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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 1-12246
NATIONAL GOLF PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
MARYLAND 95-4549193
(STATE OF
INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
2951 28TH STREET, SUITE 3001
SANTA MONICA, CA 90405
(ADDRESS OF
PRINCIPAL
EXECUTIVE
OFFICES) (ZIP CODE)
1448 15TH
STREET, SUITE
200
SANTA MONICA, CA 90404
(FORMER ADDRESS
OF PRINCIPAL
EXECUTIVE
OFFICES) (FORMER ZIP CODE)
(310) 664-4100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(310) 260-5500
(FORMER REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
COMMON STOCK NEW YORK STOCK EXCHANGE
$.01 PAR VALUE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of February 18, 1997, the aggregate market value of the voting stock held
by nonaffiliates of the registrant was approximately $369.3 million, based
upon the closing price ($32.625) on the New York Stock Exchange on that date.
(For this computation, the registrant has excluded the market value of all
shares of its common stock reported as owned by executive officers and
directors of the registrant and certain other stockholders; such exclusion
shall not be deemed to constitute an admission that any such person is an
"affiliate" of the registrant).
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
12,364,320 SHARES OF COMMON STOCK, $.01 PAR VALUE, AS OF FEBRUARY 18, 1997
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its Annual
Meeting of Stockholders to be held May 6, 1997, are incorporated by reference
in Part III.
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PART I
ITEM 1. BUSINESS
a) General Development of Business
National Golf Properties, Inc. (the "Company") was incorporated under the
General Corporation Law of Delaware in April 1993 and commenced operations
effective with the completion of its initial public stock offering (the
"Offering") of 9,716,000 shares of common stock, par value $.01 per share (the
"Common Stock"), on August 18, 1993. On August 31, 1995, the Company was
reincorporated as a Maryland corporation, which was also named National Golf
Properties, Inc., pursuant to a merger of the Company into a wholly-owned
Maryland subsidiary and the conversion of each outstanding share of Common
Stock of the Company into one share of Common Stock of the surviving
corporation. The Company qualifies as a Real Estate Investment Trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code").
The Company became the general partner in National Golf Operating
Partnership, L.P. (the "Operating Partnership") when the Operating Partnership
was formed as a Delaware limited partnership in June 1993. On July 8, 1994,
the Operating Partnership acquired an 89% general partner interest in Royal
Golf, L.P. II ("Royal Golf"). Royal Golf owns four golf courses on Hilton Head
Island, South Carolina. Unless the context otherwise requires, all references
to the Company's business and properties include the business and properties
of the Operating Partnership and Royal Golf.
The Company is the sole general partner in the Operating Partnership with a
58.3% interest therein. David G. Price, the Chairman of the Board of Directors
of the Company, and entities controlled by him and approximately seven other
individuals and personal trusts are the only limited partners of the Operating
Partnership (the "OP Limited Partners").
In 1996, the Company purchased 35 golf courses for an aggregate initial
investment of approximately $155 million (including the $60 million purchase
of 20 golf courses from Golf Enterprises, Inc. and the $31.6 million purchase
of four golf courses upon which the Company previously held participating
mortgages), which investment was financed by $27.4 million of cash from
operations; $57.6 million of advances under the Company's credit facility;
$2.5 million of the $40 million first note series issued in July 1996; the
issuance of $1.5 million (61,339) of units of limited partnership interest in
the Operating Partnership (the "OP Units"); the assumption of approximately
$25.2 million of debt; and the issuance of $40.8 million (1,577,820 shares) of
Common Stock. Subsequent to December 31, 1996, the Company purchased two golf
courses for an aggregate initial investment of approximately $14.7 million.
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The following diagram depicts the beneficial ownership of the Company, the
Operating Partnership and Royal Golf as of February 18, 1997:
[CHART OF NATIONAL GOLF PROPERTIES AND ITS SUBSIDIARIES APPEARS HERE]
b) Narrative Description of Business
The Company is a self-administered REIT specializing in the acquisition and
ownership of golf course properties. As of February 18, 1997, the Company's
portfolio consisted of the ownership of 116 golf courses (the "Golf Courses")
in 106 separate locations in 27 states.
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The Golf Courses include facilities such as clubhouses with restaurants,
banquet space, locker rooms and retail pro shops, driving ranges, pools and
tennis courts. Services provided at such properties include golf cart rentals,
golf and tennis lessons, banquets and tournaments. In order to maintain
qualification as a REIT, the Company's income must be derived from certain
sources, including rents from real property (and generally excluding income
from the operation of a golf course). Accordingly, the Company is generally
precluded from operating golf courses and, as a consequence, leases the Golf
Courses to experienced and creditworthy golf course operators.
BUSINESS OBJECTIVES AND OPERATING STRATEGIES
The Company's primary business objective is to maximize stockholder return
through the aggressive acquisition of quality golf courses and the subsequent
lease of such properties to experienced and creditworthy operators. The
Company focuses on the ownership and acquisition of golf course properties
that have strong cash flow growth potential and expects to hold such
properties for long-term investment and capital appreciation. The Company's
business and operating strategies include:
.Increasing income and portfolio value by continuing the strategic
expansion of its golf course portfolio through the selective acquisition
of golf course properties in urban areas or resort locations that
demonstrate potential for significant revenue and cash flow increases.
For the period August 18, 1993 to December 31, 1996, the Company
purchased 70 Golf Courses for an aggregate initial investment of
approximately $356.9 million. For the period January 1, 1997 to February
18, 1997, the Company purchased two Golf Courses for approximately $14.7
million.
.Working with golf course operators on strategies to improve and enhance
golf course holdings through proper maintenance and capital
improvements.
.Selecting the best golf course operators for specific locations and course
types and structuring favorable leases with those operators under which
the operators pay minimum base rent and percentage rent based on
revenues and pay substantially all expenses in connection with the
operation of the property such as real estate taxes, insurance,
utilities and services, maintenance and other operating expenses.
.Investing in participating mortgages or other appropriate equity-linked
financing vehicles in circumstances where the acquisition of ownership
is not otherwise possible.
.Monitoring on an ongoing basis the operating performance of the Golf
Courses, compliance by its operators with their lease obligations and
other market factors that could affect the financial performance of its
courses.
.Maintaining a ratio of debt-to-total market capitalization (i.e., total
debt of the Company as a percentage of the market value of issued and
outstanding shares of Common Stock and interests in the Operating
Partnership that are exchangeable for shares of Common Stock plus total
debt) of 50% or less. At December 31, 1996, the Company's total debt
constituted approximately 26% of its total market capitalization.
SEASONALITY
Although the results of operations of the Company and its predecessors have
not been significantly impacted by seasonality, the Company generally expects
that its results of operations may be adversely affected as a function of
reduced payments of percentage rent in the first and fourth quarters of each
year due to adverse weather conditions and the scheduled closure of the Golf
Courses located in harsh winter climates.
TENANT AND LEASES
All but five of the Golf Courses in the Company's portfolio are currently
leased to American Golf Corporation ("AGC") pursuant to long-term triple net
leases (the "Leases"). AGC is one of the largest and
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most experienced operators of golf courses and related facilities in the world
and currently manages 241 golf courses and related facilities in 30 states. In
addition, AGC, through its subsidiary American Golf (U.K.) Limited, manages
ten golf courses and related facilities in the United Kingdom. AGC operates a
diverse portfolio of golf courses for a variety of golf course owners
including municipalities, counties and others. AGC was founded in 1973 by
David G. Price, its Chairman and principal shareholder. Including the Golf
Courses, AGC manages 150 daily fee golf courses, 64 private club courses, 30
resort courses and 7 golf practice centers. AGC oversees the management and
operations of championship golf courses throughout the United States and
manages municipal golf courses for such cities as Atlanta, New York and San
Diego and for the County of Los Angeles.
AGC does not own any golf courses, but rather manages and operates golf
courses either as a lessee under leases, generally triple net, or pursuant to
management agreements. AGC derives revenues from the operation of golf courses
principally through the receipt of green fees, membership initiation fees,
membership dues, golf cart rentals, driving range charges and sales of food,
beverages and merchandise.
Each Lease is for an initial term, depending upon the Golf Course, ranging
between 15 and 20 years. The Leases are triple net leases which require AGC to
pay substantially all expenses associated with the operation of the Golf
Courses, such as real estate taxes, insurance, utilities and services,
maintenance and other operating expenses. In addition, AGC has options to
extend the term of each Lease for one to three five-year terms. Each Lease
permits AGC to operate the leased property as a golf course, along with a
clubhouse and other activities customarily associated with or incidental to
the operation of a golf course.
The minimum base rent for the first year for each Golf Course under the
Leases is initially set at a fixed amount. Thereafter, with respect to the
Leases for the initial portfolio of 45 golf courses at the time of the
Offering (the "Initial Golf Courses"), minimum base rent is increased each
year by 4% or, if lower, 150% of the annual percentage increase in the
Consumer Price Index ("CPI") (the "Base Rent Escalation"). In addition,
percentage rent is paid each year in the amount, if any, by which the sum of
35% of Course Revenue in excess of a baseline amount and 5% of Other Revenue
in excess of a baseline amount exceeds the cumulative Base Rent Escalation
since the commencement date of such Leases. Course Revenue is generally
defined in the Leases to include all revenue received from the operation of
the applicable Golf Course, including revenues from memberships, initiation
fees, dues, green fees, guest fees, driving range charges and golf cart
rentals, but excluding those revenues described as Other Revenue. Other
Revenue is generally defined in the Leases to include all revenue received
from food and beverage and merchandise sales and other revenue not directly
related to golf activities. Generally, the baseline amounts for the Initial
Golf Courses were established based on revenues for each of such Golf Courses
for the twelve months ended February 28, 1993. Payment of percentage rent
based upon the revenues of the Golf Courses will enable the Company to
participate in growth in revenues at the Golf Courses.
Generally, for the Leases entered into subsequent to the Offering, the rent
is based upon the greater of (a) the minimum base rent or (b) a specified
percentage of Course Revenue and Other Revenue. The minimum base rent under
these Leases is increased for specified years during the Lease term based upon
increases in the CPI, provided that each such annual CPI increase shall not
exceed five percent.
Pursuant to the Leases for the Initial Golf Courses, AGC is required to post
and maintain an irrevocable letter of credit in an amount equal to six monthly
installments of annual minimum rent (approximately $13.6 million) to
collateralize its obligations under such Leases. AGC's obligation to post and
maintain such letter of credit will be suspended, subject to reinstatement, at
such time as AGC achieves: (i) a Fixed Charge Coverage Ratio, as defined, of
not less than 1.5 to 1.0 for two consecutive fiscal quarters and (ii) a
minimum Tangible Net Worth, as defined, of at least $30,000,000 or, following
a change in control, $30,000,000 increased by 4% per annum compounded annually
from the commencement date of the Leases to the date of a change in control of
AGC.
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The obligations of AGC under each Lease are cross-defaulted to each of the
other Leases with respect to monetary defaults and all other defaults except
those not within the reasonable control of AGC. The Company has general
recourse to AGC under the Leases, but such Leases are not collateralized by
any assets of AGC. The stockholders of the Company have no recourse to AGC
under the Leases.
The Independent Committee, comprised of all four independent Directors of
the Company, oversees the selection of operators and approves transactions
between the Company and David G. Price and his affiliates.
The Company continues to explore the use of experienced and creditworthy
operators other than AGC for certain of its new acquisitions. Such operators
must have a history of successful operation and meet appropriate financial
standards for creditworthiness. In addition to AGC, the Company has four
leases (with respect to five Golf Courses) with three other operators:
Cobblestone Golf Group, Inc. ("CGG"); The Links Group, Inc. ("TLG"); and
Evergreen Alliance Golf Limited ("EAGL"). Unless the context otherwise
requires, all references to the Leases include the leases with CGG, TLG and
EAGL.
CGG operates Carmel Mountain Ranch Country Club in San Diego, California,
and Sweetwater Country Club (two courses) near Houston, Texas. CGG is a golf
course acquisition and operating company with 22 properties under ownership or
management primarily in the southwestern United States.
TLG operates Colonial Charters Golf Course near Myrtle Beach, South
Carolina. TLG is a golf course operating company that operates 11 golf courses
in the southeastern United States.
EAGL operates San Geronimo Golf Course near San Francisco, California. EAGL
is a golf course acquisition and operating company with 25 properties under
ownership or management in nine states.
COMPETITIVE CONDITIONS
The Golf Courses are, and any additional golf courses and related facilities
acquired by the Company will be, subject to competition for players and
members from other golf courses located in the same geographic areas,
including golf courses owned by municipalities or third parties that are
operated by the lessees. The number and quality of golf courses in a
particular area could have a material effect on the revenues of the Golf
Courses. In addition, revenues of the Golf Courses will be affected by a
number of factors including the demand for golf and the availability of other
forms of recreation.
According to the National Golf Foundation, an independent industry
organization, the number of golfers in the United States has remained stable
at approximately 25 million for the last several years. In addition, favorable
demographic trends offer encouraging growth prospects for the golf course
industry. The National Golf Foundation reports that the annual average rounds
played per golfer increases significantly as golfers age. Golfers in their
fifties generally play twice as many rounds annually as golfers in their
thirties. Golfers age 65 and older generally play three times as many rounds
annually as golfers in their thirties. Currently, approximately 75% of all
golfers are less than 50 years old and approximately 45% of all golfers are
between the ages of 30 and 49. Accordingly, the Company expects an increase in
the demand for golf as this segment of the golfing population reaches its
prime golfing age over the next 20 years. In addition, the children of the
baby boom generation are entering their twenties and thirties, an age range in
which they are most likely to begin playing golf.
The Company is also subject to competition for the acquisition of golf
courses and related facilities with other purchasers of golf course
properties, including other golf course acquisition companies. According to
the National Golf Foundation, there are approximately 15,700 golf courses in
the United States. Of this total, approximately 3,500 satisfy the Company's
investment criteria. Ownership of these courses is extremely fragmented. The
Company believes that the nation's 15 largest golf course owners and operators
collectively own or lease less than five percent of the courses in the United
States. This fragmented ownership provides an excellent opportunity for
aggressive acquisition of quality golf course properties.
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In certain markets, construction of new golf courses has increased in the
last several years. Although such construction activity may add excess
capacity to some local markets, the Company's experience indicates that well-
managed and properly located facilities should continue to generate stable
revenue growth. The Company's courses are generally located in communities
with populations sufficient to absorb additional course development or in
areas with significant barriers to new course construction (i.e., limited
supply of suitable land, governmental restrictions, etc.). Consequently, new
course development has not adversely affected the Company's portfolio. In
addition, the Company expects that new course development will provide
numerous acquisition opportunities. Moreover, the new courses offer improved
access for golfers, particularly beginners, women and juniors, which should
ultimately increase the pool of golf customers.
EMPLOYEES
As of February 18, 1997, the Company and the Operating Partnership had 14
full-time employees including two regional vice presidents who are dedicated
on a full-time basis to the identification of golf courses to be acquired or
financed.
Certain employees are employed and compensated by both the Operating
Partnership and the Company. The Company believes that the allocation of such
persons' compensation as between the Company and the Operating Partnership
reflects the services provided by such persons with respect to each entity.
The remainder of the employees are employed solely by the Operating
Partnership. Royal Golf has no employees.
The Company and the Operating Partnership have entered into a services
agreement pursuant to which the Operating Partnership provides the Company
with administrative, accounting and other services relating to the operations
and administration of the Company at a rate equal to the cost (including
allocable overhead) to the Operating Partnership of providing such services
plus 15% of such costs.
GOVERNMENT REGULATION
Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous substances
released on or in its property. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of such hazardous substances. The presence of such substances, or the
failure to remediate such substances properly when released, may adversely
affect the owner's ability to sell such real estate or to borrow using such
real estate as collateral. The Company has not been notified by any
governmental authority of any material non-compliance, liability or other
claim in connection with any of the Golf Courses. The Company is not aware of
any other environmental condition with respect to any of the Golf Courses that
is likely to be material to the Company. All of the Golf Courses have been
subjected to a preliminary environmental investigation. Such investigation
generally involves an examination of public records for ownership, use and
current permitting status, site visits, visual inspections for indications of
contamination or potential contamination and interviews with the on-site
managers. Such investigation generally does not involve invasive procedures,
such as soil sampling or ground water analysis. No assurance can be given that
such investigation would reveal all potential environmental liabilities, that
no prior owner or adjacent landowner created any material environmental
condition not known to the Company or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability. The
Leases provide that the lessees will indemnify the Company for certain
potential environmental liabilities at the Golf Courses.
Americans with Disabilities Act. The Golf Courses are subject to the
Americans with Disabilities Act of 1990 (the "ADA"). The ADA has separate
compliance requirements for "public accommodations" and "commercial
facilities" but generally requires that public facilities such as clubhouses
and recreation areas be made accessible to people with disabilities. These
requirements became effective in 1992. Compliance with the ADA requirements
could require removal of access barriers and other capital improvements at the
Golf Courses. Noncompliance could result in imposition of fines or an award of
damages to private litigants. Under the Leases,
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the lessees are required to make any necessary modifications or improvements
to comply with the ADA. The lessees and the Company have undertaken, where
necessary, a capital improvement program to cause the public facilities at the
Golf Courses to comply with the ADA. The expenditures for the modifications
and improvements have not been material.
ITEM 2. PROPERTIES
As of February 18, 1997, the Golf Courses consisted of 116 golf courses that
are geographically diversified and located in 27 states, with 20 Golf Courses
in California, 18 in Texas, 13 in Arizona, six in South Carolina, five in each
of Florida, Ohio and Pennsylvania, four in each of Colorado and Kansas, three
in each of Georgia, Illinois, Nevada, Virginia and Washington, two in each of
Louisiana, Maryland, Missouri, New Jersey, New Mexico, North Carolina,
Oklahoma and Oregon and one in each of Idaho, Indiana, Minnesota, Nebraska and
Tennessee. The distribution of the Golf Courses reflects the Company's belief
that geographic diversification helps insulate the portfolio from regional
economic and climatic influences. Substantially all of the Golf Courses are
located in Standard Metropolitan Statistical Areas with populations in excess
of 250,000 people.
Of the 116 Golf Courses, 53 are daily fee courses, 43 are private club
courses and 20 are resort courses. All of the Golf Courses are owned 100% in
fee by either the Company, the Operating Partnership or Royal Golf except for
the three Golf Courses at Bear Creek Golf World, which are leased by the
Company under a ground lease expiring in 2022, and Mesquite Golf & Country
Club, of which approximately 14 acres are under various ground leases expiring
between 2041 and 2043.
Daily Fee Courses. Daily fee courses are open to the public and related
amenities generally include practice facilities, small clubhouses with pro
shops offering limited merchandise and a moderate food and beverage operation.
Daily fee courses generate revenues principally through green fees, golf cart
rentals and food, beverage and merchandise sales. The average golf revenue per
round at the Company's daily fee courses in 1996 was $25.42, a 7.8% increase
from $23.58 in 1995. Daily fee courses generated $24.2 million of rent
revenues to the Company in 1996 compared to $19.8 million in 1995.
Private Club Courses. Private club courses are generally closed to the
public and related amenities typically include practice facilities, large
clubhouses with pro shops offering extensive merchandise, locker room
facilities and multiple food and beverage outlets, including grills,
restaurants and banquet facilities. Private club courses generate revenues
principally through initiation fees, membership dues, and food, beverage and
merchandise sales. As of December 31, 1996, the Company's private club courses
had more than 30,000 members. Private club courses generated $19.8 million of
rent revenues to the Company in 1996 compared to $12.7 million in 1995.
Resort Courses. Resort courses are generally higher-quality daily fee
courses that draw a high percentage of players from outside the immediate area
in which the course is located. The average golf revenue per round at the
Company's resort courses was $42.38 in 1996, a 3.7% increase from $40.87 in
1995. Resort courses generated $14.9 million of rent revenues to the Company
in 1996 compared to $13.5 million in 1995.
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The following table sets forth certain information regarding the Golf
Courses as of February 18, 1997. As of that date, the Company owned 116 Golf
Courses in 27 states. The number of locations (106) differs from the number of
Golf Courses because in some cases there is more than one Golf Course at a
specific location. The number of courses at each location is indicated for
locations with more than one course.
THE GOLF COURSES--DAILY FEE COURSES
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LOCATION NO. OF 1996
COURSE NAME (CITY, STATE) HOLES RENT REVENUES
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(IN THOUSANDS)
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1 Continental Golf Course............. Scottsdale, Arizona 18 $ 427
2 Desert Lakes Golf Club.............. Fort Mojave, Arizona 18 390
3 El Caro Golf Club................... Phoenix, Arizona 18 274
4 Kokopelli Golf Resort............... Gilbert, Arizona 18 544
5 Villa De Paz Golf Course............ Phoenix, Arizona 18 293
6 Camarillo Springs Golf Course....... Camarillo, California 18 1,181
7 Carmel Mountain Ranch Country Club.. San Diego, California 18 763
Lomas Santa Fe Executive Golf
8 Course.............................. Solana Beach, California 18 520
9 Mesquite Golf & Country Club........ Palm Springs, California 18 677
10 Rancho San Joaquin Golf Course...... Irvine, California 18 2,241
11 San Geronimo Golf Course............ San Geronimo, California 18 24
12 Summitpointe Golf Club.............. Milpitas, California 18 959
13 Upland Hills Country Club........... Upland, California 18 797
Vista Valencia Golf Course (2
14 Courses) ........................... Valencia, California 27 790
15 Eagle Golf Club..................... Broomfield, Colorado 18 374
16 Arrowhead Golf & Sports Club........ Davie, Florida 18 347
17 Binks Forest Country Club........... Wellington, Florida 18 445
18 Kendale Lakes Golf Course........... Miami, Florida 27 368*
19 Sabal Palm Golf Course.............. Tamarac, Florida 18 507
20 Summerfield Crossing Golf Club...... Tampa, Florida 18 110
21 Goshen Plantation Country Club...... Augusta, Georgia 18 310
22 River's Edge Golf Club.............. Fayetteville, Georgia 18 432
23 Ruffled Feathers Golf Course........ Lemont, Illinois 18 934
24 Tamarack Golf Club.................. Naperville, Illinois 18 **
25 Sugar Ridge Golf Course............. Lawrenceburg, Indiana 18 202
26 Deer Creek Golf Club................ Overland Park, Kansas 18 83
27 Dub's Dread Golf Course............. Kansas City, Kansas 18 327
28 WestWinds Country Club.............. New Market, Maryland 18 29
29 The Links at Northfork.............. Ramsey, Minnesota 18 396
Royal Meadows Golf Course (2
30 Courses)............................ Kansas City, Missouri 27 267
31 Rancocas Golf Club.................. Willingboro, New Jersey 18 469
32 Paradise Hills Golf Course.......... Albuquerque, New Mexico 18 403
Charlotte, North
33 Pawtuckett Golf Club................ Carolina 18 68
34 Bent Tree Golf Club................. Columbus, Ohio 18 182
35 Fowler's Mill Golf Course........... Chesterland, Ohio 27 406
Country Club of Hershey South
36 Course.............................. Hershey, Pennsylvania 18 215
37 Golden Oaks Country Club............ Fleetwood, Pennsylvania 18 532
Bridgeville,
38 Hickory Heights Golf Club........... Pennsylvania 18 255
Charleston, South
39 The Links at Stono Ferry............ Carolina 18 68
</TABLE>
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* Sold in 1996
** Acquired in 1997
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<TABLE>
<CAPTION>
LOCATION NO. OF 1996
COURSE NAME (CITY, STATE) HOLES RENT REVENUES
----------- ------------- ------ --------------
(IN THOUSANDS)
<C> <C> <S> <C> <C>
40 Forrest Crossing Golf Course........ Nashville, Tennessee 18 $ 125
41 Bear Creek Golf World (3 Courses)... Houston, Texas 54 1,526
42 Lake Houston Golf Club.............. Huffman, Texas 18 203
43 Riverchase Golf Club................ Coppell, Texas 18 1,083
44 Riverside Golf Club................. Grand Prairie, Texas 18 749
45 Southwyck Golf Club................. Pearland, Texas 18 503
46 Chesapeake Golf Club................ Chesapeake, Virginia 18 251
47 Honey Bee Golf Club................. Virginia Beach, Virginia 18 547
48 Reston National Golf Course......... Reston, Virginia 18 1,025
49 Capitol City Golf Club.............. Olympia, Washington 18 296
50 Lake Wilderness Golf Course......... Maple Valley, Washington 18 251
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Total Daily Fee Courses..................................... $24,168
=======
</TABLE>
THE GOLF COURSES--PRIVATE CLUB COURSES
<TABLE>
<CAPTION>
LOCATION NO. OF 1996
COURSE NAME (CITY, STATE) HOLES RENT REVENUES
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(IN THOUSANDS)
<C> <C> <S> <C> <C>
1 Ancala Country Club................. Scottsdale, Arizona 18 $ 416
2 Arrowhead Country Club.............. Glendale, Arizona 18 292
3 Canyon Oaks Country Club............ Chico, California 18 422
4 Escondido Country Club.............. Escondido, California 18 587
5 Monterey Country Club............... Palm Desert, California 27 777
Palm Valley Country Club (2
6 Courses)............................ Palm Desert, California 36 1,395
Huntington Beach,
7 SeaCliff Country Club............... California 18 897
Thousand Oaks,
8 Sunset Hills Country Club........... California 18 1,281
9 Wood Ranch Golf Club................ Simi Valley, California 18 971
10 Heather Ridge Country Club.......... Aurora, Colorado 18 321
11 Pinery Country Club................. Denver, Colorado 27 233
12 Crescent Oaks Country Club.......... Clearwater, Florida 18 36
13 Brookstone Golf & Country Club...... Acworth, Georgia 18 488
14 The Plantation Golf Club............ Boise, Idaho 18 111
15 Mission Hills Country Club.......... Northbrook, Illinois 18 798
16 Highlands Golf & Supper Club........ Hutchinson, Kansas 18 26
17 Tallgrass Country Club.............. Wichita, Kansas 18 103
18 Shenandoah Country Club............. Baton Rouge, Louisiana 18 55
19 Stonebridge Country Club............ New Orleans, Louisiana 27 37
20 Hunt Valley Golf Club............... Phoenix, Maryland 27 1,548
21 Skyline Woods Country Club.......... Elkhorn, Nebraska 18 406
22 Tanoan Country Club................. Albuquerque, New Mexico 27 1,275
23 Brandywine Country Club............. Maumee, Ohio 27 699
24 Oakhurst Country Club............... Grove City, Ohio 18 373
25 Royal Oak Country Club.............. Cincinnati, Ohio 18 263
26 Meadowbrook Country Club............ Tulsa, Oklahoma 18 139
27 The Trails.......................... Norman, Oklahoma 18 101
28 Creekside Golf Club................. Salem, Oregon 18 513
29 The Oregon Golf Club................ West Linn, Oregon 18 1,279
</TABLE>
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<TABLE>
<CAPTION>
LOCATION NO. OF 1996
COURSE NAME (CITY, STATE) HOLES RENT REVENUES
----------- ------------- ------ --------------
(IN THOUSANDS)
<C> <C> <S> <C> <C>
30 Country Club of Hershey (2 Courses). Hershey, Pennsylvania 36 $ 888
31 Berry Creek Country Club............ Georgetown, Texas 18 515
32 Diamond Oaks Country Club........... Fort Worth, Texas 18 156
33 Eldorado Country Club............... McKinney, Texas 18 271
34 Great Southwest Golf Club........... Grand Prairie, Texas 18 347
35 Oakridge Country Club............... Garland, Texas 18 148
36 Sweetwater Country Club (2 Courses). Sugarland, Texas 36 594
37 Walden on Lake Houston Country Club. Humble, Texas 18 41
38 Willow Fork Country Club............ Katy, Texas 18 117
39 Woodhaven Country Club.............. Forth Worth, Texas 18 87
40 Bear Creek Country Club............. Woodinville, Washington 18 769
Wiltshire, United
41 Wootton Bassett Golf Club........... Kingdom 18 9*
-------
Total Private Club Courses................................. $19,784
=======
</TABLE>
THE GOLF COURSES--RESORT COURSES
<TABLE>
<CAPTION>
LOCATION NO. OF 1996
COURSE NAME (CITY, STATE) HOLES RENT REVENUES
----------- ------------- ------ --------------
(IN THOUSANDS)
<C> <C> <S> <C> <C>
Lake Havasu City,
1 London Bridge Golf Club (2 Courses). Arizona 36 $ 405
2 Stonecreek Golf Course.............. Phoenix, Arizona 18 **
3 Superstition Springs Golf Club...... Mesa, Arizona 18 742
4 Tatum Ranch Golf Club............... Cave Creek, Arizona 18 1,057
5 The Legend at Arrowhead............. Glendale, Arizona 18 583
6 Aptos Seascape Golf Course.......... Aptos, California 18 1,421
7 BlackLake Golf Course............... Nipomo, California 18 538
8 Arrowhead Golf Club................. Littleton, Colorado 18 878
9 Las Vegas Hilton Country Club....... Las Vegas, Nevada 18 2,779
10 Painted Desert Golf Course.......... Las Vegas, Nevada 18 428
11 Wildhorse Country Club.............. Henderson, Nevada 18 1,268
12 Brigantine Golf Links............... Brigantine, New Jersey 18 350
13 Carolina Shores Golf & Country Club. Calabash, North Carolina 18 782
14 Colonial Charters Golf Course....... Longs, South Carolina 18 226
Hilton Head Island,
15 Port Royal Golf & Racquet Club...... South Carolina 54 2,045
(3 Courses)
Hilton Head Island,
16 Shipyard Golf Club.................. South Carolina 27 924
17 Pecan Valley Golf Club.............. San Antonio, Texas 18 520
-------
Total Resort Courses........................................ $14,946
-------
Total All Courses........................................... $58,898
=======
</TABLE>
- --------
* Sold in 1996
** Acquired in 1997
10
<PAGE>
CAPITAL IMPROVEMENTS
Under the Leases, the lessees are required to maintain each Golf Course in
good order, repair and appearance. For the Golf Courses acquired through
February 18, 1997, the Company is required under the applicable Leases to pay
for various remaining capital improvements totaling approximately $21.3
million, of which approximately $20.6 million will be paid during the next two
years. Upon completion of such capital improvements, the base rent payable
under the Leases with respect to these Golf Courses will be adjusted to
reflect, over the initial term of the Leases, the Company's investment in such
improvements.
