, are the exclusive
46
<PAGE>
property of Tenant or its Affiliates (collectively, the "Tenant-Owned Names").
------------------
Accordingly, Landlord agrees that no right or remedy of Landlord for any default
on the part of Tenant under this Lease shall, nor shall any provision of this
Lease, confer upon Landlord or its successors or assigns the right to use
Tenant-Owned names in the operation of the Leased Property or otherwise. In the
event of any breach of this covenant by Landlord, Tenant, in addition to any
remedies available to it under this Lease or at law or in equity, shall have the
right to injunctive relief.
47
<PAGE>
EXHIBIT A
---------
Defined Terms; Interpretation
-----------------------------
Defined Terms. For all purposes of this Lease, except as otherwise expressly
- -------------
provided or unless the context otherwise requires, the terms defined below have
the meanings assigned to them below.
Additional Charges: As defined in Section 3.4.
------------------ -----------
Additional Rent: As defined in Basic Lease Provisions.
---------------
Affiliate: As applied to any Person, means any other Person directly
---------
or indirectly controlling, controlled by, or under common control with, that
Person.
Annual Base Rent: As defined in the Basic Lease Provisions.
----------------
Applicable Percentage: As defined in the Basic Lease Provisions.
---------------------
Award: Means all compensation, sums or anything of value awarded, paid
-----
or received on a total or partial Condemnation.
Base Rent: Means one-twelfth of the Annual Base Rent.
---------
Basic Lease Provisions: The provisions so labelled starting on page
----------------------
(i) of this Lease.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
------------
which is not a day on which national banks in the City of New York, New York,
are authorized, or obligated, by law or executive order, to close.
Change of Control: As defined in Section 22.2.
----------------- ------------
Code: The Internal Revenue Code of 1986, as amended.
----
Commencement Date: As defined in the Basic Lease Provisions.
-----------------
Condemnation: Means (a) the exercise of any governmental power,
------------
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
Condemnation Threshold: Means, as of any given date, an amount
----------------------
determined by dividing (i) the aggregate Base Rent and Additional Rent under
this Lease for the most recent 12 full calendar months by (ii) the average
dividend yield for such 12
A-1
<PAGE>
month period on the common stock then issued and outstanding of Landlord's
general partner.
Condemnor: Means any public or quasi-public authority, or private
---------
corporation or individual, having the power of condemnation.
Consumer Price Index: Means the Consumer Price Index for Urban Wage
--------------------
Earners and Clerical Workers for the Los Angles-Anaheim-Riverside, California or
alternative index such as national index areas.
Control: Means (including, with correlative meanings, the terms
-------
"controlling" and "controlled by"), as applied to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
Course Revenue: Means all revenues received (whether by Tenant or any
--------------
subtenants, concessionaires or licensees) from or by reason of the operation of
the Facility, or any other use of the Leased Property, including revenues from
memberships (to the extent the membership was sold on or after the Commencement
Date or to the extent revenue is received by Tenant for a membership sold
previous to the Commencement Date), initiation fees (to the extent the
membership was sold on or after the Commencement Date or to the extent such fees
are received by Tenant for a membership sold previous to the Commencement Date),
dues, greens fees, fees to reserve a tee time, golf-related guest fees or golf
cart rentals, golf-related surcharges, fees or other charges paid to Tenant by
sponsors of golf tournaments at the Leased Property (unless the terms under
which Tenant is paid by such sponsor do not comply with Section 22.5, in which
------------
event the gross revenues received by such sponsor for the tournament shall be
included in Course Revenue) and revenues from providing hotel, overnight or
similar accommodations to members, guests or others; provided, however, that
-----------------
Course Revenue shall not include:
(a) Other Revenue;
(b) Cash refunds or credits allowed on returns by customers;
(c) The amount of any city, county, state or federal sales or
excise tax on sales, which is both added to the selling price and
paid to the taxing authority by Tenant; and the amount of any
city, county, state, or federal admission tax or use tax, which
is paid to the relevant taxing authority by Tenant;
(d) The actual uncollectible amount of any check or bank draft
received by Tenant as payment for
A-2
<PAGE>
goods or services and returned to Tenant from a customer's bank
as being uncollectible, but only after Tenant has made reasonable
efforts to collect on the check;
(e) The actual uncollectible amount of any charge or credit
account incurred by Tenant for the sale of merchandise or
services; provided, however, that the credit was extended to the
-----------------
customer by Tenant, and that reasonable efforts to collect said
account have been made;
(f) The actual uncollectible amount of any sale of merchandise or
services for which Tenant accepted a credit card; provided,
---------
however, that Tenant has made reasonable efforts to collect the
-------
debt after being notified by the issuing bank of the invalidity
or uncollectibility of the charge;
(g) Interest or other charges paid by customers for extension of
credit;
(h) Revenue or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property used in connection
with Tenant's operation of the Leased Property;
(i) The value of any merchandise, supplies or equipment exchanged
or transferred from or to other locations or businesses of Tenant
where such exchange or transfer is not made for the purpose of
avoiding a sale which would otherwise be made from or at the
Leased Property;
(j) Revenue, if any, from receipts in the form of refunds from or
the value of merchandise, supplies or equipment returned to
shippers, suppliers or manufacturers;
(k) Revenue, if any, from the amount of any cash or quantity
discounts received from sellers, suppliers or manufacturers;
(l) The amount of any gratuities paid or given by customers to or
for employees of Tenant;
(m) Receipts from the sales of uniforms or clothing required to
be worn by employees;
(n) Revenues from charging employees for meals served or provided
to employees of Tenant;
(o) Receipts from the sale of waste or scrap materials resulting
from Tenant's operations;
A-3
<PAGE>
(p) Revenue received from any subtenant, concessionaire or
licensee, inasmuch as the gross revenue received by such
subtenant, concessionaire or licensee is otherwise included in
the definition of Course Revenue or Other Revenue;
(q) Gross revenue received by any sponsor of a golf tournament at
the Leased Property, provided that the terms under which Tenant
is paid surcharges, fees or other charges by such sponsor comply
with Section 22.5; and
------------
(r) Receipts from the sales of supplies or inventory by Tenant to
subtenants, concessionaires, or licensees provided that such
sales are at Tenant's cost of such supplies or inventories with
no mark-up or premium.