ITEM 3. LEGAL PROCEEDINGS
Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course,
including proceedings relating to personal injury and property damage. Such
proceedings are generally brought against the operator of a golf course, but
may also be brought against the owner. Although neither the Company nor the
predecessor owners of the Golf Courses are currently parties to any legal
proceedings relating to the Golf Courses, it is possible that in the future
the Company could become a party to such proceedings. The lessees are a party
to certain litigation relating to the Golf Courses arising in the ordinary
course of operations. The lessees have advised the Company that they do not
believe that such litigation, if resolved against the lessees, would have a
material adverse effect upon their business or financial position. The Leases
provide that the lessees are responsible for claims based on personal injury
and property damage at the Golf Courses and require the lessees to maintain
insurance for such purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a) Market Information
The following table sets forth for periods shown the high and low sales
price for the Company's Common Stock on the New York Stock Exchange and
distributions declared.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTION
------- ------- ------------
<S> <C> <C> <C>
1996
Fourth quarter................................ $31.625 $27.875 $.42
Third quarter................................. 28.25 24.75 .42
Second quarter................................ 25.375 23.125 .41
First quarter................................. 26.50 22.25 .41
1995
Fourth quarter................................ $24.00 $21.50 $.41
Third quarter................................. 22.25 20.00 .41
Second quarter................................ 22.50 19.375 .39375
First quarter................................. 22.125 19.50 .39375
</TABLE>
b) Holders
The number of record holders of the Company's Common Stock was 700 as of
February 18, 1997. The number of street name stockholders is estimated at
15,500.
c) Distributions
The Company paid distributions to stockholders of $1.65 per share in 1996,
of which $1.45 represents ordinary income and $0.20 represents return of
capital on a tax basis. On a book basis, $0.48 per share represents return of
capital. In 1995, the Company paid distributions to stockholders of $1.59 per
share, of which $1.34 represents ordinary income and $0.25 represents return
of capital on a tax basis. On a book basis, $0.34 per share represents return
of capital. In order to maintain its qualification in 1996 and 1995 as a REIT
for federal income tax purposes, the Company was required to make
distributions to its stockholders of at least $1.25 and $1.18 per share,
respectively. In addition, on January 14, 1997, the Company declared a
quarterly distribution for the fourth quarter of 1996 of $0.42 per share to
stockholders of record on January 31, 1997, which was paid on February 17,
1997.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data included in this table by the Company is derived
from the Company's consolidated financial statements and the Company's
predecessors' (Golf Properties Group ("GPG")) combined financial statements
for those years, which have been audited by Coopers & Lybrand L.L.P.
Historical operating results of GPG may not be comparable to future operating
results of the Company because: (i) the Leases with AGC have materially
different terms from the terms of the leases with GPG; (ii) historical
operating revenues and operating expenses include revenues and expenses
relating to five courses that were operated by AGC pursuant to management
agreements (under which GPG received revenues and bore expenses and paid the
operator a fee) rather than leases; and (iii) management fee expense reflects
consulting services provided by AGC to GPG, which were not continued following
the Offering.
<TABLE>
<CAPTION>
NATIONAL GOLF PROPERTIES, INC. GOLF PROPERTIES GROUP
------------------------------------------- --------------------------
YEAR ENDED
DECEMBER 31, AUG. 18, 1993 JAN. 1, 1993 YEAR ENDED
---------------------------- THROUGH THROUGH DECEMBER 31,
1996 1995 1994 DEC. 31, 1993 AUG. 17, 1993 1992
-------- -------- -------- ------------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues
Rent................... $ 58,898 $ 45,931 $ 36,637 $10,787 $10,678 $13,200
Gain on sale of
property.............. 1,199 1,893 -- -- -- --
Operating.............. -- -- -- -- 4,708 5,938
Other income........... -- -- -- 17 499 1,013
-------- -------- -------- ------- ------- -------
Total revenues.......... 60,097 47,824 36,637 10,804 15,885 20,151
-------- -------- -------- ------- ------- -------
Expenses
Operating.............. -- -- -- -- 3,950 5,151
Management fee......... -- -- -- -- 2,193 2,485
General &
administrative........ 4,734 4,258 4,709 1,374 -- --
Depreciation &
amortization.......... 19,124 14,027 10,413 3,384 4,661 4,937
-------- -------- -------- ------- ------- -------
Total expenses.......... 23,858 18,285 15,122 4,758 10,804 12,573
-------- -------- -------- ------- ------- -------
Interest expense....... (14,067) (8,793) (2,212) (335) (4,627) (5,424)
Interest income........ 2,110 4,144 3,459 1,584 24 95
Other income........... 238 114 194 -- -- --
-------- -------- -------- ------- ------- -------
Income before provision
for taxes and minority
interest............... 24,520 25,004 22,956 7,295 478 2,249
Provision for taxes..... (256) (352) (368) (158) -- --
-------- -------- -------- ------- ------- -------
Income before minority
interest............... 24,264 24,652 22,588 7,137 478 2,249
Minority interest....... (10,852) (11,366) (10,712) (3,317) -- --
-------- -------- -------- ------- ------- -------
Net income.............. $ 13,412 $ 13,286 $ 11,876 $ 3,820 $ 478 $ 2,249
======== ======== ======== ======= ======= =======
Net income per share.... $ 1.17 $ 1.25 $ 1.12 $ 0.36 -- --
Weighted average number
of shares.............. 11,420 10,643 10,616 10,603 -- --
</TABLE>
<TABLE>
<CAPTION>
GOLF PROPERTIES
NATIONAL GOLF PROPERTIES, INC. GROUP
----------------------------------- ---------------
DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate before
accumulated depreciation.. $515,794 $362,068 $272,034 $166,410 $130,327
Total assets............... 469,945 347,967 275,071 222,739 102,779
Total debt................. 230,590 144,983 66,441 12,666 70,044
Minority interest.......... 20,831 23,000 22,936 19,979 --
Stockholders' equity....... 215,390 177,907 183,136 181,997 --
Cash distributions declared
per share................. 1.66 1.61 1.49 0.51 --
</TABLE>
<TABLE>
<CAPTION>
NATIONAL GOLF PROPERTIES, INC. GOLF PROPERTIES GROUP
------------------------------------------- --------------------------
YEAR ENDED
DECEMBER 31, AUG. 18, 1993 JAN. 1, 1993 YEAR ENDED
---------------------------- THROUGH THROUGH DECEMBER 31,
1996 1995 1994 DEC. 31, 1993 AUG. 17, 1993 1992
-------- -------- -------- ------------- ------------- ------------
(IN THOUSANDS, EXCEPT PROPERTY DATA)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Company's funds from
operations(1).......... $ 23,215 $ 19,641 $ 17,209 $ 5,587 $ 5,129 $ 7,176
Cash flows from (used
in):
Operating activities... 44,217 36,383 34,241 9,282 6,649 18,520
Investing activities... (68,481) (76,019) (32,003) (106,728) (8,763) (16,961)
Financing activities... 28,399 42,639 (52) 99,346 1,188 (1,069)
Number of courses....... 114 81 71 51 47 43
Number of locations..... 104 72 63 46 42 38
</TABLE>
13
<PAGE>
- --------
(1) The Company believes that to facilitate a clear understanding of the
historical consolidated and combined operating results, funds from
operations should be examined in conjunction with net income. Funds from
operations is considered by management as an appropriate measure of the
performance of an equity REIT because it is predicated on cash flow
analyses, which management believes is more reflective of the value of
real estate companies such as the Company rather than a measure predicated
on generally accepted accounting principles which gives effect to non-cash
expenditures such as depreciation. Funds from operations is generally
defined as net income (loss) plus certain non-cash items, primarily
depreciation and amortization. Funds from operations should not be
considered as an alternative to net income as an indication of the
Company's performance or as an alternative to cash flow, as defined by
generally accepted accounting principles, as a measure of liquidity. The
National Association of Real Estate Investment Trusts, Inc. ("NAREIT")
adopted revisions to the definition of funds from operations as set forth
in the NAREIT "White Paper on Funds From Operations" dated March 1995. The
Company has adopted the new definition of funds from operations and
intends to present both the old and new definitions of funds from
operations to assist in comparisons with prior periods of the Company. The
funds from operations presented may not be comparable to funds from
operations for other REITs. The following table summarizes the Company's
funds from operations, based on the old and new definitions, for the years
ended December 31, 1996, 1995 and 1994, and the period August 18, 1993
through December 31, 1993, and GPG's funds from operations for the period
January 1, 1993 through August 17, 1993 and the year ended December 31,
1992.
<TABLE>
<CAPTION>
NATIONAL GOLF PROPERTIES, INC. GOLF PROPERTIES GROUP
---------------------------------------- --------------------------
FOR THE PERIOD
---------------------------
FOR THE YEAR ENDED FOR THE YEAR
DECEMBER 31, AUG. 18, 1993 JAN. 1, 1993 ENDED
------------------------- TO TO DECEMBER 31,
1996 1995 1994 DEC. 31, 1993 AUG. 17, 1993 1992
------- ------- ------- ------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income............. $13,412 $13,286 $11,876 $ 3,820 $ 478 $2,249
Minority interest...... 10,852 11,366 10,712 3,317 -- --
Depreciation and
amortization.......... 19,124 14,027 10,413 3,384 4,661 4,937
Amortization--
restricted stock...... 1,089 943 893 311 -- --
Amortization--
investment premiums... -- -- 540 -- -- --
Gain on sale of
property.............. (1,199) (1,893) -- -- -- --
Write off of option
payable............... -- (101) -- -- -- --
Discount on payoff of
note payable.......... -- -- (175) -- -- --
------- ------- ------- ------- ------ ------
Funds from operations--
old definition........ 43,278 37,628 34,259 10,832 5,139 7,186
Amortization--
restricted stock...... (1,089) (943) (893) (311) -- --
Amortization--
investment premiums... -- -- (540) -- -- --
Amortization--loan
costs................. (147) (195) (66) (78) (10) (10)
Depreciation--
corporate............. (47) (43) (31) (3) -- --
------- ------- ------- ------- ------ ------
Funds from operations--
new definition........ $41,995 $36,447 $32,729 $10,440 $5,129 $7,176
Company's share of
funds from operations. 55.28% 53.89% 52.58% 53.52% 100.00% 100.00%
------- ------- ------- ------- ------ ------
Company's funds from
operations............ $23,215 $19,641 $17,209 $ 5,587 $5,129 $7,176
======= ======= ======= ======= ====== ======
</TABLE>
In order to maintain its qualification as a REIT for federal income
purposes, the Company is required to make distributions to its stockholders.
The Company's distributions to stockholders have been less than the total
funds from operations because the Company is obligated to make certain
payments with respect to principal debt and capital improvements. Management
believes that to continue the Company's growth, funds from operations in
excess of distributions, principal reductions and capital improvement
expenditures should be invested in assets expected to generate returns on
investment to the Company commensurate with the Company's investment
objectives and policies.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto. The forward-looking
statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") relating to certain matters
involve risks and uncertainties, including anticipated financial performance,
business prospects, anticipated capital expenditures and other similar
matters, which reflect management's best judgement based on factors currently
known. Actual results and experience could differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements as a result of a number of factors, including but not
limited to those discussed in MD&A.
The discussion of the results of operations compares the year ended December
31, 1996 with the year ended December 31, 1995 and the year ended December 31,
1995 with the year ended December 31, 1994.
RESULTS OF OPERATIONS
Comparison of year ended December 31, 1996 to year ended December 31, 1995
Net income increased by $126,000 to $13,412,000 for the year ended December
31, 1996 compared to $13,286,000 for the year ended December 31, 1995. The
increase was primarily attributable to (i) an increase in rent revenues of
approximately $12,967,000; (ii) an increase in general and administrative
expenses of approximately $476,000; (iii) an increase in depreciation and
amortization expense of approximately $5,097,000; (iv) a decrease in interest
income from affiliates of approximately $1,201,000; (v) a decrease in interest
income of approximately $833,000; and (vi) an increase in interest expense of
approximately $5,274,000.
The increase in rent revenues is due to (i) the acquisition of 35 golf
course properties during 1996, which accounted for approximately $7,248,000 of
the increase; (ii) a full year of rent in 1996 on 11 golf course properties
acquired in 1995, which accounted for approximately $4,854,000 of the
increase; (iii) an increase in base rent of approximately $625,000; and (iv)
an increase in percentage rent of approximately $240,000. The increase in
general and administrative expenses in 1996 was primarily due to (i)
implementation of an investor relations program; (ii) payments made to former
employees; and (iii) relocation of the Company's corporate office. The
increase in depreciation and amortization expense is due to an increase in
depreciation expense of approximately $5,403,000, which was offset by a
decrease in amortization expense of approximately $306,000. The increase in
depreciation expense is primarily due to (i) the acquisition of 35 golf course
properties during 1996, which accounted for approximately $3,237,000 of the
increase and (ii) a full year of depreciation expense in 1996 on 11 golf
course properties acquired in 1995, which accounted for approximately
$2,266,000 of the increase. The decrease in amortization expense is primarily
due to certain covenants and loan costs becoming fully amortized.
The decrease in interest income from affiliates is due to the retirement of
the participating mortgage loans. The decrease in interest income is due to
less available cash during the year because the Company purchased 35 golf
courses for an aggregate initial investment of approximately $155 million. The
increase in interest expense was primarily attributable to (i) the $50 million
fixed-rate, unsecured notes issued by the Operating Partnership in June 1995;
(ii) the $75 million fixed-rate, unsecured notes issued by the Operating
Partnership in 1996 ($40 million in July and $35 million in December); and
(iii) the increase in outstanding advances under the $40 million credit
facility.
Comparison of year ended December 31, 1995 to year ended December 31, 1994
Net income increased by $1,410,000 to $13,286,000 for the year ended
December 31, 1995 compared to $11,876,000 for the year ended December 31,
1994. The increase was primarily attributable to (i) an increase in rent
revenues of approximately $9,294,000; (ii) a decrease in general and
administrative expenses of approximately $451,000; (iii) an increase in
depreciation and amortization expense of approximately $3,614,000; (iv) an
increase in interest income of approximately $560,000; (v) an increase in
interest expense of
15
<PAGE>
approximately $6,581,000; (vi) a gain on sale of property of approximately
$1,893,000; and (vii) an increase in income applicable to minority interest of
approximately $654,000.
The increase in rent revenues is due to (i) the acquisition of 11 golf
course properties during 1995; (ii) a full year of rent in 1995 on 20 golf
course properties acquired in 1994; and (iii) an increase in percentage rent
of approximately $1,074,000. The decrease in general and administrative
expenses in 1995 was due to the Company's continued efforts to reduce
expenses. The increase in depreciation and amortization expense is due to (i)
the acquisition of 11 golf course properties during 1995 and (ii) a full year
of depreciation expense in 1995 on 20 golf course properties acquired in 1994.
The increase in interest income is due to (i) interest earned on the
proceeds from the Operating Partnership's sale of $100 million of fixed-rate,
unsecured notes due 2004 and 2005 before the proceeds from such sale were
invested in golf course properties and (ii) interest income earned on a $2.2
million mortgage loan made by the Operating Partnership. The notes issued by
the Operating Partnership were issued in two series of $50 million. The first
note series was issued with a fixed interest rate of 8.68%, and the second
note series was issued with a fixed interest rate of 8.73%. With respect to
the $50 million first note series, the Operating Partnership received $30
million in December 1994 and $20 million in January 1995. With respect to the
$50 million second note series, the Operating Partnership received $50 million
in June 1995. On March 13, 1995, the Company sold Hidden Hills Country Club
for approximately $3.2 million. The Company provided seller financing in the
form of a mortgage loan in the amount of $2.2 million at an initial interest
rate of 11% per annum. The increase in interest expense is primarily due to
the $100 million notes issued. The gain on the sale of property is due to the
sale of Hidden Hills Country Club.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had approximately $11.5 million in cash
and investments, mortgage loans of approximately $3 million, mortgage
indebtedness of approximately $25.4 million and unsecured indebtedness of
approximately $204.6 million. The $230 million principal amount of mortgage
and unsecured indebtedness bears interest at a weighted average rate of 8.10%,
is payable either monthly, quarterly or semi-annually and matures between 1997
and 2008. Of the $230 million of debt, $205.1 million is fixed-rate debt.
In order to maintain its qualification as a REIT for federal income tax
purposes, the Company is required to make substantial distributions to its
stockholders. The following factors, among others, will affect cash flow from
operations and will influence the decisions of the Board of Directors
regarding distributions: (i) reduction in debt service resulting from the
repayment of certain mortgage indebtedness relating to the Golf Courses; (ii)
scheduled increases in base rent under the Leases with respect to the Golf
Courses; (iii) any payment to the Company of percentage rent under the Leases
with respect to the Golf Courses; and (iv) returns from short-term
investments. Although the Company receives most of its rental payments on a
monthly basis, it has and intends to continue to pay distributions quarterly.
Amounts accumulated for distribution will be invested by the Company in short-
term money market instruments and marketable securities.
The Company anticipates that its cash from operations and its bank line of
credit, described below, will provide adequate liquidity to conduct its
operations, fund administrative and operating costs, interest payments,
capital improvements and acquisitions and allow distributions to the Company's
stockholders in accordance with the Code's requirements for qualification as a
REIT and to avoid any corporate level federal income or excise tax. Capital
improvements for which the Company is responsible would be limited to mandated
projects or initial capital improvement projects intended to add value to the
property and reposition the facility for enhanced revenue growth. For the Golf
Courses acquired through February 18, 1997, the Company is required under the
Leases to pay for various remaining capital improvements totaling
approximately $21.3 million, of which approximately $20.6 million will be paid
during the next two years. The Company believes these improvements will add
value to the Golf Courses and bring the quality of the Golf Courses up to the
Company's expected standards in order to enhance revenue growth. Any
subsequent capital improvements are the responsibility of the lessees. Upon
completion of the capital improvements, the base rent payable under the Leases
with respect to these Golf Courses will be adjusted to reflect, over the
initial term of the Leases, the Company's investment in such improvements.
16
<PAGE>
Future acquisitions will be made subject to the Company's investment
objectives and policies established to maximize both current income and long-
term growth in income. The Company's liquidity requirements with respect to
future acquisitions may be reduced to the extent the Company uses common stock
or OP Units as consideration for such purchases. In 1996, the Operating
Partnership placed $75 million of fixed-rate, unsecured notes due 2006 with a
group of institutional investors. The notes were issued in two series. The
first note series in the amount of $40 million was issued in July 1996 with a
fixed interest rate of 7.9%, and the second note series in the amount of $35
million was issued in December 1996 with a fixed interest rate of 8%. The
Operating Partnership applied the net proceeds from the $75 million notes to
repay bank debt of $72.5 million and to partially finance the acquisition of
Sweetwater Country Club. The Company currently has a $40 million credit
facility from a commercial bank, which terminates on April 1, 1997, bearing
interest at a floating rate (which was 8.25% at February 18, 1997), that may
be used to finance working capital, acquisitions and capital improvements.
There were outstanding advances of $26.7 million and $24.9 million under this
credit facility as of February 18, 1997 and December 31, 1996, respectively.
To replace the expiring credit facility, the Company has obtained a commitment
from a group of commercial banks for a $75 million credit facility (the "New
Credit Facility"). It is expected that borrowings under the New Credit
Facility would bear maximum interest at a floating rate equal to LIBOR plus a
spread of 1.125%. The spread will be reduced based upon the Company improving
certain Company ratios. Consummation of the New Credit Facility arrangement is
subject to completion of the lenders' due diligence and completion of
documentation satisfactory to the Company and such lenders.
In 1996, the Company purchased 35 golf courses for an aggregate initial
investment of approximately $155 million (including the $60 million purchase
of 20 golf courses from Golf Enterprises, Inc. and the $31.6 million purchase
of four golf courses upon which the Company previously held participating
mortgages), which investment was financed by $27.4 million of cash from
operations; $57.6 million of advances under the Company's credit facility;
$2.5 million of the $40 million first note series issued in July 1996; the
issuance of $1.5 million (61,339) of OP Units; the assumption of approximately
$25.2 million of debt; and the issuance of $40.8 million (1,577,820 shares) of
Common Stock.
OP Limited Partners have the right, exercisable once in any twelve-month
period, to sell up to one-third of their OP Units or exchange up to the
greater of 75,000 OP Units or one-third of their OP Units to the Company. If
the OP Units are sold for cash, the Company will have the option to pay for
such OP Units with available cash, borrowed funds or from the proceeds of an
offering of Common Stock. If the OP Units are exchanged for shares of Common
Stock, the OP Limited Partner will receive the number of shares of Common
Stock having a market value at the time of exercise equal to the fair market
value of the OP Units being exchanged. On January 17, 1996, the Company
purchased 5,000 OP Units from one unaffiliated limited partner for cash of
approximately $116,000.
Comparison of cash flow statement for year ended December 31, 1996 to year
ended December 31, 1995
Net cash provided by operating activities increased by $7,834,000 to
$44,217,000 for the year ended December 31, 1996 compared to $36,383,000 for
the year ended December 31, 1995. The increase was primarily attributable to
an increase in rent revenues of approximately $12,967,000, which was offset by
an increase in interest expense of approximately $5,274,000.
Net cash used by investing activities decreased by $7,538,000 to $68,481,000
for the year ended December 31, 1996 compared to $76,019,000 for the year
ended December 31, 1995. The decrease was primarily attributable to (i) an
increase in proceeds from mortgage loans of approximately $25,472,000; (ii) an
increase in purchase of property of approximately $10,140,000; and (iii) a
decrease in net proceeds from sale of investments of approximately $8,628,000.
Net cash provided by financing activities decreased by $14,240,000 to
$28,399,000 for the year ended December 31, 1996 compared to $42,639,000 for
the year ended December 31, 1995. The decrease was primarily attributable to
an increase in principal payments on notes payable of approximately
$97,793,000, which was offset by an increase in proceeds from notes payable of
approximately $84,799,000.
17
<PAGE>
Comparison of cash flow statement for year ended December 31, 1995 to year
ended December 31, 1994
Net cash provided by operating activities increased by $2,142,000 to
$36,383,000 for the year ended December 31, 1995 compared to $34,241,000 for
the year ended December 31, 1994. The increase was primarily attributable to
an increase in rent revenues of approximately $9,294,000, which was offset by
an increase in interest expense of approximately $6,581,000.
Net cash used by investing activities increased by $44,016,000 to
$76,019,000 for the year ended December 31, 1995 compared to $32,003,000 for
the year ended December 31, 1994. The increase was primarily attributable to
(i) a decrease in net proceeds from sale of investments of approximately
$37,235,000 and (ii) an increase in purchase of property of approximately
$6,781,000.
Net cash provided by financing activities of $42,639,000 for the year ended
December 31, 1995 represents a decrease of net cash used by financing
activities of $42,691,000, compared to net cash used by financing activities
of $52,000 for the year ended December 31, 1994. The change was primarily
attributable to proceeds from additional notes payable in the amount of
$42,000,000.
OTHER DATA
The Company believes that to facilitate a clear understanding of the
historical consolidated operating results, funds from operations should be
examined in conjunction with net income as presented in the audited
Consolidated Financial Statements. Funds from operations is considered by
management as an appropriate measure of the performance of an equity REIT
because it is predicated on cash flow analyses, which management believes is
more reflective of the value of real estate companies such as the Company
rather than a measure predicated on generally accepted accounting principles
which gives effect to non-cash expenditures such as depreciation. Funds from
operations is generally defined as net income (loss) plus certain non-cash
items, primarily depreciation and amortization. Funds from operations should
not be considered as an alternative to net income as an indication of the
Company's performance or as an alternative to cash flow, as defined by
generally accepted accounting principles, as a measure of liquidity.
18
<PAGE>
The National Association of Real Estate Investment Trusts, Inc. ("NAREIT")
adopted revisions to the definition of funds from operations as set forth in
the NAREIT "White Paper on Funds From Operations" dated March 1995. The
Company has adopted the new definition of funds from operations and intends to
present both the old and new definitions of funds from operations to assist in
comparisons with prior periods of the Company. The primary difference between
the old and new definitions of funds from operations is the exclusion from
funds from operations of amortization of assets that are not uniquely
significant to the real estate industry. The funds from operations presented
may not be comparable to funds from operations for other REITs. The following
table summarizes the Company's funds from operations, based on the old and new
definitions, for the years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income........................................ $13,412 $13,286 $11,876
Minority interest................................. 10,852 11,366 10,712
Depreciation and amortization..................... 19,124 14,027 10,413
Amortization--restricted stock.................... 1,089 943 893
Amortization--investment premiums................. -- -- 540
Gain on sale of property.......................... (1,199) (1,893) --
Write off of option payable....................... -- (101) --
Discount on payoff of note payable................ -- -- (175)
------- ------- -------
Funds from operations--old definition............. 43,278 37,628 34,259
Amortization--restricted stock.................... (1,089) (943) (893)
Amortization--investment premiums................. -- -- (540)
Amortization--loan costs.......................... (147) (195) (66)
Depreciation--corporate........................... (47) (43) (31)
------- ------- -------
Funds from operations--new definition............. $41,995 $36,447 $32,729
Company's share of funds from operations.......... 55.28% 53.89% 52.58%
------- ------- -------
Company's funds from operations................... $23,215 $19,641 $17,209
======= ======= =======
</TABLE>
In order to maintain its qualification as a REIT for federal income tax
purposes, the Company is required to make distributions to its stockholders.
The Company's distributions to stockholders have been less than the total
funds from operations because the Company is obligated to make certain
payments with respect to principal debt and capital improvements. Management
believes that to continue the Company's growth, funds from operations in
excess of distributions, principal reductions and capital improvement
expenditures should be invested in assets expected to generate returns on
investment to the Company commensurate with the Company's investment
objectives and policies.
Comparison of funds from operations for year ended December 31, 1996 to year
ended December 31, 1995
Funds from operations increased by $5,650,000 to $43,278,000 for the year
ended December 31, 1996 compared to $37,628,000 for the year ended December
31, 1995. The increase was primarily attributable to an increase in rent
revenues of approximately $12,967,000, which was offset by an increase in
interest expense of approximately $5,274,000.
Comparison of funds from operations for year ended December 31, 1995 to year
ended December 31, 1994
Funds from operations increased by $3,369,000 to $37,628,000 for the year
ended December 31, 1995 compared to $34,259,000 for the year ended December
31, 1994. The increase was primarily attributable to an increase in rent
revenues of approximately $9,294,000, which was offset by an increase in
interest expense of approximately $6,581,000.
19
<PAGE>
INFLATION
All the Leases of the Golf Courses provide for base and participating rent
features. All of such Leases are triple net leases requiring the lessees to
pay for all maintenance and repair, insurance, utilities and services, and,
subject to certain limited exceptions, all real estate taxes, thereby
minimizing the Company's exposure to increases in costs and operating expenses
resulting from inflation.
SEASONALITY
Although the results of operations of the Company and its predecessors have
not been significantly impacted by seasonality, the Company generally expects
that its results of operations may be adversely affected as a function of
reduced payments of percentage rent in the first and fourth quarters of each
year due to adverse weather conditions and the scheduled closure of Golf
Courses located in harsh winter climates.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of National Golf Properties, Inc.