For purposes of this definition of Course Revenue, all references to
Tenant in clauses (a) through (r) above shall also include any subtenants,
concessionaires and licensees.
Date of Taking: Means the date the Condemnor has the right to
--------------
possession of the property being condemned.
Environmental Law: Means all applicable statutes, regulations, rules,
-----------------
ordinances, codes, licenses, permits, orders, demands, approvals, authorizations
and similar items of all governmental agencies, departments, commissions,
boards, bureaus or instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative and regulatory
decrees, judgments and orders relating to the protection of human health or the
environment as in effect on the Commencement Date or as thereafter amended,
including but not limited to those pertaining to reporting, licensing,
permitting, investigation, removal and remediation of emissions, discharges,
releases or threatened releases of "Hazardous Materials," substances,
pollutants, contaminants or hazardous or toxic substances, materials or wastes
whether solid, liquid or gaseous in nature, into the air, surface water, ground
water or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of substances, pollutants,
contaminants or hazardous or toxic substances, materials, or wastes, whether
solid, liquid or gaseous in nature, including: (x) the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. (S)(S) 9601 et
--
seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et
- --- --
seq.), the Clean Air Act (42 U.S.C. (S)(S) 7401 et seq.), the Federal Water
------
Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Safe Drinking Water Act
------
(42 U.S.C. (S)(S) 300f et seq.), the Toxic Substances Control Act (15 U.S.C.
------
(S)(S) 2601 et seq.), the Endangered Species Act (16 U.S.C. (S)(S) 1531 et
------ --
seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C:
(S)(S) 11001 et seq.), and (y) analogous state and local provisions.
------
A-4
<PAGE>
Event of Default: As defined in Section 16.1.
---------------- ------------
Extended Terms: As defined in the Basic Lease Provisions.
--------------
Facility: As defined in the Basic Lease Provisions.
--------
Facility Mortgage: As defined in Section 13.1.
----------------- ------------
Facility Mortgagee: Means the holder or beneficiary of a Facility
------------------
Mortgage, if any, and only to the extent Landlord gives Tenant notice of the
identity and address of the Person.
Fiscal Quarter: The three-month periods (or applicable portions
--------------
thereof) in any Fiscal Year from January 1 through March 31, April 1 through
June 30, July 1 through September 30 and October 1 through December 31.
Fiscal Year: As defined in the Basic Lease Provisions.
-----------
Fixed Charge Coverage Ratio: Means, if applicable, for any period,
---------------------------
the ratio of (A) the sum of, without duplication (i) consolidated net income of
Tenant excluding any gains or losses in respect of dispositions plus (ii)
provision for taxes plus (iii) consolidated interest expense (including non-cash
interest payments or accruals and the interest component, if any, of lease
obligations of Tenant and its subsidiaries) plus (iv) all lease and rent
obligations (including percentage rent obligations) of Tenant and its
subsidiaries plus (v) other non-cash charges deducted from consolidated revenues
in determining net income for such period including depreciation and
amortization (including amortization of intangibles), over (B) the sum of (i)
consolidated interest expenses of Tenant and its subsidiaries for such period
plus (ii) all lease and rent obligations (including percentage rent obligations)
of Tenant and its subsidiaries for such period.
Fixtures: Means all permanently affixed equipment, machinery,
--------
fixtures, and other items of real and/or personal property, including all
components thereof, now and hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Leased Improvements,
including all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which, to the
greatest extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items included
within the category of Tenant's Personal Property and any Tenant Improvements.
A-5
<PAGE>
Full Replacement Cost: Means the actual replacement cost thereof from
---------------------
time to time including increased cost of construction endorsement, less
exclusions provided in the normal fire insurance policy.
Hazardous Material: Means any chemical substance:
------------------
(i) the presence of which requires investigation or remediation
under any federal, state or local statute, regulation, ordinance,
order, action or policy, administrative request or civil
complaint under any of the foregoing or under common law;
(ii) which is defined as a "hazardous waste" or "hazardous
substance" under any federal, state or local statute, regulation
or ordinance or amendments thereto as in effect as of the
Commencement Date, or as thereafter amended, including the
Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. (S)(S) 9601 et seq.) and/or the Resource
------
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.);
------
(iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and as of the Commencement Date, or as thereafter
amended, is regulated by any governmental authority, agency,
department, commission, board, or instrumentality of the United
States, or any state or any political subdivision thereof having
or asserting jurisdiction over the Leased Property;
(iv) the presence of which on any of the Leased Property causes
a nuisance upon such Leased Property or to adjacent properties or
poses a hazard to the health or safety of persons on or about any
of the Leased Property;
(v) which, except as contained in building materials, contains
gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs) or friable asbestos or friable
asbestos-containing materials or urea formaldehyde foam
insulation; or
(vi) radon gas.
Impartial Appraiser: As defined in Section 13.2.
------------------- ------------
Impositions: Means collectively:
-----------
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single
A-6
<PAGE>
business, gross receipts, transaction privilege, rent or similar
taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed
prior to the date hereof and whether or not to be completed
within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property
and/or the Rent (including all interest and penalties thereon due to any failure
in payment by Tenant), which at any time during or in respect of the Term hereof
may be assessed or imposed on or in respect of or be a lien upon (i) Landlord or
Landlord's interest in the Leased Property; (ii) the Leased Property or any part
thereof or any rent therefrom or any estate, right, title or interest therein;
or (iii) any operation, use or possession of, or sales from or activity
conducted on or in connection with the Leased Property or the leasing or use of
the Leased Property or any part thereof; provided, however, that Impositions
-----------------
shall not include:
(aa) any tax based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on
Landlord or any other Person other than Tenant;
(bb) any transfer, or net revenue tax of Landlord or any other
Person other than Tenant;
(cc) any tax imposed solely with respect to the sale, exchange
or other disposition by Landlord of any Leased Property or the
proceeds thereof; or
(dd) any tax imposed with respect to any principal or interest
on any indebtedness on the Leased Property.
Impound Charges: As defined in Section 16.10.
--------------- -------------
Impound Payment: As defined in Section 16.10.
--------------- -------------
Initial Base Rent: As defined in the Basic Lease Provisions.
-----------------
A-7
<PAGE>
Initial Term: As defined in the Basic Lease Provisions.
------------
Insurance Requirements: All terms of any insurance policy required by
----------------------
this Lease and all requirements of the issuer of any such policy.
Land: As defined in Article 1.
---- ---------
Landlord: As defined in the preamble.
--------
Landlord's Encumbrance: As defined in Section 24.1.
---------------------- ------------
Landlord's Personal Property: As defined in Article 1.
---------------------------- ---------
Lease: As defined in the preamble.
-----
Leased Improvements: As defined in Article 1.
------------------- ---------
Leased Property: As defined in Article 1.
--------------- ---------
Legal Requirements: All federal, state, county, municipal and other
------------------
governmental statutes, laws (including the Americans with Disabilities Act and
any Environmental Laws), rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the
construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any which may (i) require repairs, modifications or alterations
in or to the Leased Property; (ii) in any way adversely affect the use and
enjoyment thereof, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Tenant (other than
encumbrances created by Landlord without the consent of Tenant), at any time in
force affecting the Leased Property; or (iii) require the cleanup or other
treatment of any Hazardous Material.
Letter of Credit: Means a letter of credit which:
----------------
(i) is an irrevocable standby letter of credit from a bank with a
long-term debt rating from each of Standard & Poor's and Moody's of
investment grade naming Landlord (and/or any Facility Mortgagee if
requested by Landlord) as beneficiary to secure Tenant's obligations
hereunder and Tenant's or an Affiliate of Tenant's obligations under
the Other Property Leases;
(ii) has a stated amount equal to the Letter of Credit Amount plus,
if the Letter of Credit is intended to satisfy Tenant's obligations
under the Other Property Leases with Landlord, the amounts required
under such other leases;
(iii) has a term of not less than one year;
A-8
<PAGE>
(iv) provides that it will be honored upon a signed statement by
Landlord that Landlord is entitled to draw upon the Letter of Credit
under this Lease, and shall require no signature or statement from any
party other than Landlord;
(v) provides that Landlord had given not less than three (3) Business
Day's notice to Tenant prior to submitting the Letter of Credit to the
bank for presentation; and
(vi) permits multiple draws by providing that following the honor of
any drafts in an amount less than the aggregate stated amount of the
Letter of Credit, the issuing bank shall return the original Letter of
Credit to Landlord and that Landlord's rights as to the remaining
stated amount of the Letter of Credit will not be extinguished.