We have audited the consolidated financial statements and financial
statement schedule of National Golf Properties, Inc. (the "Company") as listed
in Item 14(a)(1) and (2) of this Form 10-K. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of National Golf Properties, Inc. as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 4, 1997
21
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
ASSETS
<S> <C> <C>
Property
Land..................................................... $ 63,049 $ 51,909
Buildings................................................ 147,678 108,120
Ground improvements...................................... 263,803 168,872
Furniture, fixtures and equipment........................ 30,531 26,646
Construction in progress................................. 10,733 6,521
-------- --------
515,794 362,068
Less: accumulated depreciation........................... (73,031) (58,787)
-------- --------
Net property........................................... 442,763 303,281
Cash and cash equivalents.................................. 11,224 7,089
Investments................................................ 286 809
Mortgage notes receivable.................................. 2,971 27,441
Other assets, net.......................................... 12,701 9,347
-------- --------
Total assets........................................... $469,945 $347,967
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Notes payable.............................................. $229,949 $143,176
Accounts payable and other liabilities..................... 3,134 2,077
Due to affiliates.......................................... 641 1,807
-------- --------
Total liabilities...................................... 233,724 147,060
-------- --------
Minority interest.......................................... 20,831 23,000
-------- --------
Commitments and contingencies (Note 6)
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized--none issued................................. -- --
Common stock, $.01 par value, 40,000,000 shares
authorized, 12,303,720 and 10,621,975 shares issued and
outstanding at December 31, 1996 and 1995, respectively. 123 106
Additional paid in capital............................... 219,985 181,730
Accumulated deficit...................................... (1,360) (1,360)
Unamortized restricted stock compensation................ (3,358) (2,569)
-------- --------
Total stockholders' equity............................. 215,390 177,907
-------- --------
Total liabilities and stockholders' equity............. $469,945 $347,967
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rent from affiliates........................... $ 57,291 $ 45,339 $ 36,637
Rent........................................... 1,607 592 --
Gain on sale of property....................... 1,199 1,893 --
-------- -------- --------
Total revenues............................... 60,097 47,824 36,637
-------- -------- --------
Expenses:
General and administrative..................... 4,734 4,258 4,709
Depreciation and amortization.................. 19,124 14,027 10,413
-------- -------- --------
Total expenses............................... 23,858 18,285 15,122
-------- -------- --------
Operating income............................... 36,239 29,539 21,515
Other income (expense):
Interest income from affiliates................ 1,683 2,884 2,759
Interest income................................ 427 1,260 700
Other income................................... 238 114 194
Interest expense............................... (14,067) (8,793) (2,212)
-------- -------- --------
Income before provision for taxes and minority
interest........................................ 24,520 25,004 22,956
Provision for taxes.............................. (256) (352) (368)
-------- -------- --------
Income before minority interest.................. 24,264 24,652 22,588
Income applicable to minority interest........... (10,852) (11,366) (10,712)
-------- -------- --------
Net income....................................... $ 13,412 $ 13,286 $ 11,876
======== ======== ========
Net income per share............................. $ 1.17 $ 1.25 $ 1.12
======== ======== ========
Weighted average number of shares................ 11,420 10,643 10,616
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADDITIONAL UNAMORTIZED
NUMBER OF COMMON PAID IN ACCUMULATED RESTRICTED
SHARES STOCK CAPITAL DEFICIT STOCK TOTAL
---------- ------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 10,614,475 $106 $187,793 $ (1,630) $(4,272) $181,997
Syndication and
organization costs... -- -- (24) -- -- (24)
Amortization of
restricted stock..... -- -- -- -- 893 893
Issuance of restricted
stock, net........... 7,500 -- 133 -- (133) --
Distributions paid
($1.09375 per share). -- -- -- (11,606) -- (11,606)
Net income............ -- -- -- 11,876 -- 11,876
---------- ---- -------- -------- ------- --------
Balance at December 31,
1994................... 10,621,975 106 187,902 (1,360) (3,512) 183,136
Amortization of
restricted stock..... -- -- -- -- 943 943
Reduction for minority
interest............. -- -- (2,558) -- -- (2,558)
Distributions paid
($1.59 per share).... -- -- (3,614) (13,286) -- (16,900)
Net income............ -- -- -- 13,286 -- 13,286
---------- ---- -------- -------- ------- --------
Balance at December 31,
1995................... 10,621,975 106 181,730 (1,360) (2,569) 177,907
Amortization of
restricted stock..... -- -- -- -- 1,089 1,089
Issuance of stock for
acquisitions......... 1,577,820 16 40,771 -- -- 40,787
Issuance of restricted
stock................ 82,000 1 1,878 -- (1,878) 1
Exercise of stock
options.............. 21,925 -- 446 -- -- 446
Distributions paid
($1.65 per share).... -- -- (4,840) (13,412) -- (18,252)
Net income............ -- -- -- 13,412 -- 13,412
---------- ---- -------- -------- ------- --------
Balance at December 31,
1996................... 12,303,720 $123 $219,985 $ (1,360) $(3,358) $215,390
========== ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 13,412 $ 13,286 $ 11,876
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 19,124 14,027 10,413
Amortization of restricted stock........... 1,089 943 893
Minority interest in earnings.............. 10,852 11,366 10,712
Gain on sale of property................... (1,199) (1,893) --
Other adjustments.......................... 5 (101) 390
Changes in assets and liabilities:
Other assets............................. (591) 122 782
Accounts payable and other liabilities... 866 (478) 630
Due from/to affiliates................... 659 (889) (1,455)
--------- --------- --------
Net cash provided by operating
activities............................ 44,217 36,383 34,241
--------- --------- --------
Cash flows from investing activities:
Purchase of held-to-maturity securities...... -- (402,910) (18,878)
Proceeds from sale of held-to-maturity
securities.................................. -- 412,870 17,175
Purchase of available-for-sale securities.... (5,644) (22,620) (28,935)
Proceeds from sale of available-for-sale
securities.................................. 6,167 21,811 77,024
Proceeds from mortgage notes receivable...... 25,472 -- --
Purchase of property and related assets...... (90,368) (85,165) (77,864)
Purchase of property and related assets from
affiliates.................................. (4,937) -- --
Proceeds from sale of property and related
assets...................................... 829 -- --
Payments for covenants not to compete........ -- (5) (525)
--------- --------- --------
Net cash used by investing activities.. (68,481) (76,019) (32,003)
--------- --------- --------
Cash flows from financing activities:
Principal payments on notes payable.......... (111,952) (14,159) (18,391)
Proceeds from notes payable.................. 173,299 88,500 46,540
Loan costs................................... (530) (940) (259)
Repurchase of OP Units....................... (116) -- (82)
Proceeds from stock options exercised........ 446 -- --
Syndication and organization costs........... -- -- (24)
Cash distributions........................... (18,252) (16,902) (15,317)
Limited partners' cash distributions......... (14,496) (13,860) (12,519)
--------- --------- --------
Net cash provided (used) by financing
activities............................ 28,399 42,639 (52)
--------- --------- --------
Net increase in cash and cash equivalents...... 4,135 3,003 2,186
Cash and cash equivalents at beginning of
period........................................ 7,089 4,086 1,900
--------- --------- --------
Cash and cash equivalents at end of period..... $ 11,224 $ 7,089 $ 4,086
========= ========= ========
Supplemental cash flow information:
Interest paid................................ $ 13,646 $ 8,503 $ 2,088
Taxes paid................................... 265 386 312
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Organization
National Golf Properties, Inc. (the "Company") commenced operations
effective with the completion of its initial public stock offering (the
"Offering") of 9,716,000 shares of common stock (the "Common Stock"), on
August 18, 1993. The Company acquires and owns golf courses primarily located
throughout the United States. At December 31, 1996, the Company leased all but
five of its golf courses to American Golf Corporation ("AGC") pursuant to
long-term triple net leases (the "Leases"). David G. Price, the Chairman of
the Board of Directors of the Company, owns approximately 5.5% of the
Company's outstanding Common Stock and approximately 38.3% of National Golf
Operating Partnership, L.P. (the "Operating Partnership") and a controlling
interest in AGC. The Company owns substantially all of the golf courses
through its 58.3% general partner interest in the Operating Partnership. On
July 8, 1994, the Operating Partnership acquired an 89% general partner
interest in Royal Golf, L.P. II ("Royal Golf"). Royal Golf owns four golf
courses on Hilton Head Island, South Carolina. Royal Golf's results of
operations for the period July 8, 1994 to December 31, 1994 have been included
in the Company's consolidated financial statements. Unless the context
otherwise requires, all references to the Company's business and properties
include the business and properties of the Operating Partnership and Royal
Golf.
In conjunction with the formation of the Company and the Operating
Partnership, the partners of the entities transferring their interest in the
initial portfolio of golf courses (the "Initial Golf Courses") to the
Operating Partnership became limited partners in the Operating Partnership
(the "OP Limited Partners") and received units of limited partnership interest
in the Operating Partnership (the "OP Units"). An OP Unit and a share of
Common Stock of the Company have the same economic characteristics inasmuch as
they effectively share equally in the net income or loss and any distributions
of the Operating Partnership.
The consolidated financial statements include the accounts of the Company,
the Operating Partnership and Royal Golf. All significant intercompany
transactions and balances have been eliminated.
b) Cash Equivalents
The Company considers all money market funds with an original maturity of
three months or less at the date of purchase to be cash equivalents with cost
approximating market.
c) Investments
Debt securities that the Company expects to hold to maturity are classified
as held-to-maturity securities and reported at amortized cost. Debt securities
not classified as either held-to-maturity securities or bought and held
principally for the purpose of selling them in the near term are classified as
available-for-sale securities and reported at fair value. Cost of investments
sold is determined on the average cost method.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The adoption of SFAS No. 115 had no effect on net
income for the year ended December 31, 1994. SFAS No. 115 requires the Company
to report available-for-sale securities at fair value, with unrealized gains
and losses excluded from earnings and reported as a separate component of
stockholders' equity.
d) Concentration of Credit Risk
Concentration of credit risk with respect to the Company's portfolio of 114
golf courses is limited due to the golf courses being geographically
diversified and located in 27 states. The distribution of the golf courses
reflects the Company's belief that geographic diversification helps insulate
the portfolio from regional economic and climatic influences. As of December
31, 1996, the Company had no significant concentration of credit risk.
26
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d) Concentration of Credit Risk (continued)
The Company has cash in financial institutions which is insured by the
Federal Deposit Insurance Corporation ("FDIC") up to $100,000 per institution.
At December 31, 1996 and 1995, the Company had cash accounts in excess of FDIC
insured limits.
e) Property
Property is carried at the lower of cost or net realizable value.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets as follows:
<TABLE>
<S> <C>
Buildings.................................................... 30 years
Ground improvements.......................................... 20 years
Furniture, fixtures & equipment.............................. 3 to 10 years
</TABLE>
The Leases presently provide that at the end or termination of the existing
Leases, all improvements and fixtures placed on the rental property become the
property of the Company.
The Company assesses whether there has been a permanent impairment in the
value of rental property by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's
ability to perform its duties and pay rent under the terms of the lease. If
the property was leased at a significantly lower rent, the Company may
recognize a permanent impairment loss if the income stream were not sufficient
to recover its investment. Such a loss would be determined as the difference
between the carrying value, including any allocated goodwill, and the fair
value of the property, with the carrying value of the intangible asset reduced
first. Management believes no permanent impairment has occurred in its net
property carrying values.
When assets are sold or retired, the asset and related depreciation
allowance is eliminated from the records and any gain or loss on disposal is
included in operations.
f) Income Taxes
The Company qualifies as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"). A REIT will generally
not be subject to federal income taxation to the extent that it distributes at
least 95% of its taxable income to its stockholders and complies with other
requirements. The Company paid distributions to stockholders of $1.65 per
share in 1996 of which $1.45 represents ordinary income and $0.20 represents
return of capital on a tax basis. On a book basis $0.48 per share represents
return of capital. In addition, on January 14, 1997, the Company declared a
quarterly distribution for the fourth quarter of 1996 of $0.42 per share to
stockholders of record on January 31, 1997, which was paid on February 17,
1997. The Company was subject to federal alternative minimum tax in 1994 and
may be subject to such tax in 1996. The Company is also subject to United
Kingdom income taxes and state income and franchise taxes in certain states in
which it operates. Therefore, a tax provision has been reflected for these
income, franchise, and alternative minimum taxes.
g) Revenue Recognition
The Company recognizes rental revenue on an accrual basis over the terms of
the Leases.
27
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Intangible Assets
Included in other assets are intangible assets which consist of covenants
not to compete, goodwill and other intangibles. Intangible assets are carried
at cost less accumulated amortization and are amortized on a straight-line
basis. The covenants are amortized over their contractual lives which range
from three to 30 years. Goodwill, arising from golf course acquisitions, is
amortized over the life of the Leases (15 to 20 years). Other intangibles are
amortized over periods from one to ten years. The Company assesses whether
there has been a permanent impairment in the value of intangible assets by
considering factors such as expected future operating income, trends and
prospects, as well as the effects of demand, competition and other economic
factors. Such factors include a lessee's ability to perform its duties and pay
rent under the terms of the lease. If the property was leased at a
significantly lower rent, the Company may recognize a permanent impairment
loss if the income stream is not sufficient to recover its investment. Such a
loss would be determined as the difference between the carrying value,
including any allocated goodwill, and the fair value of the property, with the
carrying value of the intangible asset reduced first. Management believes no
permanent impairment in the carrying value of its intangible assets has
occurred. Accumulated amortization at December 31, 1996 and 1995, was
approximately $4,310,000 and $3,211,000, respectively.
i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
j) Fair Value of Financial Instruments
To meet the reporting requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," the Company calculates the fair value of
financial instruments and includes this additional information in the notes to
the consolidated financial statements when the fair value is different than
the carrying value of those financial instruments. When the fair value
reasonably approximates the carrying value, no additional disclosure is made.
The estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
k) Earnings Per Share
The computation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period and the
incremental shares, using the treasury stock method, from stock options.
The computation of fully diluted earnings per share is less than 3% dilutive
and accordingly has not been presented.
28
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
l) Impairment of Long-Lived Assets
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
m) Accounting for Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This Statement encourages entities to adopt a fair value based
method of accounting for all employee stock compensation, as well as
transactions in which an entity issues its equity instruments to acquire goods
or services from nonemployees. Those transactions must be accounted for based
on the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reasonably determinable. The
Statement allows an entity to continue measuring compensation cost for the
plans using the accounting principles prescribed by Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." In
that case, however, companies must also include pro forma disclosures of net
income and earnings per share, as if the fair value based method of accounting
defined in SFAS No. 123 had been applied. SFAS No. 123 is effective for fiscal
years beginning after December 15, 1995. The Company adopted SFAS No. 123
during 1996, and elected to continue to apply the accounting rules contained
in APB Opinion No. 25.
29
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) PROPERTY ACQUISITIONS
In 1996, the Company purchased 35 golf courses for an aggregate initial
investment of approximately $155 million (including the $60 million purchase
of 20 golf courses from Golf Enterprises, Inc. ("GEI") and the $31.6 million
purchase of four golf courses upon which the Company previously held
participating mortgages). All but four golf courses were purchased from
unaffiliated third parties. The acquisitions have been accounted for utilizing
the purchase method of accounting and, accordingly, the acquired assets are
included in the statement of operations from the date of acquisition. The
initial investment amount includes purchase price, closing costs and other
direct costs associated with the purchase. The aforementioned golf courses,
except for Sweetwater Country Club, Colonial Charters Golf Course and San
Geronimo Golf Course, are leased to AGC pursuant to long-term triple net
leases. Sweetwater Country Club, Colonial Charters Golf Course and San
Geronimo Golf Course are leased to Cobblestone Golf Group, Inc., The Links
Group, Inc. and Evergreen Alliance Golf Limited, respectively, pursuant to
long-term triple net leases.
<TABLE>
<CAPTION>
ACQUISITION INITIAL
DATE COURSE NAME LOCATION INVESTMENT
----------- ----------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
1/11/96 Golden Oaks Country Club Fleetwood, Pennsylvania $ 5,665
4/9/96 Paradise Hills Golf Course Albuquerque, New Mexico 5,530
4/30/96 Chesapeake Golf Club Chesapeake, Virginia 3,811
5/9/96 SeaCliff Country Club Huntington Beach, California 10,032
7/1/96 Ancala Country Club Scottsdale, Arizona 8,526*
Arrowhead Country Club Glendale, Arizona 6,001*
BlackLake Golf Course Nipomo, California 11,043*
Painted Desert Golf Course Las Vegas, Nevada 6,096*
Sweetwater Country Club (2 Courses) Sugarland, Texas 11,990
7/10/96 Colonial Charters Golf Course Longs, South Carolina 4,792
7/31/96 Pinery Country Club Denver, Colorado 5,554
Crescent Oaks Country Club Clearwater, Florida 868
Summerfield Crossing Golf Club Tampa, Florida 2,613
The Plantation Golf Club Boise, Idaho 2,649
Highlands Golf & Supper Club Hutchinson, Kansas 616
Tallgrass Country Club Wichita, Kansas 2,453
Shenandoah Country Club Baton Rouge, Louisiana 1,306
Stonebridge Country Club New Orleans, Louisiana 886
Pawtuckett Golf Club Charlotte, North Carolina 1,626
Bent Tree Golf Club Columbus, Ohio 4,330
Meadowbrook Country Club Tulsa, Oklahoma 3,325
The Trails Norman, Oklahoma 2,402
The Links at Stono Ferry Charleston, South Carolina 1,626
Forrest Crossing Golf Course Nashville, Tennessee 2,969
Diamond Oaks Country Club Fort Worth, Texas 3,709
Eldorado Country Club McKinney, Texas 6,468
Great Southwest Golf Club Grand Prairie, Texas 8,267
Oakridge Country Club Garland, Texas 3,526
Willow Fork Country Club Katy, Texas 2,786
Woodhaven Country Club Fort Worth, Texas 2,064
11/19/96 Walden on Lake Houston Country Club Humble, Texas 3,603
11/22/96 Deer Creek Golf Club Overland Park, Kansas 7,842
12/3/96 WestWinds Country Club New Market, Maryland 3,767
12/18/96 San Geronimo Golf Course San Geronimo, California 6,272
--------
Total Initial Investment...................................... $155,013
========
</TABLE>
- -------
* Company previously held participating mortgages.
30
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) PROPERTY ACQUISITIONS (CONTINUED)
On January 19, 1996, the Company sold Wootton Bassett Golf Club in
Wiltshire, United Kingdom for approximately $2 million. The Company provided
seller financing in the form of a mortgage loan in the amount of approximately
$900,000 at an interest rate of 6% per annum and a maturity date of January
1999 (the "Wootton Bassett Mortgage"). The Company recognized a gain of
approximately $25,000, net of payment to American Golf (U.K.) Limited,
subsidiary of AGC, of approximately $166,000.
On December 30, 1996, the Company sold Kendale Lakes Golf Course in Miami,
Florida for $3.5 million. For financial statement purposes, the Company
recognized a gain of approximately $1.2 million. However, for tax purposes,
the Company accounted for the sale as part of a Code section 1031 tax-free
exchange.
(3) MORTGAGE NOTES RECEIVABLE
The Company had fixed-term options to acquire four golf courses (the "Option
Golf Courses") in exchange for OP Units. The Operating Partnership made
participating mortgage loans of approximately $25.2 million at the time of the
Offering (the "Participating Mortgage Loans") to David G. Price and one of his
affiliates (the other partner in the affiliate is Richard C. Price, the
President of the Company) that owned the Option Golf Courses and were
collateralized by first mortgage liens on such Option Golf Courses. AGC, the
current operator of the Option Golf Courses, had guaranteed the repayment of
each Participating Mortgage Loan. Interest was payable monthly and the
interest rate for 1996 was 9.28%. The interest rate was subject to annual
increases in an amount equal to the greater of (a) 4% of the rate applicable
for the prior year or (b) an amount corresponding to a percentage of growth in
revenues over a specified baseline amount from each Option Golf Course. All
principal, together with 50% of any appreciation in each Option Golf Course,
was payable to the Operating Partnership at the end of the tenth year. Each
Participating Mortgage Loan contained customary representations and
warranties, covenants and indemnities, and was cross-defaulted to, and cross-
collateralized with, the other Participating Mortgage Loans. During 1996, the
Participating Mortgage Loans were paid off and the Company exercised the
options on the Option Golf Courses on terms that were different from the
original terms of such options. The changes to the terms included, among
others, reducing the option prices and base rent payable by AGC and modifying
the percentage rents payable by AGC so as to comport generally with the leases
currently entered into with AGC.
On March 13, 1995, the Company sold Hidden Hills Country Club in Stone
Mountain, Georgia for approximately $3.2 million. The Company provided seller
financing in the form of a mortgage loan in the amount of $2.2 million at an
initial interest rate of 11% per annum and a maturity date of March 2000 (the
"Hidden Hills Mortgage"). Interest income from the Hidden Hills Mortgage for
the year ended December 31, 1996 and the period March 13, 1995 through
December 31, 1995 was $242,000 and approximately $194,000, respectively.
Interest income from the Wootton Bassett Mortgage for the period January 19,
1996 through December 31, 1996 was approximately $47,000.
The market value of mortgage notes receivable at December 31, 1996 and 1995
is estimated to be approximately $3,200,000 and $31,397,000, respectively,
based on current interest rates for comparable loans.
(4) INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
COST MARKET COST MARKET MATURITY
---- ------ ---- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Available-for-sale securities:
Commercial Paper.......................... $-- $-- $809 $809 1/1996
Commercial Paper.......................... 86 86 -- -- 1/1997
Corporate Note............................ 200 200 -- -- 3/1997
---- ---- ---- ----
Total................................... $286 $286 $809 $809
==== ==== ==== ====
</TABLE>
31
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) INVESTMENTS (CONTINUED)
In 1996 and 1995, available-for-sale securities were sold resulting in
proceeds of $6,167,000 and approximately $21,811,000, respectively. There were
no gross realized gains or losses in 1996 and 1995.
(5) NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
INTEREST INTEREST
TYPE OF COLLATERAL RATE PAYMENT 1996 1995 MATURITY
- ------------------ -------- ------------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Uncollateralized note.... 7.43% Monthly $ -- $ 5,000 1/1996
Uncollateralized note.... 7.44% Monthly -- 7,000 2/1996
Collateralized notes..... 5.00% Quarterly -- 785 5/1996
Uncollateralized note.... 7.43% Monthly 5,500 -- 1/1997
Uncollateralized note.... 7.64% Monthly 6,240 -- 1/1997
Uncollateralized note.... 7.73% Monthly 3,850 -- 1/1997
Uncollateralized note.... 8.25% Monthly 9,300 -- 1/1997
Collateralized note...... 5.50% Quarterly 4,500 4,500 2/1999
Collateralized note...... 5.50% Quarterly 809 964 5/2001
Collateralized note...... 6.60% Quarterly 20,000 20,000 7/2001
Uncollateralized notes... 8.68% Semi-annually 50,000 50,000 12/2004
Uncollateralized notes... 8.73% Semi-annually 50,000 50,000 6/2005
Uncollateralized notes... 7.90% Semi-annually 40,000 -- 6/2006
Uncollateralized note.... 2,579 2,394 7/2006
Uncollateralized notes... 8.00% Semi-annually 35,000 -- 12/2006
Uncollateralized note.... 8.00% Quarterly 2,121 2,233 1/2008
Other collateralized
notes.................... 50 300 various
-------- --------
$229,949 $143,176
======== ========
</TABLE>
The following is a schedule of maturities on notes payable for the next five
years ending December 31 and in total thereafter:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997........................................................ $ 27,150
1998........................................................ 3,059
1999........................................................ 9,918
2000........................................................ 7,039
2001........................................................ 26,013
Thereafter................................................ 156,770
--------
$229,949
========
</TABLE>
The note agreements contain, among other things, covenants restricting the
sale of property and certain financial ratios and reporting requirements.
In 1996, the Operating Partnership placed $75 million of fixed-rate,
uncollateralized notes due 2006 with a group of institutional investors. The
notes were issued in two series. The first note series in the amount of $40
million was issued in July 1996 with a fixed interest rate of 7.9%, and the
second note series in the amount of $35 million was issued in December 1996
with a fixed interest rate of 8%.
32
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) NOTES PAYABLE (CONTINUED)
The Operating Partnership applied the net proceeds from the $75 million notes
to repay bank debt and to partially finance the acquisition of Sweetwater
Country Club.
In 1994, the Operating Partnership placed $100 million of fixed-rate,
uncollateralized notes due 2004 and 2005 with a group of institutional
investors. The notes were issued in two series of $50 million. The first note
series was issued with a fixed interest rate of 8.68%, and the second note
series was issued with a fixed interest rate of 8.73%. With respect to the $50
million first note series, the Operating Partnership received $30 million in
December 1994 and $20 million in January 1995. With respect to the $50 million
second note series, the Operating Partnership received $50 million in June
1995. The Operating Partnership applied the net proceeds from the $100 million
notes to repay bank debt, to finance future acquisitions of golf courses and
related facilities and properties, and for general partnership purposes.
The Company has a $40 million credit facility, which terminates on April 1,
1997, bearing interest at a floating rate (which was 8.25% at December 31,
1996), from a commercial bank that may be used to finance working capital,
acquisitions and capital improvements. There were outstanding advances of
approximately $24.9 million under this credit facility as of December 31,
1996.
In connection with the combined purchase of Monterey Country Club and Palm
Valley Country Club, the Company entered into an eleven-year, non-interest
bearing, uncollateralized note for $4,000,000 with the seller of the
properties. Based on the borrowing rates available to the Company for debt
with similar terms and average maturities, the interest rate used to discount
the note is 7.75%. The discount is being amortized over the life of the loan
using the effective interest method. The discounted note balance at December
31, 1996 was approximately $2,579,000. The unamortized discount balance at
December 31, 1996 was approximately $1,421,000.
An OP Limited Partner, who owns or controls 75,003 OP Units, is the holder
of a promissory note for approximately $2.1 million that the Company assumed
at the time of the Offering in connection with the Company's acquisition of
four golf courses from a corporation that previously had been 50% owned by
such OP Limited Partner. The Company made interest payments in 1996 and 1995
of approximately $175,000 and $184,000, respectively.
The market value of notes payable at December 31, 1996 and 1995 is estimated
to be approximately $235,095,000 and $147,882,000, respectively, based on
current interest rates for comparable loans. The net book value at December
31, 1996 of the assets collateralizing the notes payable is $49 million.
(6) COMMITMENTS AND CONTINGENCIES
The Company is required under the Leases to pay for various remaining
capital improvements totaling approximately $20.6 million, of which
approximately $19.9 million will be paid during the next two years. Any
subsequent capital improvements to these golf courses are the responsibility
of the Lessees.
In addition, the Company leases the land associated with Bear Creek Golf
World from a local municipality pursuant to a ground lease. At December 31,
1996, there was a net book value of approximately $3,241,000 of improvements
at this property included in buildings, ground improvements and furniture,
fixtures and equipment on the balance sheet. At the termination of the lease
in June 2022, all fixed improvements are surrendered to the local
municipality. Under the terms of the ground lease, the Company remits a
percentage of the green fees and net profits from the sale of food and
beverages to the local municipality. For the years ended December 31, 1996,
1995 and 1994, the ground lease expense was approximately $351,000, $369,000
and $341,000, respectively.
Also, the Company leases approximately 14 acres of land associated with
Mesquite Golf & Country Club from various landowners. The leases for this
property expire between 2041 and 2043. AGC, as the lessee under the Lease, is
required to make all ground lease payments.
33
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) LEASE RENTAL AGREEMENTS
Future minimum rents to be received by the Company under the Leases for the
next five years ending December 31 and in total thereafter are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997........................................................ $ 65,978
1998........................................................ 65,979
1999........................................................ 65,979
2000........................................................ 65,979
2001........................................................ 65,979
Thereafter.................................................. 625,855
--------
$955,749
========
</TABLE>
The minimum rent for the first year for each golf course under the Leases is
initially set at a fixed amount. Thereafter, with respect to the Leases for
the Initial Golf Courses, minimum rent is increased each year by 4% or, if
lower, 150% of the annual percentage increase in the Consumer Price Index
("CPI") (the "Base Rent Escalation"). For these Leases, percentage rent is
paid to the Company each year in the amount, if any, by which the sum of 35%
of Course Revenue in excess of a baseline amount plus 5% of Other Revenue in
excess of a baseline amount exceeds the cumulative Base Rent Escalation since
the commencement date of such Leases. Course Revenue is generally defined in
the Leases to include all revenue received from the operation of the
applicable golf course, including revenues from memberships, initiation fees,
dues, green fees, guest fees, driving range charges and golf cart rentals, but
excluding those revenues described as Other Revenue. Other Revenue is
generally defined in the Leases to include all revenue received from food and
beverage and merchandise sales and other revenue not directly related to golf
activities. AGC has options to extend the term of each lease for one to three
five-year terms. Generally, for the Leases entered into subsequent to the
Offering, the rent is based upon the greater of (a) the minimum base rent or
(b) a specified percentage of Course Revenue and Other Revenue. The minimum
base rent under these Leases is increased for specified years during the Lease
term based upon increases in the CPI, provided that each such annual CPI
increase shall not exceed five percent. Percentage rent income for the years
ended December 31, 1996, 1995 and 1994 was approximately $4,289,000,
$3,731,000 and $2,657,000, respectively.
(8) STOCK OPTIONS AND AWARDS
The Company has established a Stock Incentive Plan, under which executive
officers and other key employees of the Company and AGC may be granted stock
options or restricted stock. Restricted stock is subject to restrictions
determined by the Company's Compensation Committee. The Compensation
Committee, comprised of Directors who are not officers of the Company,
determines compensation, including awards under the Stock Incentive Plan, for
the Company's executive officers. The shares of restricted stock will be sold
at a purchase price equal to $.01 and will vest 20% per year over a five year
period. Restricted stock has the same dividend and voting rights as other
common stock and is considered to be currently issued and outstanding.
Compensation expense is determined by reference to the market value on the
date of grant and is being amortized on a straight-line basis over the five
year vesting period. Such expense amounted to approximately $1,089,000,
$943,000, and $893,000 for the years ended December 31, 1996, 1995, and 1994,
respectively.
34
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) STOCK OPTIONS AND AWARDS (CONTINUED)
Stock options vest at 25% per year over four years and are exercisable at
the market value on the date of grant. The options' maximum term is ten years.
The following table summarizes the restricted stock and stock option
transactions pursuant to the Company's Stock Incentive Plan for the years
ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NUMBER OF SHARES-- SHARES-- OPTION EXERCISE
RESTRICTED STOCK OPTIONS PRICE
------------------ --------- ----------------
<S> <C> <C> <C>
Outstanding at December 31,
1993........................ 225,000 502,500 $20.28
Granted.................... 17,500 55,000 20.76
Vested..................... (43,000) -- --
Cancelled.................. (10,000) (39,100) 20.38
------- ------- ------
Outstanding at December 31,
1994........................ 189,500 518,400 $20.32
Vested..................... (46,500) -- --
Cancelled.................. -- (17,300) 20.38
------- ------- ------
Outstanding at December 31,
1995........................ 143,000 501,100 $20.32
Granted.................... 70,000 40,000 25.88
Vested..................... (46,500) -- --
Cancelled.................. -- (34,075) 21.70
Exercised.................. -- (21,925) 20.38
------- ------- ------
Outstanding at December 31,
1996........................ 166,500 485,100 $20.68
======= ======= ======
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF OPTION EXERCISE
SHARES PRICE
--------- ----------------
<S> <C> <C> <C>
Options exercisable at:
December 31, 1996............................. 327,575 $20.23
December 31, 1995............................. 236,800 $20.30
December 31, 1994............................. 115,850 $20.27
</TABLE>
The range of exercise prices for the options outstanding at December 31,
1996 is $18.50 through $25.875 with a weighted average remaining contractual
life of seven years. The range of exercise prices for options exercisable at
December 31, 1996 is $18.50 through $20.375 with a weighted average remaining
contractual life of 6.7 years.
As of December 31, 1996, a total of 790,475 additional shares remain
reserved for issuance under the Stock Incentive Plan. There were 1,600,000
shares originally reserved for issuance under the Stock Incentive Plan.
35
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) STOCK OPTIONS AND AWARDS (CONTINUED)
The Company also has adopted the 1995 Independent Director Equity
Participation Plan, pursuant to which directors of the Company may be granted
stock options and restricted stock. The shares of restricted stock will be
sold at a purchase price equal to $.01 and will vest at the earlier of (i) the
fifth anniversary of the date of grant or (ii) the directors' normal
retirement at or after age 65. Restricted stock has the same dividend and
voting rights as other common stock and is considered to be currently issued
and outstanding. Stock options vest on the first anniversary of the date on
which the option was granted and are exercisable at the market value on the
date of grant. The options' maximum term is ten years. The following table
summarizes the restricted stock and stock option transactions pursuant to the
Company's 1995 Independent Director Equity Participation Plan for the year
ended December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NUMBER OF SHARES-- SHARES-- OPTION EXERCISE
RESTRICTED STOCK OPTIONS PRICE
------------------ --------- ----------------
<S> <C> <C> <C>
Granted....................... 12,000 24,000 $23.42
------ ------ ------
Outstanding at December 31,
1996......................... 12,000 24,000 $23.42
------ ------ ------
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF OPTION EXERCISE
SHARES PRICE
--------- ----------------
<S> <C> <C> <C>
Options exercisable at:
December 31, 1996.............................. 16,000 $20.94
</TABLE>
The range of exercise prices for the options outstanding at December 31,
1996 is $19.75 through $28.375 with a weighted average remaining contractual
life of nine years. The range of exercise prices for options exercisable at
December 31, 1996 is $19.75 through $22.125 with a weighted average remaining
contractual life of 8.6 years.
As of December 31, 1996, a total of 112,000 shares remain reserved for
issuance under the 1995 Independent Director Equity Participation Plan. There
were 148,000 shares originally reserved for issuance under the 1995
Independent Director Equity Participation Plan.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" and will continue to use the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, no compensation cost
has been recognized for the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant date for awards in 1996 and 1995 consistent with the provisions of SFAS
No. 123, the Company's net income and net income per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------
1996 1995
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE)
<S> <C> <C>
Net income, as reported............................... $ 13,412 $ 13,286
Net income, pro forma................................. 13,387 13,278
Net income per share, as reported..................... 1.17 1.25
Net income per share, pro forma....................... 1.17 1.25
</TABLE>
The weighted average fair value of options granted during 1996 and 1995 are
$6.19 and $2.08, respectively. The fair value of each option grant issued in
1996 and 1995 is estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: (a)
dividend yield of 1.3%,
36
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) STOCK OPTIONS AND AWARDS (CONTINUED)
(b) expected volatility of the Company's stock of 19.6%, (c) a risk free
interest rate based on U.S. Zero Coupon Bonds with time to maturity
approximately equal to the options' expected time to exercise and (d) expected
option lives of four years for options granted in 1996 and one year for
options granted in 1995.
(9) 401(K) PLAN
The Company established a qualified retirement plan designed to qualify
under Section 401(k) of the Code (the "401(k) Plan"). The 401(k) Plan allows
participants to defer up to 10% of their eligible compensation on a pre-tax
basis subject to certain maximum amounts. Matching contributions may be made
in amounts and at times determined by the Company. The 401(k) Plan provides
for matching contributions by the Company in an amount equal to fifty-cents
for each one dollar of participant contributions up to a maximum of three
percent of the participant's salary per year. Participants received credit for
employment with the predecessors of the Company and affiliates. Amounts
contributed by the Company for a participant will vest over five years.
Employees of the Company will be eligible to participate in the 401(k) Plan if
they meet certain requirements concerning minimum age and period of credited
service.
For the years ended December 31, 1996, 1995 and 1994 the Company's
contributions to the 401(k) Plan were approximately $14,000, $13,000 and
$12,000, respectively.
(10) RELATED PARTY TRANSACTIONS
The Company has in the past and will continue to identify golf courses it
seeks to acquire for the purpose of leasing such courses to AGC and other golf
course operators. The Company evaluates potential golf course acquisitions
based on a golf course's ability to generate cash flows sufficient to enable
an operator to operate the course profitably and provide the Company its
desired rate of return on its capital investment. Such evaluation is integral
to the Company's determination of the price it is willing to pay for a
particular course. The Company's acquisition of a course is recorded in the
Company's financial statements at cost and the value of such course then is
evaluated periodically to determine its carrying value based on the cash flow
from the lease of such property. Because AGC may be deemed to be an affiliate
of the Company, the Company's leases with AGC may not reflect arms-length
transactions. As a result, there is a risk that the terms of such leases are
not as favorable to the Company as the terms would have been if the Company
leased its golf courses to unaffiliated operators and, if the Company could
have obtained more favorable terms, that the Company's financial statements
understate the returns that the Company could obtain on leases of such
properties. It is management's belief, however, that the terms and conditions
of its leases with AGC are no less favorable to the Company than the terms and
conditions that the Company could obtain if it leased its golf courses to
operators other than AGC.
(11) STATEMENT OF CASH FLOWS--SUPPLEMENTAL DISCLOSURES
Non-cash transactions for the year ended December 31, 1996 include (i)
approximately $40.8 million of golf course acquisitions which were financed by
the issuance of 1,577,820 shares of Common Stock; (ii) the assumption of
approximately $25.2 million of debt; (iii) approximately $1.3 million in
capital improvements accrued but not paid; (iv) approximately $1.5 million of
golf course acquisitions which were financed by the issuance of 61,339 OP
Units; and (v) approximately $900,000 in seller financing related to the sale
of Wootton Bassett Golf Club by the Company.
Non-cash transactions for the year ended December 31, 1995 include
approximately $2.3 million of golf course acquisitions which were financed by
a note payable and approximately $2.2 million in seller financing related to
the sale of a golf course by the Company.
Non-cash transactions for the year ended December 31, 1994 include
approximately $28.2 million of golf course acquisitions which were financed by
notes payable and a capital contribution from an unaffiliated limited partner.
37
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) OTHER DATA
AGC is the lessee of all but five of the golf courses in the Company's
portfolio. AGC is a golf course management company that operates a diverse
portfolio of golf courses for a variety of golf course owners including
municipalities, counties and others. AGC does not own any golf courses, but
rather manages and operates golf courses either as a lessee under leases,
generally triple net, or pursuant to management agreements. AGC derives
revenues from the operation of golf courses principally through receipt of
green fees, membership initiation fees, membership dues, golf cart rentals,
driving range charges and sales of food, beverages and merchandise.
The following table sets forth certain condensed financial information
concerning AGC.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current assets............................................ $ 57,511 $ 47,384
Non-current assets........................................ 131,654 96,771
-------- --------
Total assets.............................................. $189,165 $144,155
======== ========
Total current liabilities................................. $ 50,993 $ 36,478
Total long-term liabilities............................... 68,041 42,394
Minority interest......................................... 466 681
Total stockholders' equity................................ 69,665 64,602
-------- --------
Total liabilities and stockholders' equity................ $189,165 $144,155
======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Total revenues.................................... $439,567 $359,066 $306,529
======== ======== ========
Net income........................................ $ 14,275 $ 9,682 $ 10,291
======== ======== ========
</TABLE>
(13) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1996
and 1995 is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------
FISCAL 1996 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues........................... $13,114 $13,844 $16,034 $17,105
Operating income................... $ 7,767 $ 8,279 $ 9,818 $10,375
Net income......................... $ 3,034 $ 3,339 $ 3,401 $ 3,638
Net income per share............... $ 0.29 $ 0.31 $ 0.29 $ 0.29
<CAPTION>
QUARTER ENDED
-----------------------------------------
FISCAL 1995 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues........................... $10,583 $11,420 $11,842 $13,979
Operating income................... $ 6,377 $ 7,129 $ 7,016 $ 9,017
Net income......................... $ 4,166 $ 3,298 $ 2,993 $ 2,829
Net income per share............... $ 0.39 $ 0.31 $ 0.28 $ 0.27
</TABLE>
38
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial information set forth below is presented as if the
1996 acquisitions (Note 2) had been consummated as of January 1, 1996 and
1995.
The pro forma financial information is not necessarily indicative of what
actual results of operations of the Company would have been assuming the
acquisitions had been consummated as of January 1, 1996 and 1995, nor does it
purport to represent the results of operations for future periods (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Revenues from rental property............ $67,441 $61,498
Net income............................... $13,637 $12,869
Net income per share..................... $ 1.19 $ 1.21
</TABLE>
The pro forma financial information includes the following adjustments: (i)
an increase in depreciation and amortization expense; (ii) a decrease in
interest income; (iii) an increase in interest expense; and (iv) an increase
for 1996 and a decrease for 1995 in income applicable to minority interest.
(15) SUBSEQUENT EVENTS (UNAUDITED)
On January 2, 1997 the Company purchased Stonecreek Golf Course located in
Phoenix, Arizona for approximately $9.4 million.
On January 10, 1997 the Company purchased Tamarack Golf Club located in
Naperville, Illinois for approximately $5.3 million.
On January 14, 1997, the Company declared a quarterly distribution for the
fourth quarter of 1996 of $0.42 per share to stockholders of record on January
31, 1997, which was paid on February 17, 1997.
In the first quarter of 1997, the Company obtained a commitment from a group
of commercial banks for a $75 million credit facility (the "New Credit
Facility"). It is expected that borrowings under the New Credit Facility would
bear maximum interest at a floating rate equal to LIBOR plus a spread of
1.125%. The spread will be reduced based upon the Company improving certain
Company ratios. Consummation of the New Credit Facility arrangement is subject
to completion of the lenders' due diligence and completion of documentation
satisfactory to the Company and such lenders.
39
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the sections entitled (i) "Nominees for
Election as Director;" (ii) "Directors Continuing in Office;" and (iii)
"Executive Officers" contained in the Company's Proxy Statement to be filed
pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the section entitled "Executive Compensation"
contained in the Company's Proxy Statement to be filed pursuant to Regulation
14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the section entitled "Security Ownership of
Certain Beneficial Owners and Management" contained in the Company's Proxy
Statement to be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the section entitled "Certain Relationships and
Related Transactions" contained in the Company's Proxy Statement to be filed
pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
(a) 1. FINANCIAL STATEMENTS
Report of Independent Accountants...................................... 21
Consolidated Balance Sheets of National Golf Properties, Inc. as of De-
cember 31, 1996
and 1995.............................................................. 22
Consolidated Statements of Operations of National Golf Properties, Inc.
for the years ended December 31, 1996, 1995 and 1994.................. 23
Consolidated Statements of Stockholders' Equity of National Golf
Properties, Inc. for the years ended December 31, 1996, 1995 and 1994. 24
Consolidated Statements of Cash Flows of National Golf Properties, Inc.
for the years ended December 31, 1996, 1995 and 1994.................. 25
Notes to Consolidated Financial Statements............................. 26
2. FINANCIAL STATEMENT SCHEDULES
Schedule III--Real Estate and Accumulated Depreciation................. 41
</TABLE>
40
<PAGE>
SCHEDULE III
NATIONAL GOLF PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION(1)
(IN THOUSANDS)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY CARRIED AT CLOSE OF PERIOD
-------------------- -----------------------------
COST
CAPITALIZED
SUBSEQUENT TOTAL COST
BUILDINGS & TO BUILDINGS & ACCUMULATED DATE DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTED ACQUIRED
----------- ------------ ------- ------------ ----------- ------- ------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DAILY FEE
COURSES:
Continental,
Scottsdale, AZ. $ -- $ 64 $ 881 $ 12 $ 66 $ 891 $ 957 $ 479 1974 1986
Desert Lakes,
Fort Mojave,
AZ............. -- 163 3,102 40 163 3,142 3,305 468 1990 1993
El Caro,
Phoenix, AZ.... -- 61 553 13 63 564 627 534 1975 1983
Kokopelli,
Gilbert, AZ.... -- 1,177 4,261 135 1,177 4,396 5,573 711 1993 1994
Villa De Paz,
Phoenix, AZ.... -- 186 397 18 188 413 601 344 1974 1981
Camarillo
Springs,
Camarillo, CA.. -- 141 2,880 710 143 3,588 3,731 1,629 1972 1984
Carmel Mountain,
San Diego, CA.. -- 1,669 5,865 -- 1,669 5,865 7,534 478 1986 1995
Lomas Santa Fe,
Solana Beach, CA. -- 175 575 20 177 593 770 530 1974 1982
Mesquite, Palm
Springs, CA.... -- 1,057 5,140 203 1,061 5,339 6,400 749 1985 1993
Rancho San
Joaquin,
Irvine, CA..... -- 871 8,375 411 873 8,784 9,657 2,420 1962 1992
San Geronimo,
San Geronimo,
CA............. -- 846 5,426 -- 846 5,426 6,272 12 1964 1996
Summitpointe,
Milpitas, CA... 4,500 2,315 4,813 361 2,315 5,174 7,489 791 1977 1994
Upland Hills,
Upland, CA..... -- 1,835 6,312 93 1,835 6,405 8,240 382 1982 1995
Vista Valencia,
Valencia, CA... -- 652 5,369 40 657 5,404 6,061 2,632 1963 1987
Eagle,
Broomfield, CO. -- 400 2,425 20 402 2,443 2,845 1,372 1961 1988
Arrowhead,
Davie, FL...... -- 601 2,190 20 604 2,207 2,811 568 1967 1993
Binks Forest,
Wellington, FL. -- 224 4,591 125 224 4,716 4,940 592 1991 1994
Sabal Palm,
Tamarac, FL.... -- 441 3,357 20 443 3,375 3,818 1,526 1967 1990
Summerfield
Crossing,
Tampa, FL...... -- 105 2,508 -- 105 2,508 2,613 55 1987 1996
Goshen
Plantation,
Augusta, GA.... -- 195 3,042 221 195 3,263 3,458 356 1971 1994
River's Edge,
Fayetteville,
GA............. -- 250 4,069 151 143 4,327 4,470 458 1989 1994
Ruffled
Feathers,
Lemont, IL..... -- 293 9,316 (23) 293 9,293 9,586 579 1992 1995
Sugar Ridge,
Lawrenceburg,
IN............. -- 168 2,602 454 168 3,056 3,224 354 1994 1994
Deer Creek,
Overland Park,
KS............. -- 695 7,147 -- 695 7,147 7,842 39 1989 1996
Dub's Dread,
Kansas City,
KS............. -- 135 2,997 298 135 3,295 3,430 477 1963 1994
WestWinds, New
Market, MD..... -- 153 3,614 -- 153 3,614 3,767 19 1971 1996
Links at
Northfork,
Ramsey, MN..... -- 280 3,770 75 280 3,845 4,125 499 1992 1994
Royal Meadows,
Kansas City,
MO............. -- 176 1,822 40 181 1,857 2,038 1,036 1933 1984
Rancocas,
Willingboro,
NJ............. -- 239 1,816 1,206 241 3,020 3,261 915 1963 1989
Paradise Hills,
Albuquerque,
NM............. -- 350 5,181 -- 350 5,181 5,531 197 1963 1996
Pawtuckett,
Charlotte, NC.. -- 63 1,563 -- 63 1,563 1,626 33 1971 1996
Bent Tree,
Columbus, OH... -- 123 4,207 -- 123 4,207 4,330 90 1988 1996
Fowler's Mill,
Chesterland,
OH............. -- 346 1,760 20 349 1,777 2,126 972 1972 1986
Hershey South,
Hershey, PA.... -- 150 1,995 85 150 2,080 2,230 316 1927 1994
Golden Oaks,
Fleetwood, PA.. -- 989 4,677 100 989 4,777 5,766 249 1994 1996
Hickory Heights,
Bridgeville,
PA............. -- 87 2,027 966 82 2,998 3,080 231 1990 1994
The Links,
Charleston,
SC............. -- 44 1,582 2 44 1,584 1,628 34 1989 1996
Forrest
Crossing,
Nashville, TN.. -- 140 2,829 17 140 2,846 2,986 63 1988 1996
Bear Creek,
Houston, TX.... -- -- 6,163 757 -- 6,920 6,920 3,678 1966 1985
Lake Houston,
Huffman, TX.... -- 823 1,620 63 829 1,677 2,506 896 1975 1985
Riverchase,
Coppell, TX.... -- 250 1,658 1,081 253 2,736 2,989 930 1987 1988
Riverside, Grand
Prairie, TX.... -- 574 4,445 105 576 4,548 5,124 1,195 1986 1990
Southwyck,
Pearland, TX... -- 672 3,492 131 673 3,622 4,295 586 1988 1993
Chesapeake,
Chesapeake,
VA............. -- 321 3,490 299 321 3,789 4,110 120 1984 1996
Honey Bee,
Virginia Beach,
VA............. -- 556 5,009 -- 556 5,009 5,565 504 1987 1995
Reston National,
Reston, VA..... -- 996 4,584 20 999 4,601 5,600 929 1968 1993
Capitol City,
Olympia, WA.... 809 437 2,572 161 437 2,733 3,170 347 1961 1994
Lake Wilderness,
Maple Valley,
WA............. -- 110 1,665 332 110 1,997 2,107 262 1974 1994
------ ------- -------- ------ ------- -------- -------- -------
$5,309 $22,598 $169,734 $8,802 $22,539 $178,595 $201,134 $32,636
------ ------- -------- ------ ------- -------- -------- -------
</TABLE>
41
<PAGE>
SCHEDULE III (CONTINUED)
NATIONAL GOLF PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION(1)
(IN THOUSANDS)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY CARRIED AT CLOSE OF PERIOD
-------------------- -----------------------------
COST
CAPITALIZED
SUBSEQUENT TOTAL COST
BUILDINGS & TO BUILDINGS & ACCUMULATED DATE DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTED ACQUIRED
----------- ------------ ------- ------------ ----------- ------- ------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIVATE COUNTRY
CLUBS:
Ancala,
Scottsdale,
AZ............. $ -- $ 207 $ 8,319 $ -- $ 207 $ 8,319 $ 8,526 $ 170 1990 1996
Arrowhead,
Glendale, AZ... -- 185 5,816 -- 185 5,816 6,001 123 1986 1996
Canyon Oaks,
Chico, CA...... 50 309 2,172 2,126 309 4,298 4,607 324 1987 1994
Escondido,
Escondido, CA.. -- 114 2,382 587 116 2,967 3,083 1,386 1962 1983
Monterey, Palm
Desert, CA..... -- 1,294 6,584 202 1,294 6,786 8,080 546 1978 1995
Palm Valley,
Palm Desert,
CA............. -- 1,750 13,769 334 1,750 14,103 15,853 963 1985 1995
SeaCliff,
Huntington
Beach, CA...... -- 2,430 7,602 111 2,430 7,713 10,143 221 1975 1996
Sunset Hills,
Thousand Oaks,
CA............. -- 302 1,378 18 304 1,394 1,698 1,130 1966 1975
Wood Ranch, Simi
Valley, CA..... -- 481 9,111 698 481 9,809 10,290 775 1984 1995
Heather Ridge,
Aurora, CO..... -- 992 1,500 715 995 2,212 3,207 1,039 1970 1990
Pinery, Denver,
CO............. -- 174 5,380 -- 174 5,380 5,554 122 1972 1996
Crescent Oaks,
Clearwater, FL. -- 35 833 25 35 858 893 28 1990 1996
Brookstone,
Acworth, GA.... -- 557 2,608 410 559 3,016 3,575 655 1987 1993
The Plantation,
Boise, ID...... -- 87 2,562 2 87 2,564 2,651 56 1920 1996
Mission Hills,
Northbrook, IL. -- 400 3,600 531 402 4,129 4,531 2,058 1980 1988
Highlands Golf,
Hutchinson, KS. -- 40 576 1 40 577 617 15 1972 1996
Tallgrass,
Wichita, KS.... -- 43 2,409 20 43 2,429 2,472 54 1980 1996
Shenandoah,
Baton Rouge,
LA............. -- 38 1,268 -- 38 1,268 1,306 37 1972 1996
Stonebridge, New
Orleans, LA.... -- 31 856 6 31 862 893 34 1984 1996
Hunt Valley,
Phoenix, MD.... -- 515 1,662 12 517 1,672 2,189 1,269 1972 1983
Skyline Woods,
Elkhorn, NE.... -- 358 3,432 265 361 3,694 4,055 1,311 1986 1990
Tanoan,
Albuquerque,
NM............. -- 12 3,241 20 15 3,258 3,273 2,472 1978 1982
Brandywine,
Maumee, OH..... -- 814 2,861 82 816 2,941 3,757 862 1967 1991
Oakhurst, Grove
City, OH....... -- 344 1,776 581 346 2,355 2,701 819 1959 1980
Royal Oak,
Cincinnati, OH. -- 175 822 12 178 831 1,009 494 1963 1985
Meadowbrook,
Tulsa, OK...... -- 89 3,236 3 89 3,239 3,328 69 mid 1950's 1996
The Trails,
Norman, OK..... -- 42 2,361 7 42 2,368 2,410 58 1982 1996
Creekside,
Salem, OR...... -- 128 3,456 2,374 128 5,830 5,958 425 1993 1995
Oregon Golf,
West Linn, OR.. -- 433 10,230 495 434 10,724 11,158 521 1992 1995
Hershey,
Hershey, PA.... -- 1,624 6,400 921 1,624 7,321 8,945 1,028 1915 1994
Berry Creek,
Georgetown, TX. -- 204 4,876 146 204 5,022 5,226 411 1986 1995
Diamond Oaks,
Fort Worth, TX. -- 132 3,577 54 132 3,631 3,763 72 1959 1996
Eldorado,
McKinney, TX... -- 221 6,247 2 221 6,249 6,470 126 1981 1996
Great Southwest,
Grand Prairie,
TX............. -- 442 7,825 19 442 7,844 8,286 163 1964 1996
Oakridge,
Garland, TX.... -- 87 3,439 115 87 3,554 3,641 74 1982 1996
Sweetwater,
Sugarland, TX.. -- 207 11,783 -- 207 11,783 11,990 338 1983 1996
Walden, Humble,
TX............. -- 178 3,425 -- 178 3,425 3,603 23 1984 1996
Willow Fork,
Katy, TX....... -- 44 2,742 2 44 2,744 2,788 54 1990 1996
Woodhaven, Fort
Worth, TX...... -- 43 2,022 -- 43 2,022 2,065 47 1972 1996
Bear Creek,
Woodinville,
WA............. -- 705 4,823 310 711 5,127 5,838 1,350 1983 1993
------- ------- -------- ------- ------- -------- -------- -------
$ 50 $16,266 $168,961 $11,206 $16,299 $180,134 $196,433 $21,722
------- ------- -------- ------- ------- -------- -------- -------
RESORT COURSES:
London Bridge,
Lake Havasu
City, AZ....... $ -- $ 301 $ 1,699 $ 24 $ 305 $ 1,719 $ 2,024 $ 719 1968 1986
Superstition
Springs, Mesa,
AZ............. -- 698 3,771 32 702 3,799 4,501 1,108 1986 1992
Tatum Ranch,
Cave Creek, AZ. -- 1,000 3,972 (5) 1,002 3,965 4,967 1,289 1986 1992
Legend at
Arrowhead,
Glendale, AZ... -- 502 3,408 -- 502 3,408 3,910 927 1986 1992
Aptos Seascape,
Aptos, CA...... -- 901 3,491 20 904 3,508 4,412 875 1926 1986
BlackLake,
Nipomo, CA..... -- 1,744 9,299 -- 1,744 9,299 11,043 224 1965 1996
Arrowhead,
Littleton, CO.. -- 302 3,245 425 304 3,668 3,972 1,094 1972 1988
</TABLE>
42
<PAGE>
SCHEDULE III (CONTINUED)
NATIONAL GOLF PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION(1)
(IN THOUSANDS)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY CARRIED AT CLOSE OF PERIOD
-------------------- -----------------------------
COST
CAPITALIZED
SUBSEQUENT TOTAL COST
BUILDINGS & TO BUILDINGS & ACCUMULATED DATE DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTED ACQUIRED
----------- ------------ ------- ------------ ----------- ------- ------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Las Vegas
Hilton, Las
Vegas, NV...... $ -- $ 261 $ 3,727 $ 1,586 $ 264 $ 5,310 $ 5,574 $ 2,951 1961 1982
Painted Desert,
Las Vegas, NV.. -- 1,355 4,741 -- 1,355 4,741 6,096 115 1987 1996
Wildhorse,
Henderson, NV.. -- 4,677 6,557 2,528 4,677 9,085 13,762 758 1959 1994
Brigantine,
Brigantine, NJ. -- 194 1,768 1,299 196 3,065 3,261 1,035 1926 1989
Carolina Shores,
Calabash, NC... -- 588 5,903 12 590 5,913 6,503 2,504 1974 1986
Colonial
Charters,
Longs, SC...... -- 213 4,579 -- 213 4,579 4,792 101 1989 1996
Port Royal,
Hilton Head
Island, SC..... 20,000(2) 6,289 15,190 1,994 6,289 17,184 23,473 1,941 1985 1994
Shipyard, Hilton
Head Island,
SC............. -- (2) 4,773 9,756 381 4,773 10,137 14,910 1,242 1969 1994
Pecan Valley,
San Antonio,
TX............. -- 389 3,989 412 391 4,399 4,790 1,665 1962 1990
------- ------- -------- ------- ------- -------- -------- -------
$20,000 $24,187 $ 85,095 $ 8,708 $24,211 $ 93,779 $117,990 $18,548
------- ------- -------- ------- ------- -------- -------- -------
$25,359 $63,051 $423,790 $28,716 $63,048 $452,508 $515,557 $72,906
======= ======= ======== ======= ======= ======== ======== =======
</TABLE>
- -------
(1) Corporate assets are not included within the amounts.
(2) Combined encumbrance for Port Royal and Shipyard golf courses.