Letter of Credit Amount: If applicable, means, for any Fiscal Year,
-----------------------
an amount equal to six (6) months of Base Rent for such Fiscal Year.
Officer's Certificate: A certificate of Tenant signed by an officer
---------------------
authorized to so sign by the board of directors or by-laws.
Other Leased Properties: Mean the properties leased to Tenant or an
-----------------------
Affiliate of Tenant by Landlord or an Affiliate of Landlord, and listed on
Exhibit C attached hereto.
- ---------
Other Property Leases: Mean the other leases entered into between
---------------------
Landlord or an Affiliate of Landlord and Tenant or an Affiliate of Tenant
relating to Tenant's use of the Other Leased Properties.
Other Revenue: Means all revenue received (whether by Tenant or any
-------------
subtenants, concessionaires or licensees) from or by reason of the Leased
Property relating to (i) the operation of snack bars, restaurants, bars and
banquet operations, (ii) golf and tennis professionals' shops on the Leased
Property, (iii) parking, (iv) fitness centers, (v) tennis facilities, (vi) day
care, (vii) nongolf-related guest fees and related surcharges, (viii) locker
rentals, (ix) bag storage, (x) video games, (xi) vending machines and (xii) fees
or other charges paid to Tenant by providers of golf lessons (unless the terms
under which Tenant is paid by such provider do not comply with Section 22.5, in
------------
which event the gross revenue received by such provider shall be included in
Other Revenue); but excluding: (1) the items described in clauses (b) through
-------------
(r) of the definition of Course Revenue (for purposes of this definition of
Other Revenue, all references to Tenant in clauses (a) through (r) of the
definition of Course Revenue shall also include any subtenants, concessionaires
and licensees) and (2) gross revenue received by any provider of golf
A-9
<PAGE>
lessons, provided that the terms under which Tenant is paid fees or other
charges by such provider comply with Section 22.5.
------------
Overdue Rate: On any date, a rate equal to 2 1/2% above the Prime
------------
Rate, but in no event greater than the maximum rate then permitted under
applicable law.
Person: Means and includes natural persons, corporations, limited
------
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, Indian tribes or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
Primary Intended Use: Means the operation of a golf course,
--------------------
consisting of the Facility, and other activities customarily associated with or
incidental to the operation of a Golf Course, including sale or rental of golf-
related merchandise at a golf professional's shop, sale of memberships,
furnishing of lessons by a golf professional, operation of a driving range, and
sales of food and beverages, including liquor sales.
Prime Rate: On any date, a rate equal to the annual rate on such
----------
date announced by Citibank, N.A. to be its prime rate or base rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing but in
no event greater than the maximum rate then permitted under applicable law.
Related Rights: As defined in Article 1.
-------------- ---------
Rent: Collectively, the Base Rent, Additional Rent and Additional
----
Charges, all as defined in Article 3.
---------
Replacement Water Rights: Means Water Rights that provide water
------------------------
supply and transportation at a quantity, price and priority which at the time of
their acquisition are not less favorable in any material respect to the holder
of the Water Rights than the quantity, price and priority of the Water Rights
which will be replaced by such Replacement Water Rights.
State: The State or Commonwealth in which the Leased Property is
-----
located.
Tangible Net Worth: Means the total book value of the assets of
------------------
Tenant (excluding goodwill, patents, trademarks, trade names, and organizational
expense) less all liabilities.
Tenant: As defined in the preamble.
------
Tenant Improvement: As defined in Section 10.1.
------------------ ------------
Tenant's Original Water Rights: As defined in Section 6.7.
------------------------------ -----------
A-10
<PAGE>
Tenant-Owned Names: As defined in Section 25.21.
------------------ -------------
Tenant's Personal Property: All machinery, equipment, furniture,
--------------------------
furnishings, movable walls or partitions, phone system, computers or trade
fixtures or other personal property, and consumable inventory and supplies,
owned by Tenant and used or useful in Tenant's business on the Leased Property,
including all items of furniture, furnishings, equipment, supplies and
inventory, kitchen fixtures, bar equipment, flatware, lawn mowers and other
gardening tools, tractors and other motorized vehicles and golf carts.
Term: Collectively, the Initial Term and the Extended Terms, as the
----
context may require, unless earlier terminated pursuant to the provisions
hereof.
Title Commitment: As defined in the Basic Lease Provisions.
----------------
Unavoidable Delays: Delays due to strikes, lockouts, inability to
------------------
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
- -------------
either party hereto unless such lack of funds is caused by the failure of the
other party hereto to perform any obligations of such party, under this Lease.
Unsuitable For Its Primary Intended Use: A state or condition of the
---------------------------------------
Facility such that in the good faith judgment of Tenant, reasonably exercised,
the Facility cannot be operated on a commercially practicable basis for its
Primary Intended Use.