Depreciation of the Company's investment in Buildings and Improvements
reflected in the statements of operations are calculated over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings.................................................... 30 years
Ground improvements.......................................... 20 years
Furniture, fixtures and equipment............................ 3 to 10 years
</TABLE>
The changes in total real estate assets and accumulated depreciation
(excluding corporate assets and related accumulated depreciation) for the
three years ended December 31, are as follows:
<TABLE>
<CAPTION>
TOTAL REAL ESTATE ASSETS
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year................... $361,831 $271,850 $166,284
Acquisitions................................. 155,013 83,171 101,742
Improvements................................. 6,346 8,770 3,879
Disposals.................................... (7,633) (1,960) (55)
-------- -------- --------
Balance, end of year......................... $515,557 $361,831 $271,850
======== ======== ========
<CAPTION>
ACCUMULATED DEPRECIATION
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year................... $ 58,709 $ 46,862 $ 37,634
Depreciation for year........................ 17,978 12,598 9,228
Disposals.................................... (3,781) (751) --
-------- -------- --------
Balance, end of year......................... $ 72,906 $ 58,709 $ 46,862
======== ======== ========
</TABLE>
43
<PAGE>
3. EXHIBITS
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 31, 1995, by and
between National Golf Properties, Inc., a Delaware corporation, and
National Golf Properties of Maryland, Inc. (renamed "National Golf
Properties, Inc." immediately upon effectiveness of the merger), a
Maryland corporation (incorporated by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated September 26, 1995)
2.2 Asset Purchase Agreement and Agreement and Plan of Merger by and among
Golf Enterprises, Inc., National Golf Properties, Inc. and GEI
Acquisition Corporation, dated February 2, 1996 (incorporated by
reference to Exhibit 2 to Golf Enterprises, Inc. (File No. 0-24264)
Current Report on Form 8-K dated February 7, 1996)
2.3 First Amendment to Asset Purchase Agreement and Agreement and Plan of
Merger, dated as of February 16, 1996, by and among National Golf
Properties, Inc., GEI Acquisition Corporation and Golf Enterprises,
Inc. (incorporated by reference to Exhibit 2.3 to the Company's Annual
Report on Form 10-K dated February 29, 1996)
3.1 Articles of Incorporation of National Golf Properties, Inc.
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K dated September 26, 1995)
3.2 By-Laws of National Golf Properties, Inc. (incorporated by reference to
Exhibit 3.2 to the Company's Current Report on Form 8-K dated September
26, 1995)
3.3 Specimen of certificate representing shares of Common Stock
(incorporated by reference to Exhibit 3.3 to the Company's Report on
Form 8-B dated December 29, 1995)
10.1 Agreement of Limited Partnership of National Golf Operating
Partnership, L.P., dated as of August 18, 1993, by and among National
Golf Properties, Inc. and the Persons named therein as Limited Partners
(incorporated by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K dated February 29, 1996)
10.2 Form of Lease Agreement between the Company and AGC with respect to the
Initial Golf Courses and the Mesquite and Desert Lakes golf courses
(incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-11 No. 33-63110)
10.3 Form of Lease Agreement between the Company and AGC with respect to the
following golf courses: Southwyck, Dub's Dread, Kokopelli,
Summitpointe, Lake Wilderness, Links at Northfork, Hershey, Hershey
South, Canyon Oaks, Capitol City, Binks Forest, Port Royal, Shipyard,
Sugar Ridge, Wildhorse, Goshen Plantation, Hickory Heights, River's
Edge, Berry Creek, Carmel Mountain, Creekside, Honey Bee, Wood Ranch,
Monterey, Palm Valley, Ruffled Feathers, Upland Hills, Oregon Golf,
Golden Oaks, Paradise Hills, Chesapeake, SeaCliff, Ancala, Arrowhead,
BlackLake, Painted Desert, Walden, Deer Creek, WestWinds, Stonecreek
and Tamarack; and Form of Lease Agreement between the Company and CGG
with respect to the Carmel Mountain golf course and the Sweetwater golf
course (incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K dated February 29, 1996)
10.4 Registration Rights Agreement, made and entered into as of August 18,
1993, by and among National Golf Properties, Inc. and the persons named
therein (incorporated by reference to Exhibit 10.4 to the Company's
Annual Report on Form 10-K dated February 29, 1996)
10.5 Shelf Registration Rights Agreement, made and entered into as of August
18, 1993, by and among National Golf Properties, Inc. and the persons
named therein (incorporated by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K dated February 29, 1996)
</TABLE>
44
<PAGE>
<TABLE>
<C> <S>
*10.6 National Golf Properties, Inc. Stock Incentive Plan Key Employees of
National Golf Properties, Inc., National Golf Operating Partnership,
L.P. and American Golf Corporation, effective August 18, 1993
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K dated February 29, 1996)
*10.7 Indemnification Agreement, made as of August 18, 1993, by and between
National Golf Properties, Inc. and its directors and officer
(incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K dated February 29, 1996)
*10.8 Employment Agreements, dated August 18, 1993, between National Golf
Properties, Inc. and each of Richard C. Price and Edward R. Sause
(incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K dated February 29, 1996)
10.9 Director Designation Agreement, dated as of August 18, 1993 by and
among David G. Price, National Golf Properties, Inc. and National Golf
Operating Partnership, L.P. (incorporated by reference to Exhibit 10.9
to the Company's Annual Report on Form 10-K dated February 29, 1996)
10.10 Services Agreement, entered into as of August 18, 1993, by and between
National Golf Properties, Inc. and National Golf Operating
Partnership, L.P. (incorporated by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K dated February 29, 1996)
10.11 Senior Secured Promissory Notes and Guarantees related to the Option
Golf Courses, each made and entered into as of August 18, 1993,
between National Golf Operating Partnership, L.P., and The Price
Revocable Trust (incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K dated February 29, 1996)
10.12 First Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing relating to each of the Senior Secured Participating
Promissory Notes, each made as of August 18, 1993, by and among The
Price Revocable Trust and National Golf Operating Partnership, L.P.
(incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K dated February 29, 1996)
10.13 Partnership Interests Exchange Agreement, dated as of August 18, 1993,
by and among National Golf Operating Partnership, L.P. and Partners of
Partnerships Controlling 21 Courses (incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K dated
February 29, 1996)
10.14 Agreement for Transfer of Realty and Assets, dated as of August 18,
1993, by and among The Price Revocable Trust, Myershan, Inc. and
National Golf Operating Partnership, L.P. (incorporated by reference
to Exhibit 10.14 to the Company's annual Report on Form 10-K dated
February 29, 1996)
10.15 Plan and Agreement of Merger, dated as of August 18, 1993, by and
among Bear Creek Enterprises, Inc., National Golf Properties, Inc.,
The Price Revocable Trust and David G. Price (incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K
dated February 29, 1996)
10.16 Partnership Interests Acquisition Agreement, dated as of August 18,
1993, by and among The Price Revocable Trust, American Golf
Investment, Inc., Supermarine Aviation, Limited, David G. Price and
National Golf Properties, Inc. (incorporated by reference to Exhibit
10.16 to the Company's Annual Report on Form 10-K dated February 29,
1996)
10.17 Contribution Agreement, dated as of August 18, 1993, by and between
National Golf Operating Partnership, L.P. and National Golf
Properties, Inc. (incorporated by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-K dated February 29, 1996)
</TABLE>
- --------
*Management contract or compensatory plan or arrangement.
45
<PAGE>
<TABLE>
<C> <S>
10.18 Option Courses Agreement, dated as of August 18, 1993, by and among
David G. Price, The Price Revocable Trust, Black Lake/Penasquitos,
David G. Price, American Golf Corporation and National Golf Operating
Partnership, L.P. (incorporated by reference to Exhibit 10.18 to the
Company's Annual Report on Form 10-K dated February 29, 1996)
10.19 Agreement relating to prohibition on acquisitions of golf courses by
David G. Price and his affiliates, made and entered into as of August
18, 1993, by and among National Golf Properties Inc., National Golf
Operating Partnership, L.P., American Golf Corporation, David G. Price,
Dallas P. Price and The Price Revocable Trust (incorporated by
reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K
dated February 29, 1996)
10.20 Amendment to agreement relating to prohibition on acquisitions of golf
courses by David G. Price and his affiliates among National Golf
Properties, Inc., National Golf Operating Partnership, L.P., American
Golf Corporation, David G. Price, Dallas P. Price and The Price
Revocable Trust (incorporated by reference to the Company's Quarterly
Report on Form 10-Q/A for the period ended September 30, 1995)
10.21 Note Purchase Agreement ("Note Purchase Agreement"), dated as of
December 15, 1994, with respect to National Golf Operating Partnership,
L.P.'s Series A 8.68% Guarantied Senior Promissory Notes due December
15, 2004 and Series B 8.73% Guarantied Senior Promissory Notes due June
15, 2005 (incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K dated February 29, 1996)
10.22 Series A 8.68% Guarantied Senior Promissory Notes and Series B 8.73%
Guarantied Senior Promissory Notes (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K dated
February 29, 1996)
10.23 General Continuing Guaranty of National Golf Properties, Inc. ("General
Continuing Guaranty"), dated as of December 15, 1994, with respect to
National Golf Operating Partnership, L.P.'s Series A 8.68% Guarantied
Senior Promissory Notes due December 15, 2004 and Series B 8.73%
Guarantied Senior Promissory Notes due June 15, 2005 (incorporated by
reference to Exhibit 10.15 to the Company's Report on Form 8-B dated
December 29, 1995)
10.24 First Amendment to Note Purchase Agreements, dated as of August 31,
1995 (incorporated by reference to Exhibit 10.17 to the Company's
Report on Form 8-B dated December 29, 1995)
10.25 First Amendment to General Continuing Guarantee, dated as of August 31,
1995 (incorporated by reference to Exhibit 10.18 to the Company's
Report on Form 8-B dated December 29, 1995)
10.26 Agreement of Limited Partnership of Royal Golf, L.P., II, dated as of
July 7, 1994 (incorporated by reference to Exhibit 10.19 to the
Company's Report on Form 8-B dated December 29, 1995)
10.27 Amended and Restated Loan Agreement, dated as of July 7, 1994,
(incorporated by reference to Exhibit 10.19 to the Company's Report on
Form 8-B dated December 29, 1995)
10.28 Credit Agreement among Bank of America National Trust and Savings
Association, National Golf Operating Partnership, L.P. and National
Golf Properties, Inc. dated as of September 29, 1993, as amended
(incorporated by reference to Exhibit 10.21 to the Company's Report on
Form 8-B dated December 29, 1995)
10.29 Agreement to Enter Into Leases, entered into as of February 1, 1996, by
and among National Golf Properties, Inc., National Golf Operating
Partnership and American Golf Corporation (incorporated by reference to
Exhibit 10.29 to the Company's Annual Report on Form 10-K dated
February 29, 1996)
10.30 Restated Note Agreement, dated as of July 1, 1996, with respect to
National Golf Operating Partnership, L.P.'s Series A-1, Series A-2 and
Series A-3 7.9% Guarantied Senior Promissory Notes due June 15, 2006
and Series B 8% Guarantied Senior Promissory Notes due December 12,
2006
</TABLE>
46
<PAGE>
<TABLE>
<C> <S>
10.31 Form of Series A 7.9% Guarantied Senior Promissory Notes and Series B
8% Guarantied Senior Promissory Notes
10.32 Amended and Restated General Continuing Guaranty of National Golf
Properties, Inc., dated as of July 1, 1996, with respect to National
Golf Operating Partnership, L.P.'s Series A-1, Series A-2 and Series A-
3 7.9% Guarantied Senior Promissory Notes due June 15, 2006 and Series
B 8% Guarantied Senior Promissory Notes due December 12, 2006
10.33 Assumption Agreement, dated as of July 1, 1996, by National Golf
Operating Partnership, L.P. and the Purchasers named therein
10.34 Assumption Agreement, dated as of July 1, 1996, by National Golf
Operating Partnership, L.P. and the Purchasers named therein
10.35 Lease Agreement, dated as of July 11, 1996, between the Company and The
Links Group, Inc. with respect to Colonial Charters Golf Course
10.36 Lease Agreement, dated as of December 17, 1996, between the Company and
Evergreen Alliance Golf Limited with respect to San Geronimo Golf
Course
10.37 Assignment Agreement, dated as of July 30, 1996, between National Golf
Properties, Inc. and National Golf Operating Partnership, L.P.
(incorporated by reference to Exhibit 2.3 to the Company's Current
Report on Form 8-K dated August 13, 1996)
10.38 Lease Agreement, dated as of July 30, 1996, between National Golf
Operating Partnership, L.P. and American Golf Corporation (incorporated
by reference to Exhibit 2.4 to the Company's Current Report on Form 8-K
dated August 13, 1996)
10.39 Amendment of Agreement of Limited Partnership of National Golf
Operating Partnership, L.P., dated as of July 25, 1996, by National
Golf Properties, Inc.
10.40 Second Amendment of Agreement of Limited Partnership of National Golf
Operating Partnership, L.P., dated as of July 29, 1996, by National
Golf Properties, Inc.
10.41 Registration Rights Agreement, dated as of July 30, 1996, by and among
National Golf Properties, Inc., and the parties set forth therein
11.1 Statement regarding computation of per share earnings
21.1 List of Subsidiaries of National Golf Properties, Inc. (incorporated by
reference to Exhibit 22.1 to the Company's Report on Form 8-B dated
December 29, 1995)
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
(b) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER
None
(d) ADDITIONAL INFORMATION REGARDING AMERICAN GOLF CORPORATION AND
SUBSIDIARIES
Analysis of American Golf Corporation's Consolidated Financial
Information............................................................. 49
American Golf Corporation's Consolidated Financial Statements
Report of Independent Accountants...................................... 51
Consolidated Balance Sheets as of December 31, 1996 and 1995............ 52
Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994.................................................... 53
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994....................................... 54
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.................................................... 55
Notes to Consolidated Financial Statements.............................. 56
</TABLE>
48
<PAGE>
ANALYSIS OF AMERICAN GOLF CORPORATION'S FINANCIAL INFORMATION
This financial analysis should be read in conjunction with the consolidated
financial statements of American Golf Corporation and Subsidiaries ("AGC") for
the years ended December 31, 1996, 1995 and 1994.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995
Total revenues from golf course operations and management agreements for AGC
increased by $80.6 million, or 22.5%, to $439.6 million for the year ended
December 31, 1996 as compared to $359 million for the year ended December 31,
1995. The increase in revenues was primarily attributable to the net increase
of 48 new leased courses and 6 new courses under management agreements. Green
fees for the year ended December 31, 1996, $157.8 million, increased by $23.7
million, or 17.7%, as compared to $134.1 million for the year ended December
31, 1995. Cart rental revenues for the year ended December 31, 1996, $57.8
million, increased by $6 million, or 11.6%, from $51.8 million for the year
ended December 31, 1995. Member dues and initiation fees for the year ended
December 31, 1996, $74.1 million, increased by $24 million, or 47.9%, from
$50.1 million for the year ended December 31, 1995. Food and beverage revenues
for the year ended December 31, 1996, $70.3 million, increased by $15.3
million, or 27.8%, from $55 million for the year ended December 31, 1995.
Merchandise sales were $37.8 million, an increase of $6.9 million or 22.3%
from $30.9 million for the year ended December 31, 1995. Other operating
income, which includes range income, increased by $4.6 million, or 14%, to
$37.4 million for the year ended December 31, 1996, from $32.8 million for the
year ended December 31, 1995. Management fee revenue of $4.4 million was
unchanged for the year ended December 31, 1996 when compared to the year ended
December 31, 1995. Each revenue category rose in reasonable proportion to the
overall increase in revenues due to the new acquisitions, with the exception
of member dues and initiation fees. This revenue category increased as a
result of the acquisition of a number of large private clubs.
Total operating expenses increased by $75.2 million or 21.6%, to $423.7
million for the year ended December 31, 1996 as compared to $348.5 million for
the year ended December 31, 1995. Rent expense increased by $16.5 million, or
21.2%, to $94.3 million for the year ended December 31, 1996, from $77.8
million for the year ended December 31, 1995. General and administrative
expenses for the year ended December 31, 1996, $42.2 million, increased by $7
million, or $19.9%, from $35.2 million for the year ended December 31, 1995.
These expenses increased primarily due to additional lease agreements.
Net income increased by $4.6 million to $14.3 million for the year ended
December 31, 1996, from $9.7 million for the year ended December 31 1995. The
increase in net income is primarily due to the seasonal nature of AGC's
business in that the weather during the year ended December 31, 1996, was less
severe than the year ended December 31, 1995.
Comparison of the year ended December 31, 1995 to the year ended December 31,
1994
Total revenues from golf course operations and management agreements for AGC
increased by $52.5 million, or 17.1%, to $359 million for the year ended
December 31, 1995 as compared to $306.5 million for the year ended December
31, 1994. The increase in revenues was primarily attributable to the addition
of 14 new leased courses and 6 new courses under management agreements. Greens
fees for the year ended December 31, 1995 were $134.1 million, an increase of
$14.9 million, or 12.5%, from $119.2 million for the year ended December 31,
1994. Cart rental revenues for the year ended December 31, 1995 were $51.8
million, an increase of $6.8 million, or 15.1%, from $45 million for the year
ended December 31, 1994. Member dues and initiation fees for the year ended
December 31, 1995 were $50.1 million, an increase of $11.2 million, or 28.9%,
from $38.9 million for the year ended December 31, 1994. Food and beverage
revenues for the year ended December 31, 1995 were $55 million, an increase of
$8.7 million, or 18.8%, from $46.3 million for the year December 31, 1994.
Merchandise sales were $30.9 million, an increase of $7.9 million, or 34.3%,
from $23 million for the year ended December 31, 1994. Other revenue, which
includes range income, increased by
49
<PAGE>
$3.6 million, or 12.3%, to $32.8 million for the year ended December 31, 1995,
from $29.2 million for the year ended December 31, 1994. Each revenue category
rose in reasonable proportion to the overall increase in revenues due to the
new acquisitions, with the exception of member dues and initiation fees. This
revenue category increased as a result of the acquisition of a number of large
private clubs.
Total operating expenses increased by $52 million or 17.5%, to $348.5
million for the year ended December 31, 1995 as compared to $296.5 million for
the year ended December 31, 1994. The margin on merchandise sold increased
from 29.7% in 1994 to 34.8% in 1995 due to the greater use of national
contracts which provide the Company with more favorable purchasing terms. The
margin on food and beverage sales remained relatively constant. Rent expense
increased by $9.7 million or 14.2% to $77.8 million for the year ended
December 31, 1995, from $68.1 million for the year ended December 31, 1994.
General and administrative expenses of $35.2 million (which include, among
other things, personal and property taxes, insurance and advertising),
increased by $4.8 million, or 15.8% for the year ended December 31, 1995, from
$30.4 million for the year ended December 31, 1994. These expenses increased
primarily due to additional lease agreements. Depreciation and amortization
increased by approximately $1.9 million due, in part, to the completion of
significant capital improvements as well as AGC entering into capital leases
for the purchase of approximately $4.7 million of machinery and equipment.
Net income decreased by $.6 million to $9.7 million for the year ended
December 31, 1995, from $10.3 million for the year ended December 31, 1994.
This decrease is due to a $2.4 million increase in interest expense offset by
increases in operating income of approximately $.7 million, interest income of
$.6 million and minority interest in loss of $.5 million. The increase in
interest expense is due to increased borrowings of approximately $20.3 million
during 1995. Interest income increased primarily due to a full year of
interest earned on the receivable from officers and directors. The income
attributable to the minority interest in loss is due to the consolidation of
the Company with its majority owned entities American Golf of Atlanta,
American Golf of Detroit, American Golf (UK) Limited and CW Golf Partners.
Liquidity and Capital Resources
On July 30, 1996, the Company entered into two $15 million credit facilities
with a commercial bank that bear interest at prime or Libor based rate.
Letters of credit issued under these credit facilities are charged a
1.5% annual letter of credit fee. The $15 million facility is used to finance
working capital requirements and expires on August 1, 1997. At December 31,
1996, there was $3 million advanced against this line of credit and the
standby letters of credit outstanding totaled $4.2 million. At December 31,
1995, the outstanding cash balance advanced against this line of credit was
$8.5 million and the standby letters of credit outstanding totaled
$7.2 million. The first $15 million credit facility, which expires on August
15, 1997, supports $13.6 million of letters of credit issued in favor of
National Golf Properties ("NGP"), pursuant to the terms of the leases between
NGP and AGC.
AGC had working capital of approximately $6.5 million as of December 31,
1996. AGC believes it will be able to satisfy its liquidity requirements,
including capital expenditures and rental payments under the leases with cash
flow available from operations and available borrowings. AGC has capital
expenditure commitments related to acquiring and renewing leases. These
commitments are typically satisfied over several years. The material capital
commitments are clubhouse renovations, building and course improvements and
irrigation systems. At December 31, 1996, AGC's capital expenditure commitment
was approximately $1.8 million. The improvements will be funded form AGC's
operating cash flow and from available borrowings under the bank credit
facilities.
50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American Golf Corporation
We have audited the accompanying consolidated balance sheets of American
Golf Corporation and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of American Golf Corporation and Subsidiaries as of December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Los Angeles, California
February 25, 1997
51
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 2,291 $ 2,345
Accounts receivable--members (less allowance for doubtful
accounts of $1,234 and $892 in 1996 and 1995,
respectively)........................................... 17,605 10,674
Other receivables........................................ 15,635 11,410
Receivables from affiliates, net......................... 7,985 9,290
Inventories.............................................. 11,462 10,224
Prepaid expenses......................................... 2,533 3,441
-------- --------
Total current assets................................... 57,511 47,384
Property, equipment and capital leases, net................ 80,967 75,567
Licenses................................................... 775 696
Leasehold rights........................................... 13,907 11,034
Deposits and other assets.................................. 7,005 9,474
Note receivable from shareholder........................... 29,000 --
-------- --------
Total assets........................................... $189,165 $144,155
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 7,572 $ 6,802
Notes payable--current portion:
Shareholders........................................... 29 26
Capital leases......................................... 1,719 738
Other.................................................. 3,627 1,375
Accrued expenses......................................... 26,837 21,033
Other liabilities........................................ 11,209 6,504
-------- --------
Total current liabilities.............................. 50,993 36,478
Notes payable--long-term portion:
Shareholders............................................. 453 482
Capital leases........................................... 4,437 3,701
Other.................................................... 53,841 32,094
Accrued expenses........................................... 9,310 6,117
-------- --------
Total liabilities...................................... 119,034 78,872
-------- --------
Minority interest.......................................... 466 681
-------- --------
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock--no par value; 10,000,000 shares authorized;
6,354,497 shares outstanding at December 31, 1996 and
1995.................................................... 8,080 8,682
Retained earnings........................................ 65,907 60,765
Notes receivable from officers/directors................. (4,299) (4,901)
Cumulative foreign currency translation adjustment....... (23) 56
-------- --------
Total shareholders' equity............................. 69,665 64,602
-------- --------
Total liabilities and shareholders' equity............. $189,165 $144,155
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
52
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Green fees............................. $157,821 $134,100 $119,228
Cart rentals........................... 57,753 51,801 45,044
Member dues and initiation fees........ 74,112 50,134 38,891
Food and beverage sales................ 70,289 54,956 46,280
Merchandise sales...................... 37,805 30,888 22,993
Other revenue.......................... 37,427 32,755 29,209
Management fees........................ 4,360 4,432 4,884
-------- -------- --------
Total revenues....................... 439,567 359,066 306,529
Costs and expenses:
Payroll and related expenses........... 145,245 118,440 99,788
Cost of food and beverage sold......... 22,682 17,514 14,697
Cost of merchandise sold............... 24,660 20,142 16,161
General and administrative............. 42,155 35,204 30,399
Repairs and maintenance................ 11,639 11,435 11,322
Other operating expenses............... 73,391 60,983 51,020
Rents.................................. 94,335 77,767 68,065
Depreciation and amortization.......... 9,546 6,970 5,105
-------- -------- --------
Total costs and expenses............. 423,653 348,455 296,557
Operating income......................... 15,914 10,611 9,972
Other income (expense):
Interest income........................ 2,210 1,583 961
Interest expense....................... (3,841) (2,830) (405)
-------- -------- --------
Income before provision for state
income taxes and minority interest
in loss............................. 14,283 9,364 10,528
Provision for state income taxes......... (223) (201) (237)
-------- -------- --------
Income before minority interest in
loss................................ 14,060 9,163 10,291
Minority interest in loss................ 215 519 --
-------- -------- --------
Net income........................... $ 14,275 $ 9,682 $ 10,291
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
53
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------
CUMULATIVE
FOREIGN
NOTES RECEIVABLE CURRENCY TOTAL
RETAINED FROM TRANSLATION SHAREHOLDERS'
SHARES AMOUNT EARNINGS OFFICERS/DIRECTORS ADJUSTMENT EQUITY
------ ------ -------- ------------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... 6,140 $3,350 $50,977 $ -- $-- $54,327
Net income............ -- -- 10,291 -- -- 10,291
Dividends............. -- -- (5,826) -- -- (5,826)
Issuance of stock for
notes receivable from
officers/directors... 199 4,939 -- (4,939) -- --
----- ------ ------- ------- ---- -------
Balance, December 31,
1994................... 6,339 8,289 55,442 (4,939) -- 58,792
Net income............ -- -- 9,682 -- -- 9,682
Dividends............. -- -- (4,359) -- -- (4,359)
Foreign currency
translation
adjustment........... -- -- -- -- 56 56
Issuance of stock for
notes receivable from
officers/directors... 15 393 -- (368) -- 25
Payments on notes
receivable from
officers/directors... -- -- -- 406 -- 406
----- ------ ------- ------- ---- -------
Balance, December 31,
1995................... 6,354 8,682 60,765 (4,901) 56 64,602
Net income............ -- -- 14,275 -- -- 14,275
Dividends............. -- -- (9,133) -- -- (9,133)
Adjustment to notes
receivable from
officers/directors... -- (602) -- 602 -- --
Foreign currency
translation
adjustment........... -- -- -- -- (79) (79)
----- ------ ------- ------- ---- -------
Balance, December 31,
1996................... 6,354 $8,080 $65,907 $(4,299) $(23) $69,665
===== ====== ======= ======= ==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
54
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 14,275 $ 9,682 $ 10,291
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 9,475 6,970 5,105
Minority interest in loss.................... (215) (519) --
Increase (decrease) from changes in:
Accounts receivable........................ (6,914) (5,177) (935)
Other receivables.......................... (4,204) (3,444) (4,290)
Receivable from affiliates, net............ 1,288 (4,691) 5,096
Inventories................................ (1,205) (1,869) (1,335)
Prepaid expenses........................... 930 391 2,534
Licenses, deposits and other assets........ 2,413 (668) (800)
Accounts payable........................... 770 1,200 1,291
Accrued expenses........................... 8,882 2,764 (405)
Other liabilities.......................... 4,177 (346) 443
-------- -------- --------
Net cash provided by operating
activities.............................. 29,672 4,293 16,995
-------- -------- --------
Cash flows from investing activities:
Acquisition of property and equipment.......... (9,970) (19,703) (12,242)
Acquisition of leasehold rights................ (3,571) (538) (10,362)
Issuance of note receivable from shareholder... (29,000) -- --
-------- -------- --------
Net cash used in investing activities.... (42,541) (20,241) (22,604)
-------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable--other............. 57,732 28,478 38,254
Payments on notes payable--
Shareholders............................... (26) (343) (23)
Other...................................... (34,717) (12,619) (30,848)
Capital leases............................. (1,160) (268) --
Proceeds from notes receivable from
officers/directors............................ -- 431 --
Capital contribution by minority interest ..... -- 1,200 --
Dividends paid................................. (9,133) (4,359) (5,826)
-------- -------- --------
Net cash provided by financing
activities.............................. 12,696 12,520 1,557
Effect of exchange rate changes on cash
and cash equivalents.................... 119 56 --
-------- -------- --------
Net decrease in cash and cash
equivalents............................. (54) (3,372) (4,052)
Cash and cash equivalents, beginning of period... 2,345 5,717 9,769
-------- -------- --------
Cash and cash equivalents, end of period......... $ 2,291 $ 2,345 $ 5,717
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
55
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
The consolidated financial statements include the accounts of American Golf
Corporation ("AGC"), a California subchapter S Corporation, and its
subsidiaries, American Golf of Atlanta ("Atlanta"), a Georgia general
partnership, American Golf of Detroit ("Detroit"), a Michigan general
partnership, American Golf (UK) Limited ("AG(UK)"), a United Kingdom limited
liability company, and CW Golf Partners ("CWP"), a California limited
partnership (collectively, the "Company"). AGC was formed in 1973 for the
purpose of operating public and private golf and tennis facilities on leased
premises. The Company is 71% owned by David G. Price. The following table
lists AGC's subsidiaries and selected information:
<TABLE>
<CAPTION>
AGC
ENTITY FORMATION DATE OWNERSHIP PURPOSE
- ------ -------------- --------- -------
<S> <C> <C> <C>
Atlanta June 1986 65% Acquire and operate four courses in Atlanta, Georgia.
Detroit December 1990 80% Acquire and operate four courses in Detroit, Michigan.