Water Rights: Means any rights for the supply or transportation of
------------
water to the Leased Property owned from time to time by Landlord or Tenant,
including Tenant's Original Water Rights and the Replacement Water Rights.
Interpretation. The foregoing defined terms include the plural as well as the
- --------------
singular. "Including" and variants thereof shall be deemed to mean "including
without limitation." All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as at the time applicable. All references in this Lease to
designated "Articles," "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of the Detailed Lease Provisions
unless otherwise indicated. The words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Lease as a whole and not to any
particular Article, Section or other subdivision.
A-11
<PAGE>
EXHIBIT B
---------
List of Golf Courses
--------------------
<TABLE>
<CAPTION>
GOLF COURSES CITY STATE
<C> <S> <C> <C>
1. Summerfield Crossing Golf Club Tampa FL
2. Pawtuckett Golf Club Charlotte NC
3. The Links at Stone Ferry Charleston SC
4. Pinery Country Club Parker CO
5. Plantation Golf Club Boise ID
6. Crescent Oaks Country Club Clearwater FL
7. Highlands Golf & Supper Club Hutchinson KS
8. Tallgrass Country Club Wichita KS
9. Shenandoah Country Club Baton Rouge LA
10. Stonebridge Country Club New Orleans LA
11. Meadowbrook Country Club Tulsa OK
12. The Trails Norman OK
13. Diamond Oaks Country Club Fort Worth TX
14. Eldorado Country Club McKinney TX
15. Great Southwest Country Club Grand Prairie TX
16. Oakridge Country Club Garland TX
17. Willow Fork Country Club Katy TX
18. Woodhaven Country Club Fort Worth TX
19. Forrest Crossing Golf Course Nashville TN
20. Bent Tree Golf Club Sunbury OH
</TABLE>
B-1
<PAGE>
EXHIBIT C
---------
Other Leased Properties
-----------------------
<TABLE>
<CAPTION>
COURSE NAME CITY COUNTY STATE
- ------------------------------ ------------- --------- ----------
<S> <C> <C> <C>
Continental Golf Course Scottsdale Maricopa Arizona
Eagle Golf Club Broomfield Boulder Colorado
El Caro Country Club Phoenix Maricopa Arizona
Fowler's Mill Golf Course Chesterland Geauga Ohio
Kendale Lakes Golf & C.C. Miami Dade Florida
Lomas Santa Fe Exec. C.C. Solana Beach San Diego California
Rancocas Golf Course Willingboro Burlington N.J.
Riverchase Golf Club Coppell Dallas Texas
Riverside Golf Club Grand Prairie Dallas Texas
Royal Meadows Golf Course Independence Jackson Missouri
Sabal Palm Golf Course Tamarac Broward Florida
Villa De Paz Golf Course Phoenix Maricopa Arizona
Bear Creek Golf World Houston Harris Texas
Lake Houston Golf Course Huffman Harris Texas
Reston Golf Course Reston Fairfax Virginia
Arrowhead Golf Course Davie Broward Florida
Camarillo Springs G.C. Camarillo Ventura California
Rancho San Joaquin G.C. Irvine Orange California
Vista Valencia Golf Course Valencia L.A. California
Brandywine Country Club Maumee Lucas Ohio
Heatherridge Country Club Aurora Arapahoe Colorado
Hunt Valley Golf Club Hunt Valley Baltimore Maryland
Mission Hills Country Club Northbrook Cook Illinois
Royal Oak Country Club Cincinnati Hamilton Ohio
Skyline Woods Country Club Elkhorn Douglas Nebraska
Tanoan Country Club Albuquerque Bernalillo N.M.
Oakhurst Country Club Grove City Franklin Ohio
Escondido Country Club Escondido San Diego California
Sunset Hills Country Club Thousand Ventura California
Bear Creek Country Club Woodinville King Washington
Brookstone Golf & C.C. Acworth Cobb Georgia
London Bridge Golf Course Lake Havasu Mohave Arizona
Aptos Seascape Golf Club Aptos Santa Cruz CA
Arrowhead Golf Club Littleton Arapahoe Colorado
Brigantine Golf Links Brigantine Atlantic New Jersey
Carolina Shores Golf Course Calabash Brunswick N.C.
Pecan Valley Golf Club San Antonio Bexar Texas
Sahara Country Club Las Vegas Clark Nevada
Superstition Springs G.C. Mesa Maricopa Arizona
Tatum Ranch Golf Course Cavecreek Newton Arizona
The Legend Golf Resort Glendale Maricopa Arizona
Southwyck Golf Club Pearland Brazoria Texas
Desert Lakes Golf Course Fort Mojave Mojave Arizona
Southwyck Golf Club Pearland Brazoria Texas
Mesquite Golf Course Palm Springs Riverside California
Dub's Dread Golf Course Kansas City Wyandotte Kansas
El Dorado Golf Course Gilbert Maricopa Arizona
SummitPointe Golf Course Milpitas Santa Clara CA
</TABLE>
C-1
<PAGE>
EXHIBIT "C"
-------------
Other Leased Properties
-----------------------
<TABLE>
<CAPTION>
COURSE NAME CITY COUNTY STATE
- ------------------------------ -------------- --------- ----------
<S> <C> <C> <C>
Lake Wilderness Golf Course Maple Valley King Washington
The Links at Northfork Ramsey Anoka Minnesota
Hershey Country Club Hershey Dauphin PA
Parkview Golf Course Hershey Dauphin PA
Sugar Ridge Golf Course Lawrencbrg Dearborn Indiana
Canyon Oaks Golf Club Chico Butte California
Wildhorse CC (Royal Ken.) Henderson Clark Nevada
Capitol City Golf Course Olympia Thurston Washington
Binks Forest Cntry Club Wellington Palm Bch Florida
Port Royal Golf Club Hilton Head Beaufort S.Carolina
Shipyard Golf Club Hilton Head Beaufort S.Carolina
Goshen Plantation G.C. Augusta Richmond Georgia
Hickory Heights G.C. Bridgeville Allegheny PA
River's Edge Fayetteville Clayton Georgia
Berry Creek C.C. Georgetown Williamson Texas
Creekside Golf Course Salem Marion Oregon
Honey Bee Golf Club Va. Beach Va. Beach Virginia
Wood Ranch Golf Club Simi Valley Ventura CA
Palm Valley Country Club Palm Desert Riverside CA
Monterey Country Club Palm Desert Riverside CA
Ruffled Feathers G.C. Lemont Cook Co., Illinois
Upland Hills C.C. Upland Hills San Bern., CA
The Oregon G.C. West Linn Clackamas, OR
Golden Oaks C.C. Fleetwood Berks Co., PA
Seven Springs G.C. Chesapeake Plst.Grv., VA
SeaCliff C.C. Huntington Bch Orange., CA
</TABLE>
C-2
<PAGE>
EXHIBIT D
---------
Operating Standards
-------------------
1. Greens, practice putting greens & nurseries
-------------------------------------------
A. Mowing - At least five days per week at a height between 3/16" - 5/16"
during the growing season; as needed during the off season.
B. Change cup locations on all greens and practice putting greens daily
during the active season and at least three times weekly in the off-
season. Cup location on all greens will be moved at least twenty feet
from the previous placement.
C. Repair ball marks, divots, or any other damaged turf areas on all
greens and practice greens daily.
D. Aerify all greens, practice putting greens and nurseries at least
three times per year during the growing season. Aerify problem areas
as often as necessary to produce superior turf quality.
E. Topdress all greens, practice putting greens and nurseries:
A. After any aerification performed with 1/2" or larger tines;
B. As needed to maintain a smooth putting surface.
C. Topdressing will be sand or a mix similar to that used to
construct the greens.
F. Light vertical mowing of all greens, practice putting greens and
nurseries shall be performed as appropriate to smooth and true the
putting surfaces. Heavy dethatching shall be performed only prior to
any winter overseeding.
Note: Where bermudagrass greens are maintained, they shall be
overseeded annually, approximately 2 to 3 weeks before the first
annual frost, using perennial rye or a blend of perennial rye, Poa
trivialis and/or fine fescues - at a rate between 20 and 30 lbs. per
1,000 square feet.
The putting surface shall be prepared for overseeding by aerifying not
later than 30 days prior to overseeding and verticutting weekly
starting three to four weeks prior.
Overseeding shall be topdressed 1/8" with material similar to green
construction material or an approved sand/organic mixture. A complete
fertilizer shall be
D-1
<PAGE>
applied immediately prior to seeding. Greens shall be irrigated
sufficient to remain moist but not soaked until all seed has
germinated.
During germination period, cup shall be changed frequently. First
mowing shall be at 5/16" reducing to normal cutting heights gradually.
A preventive program of fungicide applications shall be maintained
starting two days after overseeding.
G. Spiking of all greens and practice greens shall be performed as needed
between aerifications to maintain water infiltration.
H. Fertilization - All greens, practice greens, and nurseries shall be
fertilized with nitrogen, phosphorous, potash, and other elements as
needed to maintain color, growth, health and turgidity of the turf,
without allowing excessive or succulent growth.
The goal of the greens fertilization program is to provide the best
possible putting surface, not to produce the maximum amount of growth.
I. Fungicides - All greens, practice greens and nurseries shall receive
appropriate fungicide applications to prevent and/or control fungal
disease activity.
J. Weed Control - All greens, practice greens and nurseries shall be
maintained free of undesirable grasses and weeds. Pre-emergent
herbicides shall be used as necessary to prevent intrusion into the
greens of weeds difficult to eradicate such as goosegrass, crabgrass,
etc.
K. Insecticides - All greens, practice greens and nurseries shall be
treated as necessary to prevent or halt insect damage.
2. Tees - All areas used for tee surface
-------------------------------------
A. Mowing - All tees shall be mowed at a height between 3/8" - 5/8" three
times per week during growing season and as necessary during off-
season.