AG(UK) August 1993 75% Operate courses in the United Kingdom.
CWP September 1993 75% Operate one course in Los Angeles, California.
</TABLE>
The remaining 25% interest in AG(UK) is owned by European Golf Corporation,
an affiliate of AGC.
The term "affiliate", as used in these financial statements, refers to any
entity in which David G. Price has a controlling interest.
At December 31, 1996, the Company leases 109 golf courses from National Golf
Properties, Inc. ("NGP"). David G. Price is the Chairman of the Board of
Directors of NGP and owns 5.5% of NGP's outstanding stock and 38.3% of
National Golf Operating Partnership, L.P. ("NGOP").
On July 30, 1996, NGP purchased 20 golf courses from Golf Enterprises, Inc.
("GEI") for a purchase price of $58 million. All of the courses acquired were
leased to the Company on a triple net basis. NGP receives minimum base rent
equal to 10% of its investment. The minimum base rent will be adjusted in
specific years based on increases in CPI. Additionally, a percentage rent
feature allows NGP to participate in growth in revenues.
PRINCIPLES OF CONSOLIDATION
All material intercompany transactions and balances have been eliminated in
consolidation.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost (using the first-in, first-out
method) or market. Inventories consist primarily of food, beverage, golf and
tennis equipment, and clothing and accessories.
REVENUE RECOGNITION
Revenue from green fees, cart rentals, food and beverage sales, merchandise
sales and range income are generally recognized at the time of sale.
56
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Revenue from membership dues are generally billed monthly and recognized in
the month earned. The monthly dues are structured to cover the club operating
costs and membership services. Initiation fees are generally refundable in 30
years. Accordingly, the difference between the amount of the fees and the net
present value of the future obligation is recognized as revenue at the time of
sale, unless uncertainty surrounding collectability exists.
PROPERTY, EQUIPMENT, CAPITAL LEASES AND LEASEHOLD RIGHTS
Property, equipment and leasehold rights are carried at the lower of cost or
net realizable value. Property and equipment under capital leases are stated
at the lower of the present value of the future minimum lease payments at the
beginning of the lease term or the fair value at the inception of the lease.
Depreciation of property and equipment is computed using the straight-line
method over the lesser of the estimated useful life of the asset (3 to 30
years) or the remaining term of the lease. Property and equipment held under
capital leases and leasehold rights are amortized using the straight-line
method over the lesser of the lease term or the estimated useful life of the
asset. Leasehold rights are recorded at cost and amortized over the term of
the lease.
When property and equipment are sold or otherwise disposed of, the asset
account and related accumulated depreciation and amortization account are
relieved, and any gain or loss is included in operations. Expenditures for
maintenance and repairs are charged to operations. Significant expenditures
which extend the useful life of existing assets are capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Certain long-lived assets and certain identifiable intangibles
to be disposed of must be reported at the lower of carrying amount or fair
value less cost to sell. The Company assessed whether there had been an
impairment in the value of long-lived assets and certain identifiable
intangibles by considering factors such as expected future operating income,
trends and prospects, as well as the effects of demand, competition and other
economic factors. Management believes no impairment has occurred.
STOCK-BASED EMPLOYEE COMPENSATION AWARDS
Statement of Financial Accounting Standards No. 123, "Accounting for the
Awards of Stock-Based Compensation to Employees" ("SFAS No. 123") encourages,
but does not require companies to record compensation cost for stock-based
compensation plans at fair value. The Company has adopted the disclosure
requirements of SFAS No. 123, which involves proforma disclosure of net income
under SFAS No. 123, detailed descriptions of plan terms and assumptions used
in valuing stock option grants. The Company has chosen to continue to account
for stock-based employee compensation awards in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist primarily of trade receivables.
57
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Concentration of credit risk with respect to trade receivables, which
consists primarily of membership dues and charges, is limited due to the large
number of club members comprising the Company's customer base, and their
dispersion across many different geographic areas. The trade receivables are
billed and due monthly, and all probable bad debt losses have been
appropriately considered in establishing an allowance for doubtful accounts.
As of December 31, 1996 the Company had no significant concentration of credit
risk.
The Company has cash in financial institutions which is insured by the
Federal Deposit Insurance Corporation ("FDIC") up to $100,000 per account. At
various times throughout the year and as of December 31, 1996, the Company had
cash in financial institutions which was in excess of the FDIC insurance
limit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the reporting requirements of SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments", the Company calculates the fair
value of financial instruments and includes this additional information in the
notes to the consolidated financial statements when the fair value is
different than the carrying value of those financial instruments. When the
fair value reasonably approximates the carrying value, no additional
disclosure is made. The Company uses quoted market prices to calculate these
fair values.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs for
the years ended December 31, 1996, 1995 and 1994 were approximately
$5,531,000, $4,521,000 and $3,562,000, respectively.
FOREIGN CURRENCY TRANSLATION
The Company translates foreign currency financial statements by translating
balance sheet accounts at the year-end exchange rate and income statement
accounts at the average exchange rate for the year. Translation gains and
losses are recorded in shareholders' equity, and realized gains and losses are
included in operations. The effect of realized gains and losses is not
material to the consolidated financial statements.
(2) RECEIVABLES FROM AFFILIATES, NET:
The receivables from affiliates, net, is uncollateralized and due within one
year.
58
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) PROPERTY, EQUIPMENT AND CAPITAL LEASES:
Property, equipment and capital leases consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES DECEMBER 31,
(YEARS) ------------------
<S> --------- <C> <C>
1996 1995
----- --------
(IN THOUSANDS)
Golf course improvements.................. 10-20 $ 48,426 $ 40,041
Buildings................................. 15-30 35,757 30,535
Furniture, fixtures, machinery and
equipment................................. 3-7 23,801 19,787
Equipment under capital leases............ 3-7 7,584 4,707
-------- --------
115,568 95,070
Less: accumulated depreciation............ (36,850) (30,497)
-------- --------
78,718 64,573
Construction-in-progress.................. 2,249 10,994
-------- --------
$ 80,967 $ 75,567
======== ========
</TABLE>
Equipment under capital leases includes golf carts, turf and maintenance
equipment, computers, and other office equipment.
Interest capitalized for the years ended December 31, 1996, 1995 and 1994
was approximately $347,000, $416,000 and $418,000 respectively.
(4) NOTE RECEIVABLE FROM SHAREHOLDER:
The note receivable from shareholder is due in 2004 with principle payments
beginning in 1999. The note bears interest at 9.35% and is payable semi-
annually.
(5) STATE INCOME TAXES:
The Company has elected to be taxed as an S corporation under the Internal
Revenue Code of 1986, as amended. Accordingly, corporate income is taxed
directly to the shareholders for federal income tax reporting purposes. The
Company therefore has no provision in its consolidated financial statements
for federal income taxes. The following is the provision for state franchise
and income taxes for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Current...................................................... $-- $-- $128
Deferred..................................................... 223 201 109
---- ---- ----
Total provision for state income taxes....................... $223 $201 $237
==== ==== ====
</TABLE>
59
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) NOTES PAYABLE--SHAREHOLDERS:
Notes payable to shareholders consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
INTEREST CURRENT LONG-TERM CURRENT LONG-TERM
INTEREST RATE PAYMENTS PORTION PORTION PORTION PORTION MATURITY
------------- -------- ------- --------- ------- --------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
8.0%........... Monthly $28 $445 $25 $474 12/2007
8.0%........... Monthly 1 8 1 8 12/2007
--- ---- --- ----
$29 $453 $26 $482
=== ==== === ====
</TABLE>
Interest expense to the shareholders for the years ended December 31, 1996,
1995 and 1994 was approximately $40,000, $75,000 and $44,000, respectively.
Annual maturities on notes payable to shareholders are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- --------------
(IN THOUSANDS)
<S> <C>
1997.................................................... $ 29
1998.................................................... 31
1999.................................................... 34
2000.................................................... 36
2001.................................................... 39
Thereafter.............................................. 313
----
$482
====
</TABLE>
(7) NOTES PAYABLE--OTHERS:
Notes payable to others consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
------- -------
LONG- LONG-
INTEREST INTEREST CURRENT TERM CURRENT TERM
TYPE OF COLLATERAL RATE PAYMENTS PORTION PORTION PORTION PORTION MATURITY
- ------------------ --------- ------------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Collateralized note..... 9.0% Monthly $ -- $ -- $ 3 $ -- 1/1996
Collateralized line of
credit................. Reference Monthly 3,000 -- -- 8,500 1/1998
Uncollateralized note... 9.0% Monthly 19 7 18 26 4/1998
Uncollateralized note... 8.3% Quarterly 39 221 36 260 6/2002
Collateralized note..... 8.0% Monthly 219 4,632 68 4,607 9/2009
Collateralized note..... 9.5% Monthly 202 4,976 -- 4,951 1/2010
Collateralized notes.... 9.4% Semi-Annually -- 41,500 1,250 13,750 7/2004
Collateralized notes.... 9%-23% Monthly 148 148 -- -- 4/1999
Collateralized note..... 9.5% Quarterly -- 2,357 -- -- 12/2001
------ ------- ------ -------
$3,627 $53,841 $1,375 $32,094
====== ======= ====== =======
</TABLE>
At December 31, 1996 and 1995 the bank prime and reference rate was 8.25% and
8.50%, respectively.
60
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) NOTES PAYABLE--OTHERS (CONTINUED):
Annual maturities on notes payable to others are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- -------------
(IN THOUSANDS)
<S> <C>
1997..................................................... $ 3,627
1998..................................................... 657
1999..................................................... 1,309
2000..................................................... 3,882
2001..................................................... 6,153
Thereafter............................................... 41,840
-------
$57,468
=======
</TABLE>
The note agreements contain, among other covenants, working capital
maintenance, fixed charge and debt to net worth ratios, minimum tangible net
worth amounts, and certain restrictions regarding indebtedness to others.
On July 30, 1996, the Company entered into two $15 million credit facilities
with a commercial bank that bear interest at prime or a Libor based rate.
Letters of credit issued under these credit facilities are charged a 1.5%
annual letter of credit fee. The first $15 million facility is used to finance
working capital requirements and expires on August 1, 1997. At December 31,
1996, there was $3,000,000 outstanding and the standby letters of credit
outstanding totaled $4,181,000. The second $15 million credit facility, which
expires on August 15, 1997, supports $13,555,000 of letters of credit issued
in favor of NGP, pursuant to the terms of the leases between NGP and AGC. The
Company is also required to maintain specified financial ratios and levels of
net worth.
Loans are collateralized by equipment, accounts receivable and inventory.
The net book value at December 31, 1996 and 1995 of the assets collateralizing
the notes payable was approximately $76.5 million and $61.4 million,
respectively.
The Company placed $41.5 million of fixed rate senior collateralized notes
due 2004 with a group of institutional investors. The net proceeds from the
private placement were used to repay bank debt and provide a $29 million loan
to David G. Price. The private placement loan is collateralized by the issued
and outstanding stock of an affiliate.
(8) NOTES PAYABLE--CAPITAL LEASES:
Future minimum payments, by year and in the aggregate, under noncancelable
capital leases with initial remaining terms of one year or more consist of the
following at December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- -------------
(IN THOUSANDS)
<S> <C>
1997.................................................... $2,164
1998.................................................... 1,887
1999.................................................... 2,296
2000.................................................... 742
------
Total minimum lease payments............................... 7,089
Amount representing interest............................... 933
------
Present value of net minimum payments...................... 6,156
Current portion............................................ 1,719
------
Long-term portion.......................................... $4,437
======
</TABLE>
61
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) EMPLOYEE BENEFITS:
In 1994, the Company established the 1994 Equity Participation Plan, as
amended (the "1994 Plan"). Under the 1994 Plan, 1,200,000 shares may be
awarded to key employees as either nonqualified stock options, Performance
Awards, as defined, or the right to purchase common stock. During 1994, the
Company issued 198,677 shares of common stock at $24.86 per share and received
notes receivable totaling $4,533,000. During 1995, the Company issued 15,820
shares of common stock at $24.86 per share and received notes receivable
totaling $368,000. On December 1, 1996, the stock grants were amended to
adjust the formula for determining the initial share value, and as a result
the price per share was reduced to $22.05 and the notes receivable were
reduced to $3,975,000 for the 1994 grants and $324,000 for the 1995 grant. The
stock options vest over a three to five year period and are subject to
continued employment as well as the Company achieving certain financial
performance targets. There were no shares exercisable at December 31, 1996 and
1995.
The fair value of stock options granted is estimated using the minimum value
pricing method with the following assumptions: (i) risk-free interest rate of
7.0%, (ii) expected option life of seven years, (iii) forfeiture rate of zero,
(iv) no expected volatility and (v) expected dividends of $1.41 per share
annually.
The summary of stock option activity with executives, key employees and AGC
Board of Directors is as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE GRANT
OF OPTION EXERCISE DATE FAIR
SHARES PRICE VALUE
------- --------------- -------------
<S> <C> <C> <C>
Options outstanding at January 1,
1994................................. -- -- --
Granted............................. 318,954 $ 22.05 $1.38
Exercised........................... -- -- --
------- ------- ------
Options outstanding at December 31,
1994................................. 318,954 22.05 1.38
Granted............................. 31,641 22.05 1.38
Exercised........................... -- -- --
------- ------- ------
Options outstanding at December 31,
1995................................. 350,595 22.05 1.38
Granted............................. -- -- --
Exercised........................... -- -- --
------- ------- ------
Options outstanding at December 31,
1996................................. 350,595 $ 22.05 $ 1.38
======= ======= ======
Options exercisable at December 31,
1996................................. -- $ 22.05
======= =======
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<S> <C>
Range of exercise prices........................................ $22.05
Weighted average contractual life............................... 4.1 years
</TABLE>
62
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) EMPLOYEE BENEFITS (CONTINUED):
The Company adopted the disclosure only provision of SFAS No. 123 and
accordingly, no compensation expense has been recognized for stock option
grants to executives, key employees and AGC Board of Directors. Had
compensation expense for such grants been determined based on the fair value
of the award, at the grant date, consistent with the provisions of SFAS No.
123, the Company's net income would have been reduced to the proforma amounts
indicated below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------
1996 1995 1994
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income--as reported.............................. $14,275 $9,682 $10,291
======= ====== =======
Net income--pro forma................................ $14,275 $9,638 $ 9,851
======= ====== =======
</TABLE>
In 1995, Performance Shares were granted to key members of management who
were not awarded the right to purchase common stock or nonqualified stock
options. The 1994 Plan provides that holders of Performance Shares have the
right to receive an amount equal to the appreciation in share value (as
measured by a predetermined formula based on the Company's earnings). All
Performance Shares mature on December 31, 1998 with the appreciation in share
value payable in three equal annual installments, beginning in January, 1999.
Performance Shares vest based on achieving certain revenue and earnings
targets of the Company and are subject to continued employment. Performance
Shares outstanding totaled 159,686 and 159,886, as of December 31, 1996 and
1995, respectively. There were 475,222 and 475,022 shares available under the
1994 Plan as of December 31, 1996 and 1995, respectively. There was no
compensation expense with respect to the 1994 Plan for the years ended
December 31, 1996, 1995 and 1994.
The Company has a long-term share appreciation plan (phantom stock plan) for
key members of management. The plan is administered by the Board of Directors
of AGC and provides that the participants have the right to receive an amount
equal to the appreciation in share value (as measured by a predetermined
formula based on cash flow) at a date five years following the date of grant.
The appreciation in share value is payable 50% after the exercise period, and
the remainder, with interest in three equal installments, on the last day of
the succeeding three years. There were 138,000 and 157,000 outstanding share
appreciation rights as of December 31, 1996 and 1995, respectively. The share
appreciation expense for the years ended December 31, 1996 and 1994 was
approximately $620,000. There was no share appreciation expense for the year
ended December 31, 1995. The Company does not intend to grant any additional
share appreciation rights.
The Company has a 401(k) Employee Savings Plan available to all employees
who have earned one year of vesting service and are at least 21 years of age.
Participants may contribute from 1% to 10% of their earnings, in whole
percentages, on a before-tax basis. The Company contributes to participants'
accounts based on the amount the participant elects to defer and a matching
contribution equal to $0.50 on each dollar contributed by a participant up to
3% of the participant's gross pay. The Company's expense for the plan for the
years ended December 31, 1996, 1995 and 1994 was approximately $635,000,
$523,000 and $524,000, respectively.
63
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) COMMITMENTS AND CONTINGENCIES:
The Company is the lessee under long-term operating leases for golf courses
and equipment. At December 31, 1996, future minimum rental payments required
pursuant to the terms of all lease obligations are as follows:
<TABLE>
<CAPTION>
RELATED UNRELATED
YEAR ENDED DECEMBER 31, PARTIES PARTIES TOTAL
----------------------- -------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1997......................................... $ 62,004 $ 29,063 $ 91,067
1998......................................... 62,004 26,545 88,549
1999......................................... 62,004 21,420 83,424
2000......................................... 62,004 18,551 80,555
2001......................................... 62,004 15,662 77,666
Thereafter................................... 582,181 173,924 756,105
-------- -------- ----------
$892,201 $285,165 $1,177,366
======== ======== ==========
</TABLE>
In addition to minimum rental payments, certain leases require payment of
the excess of various percentages of gross revenue over the minimum rental
payments. During the years ended December 31, 1996, 1995 and 1994, percentage
rentals paid to unrelated parties were approximately $9,430,000, $7,789,000,
and $7,604,000, respectively.
Under the terms of certain leases, the Company is committed to make
improvements at golf courses. At December 31, 1996, approximately $1,828,000
of such improvements remain to be made.
At December 31, 1996, the Company was contingently liable for outstanding
letters of credit in the amount of approximately $17,736,000.
The Company has continuing litigation matters and other contingencies
incurred in the ordinary course of business and has recorded allowances for
the payment of these contingencies when such amounts can be estimated and are
considered material to the results of operations. Where no allowance has been
recorded, the Company does not consider the contingencies material to either
its consolidated financial position or results of operations.
(11) RELATED PARTY TRANSACTIONS:
The Company rents golf and tennis facilities from David G. Price and related
entities in which he has a controlling interest. Rent expense paid to David G.
Price and related entities was approximately $58,643,000, $47,600,000 and
$42,492,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company recorded net management fees from related entities in the amount
of approximately $1,332,000, $554,000 and $1,240,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
The Company has accumulated costs in other receivables relating to
construction in progress at certain golf and tennis facilities owned by NGP.
Periodically, a portion of these costs are reimbursed by NGP. At December 31,
1996 and 1995, these accumulated costs amounted to approximately $6,456,000
and $3,106,000, respectively.
The Company earns interest on receivables from affiliates at a prime based
rate. Interest income from affiliates was approximately $818,000, $873,000 and
$753,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
64
<PAGE>
AMERICAN GOLF CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) STATEMENT OF CASH FLOWS--SUPPLEMENTAL DISCLOSURES:
Interest paid for the years ended December 31, 1996, 1995 and 1994 was
approximately $1,950,000, $2,213,000 and $511,000, respectively.
State income taxes paid for the years ended December 31, 1996, 1995 and 1994
was approximately $223,000, $149,000 and $269,000, respectively.
Capital lease obligations of approximately $4,707,000 were incurred when the
Company entered into leases for new equipment in 1995. In 1996, capital lease
obligations incurred of $2,877,000 were assumed from GEI courses.
(13) SHAREHOLDERS' EQUITY:
As discussed in Note 9 to the consolidated financial statements, the Company
has issued 214,497 shares of common stock to key employees for notes
receivable with a balance at December 31, 1996 of $4,299,000. The notes
receivable bear interest ranging from six to seven percent and the principal
is due in 2004. The notes are collateralized by the common stock issued and
are shown on the balance sheets as a reduction in shareholders' equity.
Interest income accrued on the notes receivable was approximately $300,000 for
the years ended December 31, 1996 and 1995.
Interest is paid with proceeds from shareholder distributions and, in part,
their annual bonus. To the extent these amounts are insufficient to cover the
current year interest, the unpaid interest may be added to the principal of
the note. No amounts were added to principal for the years ended December 31,
1996 and 1995.
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NATIONAL GOLF PROPERTIES, INC.
By: /s/ Edward R. Sause _________
Edward R. Sause
Executive Vice President,
Chief Financial Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
_________/s/ David G. Price __________ March 14, 1997
David G. Price Chairman of the Board
________/s/ Richard C. Price _________ March 14, 1997
Richard C. Price President and Director
(Principal Executive
Officer)
________/s/ Edward R. Sause __________ March 14, 1997
Edward R. Sause Executive Vice
President, Chief
Financial Officer and
Director (Principal
Financial and
Accounting Officer)
_______/s/ Richard A. Archer _________ March 14, 1997
Richard A. Archer Director
______/s/ John C. Cushman, III _______ March 14, 1997
John C. Cushman, III Director
__________/s/ Bruce Karatz ___________ March 14, 1997
Bruce Karatz Director
________/s/ Charles S. Paul __________ March 14, 1997
Charles S. Paul Director
</TABLE>
66
<PAGE>
EXHIBIT 10.30
================================================================================
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
_________________________
RESTATED NOTE AGREEMENT
DATED AS OF JULY 1, 1996
_________________________
SERIES A-1:
$14,758,700
7.9% GUARANTIED SENIOR PROMISSORY NOTES DUE JUNE 15, 2006
SERIES A-2:
$13,794,200
7.9% GUARANTIED SENIOR PROMISSORY NOTES DUE JUNE 15, 2006
SERIES A-3:
$11,447,100
7.9% GUARANTIED SENIOR PROMISSORY NOTES DUE JUNE 15, 2006
SERIES B:
$35,000,000
8% GUARANTIED SENIOR PROMISSORY NOTES DUE 10 YEARS FROM THE DATE OF ISSUANCE
================================================================================
<PAGE>
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
<TABLE>
<S> <C>
1. THE NOTES............................................................. 2
1.1 Authorization................................................... 2
1.2 Purchase and Sale of the Notes.................................. 3
1.3 Closings........................................................ 3
1.4 Use of Proceeds................................................. 4
1.5 Purchase for Instrument......................................... 4
1.6 Accredited Investor............................................. 4
1.7 Source of Funds................................................. 4
1.8 Legal Investment................................................ 5
1.9 Restrictions on Transfer or Sale................................ 5
2. CONDITIONS OF CLOSING................................................. 5
2.1 Satisfactory Proceedings........................................ 6
2.2 Opinions of Counsel; REIT Letters............................... 6
2.3 Representations and Warranties.................................. 6
2.4 Performance: No Default......................................... 6
2.5 Compliance Certificates......................................... 6
2.6 Legality........................................................ 7
2.7 Absence of Certain Events....................................... 7
2.8 Private Placement Number........................................ 7
2.9 Book Value of Subsidiaries...................................... 7
2.10 Repayment of Debt, Etc......................................... 7
2.11 Payment of Fees................................................ 7
2.12 The Guaranty................................................... 7
2.13 Sale of Other Notes............................................ 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3. PAYMENT, PREPAYMENT AND PURCHASE OF THE NOTES......................... 8
3.1 Required Annual Prepayments of the Notes........................ 8
3.2 Optional Prepayments............................................10
3.3 Notice of Prepayment............................................10
3.4 Allocation of Partial Prepayments...............................10
3.5 Maturity, etc...................................................10
3.6 Right to Put....................................................11
3.7 Purchase of Notes...............................................12
4. FINANCIAL STATEMENTS; INFORMATION.....................................13
5. INSPECTION AND CONFIDENTIALITY........................................15
5.1 Inspection......................................................15
5.2 Confidential Information........................................16
6. COVENANTS.............................................................17
6.1 Limitations on Liens............................................17
6.2 Maintenance of Certain Financial Conditions.....................17
6.3 Limitations on Debt.............................................17
6.4 Limitations on Short-Term Debt..................................18
6.5 Consolidation, Merger, Sales of Assets, etc.....................18
6.6 Sales of Assets.................................................19
6.7 Limitation on Sale and Leaseback Transactions...................19
6.8 Nature of Business..............................................19
6.9 Maintenance of Leases...........................................19
6.10 Restricted Payments............................................20
6.11 Transactions with Affiliates...................................20
6.12 Ownership of Golf Courses......................................20
6.13 Payment of Notes; Maintenance of Books and Office..............21
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.14 Partnership Existence and Tax Status; Payment of Taxes;
Maintenance of Properties; Insurance; Compliance with Laws;
Maintenance of Patents.........................................21
6.15 Compliance with ERISA..........................................23
7. REPRESENTATIONS AND WARRANTIES OF THE ISSUER...........................23
7.1 Organization, Authority and Tax Status of the Issuer.............23
7.2 Authorization....................................................23
7.3 Capitalization...................................................23
7.4 Organization and Ownership of Subsidiaries; Affiliates...........24
7.5 Disclosure.......................................................24
7.6 Financial Statements.............................................24
7.7 Changes, etc.....................................................25
7.8 Compliance with Other Instruments, etc...........................25
7.9 Governmental Authorizations, etc.................................25
7.10 Litigation......................................................25
7.11 Taxes...........................................................26
7.12 Title to Properties and Leases..................................26
7.13 Patents, Trademarks, Authorizations, etc........................26
7.14 Compliance with ERISA...........................................27
7.15 Private Offering................................................27
7.16 Use of Proceeds; Margin Regulations.............................28
7.17 Existing Debt and Long Term Leases..............................28
7.18 Status Under Certain Statutes...................................28
7.19 Environmental Matters...........................................28
7.20 Foreign Assets Control Regulations, etc.........................29
7.21 Internal Accounting Controls....................................29
7.22 Solvency........................................................29
</TABLE>
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<TABLE>
<S> <C>
7.23 Assumption of Original Issuer Notes For Equivalent Value...........30
8. EVENTS OF DEFAULT; REMEDIES...............................................30
8.1 Events of Default Defined; Acceleration of Maturity; Recission and
Annulment.........................................................30
8.2 Suits for Enforcement...............................................33
8.3 Remedies Cumulative.................................................33
8.4 Remedies Not Waived.................................................33
9. DEFINITIONS AND ACCOUNTING TERMS..........................................34
9.1 Definitions.........................................................34
9.2 Accounting Terms....................................................49
10. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES..............................49
11. LOST NOTES, ETC...........................................................49
12. AMENDMENT AND WAIVER......................................................50
13. PAYMENTS ON NOTES.........................................................51
13.1 Place Of Payment...................................................51
13.2 Home Office Payment................................................51
14. LIABILITIES OF PURCHASER..................................................51
15. MISCELLANEOUS.............................................................52
15.1 Expenses...........................................................52
15.2 Reliance on and Survival of Representations........................52
15.3 Successors and Assigns.............................................52
15.4 Notices............................................................53
15.5 Law Governing......................................................53
15.6 Forum..............................................................53
15.7 Waiver of Jury Trial...............................................53
15.8 Headings, etc......................................................54
15.9 Entire Agreement...................................................54
</TABLE>
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<TABLE>
<S> <C>
15.10 Substitution of Purchaser........................................54
15.11 Counterparts.....................................................54
15.12 Payments Due on Non-Business Days................................54
15.13 Payments Due on Non-Business Days................................54
15.14 Severability.....................................................55
15.15 Construction.....................................................55
</TABLE>
Annex 1 - Information Relating to Purchasers
Exhibit A - [Intentionally Omitted]
Exhibit B - Form of Series B Note
Exhibit C-1 - Form of Opinion of Latham & Watkins
Exhibit C-2 - Form of Opinion of Scott S. Thompson
Exhibit C-3 - Form of Letter from Edward R. Sause
Exhibit C-4 - Form of Letter from Coopers & Lybrand L.L.P.
Exhibit D - Form of Officer's Certificate delivered pursuant to Section 2.5(a)
Exhibit E - Form of Secretary's Certificate delivered pursuant to Section
2.5(b)
Exhibit F - Form of Guaranty
Exhibit G - Form of Assumption Agreements
Exhibit H - Form of Contribution Agreements
Exhibit I - Form of Notice of CC Purchase Waiver
Exhibit J - Form of Officer's Certificate delivered pursuant to Section 4(c)
v
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TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED ANNEX 1:
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
1448 15th Street, Suite 200
Santa Monica, California 90404
Series A-1:
$14,758,700
7.9% Guarantied Senior Promissory Notes due June 15, 2006
Series A-2:
$13,794,200
7.9% Guarantied Senior Promissory Notes due June 15, 2006
Series A-3
$11,447,100
7.9% Guarantied Senior Promissory Notes due June 15, 2006
Series B:
$35,000,000
8% Guarantied Senior Promissory Notes due 10 Years from the Date of Insurance
as of July 1, 1996
R E C I T A L S
- - - - - - - -
WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Issuer Note Purchase Agreements") by and between the Issuer and
each of the Purchasers listed on Annex 1 thereto, you and each of the Other
Purchasers have purchased the Issure's 7.9% guarantied senior promissory notes
due June 15, 2006 in the aggregate principal amount of $14,758,700 (together
with all notes issued in substitution or exchange therefor in accordance with
the terms of this Agreement, the Series A-1 Notes"), and you and each of the
Other Purchasers have severally agreed to purchase, in the aggregate amounts
specified opposite your and their names on Annex 1 thereto, the Issuer's 8%
guarantied senior promissory notes due ten years from the date of issuance
thereof in the aggregate principal amount of $35,000,000 (together with all
notes issued in substitution or exchange therefor in accordance with the terms
of this Agreement, the "Series B Notes");
WHEREAS, pursuant to several Note Purchase Agreements dated as of
June 28, 1996 (the "Trust Note Purchase Agreements") by and between David G.
Price, individually and as trustee of the Trust Revocable Trust Amendment in
Entirety dated February 9, 1987 (the "Trust"), and each of the Purchasers listed
on Annex 1 thereto, you and each of the Other Purchasers have purchased the
Trust's 7.9% senior promissory notes due June 15, 2006 in the aggregate
principal amount of $13,794,200 (the "Trust Notes");
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<PAGE>
WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Black Lake Note Purchase Agreements") by and between Black
Lake/Penasquitos, a California general partnership ("Black Lake"), and each of
the Purchasers listed on Annex 1 thereto, you and each of the Other Purchasers
have purchased Black Lake's 7.9% senior promissory notes due June 15, 2006 in
the aggregate principal amount of $11,447,100 (the Black Lake Notes");
WHEREAS, pursuant to Assumption Agreements dated as of July 1, 1996
(the "Assumption Agreements") by and between National Golf Operating
Partnership, L.P., a Delaware limited partnership (the "Issuer"), and each of
the Purchasers listed on Annex 1 hereto, the Issuer agreed to assume all of the
liabilities, obligation, covenants, duties and indebtedness of the Trust and
Black Lake to you and each of the Other Purchasers evidenced by the Trust Notes
and Black Lake Notes, respectively, with the same effect as if such Notes had
been executed and delivered by the Issuer to the respective Purchasers (the
Trust Notes and the Black Lake Notes assumed by the Issuer being referred to
herein as the Issuer's Series A-2 Notes and Series A-3 Notes, respectively, and,
together with all notes issued in substitution or exchange therefor in
accordance with the terms of this Agreement and together with Series A-1 Notes,
the "Series A-1 Notes, the "Series A Notes" and the Series A Notes together with
the Series B Notes being referred to as the "Notes");
WHEREAS, the Guarantor has agreed to guarantee unconditionally any and
all obligations of the Issuer to you and the Other Purchasers under the
Agreements and the Notes as provided therin:
WHEREAS, this Agreement amends and restates the Issuer Note Purchase
Agreement and shall govern the Issuer's rights and obligation with respect to
all of the Notes, including without limitation, the Series A-2 and A-3 Notes;
WHEREAS, the continuing obligations of the Trust and Black Lake under
the Trust Note Purchase Agreements and the Black Lake Note Purchase Agreements,
respectively, shall, upon execution and delivery hereof, be deemed fully
performed and shall be no further force or effect with the exception that the
covenant of each of the Trust and Black Lake to maintain its existence in
Section 4.4(a), the covenant of each of the Trust and Black Lake to maintain an
office in the last sentence of Section 4.3 and the covenants of each of the
Trust and Black Lake in Section 8 thereof, as the case may be, shall survive and
continue in full force and effect, that all representation and warranties made
by the Trust or Black Lake shall survive, and that all obligations of the Trust
and Black Lake under the Trust Notes and the Black Lake Notes shall continue in
full force and effect;
NOW, THEREFORE, the Issuer hereby agrees with you as follows:
1. THE NOTES.
---------
1.1 AUTHORIZATION. The Issuer has duly authorized and issued and
-------------
sold (or assumed) its (a) 7.9% guarantied senior promissory notes due June 15,
2006 in the aggregate principal amount of $40,000,000, which shall be know as
the Series A Notes and shall (i)bear interest from the date thereof on the
unpaid principal amount thereof at the rate of 7.9% per annum (computed on the
basis of a 360-day year of twelve 30-day months) payable semiannually on June 15
and December 15 of each year commencing on December 15, 1996, and with interest
on any overdue principal (including any overdue prepayment of principal) and (to
the extent permitted by applicable law) on any overdue premium and any overdue
interest, at the rate of 8.9% per annum until paid, such overdue interest (if
any) to be payable semiannually as aforesaid or, at the option of the registered
holder of such Note, on demand and (ii) mature and be due and payable as to the
entire remaining unpaid
2
<PAGE>
principal amount thereof and unpaid interest thereon on June 15, 2006 and (b) 8%
guarantied senior promissory notes due on the date that is ten years from the
date of issuance thereof in the aggregate principal amount of $35,00,000, which
shall be known as the Series B Notes and shall (i) bear interest from the date
thereof on the unpaid principal amount thereof at the rate of 8% per annum
(computed on the basis of a 360-day year of twelve 30-day months) payable
semiannually on the same dates each year commencing on the date that is six
months from the date of issuance thereof, and with interest on any overdue
principal (including any overdue prepayment of principal) and (to the extent
permitted by applicable law) on any overdue premium and any overdue interest, at
the rate of 9% per annum until paid, such overdue interest (if any) to be
payable semiannually as aforesaid or, at the option of the registered holder of
such Note, on demand, (ii) mature and be due and payable as to the entire
remaining unpaid principal amount thereof and unpaid interest thereon on the
date that is ten years from the date of issuance thereof and (iii) be
substantially in the form of Exhibit B hereto (with such changes therefrom as
may be approved by you).
Certain capitalized terms used and not otherwise defined herein shall
have the respective meanings attributed thereto in Section 9 hereof. Unless
otherwise specified, any reference in this Agreement to a particular section or
other subdivision, or to a particular schedule or exhibit, shall be considered a
reference to that section or other subdivision of, or to that schedule or
exhibit to, this Agreement.
1.2 PURCHASE AND SALE OF THE NOTES. Subject to the terms and
------------------------------
conditions hereof and in reliance on, with respect to the Issuer, your
representations and warranties contained in Sections 1.5 to 1.8 and your
agreements contained in Section 1.9 hereof and the representations and
warranties of the Other Purchasers contained in Sections 1.5 to 1.8 and the
agreements of the Other Purchasers contained in Section 1.9 of the Other
Agreements and, with respect to you, the representations of the Issuer contained
in Sections 7.1 to 7.21 hereof and otherwise made in writing by or on behalf of
the Issuer in connection with the transactions contemplated hereby and thereby,
(a) the Issuer has issued and sold to you and you have purchased from the
Issuer, at the First Closing provided for in Section 1.3, Series A-1 Notes in
the aggregate principal amount specified opposite your name in Annex 1, at a
purchase price equal to 100% of such principal amount and payable as provided in
Section 1.3 and (b) the Issuer will issue and sell to you and you will purchase
from the Issuer, at the Second Closing provided for in Section 1.3, Series B
Notes in the aggregate principal amount specified opposite your name in Annex 1,
at a purchase price equal to 100% of such principal amount and payable as
provided in Section 1.3. Contemporaneously with entering into this Agreement,
the Issuer is entering into separate Restated Note Agreements (the "Other
Agreements") identical with this Agreement with each of the other purchasers
named in Annex 1 (the "Other Purchasers"), with respect to and providing for the
sale at the applicable Closing to each of the Other Purchasers of Notes in the
principal amount specified opposite its name in Annex 1. Your obligations
hereunder and the obligations of the Other Purchasers under the Other Agreements
are several and not joint obligations and you shall have no obligation under any
Other Agreement and no liability to any Person for the performance or
nonperformance by any Other Purchaser thereunder.
1.3 CLOSINGS. The closing of the purchase and sale of the Series A-1
--------
Notes purchased by you (the "First Closing") occurred on July 1, 1996 (the
"First Closing Date"), at the offices of Gibson, Dunn & Crutcher LLP, your
special counsel in connection with the transactions contemplated by this
Agreement, 200 Park Avenue, New York, New York. The closing of the purchase and
sale of the Series B Notes to be purchased by you (the "Second Closing" and,
together with the First Closing, the "Closings") shall occur on a Business Day
that is a date no more than eight months from the day of the First Closing,
designated by the Issuer, upon 14 days' notice by the Issuer to
3
<PAGE>
you and the Other Purchasers or such shorter notice as may be acceptable to you
and the Other Purchasers (the "Second Closing Date" and, together with the First
Closing Date, the "Closing Dates") at the offices of Gibson, Dunn & Crutcher LLP
specified above or at such other location as you, the Other Purchasers and the
Issuer shall agree. If the Second Closing shall not occur by the day that is
eight months from the day of the First Closing, then unless you, the Other
Purchasers and the Issuer shall otherwise agree, you and the Other Purchasers
shall not have any obligation to purchase or to pay for, and the Issuer shall
not have any obligation to sell or deliver, any Series B Notes. At each of the
Closings, the Issuer shall have delivered or will deliver to you, as the case
may be, the Notes to be purchased by you in the form of one or more Notes (as
you may designate), each dated the applicable Closing Date and registered in
your name (or the name of your nominee), against delivery by you to the Issuer
or its order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Issuer to account No. 14179-03625, maintained at Bank of America, 2049 Century
Park East, Los Angeles, California 90067, ABA No. 121000358. If, at any of the
Closings, the Issuer shall have failed or shall fail, as the case may be, to
tender such Notes to you as provided in this Section 1.3, or if, at the Second
Closing, any of the conditions specified in Section 2 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement in respect of such Notes, without
thereby waiving any other rights you may have by reason of such failure or
nonfulfillment.
1.4 USE OF PROCEEDS. The Issuer applied and will apply the proceeds
---------------
from the sale of the Notes (subject in any event to Section 7.16) to repay
existing bank debt, to finance future acquisitions of golf courses and related
facilities and properties, to make participating mortgage loans for golf
courses, secured by liens on such golf courses, and for general partnership
purposes.
1.5 PURCHASE FOR INVESTMENT. You represent to the Issuer that on
-----------------------
each of the Closing Dates you have acquired or will acquire, as the case may be,
the Notes being purchased by you for your own account for investment and not
with a view to or for sale in connection with any distribution thereof, provided
that, the disposition of your property shall at all times be and remain within
your control.
1.6 ACCREDITED INVESTOR. You represent to the Issuer that you are
-------------------
knowledgeable, sophisticated and experienced in business and financial matters;
you have previously invested in securities similar to the Notes and you
acknowledge that the Notes have not been registered under the Securities Act and
understand that the Notes must be held indefinitely unless they are subsequently
registered under the Securities Act or such sale is permitted pursuant to an
available exemption from such registration requirement; you are able to bear the
economic risk of your investment in the Notes and are presently able to afford
the complete loss of such investment; you are an "accredited investor" as
defined in Regulation D, Rule 501(a)(i)-(3), promulgated under the Securities
Act; and you have been afforded access to information about the Issuer and the
Guarantor, and the Issuer's and the Guarantor's financial condition, results of
operations, business, property, management and prospects sufficient to enable
you to evaluate your investment in the Notes. You acknowledge that you have
conducted your own analysis of the Issuer's and the Guarantor's financial
condition and other foregoing factors and that you have not relied upon the
analysis of any Other Purchaser in determining the make an investment in the
Notes.
1.7 SOURCE OF FUNDS. You represent to the Issuer that the purchase of
---------------
the Notes either (a) is being funded solely out of an insurance company general
investment account which either (i) would be exempt from the prohibited
transactions rules of ERISA and the Code under Prohibited Transaction Class
Exemption 95-60, published by the Department of Labor in the Federal Register on
July 12, 1995 (60 F.R. 35925, July 12,
4
<PAGE>
1995) or (ii) exclusively supports either contracts not issued to any "employee
benefit plan" as defined in Section 3(3) of ERISA which is subject to Title I of
ERISA or any "plan" within the meaning of Section 4975 of the Code or policies
which constitute "guaranteed benefit policies" under Section 401(b) of ERISA;
(b) is not being funded with the assets of any (i) "employee benefit plan"
within the meaning of Section 3(3) of ERISA which is subject to Title I of
ERISA, (ii) "plan" within the meaning of Section 4975 of the Code or (iii)
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-
101 of any such employee benefit plan or plans, with respect to which the Issuer
or any ERISA Affiliate is a party in interest (as defined in Section 3(14) of
ERISA) or a disqualified person (as defined in Section 4975 of the Code) or (c)
is not a prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code because you have a statutory, class or administrative
exemption from such prohibited transaction rules for the purchase and holding of
Notes.
1.8 LEGAL INVESTMENT You represent to the Issuer that, as of the
----------------
date hereof, the Notes purchased or to be purchased by you, as the case may be,
are a legal investment for you under the laws of each jurisdiction to which you
may be subject, without resort to any basket provision of said laws such as New
York Insurance Law (S) 1405(a)(8) and that, as of the date hereof, you are not
aware of any fact or reason why the Notes purchased or to be purchased by you
hereunder, as the case may be, would not be a legal investment for you under the
laws of each jurisdiction to which you may be subject, without resort to any
basket provision of said laws such as New York Insurance Law (S) 1405(a)(8), on
each of the Closing Dates.
1.9 RESTRICTIONS ON TRANSFER OR SALE. No transfer or sale (including,
--------------------------------
without limitation, by pledge or hypothecation) of the Notes by any holder shall
be effective unless (a) the Notes are registered under the Securities Act or
such transfer is permitted pursuant to an available exemption from such
registration requirement and (b) the proposed transferee represents to you that
such transfer or sale of the Notes either (i) is being funded solely out of an
insurance company general investment account which either (x) would be exempt
from the prohibited transactions rules of ERISA and the Code under Prohibited
Transaction Class Exemption 95-60, published by the Department of Labor in the
Federal Register on July 12, 1995 (60 F.R. 35925, July 12, 1995) or (y)
exclusively supports either contracts not issued to any "employee benefit plan"
as defined in Section 3(3) of ERISA which is subject to Title I of ERISA or any
"plan" within the meaning of Section 4975 of the Code or policies which
constitute "guaranteed benefit policies" under Section 401(b) of ERISA; (ii) is
not being funded with the assets of any (x) "employee benefit plan" within the
meaning of Section 3(3) of ERISA which is subject to Title I of ERISA (y) "plan"
within the meaning of Section 4975 of the Code or (z) entity deemed to hold
"plan assets" within the meaning of 29 C.F.R. (S) 2510.3-101 of any such
employee benefit plan or plans, with respect to which the Issuer or any ERISA
Affiliate is a party in interest (as defined in Section 3(14) of ERISA) or a
disqualified person (as defined in Section 4975 of the Code) or (iii) is not a
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code because the proposed transferee has a statutory, class or
administrative exemption from such prohibited transaction rules for the purchase
and holding of Notes.
2. CONDITIONS OF CLOSING. The Issuer's obligation to sell and deliver
---------------------
each of the Series B Notes to be sold and delivered by it hereunder shall be
subject to the fulfillment to its satisfaction, prior to or at the Second
Closing, of the conditions set forth in Section 2.15 hereof and, your obligation
to purchase and to pay for the Series B Notes to be purchased by you hereunder
shall be subject to the fulfillment to your satisfaction, prior to or at the
Second Closing, of each of the conditions hereinafter set forth:
5
<PAGE>
2.1 SATISFACTORY PROCEEDINGS. All partnership, corporate and other
------------------------
proceedings taken in connection with the issuance of the Notes and the
consummation of the transactions contemplated hereby and all documents and
papers relating thereto, including the Guaranty, shall be reasonably
satisfactory to you and your special counsel, and you and your special counsel
shall have received counterpart originals or certified or other copies of such
documents and papers, all in form and substance reasonably satisfactory to you
and your special counsel, as you or they may reasonably request in connection
therewith.
2.2 OPINIONS OF COUNSEL; REIT LETTERS. You shall have received
---------------------------------
favorable opinions, each dated the Second Closing Date, addressed to you and
satisfactory in form, scope and substance to you, from (a) Latham & Watkins,
special counsel of the Issuer, substantially in the form of Exhibit C-1 and, in
the event that there is a change in circumstances, covering such other matters
incident to the transactions contemplated hereby as shall be attributable to
such change or changes as you may reasonably request, (b) Scott S. Thompson,
Esq., in-house counsel to the Issuer, substantially in the form of Exhibit C-2
and (c) Gibson, Dunn & Crutcher LLP, your special counsel, in form and substance
satisfactory to you and covering such other matters incident to such
transactions as you may reasonably request. You shall also have received a
letter dated the Second Closing Date from each of Edward R. Sause, Chief
Financial Officer of the Issuer, substantially in form of Exhibit C-3, and
Cooper and Lybrand, auditors and tax consultants for the Guarantor,
substantially in the form of Exhibit C-4, each with respect to certain real
estate investment trust matters.
2.3 REPRESENTATIONS AND WARRANTIES. All representations and
------------------------------
warranties of the Issuer contained in this Agreement and in the Assumption
Agreements and all representations and warranties of each of the Trust and Black
Lake contained in each of the Trust Note Purchase Agreements and Black Lake Note
Purchase Agreements, respectively, or otherwise made in writing by or on behalf
of the Issuer, the Trust or Black Lake in connection with the transactions
contemplated hereby and thereby shall be true and correct when made and (except
as affected by the consummation of such transactions) as of the time of the
Second Closing with the same effect as though such representations and
warranties had been made on and as of the Second Closing Date.
2.4 PERFORMANCE; NO DEFAULT. The Issuer shall have performed all
-----------------------
agreements and complied with all conditions contained herein and in the
Assumption Agreements required to be performed or complied with by it on or
prior to the Second Closing Date. At the time of the Second Closing (and after
giving effect to the sale of the Notes to you and the application of the
proceeds of such sale and the assumption by the Issuer of the Trust Notes and
the Black Lake Notes) no Default or Event of Default shall have occurred and be
continuing. Neither the Issuer nor any Restricted Subsidiary shall have entered
into any transaction since the date of the Memorandum that would have been
prohibited by Sections 6.6 through 6.11, inclusive, had such Sections applied
since such date.
2.5 COMPLIANCE CERTIFICATES.
-----------------------
(A) OFFICER'S CERTIFICATE. The Issuer shall have delivered to
---------------------
you an Officer's Certificate substantially in the form of Exhibit D, dated
the Second Closing Date, certifying that the conditions specified in
Sections 2.3, 2.4, and 2.7 have been fulfilled.
(B) SECRETARY'S CERTIFICATE. The Issuer shall have delivered to
-----------------------
you a Secretary's Certificate substantially in the form of Exhibit E,
certifying as to the resolutions attached thereto and other proceedings
relating to the authorization,
6
<PAGE>
execution and delivery of the Notes, this Agreement, the Other Agreements
and the Assumption Agreements.
2.6 LEGALITY. On the Second Closing Date, the Notes to be
--------
purchased by you hereunder shall (i) be a legal investment for you under the
laws of each jurisdiction to which you may be subject, without resort to any
basket provision of said laws such as New York Insurance Law (S) 1405(a)(8) and
(ii) not subject you to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
2.7 ABSENCE OF CERTAIN EVENTS. There shall not have occurred
-------------------------
any Material Adverse Change since the date of the most recent audited financial
statements included in the Memorandum. Subsequent to the respective dates as of
which information is given in the Memorandum and prior to the First Closing,
neither the Issuer nor any Restricted Subsidiary shall have consolidated with,
merged into, or sold, leased or otherwise disposed of its assets and properties
as an entirety or substantially as an entirety to any Person or succeeded to all
or substantially all or any substantial part of the liabilities of any other
Person except with respect to the golf course acquisition transactions described
on Schedule 2.7.
2.8 PRIVATE PLACEMENT NUMBER. The Issuer shall have obtained
------------------------
from the Standard & Poor's Cusip Service Bureau a Private Placement Number for
each series of Notes and shall have delivered to you an Officer's Certificate,
dated the Second Closing Date, specifying such Private Placement Numbers. Each
of the Trust and Black Lake shall have obtained from the Standard and Poor's
Cusip Service Bureau a Private Placement Number for the Trust Notes and Black
Lake Notes, respectively, and shall have delivered to you a copy of the
correspondence from the Cusip Service Bureau specifying such Private Placement
Numbers.
2.9 BOOK VALUE OF SUBSIDIARIES. Prior to the First Closing
--------------------------
Date, the Issuer shall have delivered to you a schedule presenting a complete
and correct list of the Issuer's Subsidiaries and showing, as to each
Subsidiary, the book value of its assets as determined in accordance with GAAP
and presented on a current balance sheet.
2.10 REPAYMENT OF DEBT, ETC. On the Second Closing Date, the
----------------------
Issuer shall have delivered to you a schedule detailing the bank debt to be
repaid, the future acquisitions of golf courses and related facilities and
properties to be financed and the participating mortgage loans for golf courses
to be made or general partnership purposes to be accomplished pursuant to
Section 1.4.
2.11 PAYMENT OF FEES. The Issuer shall have paid the reasonable
---------------
legal fees and expenses of Gibson, Dunn & Crutcher LLP and all other fees and
expenses for which the Issuer is obligated pursuant to Section 15.1 and for
which the Issuer shall have received invoices in proper form on or prior to the
Business Day preceding the Second Closing Date.
2.12 THE GUARANTY. National Golf Properties, Inc., a Maryland
------------
corporation (the "Guarantor"), shall have executed and delivered to you an
Amended and Restated General Continuing Guaranty dated the date of the First
Closing, in the form attached hereto as Exhibit F (the "Guaranty"), and such
Guaranty shall be in full force and effect.
7
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2.13 SALE AND ASSUMPTION OF TRUST NOTES AND BLACK LAKE NOTES. (i)
-------------------------------------------------------
the Trust shall have sold to you and the Other Purchasers and you and the Other
Purchasers shall have purchased from the Trust, the Trust Notes to be purchased
by you and them as specified in Annex 1 to the Trust Note Purchase Agreements;
(ii) Black Lake shall have sold to you and the Other Purchasers and you and the
Other Purchasers shall have purchased from Black Lake, the Black Lake Notes to
be purchased by you and them as specified in Annex 1 to the Black Lake Note
Purchase Agreements; (iii) the Issuer shall have assumed all of the liabilities,
obligations, covenants, duties and indebtedness owing to you and the Other
Purchasers under each of the Trust Note Purchase Agreements and Black Lake Note
Purchase Agreements and the Trust Notes and Black Lake Notes issued thereunder,
respectively, pursuant to the terms of Assumption Agreements dated the date of
the First Closing, in the form attached hereto as Exhibit G (the "Assumption
Agreements"), and such Assumption Agreements shall be in full force and effect.
2.14 CONTRIBUTION AGREEMENTS. The Guarantor and the Issuer shall
-----------------------
have entered into Trust Contribution Agreements with each of the Trust, Black
Lake and Richard C. Price dated a date on or prior to the First Closing Date in
the form attached hereto as Exhibit H (collectively, the "Contribution
Agreements"), and such Contribution Agreements shall be in full force and
effect.
2.15 SALE OF OTHER NOTES. Contemporaneously with the Second Closing,
-------------------
the Issuer shall sell to the Other Purchasers and the Other Purchasers shall
purchase from the Issuer, the Notes to be purchased by them as specified in
Annex 1. Prior to the Second Closing, the First Closing shall have occurred, and
the Issuer shall have sold to you and the Other Purchasers and the Other
Purchasers shall have purchased from the Issuer, the Series A-1 Notes to be
purchased by you and them at the First Closing as specified in Annex 1.
3. PAYMENT, PREPAYMENT AND PURCHASE OF THE NOTES.
---------------------------------------------
3.1 REQUIRED SEMI-ANNUAL PREPAYMENTS OF THE NOTES.
---------------------------------------------
(A) REQUIRED SEMI-ANNUAL PREPAYMENTS OF THE SERIES A NOTES.
------------------------------------------------------
On June 15, 1999 and on each June 15 and December 15 thereafter to and
including December 15, 2005 (so long as any Series A Notes shall remain
outstanding), the Issuer will prepay, and there shall become due and
payable, an aggregate principal amount of the Series A Notes (or, in the
case of the prepayment to be made on any such date pursuant to this Section
3.1(a), such lesser principal amount as shall then be outstanding) as
follows:
<TABLE>
<CAPTION>
REQUIRED
DATE PREPAYMENT
------------------------------------- --------------------
<S> <C>
June 15, 1999........................ $548,567.63
December 15, 1999.................... $570,236.05
June 15, 2000........................ $592,760.37
December 15, 2000.................... $616,174.41
June 15, 2001........................ $640,513.30
December 15, 2001.................... $665,813.57
June 15, 2002........................ $692,113.21
December 15, 2002.................... $719,451.68
June 15, 2003........................ $747,870.02
December 15, 2003.................... $777,410.89
June 15, 2004........................ $808,118.62
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
December 15, 2004..................... $840,039.30
June 15, 2005......................... $873,220.85
December 15, 2005..................... $907,713.08
</TABLE>
The remaining $29,999,997.05 in principal amount of the Series A Notes,
together with accrued interest thereon, shall become due and payable on the
maturity date of the Series A Notes.
(B) REQUIRED SEMI-ANNUAL PREPAYMENTS OF THE SERIES B NOTES.
------------------------------------------------------
On the day that is three years from the date of issuance of the Series B
Notes and semiannually thereafter on the same dates each year to and
including the day that is six months prior to the day on which the Series B
Notes will mature and be due and payable as to the entire remaining unpaid
principal amount thereof and unpaid interest thereon (so long as any Series
B Notes shall remain outstanding), the Issuer will prepay, and there shall
become due and payable, an aggregate principal amount of the Series B Notes
(or, in the case of the prepayment to be made on any such date pursuant to
this Section 3.1(b), such lesser principal amount as shall then be
outstanding) as follows:
<TABLE>
<CAPTION>
REQUIRED
DATE PREPAYMENT
------------------------------------- ------------
<S> <C>
First Payment........................ $475,206.28
Second Payment....................... $494,214.53
Third Payment........................ $513,983.12
Fourth Payment....................... $534,542.44
Fifth Payment........................ $555,924.14
Sixth Payment........................ $578,161.10
Seventh Payment...................... $601,287.55
Eighth Payment....................... $625,339.05
Ninth Payment........................ $650,352.61
Tenth Payment........................ $676,366.72
Eleventh Payment..................... $703,421.38
Twelfth Payment...................... $731,558.24
Thirteenth Payment................... $760,820.57
Fourteenth Payment................... $791,253.39
</TABLE>
The remaining $26,307,568.88 in principal amount of the Series B Notes,
together with accrued interest thereon, shall become due and payable on the
maturity date of the Series B Notes.
(C) OBLIGATION TO PREPAY FULL AMOUNT. Each prepayment made
--------------------------------
pursuant to Section 3.1(a) or (b) shall be at 100% of the principal amount
so to be prepaid, together with interest accrued thereon to the date of
such prepayment, without premium. No prepayment of less than all of the
Notes pursuant to Section 3.2(b) shall relieve the Issuer of its obligation
to make (nor, except as provided in Section 3.4, shall it reduce the amount
of) the prepayments of principal on the Notes required by Sections 3.1(a)
and (b).
9
<PAGE>
3.2 OPTIONAL PREPAYMENTS.
--------------------
(A) LIMITATION ON OPTIONAL PREPAYMENTS. The Notes shall not be
----------------------------------
subject to prepayment by the Issuer at its option, except as provided in
Section 3.2(b).
(B) OPTIONAL PREPAYMENTS WITH MAKEWHOLE AMOUNT. The Issuer may,
------------------------------------------
at its option, at any time upon notice as provided in Section 3.3, on the
date specified in such notice, prepay the Notes in whole or from time to
time in part (in an aggregate principal amount of the Notes that is equal
to or exceeds $2,000,000 in the case of a partial prepayment), each such
prepayment to be made at the principal amount of the Notes so to be prepaid
together with interest accrued on such principal amount to the date of
prepayment, plus a premium equal to the Makewhole Amount determined in
respect of such principal amount.
3.3 NOTICE OF PREPAYMENT. The Issuer will give each holder of a Note
--------------------
(a) written notice of any prepayment pursuant to Section 3.2(b) at least 30 days
(except as provided in Section 3.5) and not more than 60 days prior to the date
fixed for such prepayment in each case specifying (i) such date of prepayment,
(ii) the aggregate principal amount of the Notes to be prepaid on such date,
(iii) the principal amount of each Note held by such holder so to be prepaid
determined in accordance with Section 3.4, (iv) the Issuer's estimate as of the
date of such notice, calculated, with respect to the Makewhole Amount only, as
though payment were being made on the date of such notice, of the respective
amounts of (A) accrued interest payable to such holder in respect of each such
prepayment and (B) the Makewhole Amount, if any, applicable in respect of each
such prepayment, showing in each case in reasonable detail the calculation
thereof and, with respect to the Makewhole Amount, the Reference Rate used in
such calculation and (v) whether such prepayment is being made in connection
with an anticipated consolidation, merger or sale, lease, transfer or other
disposition of all or substantially all of its properties or assets and (b)
further written notice (a copy of which shall be telecopied by the Issuer to
each such holder concurrently with the sending thereof) at least two Business
Days prior to such date of prepayment, specifying the amount, determined as of
the date of such further notice, required to be specified pursuant to subclause
(iv)(B) of the notice required by the foregoing clause (a), showing in
reasonable detail the calculation thereof and the Reference Rate used in such
calculation.