B. Topdressing - All worn areas on tees shall be topdressed at least
weekly to fill divots and level tee surface. Topdressing material
shall contain seed of annual or perennial ryegrasses, or other species
as appropriate.
C. Overseeding - All tees shall be overseeded at a rate of not less than
10 lbs./1,000 square feet, approximately
D-2
<PAGE>
two to three weeks before the first expected annual frost. Seed used
shall be a suitable species or blend.
D. Set-up - Tee markers and all tee equipment shall be moved daily for
proper play and control of turf wear.
E. Weed Control - Tees shall be kept weed free to an extent of at least
90% of the area by the proper and timely application of pre- and/or
post-emergent herbicides.
F. Vertical Mowing - All tees shall be verticut as necessary to control
mat or thatch build-up.
G. Aerification - All tees shall be aerified at least every two months
from March through October and as necessary during the remainder of
the year.
H. Fertilization - All tees shall be fertilized with nitrogen,
phosphorous, potash, and other elements as needed to maintain color,
growth, health and turgidity of the turf, without showing excessive or
succulent growth.
3. Fairways - All areas of play except greens, tees, roughs and natural growth
---------------------------------------------------------------------------
areas
-----
A. Mowing - All fairways shall be mowed at least three times per week at
a height between 1/2" - 7/8" during the growing season and as needed
for the balance of the year.
B. Aerification - All fairways shall be aerified a minimum of three times
per year during the growing season. Aerification holes shall not
exceed a spacing of eight inches on center or be of a diameter of less
than 1/2".
C. Fertilization - All fairways shall be fertilized with nitrogen,
phosphorous, potash, or other elements as needed to maintain color,
growth, health and turgidity of the turf, without allowing excessive
or succulent growth.
D. Vertical mowing - All fairways shall be verticut as necessary to
control mat or thatch build-up.
E. Weed Control - Fairways shall be kept weed free to an extent of at
least 90% of the area by the proper and timely application of pre-
and/or post-emergent herbicides.
4. Roughs
------
All turfed areas of play except greens, tees, fairways and natural growth
areas.
A. Mowing - All roughs shall be mowed weekly during the growing season
and as necessary during the balance of the
D-3
<PAGE>
year, at heights between 3/4" and 1-1/2". Rough height shall not
exceed 2" without the direct approval of the regional superintendent,
and rough mowing shall not be suspended for any tournament without
such approval.
B. Aerification -
1) Fairway-to-tree-line play areas shall be aerified at least two
times per year.
2) Within wooded play areas - as necessary to establish and/or
maintain turf.
C. Fertilization - Roughs shall be fertilized as necessary to maintain
turf.
D. Weed Control - Shall be performed as necessary to prevent seed
formation and to allow proper play.
5. Natural Growth Areas
--------------------
All areas in which native or introduced vegetation is allowed to survive
without routine mowing, cultivating, irrigation or other routine
maintenance procedures. May be out of play areas, steep slopes, barriers,
windbreaks, nature trails, etc. Such areas are to be maintained free of
excessive trash, noxious weeds and vertebrate pests, and in such manner as
to comply fully with fire department regulations or other such regulations
as may apply. Such natural growth areas may be improved and may from time
to time be subjected to irrigation, cultivation, pruning, or other such
practices as may be necessary or desirable to establish or maintain them.
6. Planters - All areas planted with ornamental plants, not intended for golf
--------------------------------------------------------------------------
play and having a definable border
----------------------------------
A. Clean-up - All planters shall be maintained free of trash and debris.
B. Weed Control - All planters shall be maintained free of weeds by
mechanical and/or chemical means.
C. Trimming - The plant material (trees, shrubbery and ground covers) in
planters shall be trimmed for protection from wind, insect damage, and
for appearance.
7. Trees - All trees within the property lines of the golf course
--------------------------------------------------------------
A. Stakes - Trees shall be staked as necessary until of sufficient size
to stand unassisted. Stakes shall be installed and maintained in the
manner recommended by the University of California. Stakes shall be
removed as soon as possible.
D-4
<PAGE>
B. Pruning - All trees shall be properly pruned for protection from wind
and pests as well as for appearance and safety.
C. Irrigation - All trees shall be irrigated to provide adequate moisture
for normal growth.
D. Mowing - Large area mowers shall not be used within one foot of the
trunk of any tree.
E. Removal and Replacement - When appropriate, all dead trees, for
whatever cause, shall be removed. Any necessary replacement shall be
with a tree of appropriate type and size.
8. Irrigation - All equipment required to irrigate all areas of the property
-------------------------------------------------------------------------
A. Repair or replace all heads, valves, controllers, wiring, and pipe as
needed to maintain the proper operation of the entire golf course
irrigation system (including greens, tees, fairways, planters, flower
beds, etc.) on an on-going basis.
B. The golf course shall be irrigated as necessary to support proper
growth of golf turf and associated landscaping.
9. Fences - All fences and walls, block, chain link, or barbed wire, etc. on
-------------------------------------------------------------------------
or within boundaries of the property
------------------------------------
A. Repair all broken or damaged fencing as necessary.
B. Repair or replace as necessary all fences, gates and locking devices
needed for the protection of the golf course or equipment.
10. Clubhouse and structures - All structures within the boundaries of the golf
---------------------------------------------------------------------------
course
------
A. Course Restrooms - All course restrooms shall be maintained daily to
provide clean and sanitary facilities for the users and employees of
the course. Soap, towels, toilet paper, etc. shall be provided in
adequate quantity at all times. Portable facilities shall be
maintained similarly.
B. All buildings and structures shall be maintained in good repair at all
times. Surrounding areas shall be maintained free of weeds, brush,
disorganized junk or broken-down equipment, trash piles, etc.
Interior areas shall be clean and neatly organized, safe and sanitary
for customers and employees. Painting, rodent and insect control, and
landscaping shall be performed as necessary.
D-5
<PAGE>
"Housekeeping" duties shall be assigned to all maintenance crew
members and shall be performed daily.
C. Cart Paths - Maintain all cart paths in a safe and clean condition and
repair promptly as needed.
D. The golf course superintendent is responsible for all facilities and
structures maintenance not within the clubhouse area proper.
11. Edging
------
All sidewalks, patios and concrete cart paths must be kept edged. Edging
around valve boxes, meter boxes, backflow preventers, etc. shall be done as
needed to insure that there is no obstruction of play or maintenance from
growth around these item.
12. Sand traps
----------
All sand traps shall be edged as necessary to maintain an appropriate lip,
raked daily and filled with fresh sand as needed to maintain a minimum 1/2"
depth on slopes and 4" in the bottom. Replacement sand will be of a dust-
free type, suitable for trap use.
13. Landscaped areas
----------------
The various planting areas throughout the course shall be cultivated,
weeded, and pruned on a regular basis, with at least two replanting
programs for annuals scheduled each year, depending on the length of the
season.
14. Trash and refuse
----------------
Shall be collected daily and removed from the property in a safe, sanitary
and lawful manner as necessary to minimize or eliminate problems from
refuse odors, insects, etc. Approved trash receptacles shall be
conveniently stationed on tees and other appropriate areas and emptied
daily.
15. Vertebrate pest control
-----------------------
Shall be routinely performed throughout the property on an on-going basis,
in such a manner that vertebrate pest populations are steadily reduced and
eventually eliminated.
16. Aquatic
-------
All lakes, ponds and streams shall be maintained in a safe and sanitary
manner and in good appearance.
D-6
<PAGE>
17. Soil and Water
--------------
Analysis will be performed yearly by an approved professional laboratory.
18. Storage Tanks
-------------
Testing and inspection of all storage tanks located at the Leased Property
will be performed in accordance with Legal Requirements.
D-7
<PAGE>
EXHIBIT E
---------
Initial Capital Improvements
----------------------------
[to be provided by Tenant and scheduled out by course, project, and completion
schedule]
E-1
<PAGE>
EXHIBIT F
---------
Landlord's Personal Property
----------------------------
[to be attached from Bill of Sale in connection with acquisition
of Golf Courses from Seller]
F-1
<PAGE>
EXHIBIT G
---------
Pre-Existing Conditions
-----------------------
[pre-existing or threatened litigation, and pre-existing environmental
conditions to be provided separately]
G-1
<PAGE>
EXHIBIT H
---------
Title Commitments
-----------------
<TABLE>
<CAPTION>
SN # GOLF COURSE COVERAGE
- ---- -------------------------- -----------
<S> <C> <C>
79896008 Highlands Golf $ 3,900,000
Tallgrass Country Club
798960019 Pinery Golf Club 5,100,000
798960017 Crescent Oaks 4,000,000
Summerfield Crossing
798060019 Plantation Golf Course 2,700,000
798960016 Shenandoah Golf Course 2,500,000
Stonebridge Country Club
798960037 Pawtuckett Golf Course 1,500,000
798960012 Bent Tree Golf Course 3,700,000
798960015 Meadowbrook Golf Course 7,700,000
The Trails
798960013 Links at Stone Ferry 1,600,000
798960011 Forrest Crossing Golf Club 3,000,000
798960004 Diamond Oaks Country Club 22,300,000
Eldorado Country Club
Great Southwest Country Club
Oakridge Country Club
Willow Fork Country Club
Woodhaven Country Club
</TABLE>
H-1
<PAGE>
EXHIBIT 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in this Form 8-K of our report
dated March 1, 1996, on our audit of the combined financial statements of Golf
Enterprises, Inc. and Subsidiaries' Business Related to the Purchased Assets as
of December 31, 1995 and for the period ended December 31, 1995, which report is
incorporated by reference in this Form 8-K.
Coopers & Lybrand L.L.P.
Los Angeles, California
August 12, 1996