3.4 ALLOCATION OF PARTIAL PREPAYMENTS. In the event of any prepayment
---------------------------------
or purchase of less than all of the outstanding Notes, the principal amount of
the Notes to be prepaid or repurchased shall be allocated among all the Notes at
the time outstanding (and allocated among the required prepayments and maturity
date repayments required under Sections 3.1(a) and (b)) in proportion, as nearly
as practicable, to the respective principal amounts thereof not therefore
prepaid pursuant to Sections 3.1(a) and (b) or 3.2(b) or purchased pursuant to
Section 3.6. Promptly following any prepayment or purchase of less than all the
outstanding Notes pursuant to Sections 3.2(b) or 3.6 hereof, and in any event
within thirty Business Days thereafter, the Issuer shall deliver to each holder
of any Notes a schedule setting forth the revised amount of principal on the
Notes to be prepaid pursuant to Sections 3.1(a) and (b).
3.5 MATURITY, ETC. In the case of each prepayment of Notes, whether
-------------
required or optional, the principal amount of each Note to be prepaid shall
become due and payable on the date fixed for such prepayment, together with
interest accrued on such principal amount to such date and the applicable
Makewhole Amount (if any), except that in the case of any optional prepayment
made in connection with an anticipated consolidation, merger or sale, lease,
transfer or other disposition of all or substantially all of its properties
10
<PAGE>
or assets for which notice has been given in accordance with clause (v) of
Section 3.3, the Issuer may by written notice (a "Cancellation Notice") to each
holder of a Note cancel its prior written notice of prepayment pursuant to
Section 3.3 hereof and the principal amount of each Note to be prepaid pursuant
to such prior written notice shall no longer be due and payable on such date:
provided that (i) such Cancellation Notice shall be effective and the Notes to
- -------- ----
be prepaid shall no longer be due and payable on such date only in the event
that the anticipated consolidation, merger or sale, lease, transfer or other
disposition of all or substantially all of its properties or assets has not
occurred and (ii) such Cancellation Notice is given at least three Business Days
before the date fixed for optional prepayment. If the Issuer believes that the
anticipated consolidation, merger or sale, lease, transfer or other disposition
of all or substantially all of its properties or assets has been merely delayed
rather than abandoned, the Issuer may, together with the Cancellation Notice,
give a second notice of prepayment shall be at least 5 days and not more than 60
days prior to the second date fixed for such prepayment. From and after the date
fixed for required or optional prepayment, unless the Issuer shall fail to pay
to each holder of a Note such principal amount when so due, together with the
interest and the Makewhole Amount, if any, as aforesaid, interest on such
principal amount shall cease to accrue. Any Note paid or prepaid in full shall
promptly thereafter be surrendered to the Issuer and canceled and shall not be
reissued and no Note shall be issued in lieu of any paid or prepaid principal
amount of any Note.
3.6 Change of Control Purchase.
--------------------------
(1) Change of Control Purchase Obligation. In the event of a
-------------------------------------
DGP Change of Control, the Issuer shall be obligated to purchase (the
"Change of Control Purchase Obligation") from each holder of Notes on the
terms and conditions hereinafter set forth, for an amount equal to the
Agreed Purchase Consideration, the Notes held by such holder, provided,
--------
however, that upon the occurrence of a DGP Change of Control, any holder
------- ----
may waive the Change of Control Purchase Obligation with respect to all or
any portion of the Notes held by such holder, in which event the Issuer
shall be obligated to purchase only that amount of Notes held by such
holder with respect to which the Change of Control Purchase Obligation has
not been waived.
(ii) Notice of Change of Control Purchase: Waiver.
--------------------------------------------
(A) Within five Business Days after the occurrence of a DGP
Change of Control with respect to which the Issuer did not publicly
disclose that such DGP Change of Control was about to occur, the Issuer
shall give each holder of Notes written notice thereof describing the DGP
Change of Control, and the facts and circumstances surrounding the
occurrence thereof, in reasonable detail. At any time prior to forty-five
days after any holder of Notes shall receive such notice, such holder may
deliver to the Issuer a waiver (a "Notice of CC Purchase Waiver")
substantially in the form of Exhibit I hereto. When a holder of Notes shall
deliver a Notice of CC Purchase Waiver, the Issuer shall purchase that
amount of Notes held by such holder with respect to which such holder has
not in the Notice of CC Purchase Waiver specifically waived the Change of
Control Purchase Obligation on the date specified in such notice (which
shall not be less than ten days after delivery of such Notice of CC
Purchase Waiver), and such holder shall sell such Notes to the Issuer
without recourse, representation or warranty (other than as to such
holder's full right, title and interest to such Notes free of any adverse
claim therein) at a price, payable in immediately available funds by wire
transfer to the account specified in Annex I hereto or to such other
account as may be specified in such notice, equal to the Agreed Purchase
Consideration. If a holder of Notes fails to deliver a Notice of
11
<PAGE>
CC Purchase Waiver, the Issuer shall purchase all Notes held by such holder
on the date that is sixty days after the Issuer shall have given each
holder the aforementioned notice of the DGP Change of Control, and such
holder shall sell such Notes to the Issuer without recourse, representation
or warranty (other than as to such holder's full right, title and interest
to such Notes free of any adverse claim therein) at a price, payable in
immediately available funds by wire transfer to the account specified in
Annex 1 hereto, equal to the Agreed Purchase Consideration.
(B) With respect to any DGP Change of Control for which the
Issuer did publicly disclose that such DGP Change of Control was about to
occur, the Issuer shall give each holder of Notes written notice describing
the DGP Change of Control, and the facts and circumstances surrounding the
occurrence thereof, in reasonable detail, such notice to be given promptly
after the Issuer makes such disclosure and in any event within two days of
the Issuer making such disclosure. At any time prior to the occurrence of
such DGP Change of Control, a holder may deliver to the Issuer a Notice of
CC Purchase Waiver. When a holder of Notes shall deliver a Notice of CC
Purchase Waiver, the Issuer shall purchase, prior to or upon the occurrence
of the DGP Change of Control (but in any event on a date not less than ten
days after receipt by Issuer of such Notice of CC Purchase Waiver), that
amount of Notes held by such holder with respect to which such holder has
not in the Notice of CC Purchase Waiver specifically waived the Change of
Control Purchase Obligation, and such holder shall sell such Notes to the
Issuer without recourse, representation or warranty (other than as to such
holder's full right, title and interest to such Notes free of any adverse
claim therein) at a price, payable in immediately available funds by wire
transfer to the account specified in Annex 1 hereto or to such other
account as may be specified in such notice, equal to the Agreed Purchase
Consideration. If a holder of Notes fails to deliver a Notice of CC
Purchase Waiver prior to the occurrence of the DGP Change of Control, the
Issuer shall purchase all Notes held by such holder on a date not more than
ten days after the occurrence of the DGP Change of Control, and such holder
shall sell such Notes to the Issuer without recourse, representation or
warranty (other than as to such holder's full right, title and interest to
such Notes free of any adverse claim therein) at a price, payable in
immediately available funds by wire transfer to the account specified in
Annex 1 hereto, equal to the Agreed Purchase Consideration. If, at any time
after the delivery by the Issuer of a notice of an impending DGP change of
Control, the Issuer publicly discloses that such DGP Change of Control is
no longer expected to occur (whether or not Issuer has received any Notice
of CC Purchase Waivers), the Issuer shall promptly, and in any event within
two days of making such disclosure, give notice thereof to each holder of
Notes. After delivery of such notice, all obligations of the Issuer to
repurchase Notes, and all Notice of CC Purchase Waivers, with respect to
such previously announced DGP Change of Control, shall terminate; provided,
that if such DGP Change of Control later becomes pending and publicly
disclosed, or occurs, Section 3.6 (ii)(B) or 3.6 (ii)(A), as applicable,
shall again apply.
3.7 Purchase of Notes. The Issuer will not and will not permit any
-----------------
Affiliate (other than a third party investor who is an Affiliate solely by
virtue of clause (b) of the definition of "Affiliate") to purchase, redeem,
prepay or otherwise acquire, directly or indirectly, any of the outstanding
Notes except upon the payment or repayment of the Notes in accordance with the
terms of this Agreement and the Notes. The Issuer will promptly cancel all
Notes acquired by it or any Affiliate pursuant to any payment, prepayment or
purchase of Notes pursuant to any provision of this Agreement and no Notes may
be issued in substitution or exchange for any such Notes.
12
<PAGE>
4. FINANCIAL STATEMENTS; INFORMATION. The Issuer will furnish (in
---------------------------------
duplicate) to you, so long as you or your nominee shall be obligated to purchase
or shall hold any of the Notes, and to each other institutional holder of
outstanding Notes:
(a) as soon as practicable and in any event within 50 days after the
end of each of the first three quarterly fiscal periods in each fiscal year
of the Issuer, the unaudited consolidated balance sheet of the Issuer and
any Restricted Subsidiaries, and the unaudited consolidating balance sheet
of the Issuer and any Restricted Subsidiaries, as of the end of such
quarterly period and the related unaudited consolidated statements of
income, retained earnings and cash flows of the Issuer and any Restricted
Subsidiaries, and the related unaudited consolidating statement of income
of the Issuer and any Restricted Subsidiaries for such quarterly period and
(in the case of the second and third such quarterly periods) for the
portion of the fiscal year ended with the last day of such quarterly
period, setting forth in each case in comparative form the respective
figures for the corresponding periods of the previous fiscal year, all in
reasonable detail and certified as complete and correct in all material
respects in conformity with GAAP (except in respect of consolidating
statements and footnotes), subject to changes resulting from year-end audit
adjustments, by the principal financial officer of the General Partner of
the Issuer;
(b) as soon as practicable and in any event within 95 days after the
end of each fiscal year of the Issuer, the unaudited consolidated balance
sheet of the Issuer and any Restricted Subsidiaries, and the unaudited
consolidating balance sheet of the Issuer and any Restricted Subsidiaries,
as of the end of such fiscal year and the related unaudited consolidated
statements of income, retained earnings and cash flows of the Issuer and
any Restricted Subsidiaries, and the related unaudited consolidating
statement of income of the Issuer and any Restricted Subsidiaries, for such
fiscal year, setting forth in each case in comparative form the respective
figures for the previous fiscal year, all in reasonable detail and
certified as complete and correct in all material respects in conformity
with GAAP (except in respect of consolidating statements and footnotes) by
the principal financial officer of the General Partner of the Issuer,
provided, however, that should the Notes receive a rating of lower than 2
-------- ------- ----
from the NAIC, the Issuer agrees to furnish to you, as soon as practicable
and in any event within 95 days after the end of each fiscal year of the
Issuer, the consolidated balance sheet of the Issuer and any Restricted
Subsidiaries, and the unaudited consolidating balance sheet of the Issuer
and any Restricted Subsidiaries, as of the end of such fiscal year and the
related consolidated statements of income, retained earnings and cash flows
of the Issuer and any Restricted Subsidiaries, and the related unaudited
consolidating statement of income of the Issuer and any Restricted
Subsidiaries, for such fiscal year, setting forth in each case in
comparative form the respective figures for the previous fiscal year, all
in reasonable detail and (i) in the case of such consolidated statements,
accompanied by a report thereon of Coopers & Lybrand L.L.P. or other
independent certified public accountants of recognized national standing
selected by the Issuer which report shall, unless a waiver of the
provisions of this Section 4(b) has been obtained pursuant to Section 12,
be made without qualification as to or by reason of (x) changes in
accounting principles and methods (other than changes therein which such
accountants express their concurrence), (y) the unavailability of
sufficient competent evidential matter on which to base an audit or the
inadequacy of accounting records or (z) restrictions on the scope of the
audit conducted and shall comply with generally accepted auditing standards
at the time in effect and shall state that such financial statements
present fairly the financial position of the companies being reported upon
as at the dates indicated and the results of their operations and cash
flows for the periods indicated and have been prepared in accordance with
GAAP consistently applied (except for
13
<PAGE>
changes in application in which such accountants concur) on a basis
consistent with prior years, and that the examination of such accountants
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of pertinent accounting records and such
other auditing procedures as were considered necessary in the
circumstances, and (ii) in the case of such consolidating balance sheets
and statements of income of the Issuer and any Restricted Subsidiaries,
certified as complete and correct in all material respects in conformity
with GAAP by the principal financial officer of the General Partner of the
Guarantor;
(c) concurrently with each delivery of financial statements pursuant
to clause (a) or (b) of this Section 4, an Officer's Certificate
substantially in the form of Exhibit J (i) stating that such officer has
reviewed the terms of this Agreement and of the Notes and has made, or
caused to be made under such officer's supervision, a review in reasonable
detail of the transactions and conditions of the Issuer and any Restricted
Subsidiaries during the accounting period covered by such financial
statements, and that such review has not disclosed the existence during, or
at the end of such accounting period, and that such officer does not have
knowledge of the existence as at the date of such Officer's Certificate, of
any condition or event which constitutes a Default or an Event of Default,
or, if any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action the Issuer has taken or is
taking or proposes to take with respect thereto, (ii) setting forth, and
showing in reasonable detail the computation of, (A) as of the last day of
such quarterly or annual accounting period, as the case may be, the
respective amounts of Consolidated Tangible Net Worth, Consolidated Funded
Debt, Short-Term Debt, Attributable Debt, Secured Debt and Consolidated Net
Tangible Assets, and (B) for the period of four consecutive fiscal quarters
of the Issuer which shall have ended on the last day of such quarterly or
annual accounting period, as the case may be, the respective amounts of
Consolidated Net Income, Consolidated Net Operating Income and Consolidated
Debt Service, (iii) setting forth computations in reasonable detail and
dates, where applicable, demonstrating compliance with the restrictions
contained in Sections 6.1(d), 6.2, 6.3, 6.6, 6.7, and 6.12 and (iv) if the
Issuer Incurred any Short-Term Debt during such quarterly or annual period,
as the case may be, setting forth, with respect to each such Incurrence,
(A) the 45-day period during the prior 12-month period during which Short-
Term Debt of the Issuer and any Restricted Subsidiaries was zero or (B) the
45-day period during the prior twelve-month period during which Designated
Short-Term Debt was calculated and the computation in reasonable detail of
such Designated Short-Term Debt;
(d) promptly upon their becoming available (and in any event within
ten Business Days thereafter), copies of (i) all financial statements,
reports, notices, proxy statements and other information sent or made
available generally by the Issuer to any class of its security holders
other than the Guarantor or by any Subsidiary to any class of its security
holders other than the Guarantor, the Issuer or any Wholly-Owned
Subsidiary, (ii) all regular and periodic reports (including reports on
Form 8-K) and any registration statements (other than on Form S-8 or a
similar form) and prospectuses filed by the Issuer or any Subsidiaries with
any securities exchange or with the Commission and (iii) all press releases
and other statements made available generally by the Issuer or any
Subsidiary to the public concerning material developments in the business
of the Issuer or any Subsidiary;
(e) promptly upon receipt thereof (and in any event within five
Business Days thereafter), copies of all reports submitted to the Issuer or
any Subsidiary by independent public accountants in connection with any
annual, interim or special audit of the books of the Issuer or any
Subsidiary made by such accountants;
14
<PAGE>
(f) immediately upon any officer of the Issuer obtaining knowledge of
any condition or event which constitutes a Default or an Event of Default
or becoming aware that the holder of any Note has given any notice or taken
any other action with respect to a claimed Default or Event of Default an
Officer's Certificate specifying the nature and period of existence thereof
and what action the Issuer has taken or is taking or proposes to take with
respect thereto;
(g) promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Issuer or any Subsidiary from any federal or
state Governmental Body relating to any Order, ruling, statute or other law
or regulation that could reasonably be expected to have a Material Adverse
Effect;
(h) promptly upon receipt thereof (and in any event within 20
Business Days thereafter), such quarterly and annual financial statements
or other financial information, whether audited or unaudited, of any lessee
of real property (whether now owned or hereafter acquired) of the Issuer or
any Subsidiary, delivered to the Issuer or any Wholly-Owned Subsidiary,
provided that, the Issuer shall not be required to disclose any
-------- ----
confidential information received from any such lessee (other than AGC
unless such lessee has expressly consented to the release thereof and if
such lessee has not so expressly consented, the Issuer shall have, in any
event, made reasonable efforts to obtain such consent of any such lessee,
and provided further, that, in lieu of furnishing such other financial
-------- ------- ----
information received by it or its Subsidiaries, the Issuer may furnish to
you an index (promptly if the information reflected thereby involves any
material changes and in any event no less often than quarterly) of all such
other financial information from which you may request (and the Issuer
shall deliver) specific items at your discretion;
(i) promptly upon any officer of the Issuer obtaining knowledge of
the occurrence of any ERISA Event of the Issuer or any ERISA Affiliate (and
in any case within ten Business Days of the occurrence of such event), a
written notification specifying the nature of such ERISA Event and the
action, if any, that Issuer has taken, is taking or proposes to take with
respect thereto; and
(j) promptly upon request therefor (and in any event within five
Business Days thereafter), if no Default or Event of Default then exists,
such other information then within the possession of the Issuer, or, if a
Default or Event of Default then exists, such other information (whether
within or not within the possession of the Issuer), in each case as to the
business, operations, properties, financial condition or prospects of the
Issuer or any Subsidiary as may from time to time be reasonably requested.
5. INSPECTION AND CONFIDENTIALITY.
-------------------------------
5.1 INSPECTION. Subject to the provisions of Section 5.2 hereof, the
----------
Issuer shall permit the representatives of each holder of Notes that is an
institutional investor:
(A) NO DEFAULT -- if no Default or Event of Default then exists,
----------
at the expense of such holder and upon reasonable prior notice to the
Issuer, to visit the principal executive office of the Issuer, to discuss
the affairs, finances and accounts of the Issuer and any Subsidiaries with
the Issuer's officers, and (with the consent of the Issuer, which consent
will not be unreasonably withheld) its independent public accountants, and
(with the consent of the Issuer, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Issuer and each
15
<PAGE>
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
(B) DEFAULT -- if a Default or Event of Default then exists, at
-------
the expense of the Issuer to visit and inspect any of the offices or
properties of the Issuer or any Subsidiary, to examine all their respective
books of account, records, reports and other papers, to make copies and
extracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public accountants
(and by this provision the Issuer authorizes said accountants to discuss
the affairs, finances and accounts of the Issuer and its Subsidiaries), all
at such times and as often as may be requested.
5.2 CONFIDENTIAL INFORMATION. For the purposes of this Section 5.2,
------------------------
"Confidential Information" means information delivered to you by or on
behalf of the Issuer or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is proprietary
in nature and that is clearly marked or labeled or otherwise adequately
identified when received by you as being confidential information of the
Issuer or such Subsidiary, provided that such term does not include
--------
information that (a) was publicly known prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or
omission by you or any person acting on your behalf, (c) otherwise becomes
known to you other than through disclosure by the Issuer or any Subsidiary
or (d) constitutes financial statements delivered to you under Section 4
that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information
of third parties delivered to you, provided that you may deliver or
--------
disclose Confidential Information to (i) your directors, officers and
employees (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors, agents, attorneys and
affiliates who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 5.2, (iii) any
other holder of any Note, (iv) any Person to which you sell or offer to
sell such Note or any part thereof or any participation therein who agrees
to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 5.2, (v) any Person from which
you offer to purchase any security of the Issuer who agrees to hold
confidential the Confidential Information substantially in accordance with
the terms of this Section 5.2, (vi) any federal or state regulatory
authority having jurisdiction over you, (vii) the National Association of
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about your
investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with
any law, rule, regulation or order applicable to you, to the extent you may
reasonably determine such delivery or disclosure to be required thereby,
(x) in response to any subpoena or other legal process, to the extent you
may reasonably determine such delivery or disclosure to be required
thereby, (y) in connection with any litigation to which you are a party, to
the extent you may reasonably determine such delivery or disclosure to be
required thereby, (y) in connection with any litigation to which you are a
party, to the extent you may reasonably determine such delivery or
disclosure to be necessary therein or (z) if an Event of Default has
occurred and is continuing, to the extent you may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement
or for the protection of the rights and remedies under your Notes and this
Agreement, provided that, in connection with this clause (viii) of Section
--------
5.2, you agree to make commercially reasonable efforts to provide notice of
your intention to make disclosure pursuant to clause (w), (x) or (y) in
order to provide the Issuer the opportunity to take such actions as the
Issuer may determine are appropriate under the
16
<PAGE>
circumstances. Each holder of a Note, by its acceptance of a Note, will be
deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 5.2 as though it were a party to this Agreement.
6. COVENANTS. The Issuer covenants and agrees that from the date of this
---------
Agreement to the First Closing Date and thereafter so long as any Note of either
series shall be outstanding:
6.1 LIMITATIONS ON LIENS. The Issuer will not, and will not permit
--------------------
any Restricted Subsidiary to, Incur any Debt secured by any Lien upon any of
the property of the Issuer or any Restricted Subsidiary, whether now owned or
hereafter acquired, except:
(a) Debt secured by only Permitted Liens;
(b) Existing Secured Debt; and
(c) Debt not otherwise permitted under this Section provided
that after giving effect thereto the sum (without duplication) of (i) the
aggregate amount of Attributable Debt of the Issuer or any Restricted
Subsidiary then outstanding, (ii) the aggregate amount of Secured Debt of
the Issuer or any Restricted Subsidiary then outstanding (not including
Secured Debt permitted under other clauses of this Section) and (iii) the
aggregate amount of Funded Debt and Short-Term Debt of any Restricted
Subsidiary then outstanding (not including Secured Debt permitted under
other clauses of this Section other than Existing Secured Debt described in
Part II(a) of Schedule 7.17) does not exceed twenty percent (20%) of
Consolidated Net Tangible Assets at the time of Incurrence.
6.2 MAINTENANCE OF CERTAIN FINANCIAL CONDITIONS. The Issuer will
-------------------------------------------
cause the following financial conditions to exist at all times:
(a) Consolidated Tangible Net Worth to equal or exceed
$145,000,000;
(b) the ratio of (i) Consolidated Net Operating Income
determined for each period of four consecutive fiscal quarters of the
Issuer to (ii) Consolidated Debt Service determined for such period to be
at least 1.75 to 1.00.
6.3 LIMITATIONS ON DEBT.
-------------------
(a) The Issuer will not at any time permit the ratio of (i) the
sum of Consolidated Funded Debt outstanding at such time plus any
Designated Short-Term Debt with respect to such time to (ii) Consolidated
Net Operating Income for the four fiscal quarters most recently ended at or
before such time to be greater than 5.75 to 1.00;
(b) The Issuer will not, and will not permit any Restricted
Subsidiary to, Incur any Debt owed to any Subsidiary that is not a Wholly-
Owned Subsidiary if after giving effect thereto the aggregate amount of
Debt owed by the Issuer and any Restricted Subsidiaries to any Subsidiaries
that are not a Wholly-Owned Subsidiaries exceeds $500,000; and
(c) The Issuer will not permit any Restricted Subsidiary to
Incur any Funded Debt or Short-Term Debt unless after giving effect thereto
the sum (without duplication) of (i) the aggregate amount of Attributable
Debt of the Issuer or any
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Restricted Subsidiary then outstanding, (ii) the aggregate amount of
Secured Debt of the Issuer or any Restricted Subsidiary then outstanding
(other than Secured Debt permitted under clause (a) or (b) of Section 6.1)
and (iii) the aggregate amount of Funded Debt and Short-Term Debt of any
Restricted Subsidiary then outstanding (not including Secured Debt
permitted under clause (a) or (b) of Section 6.1 other than Existing
Secured Debt described in Part II(a) of Schedule 7.17) does not exceed
twenty percent (20%) of Consolidated Net Tangible Assets at such time.
6.4 LIMITATIONS ON SHORT-TERM DEBT. The Issuer will not, and will not
------------------------------
permit any Restricted Subsidiary to, Incur any Short-Term Debt (other than
Intercompany Debt) unless, after the Incurrence thereof and immediately after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing and either (a) the Short-Term Debt of the Issuer and its Restricted
Subsidiaries shall have been zero for at least 45 consecutive days during the
12-month period ending on the date of such Incurrence or (b) the ratio of (i)
the sum of Consolidated Funded Debt then outstanding and Designated Short-Term
Debt with respect to such Incurrence to (ii) Consolidated Net Operating Income
for the four fiscal quarters most recently ended at or before the date of such
Incurrence is less than 5.75 to 1.00.
6.5 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The Issuer will not
-------------------------------------------
voluntarily liquidate or dissolve, or (whether in a single transaction or a
series of transactions) consolidate or merge with any other Person, or permit
any other Person to consolidate or merge with it, or sell, lease, transfer or
otherwise dispose of all or substantially all of its properties or assets
(whether now owned or hereafter acquired) to any other Person, except that (as
long as the successor formed by such consolidation or the survivor of such
merger or the Person that acquires such assets in an entity treated as a
partnership or a real estate investment trust for purposes of United States
federal income taxation and, to the extent material, the tax laws of any state
or locality in which such entity is subject to taxation based on its income) the
Issuer may consolidate with or merge into, or sell its assets as an entirety or
substantially as an entirety to, any other Person if the successor formed by
such consolidation or the survivor of such merger or the Person that acquires
such assets is a solvent corporation, partnership or limited liability company
which shall be organized under the laws of any state of the United States of
America and, if the Issuer is not such corporation, partnership or limited
liability company, such corporation, partnership or limited liability company
(i) shall have executed and delivered to each holder of any Notes its assumption
of the due and punctual payment of the principal of, and premium (if any) and
interest on the Notes according to their tenor, and the due and punctual
performance and observance of the obligations of the Issuer under this
Agreement, the Other Agreements and under the Notes, (ii) shall have caused to
be delivered to each holder of any such Notes a favorable opinion of Latham &
Watkins or other counsel, such opinion and counsel to be reasonably satisfactory
to the holders of at least 66-2/3% in unpaid principal amount of the Notes then
outstanding, to the effect that all agreements and instruments effecting such
assumption are enforceable in accordance with their terms (subject to customary
exceptions) and comply with the terms hereof and (iii) shall have caused to be
delivered to each Gain Holder a favorable opinion of Latham & Watkins or other
counsel, such opinion and counsel to be reasonably satisfactory to the Gain
Holders which hold at least 66-2/3% in unpaid principal amount of the Notes then
outstanding and held by Gain Holders, that such consolidation, merger or sale of
assets will not result in an actual or deemed sale or exchange of the Notes for
federal income tax purposes; provided, however, that at the time of and
-------- -------
immediately after giving effect to any such merger, consolidation, sale, lease
or other disposition. (x) no Event of Default or Default shall have occurred and
be continuing and (y) the Issuer shall be entitled to increase Consolidated
Funded Debt by $1.00 pursuant to Section 6.3. No sale or other disposition
permitted by this Section 6.5 shall in any event release the Issuer or any
successor corporation, partnership or limited
18
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liability company that shall theretofore have become such in the manner
prescribed in this Section 6.5 from any of its obligations and liabilities under
this Agreement, the Other Agreements and the Notes, except that a sale of all
assets shall release the Issuer or any successor corporation, partnership or
limited liability company that shall theretofore have become such in the manner
prescribed in this Section 6.5 from all of its obligations under this Agreement,
the Other Agreements and the Notes.
6.6 SALES OF ASSETS. The Issuer will not, and will not permit any
---------------
Restricted Subsidiary to, at any time, make any Asset Disposition unless all of
the following conditions are met: (a) the net book value of all property then
being sold, leased, transferred or otherwise disposed of in such Asset
Disposition, together with the net book value of all other property sold,
leased, transferred or otherwise disposed of by the Issuer and its Restricted
Subsidiaries in other Asset Dispositions since the First Closing Date shall not,
in the aggregate, exceed thirty percent (30%) of Consolidated Net Tangible
Assets, determined as of the end of the then most recently ended fiscal quarter
of the Issuer preceding such sale, lease, transfer or other disposition and (b)
at the time of or immediately after the consummation of such sale, lease,
transfer or other disposition, and after giving effect thereto, no Default or
Event of Default would exist. Sales of all or any portion of the capital stock
or similar equity interest of a Restricted Subsidiary shall, for purposes of
determining the book value thereof in clause (a) above, be deemed to be the sale
of all or such portion of the book value of the assets of the Restricted
Subsidiary which shall have issued such capital stock or similar equity
interest.
6.7 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Issuer will
---------------------------------------------
not, and will not permit any Restricted Subsidiary to, enter into any Sale and
Leaseback Transaction unless (a) the Sale and Leaseback Transaction is accounted
for as a capital lease on the financial statements of the Issuer or Restricted
Subsidiary engaging in the Sale and Leaseback Transaction and the Attributable
Debt in respect of such transaction plus the sum (without duplication) of (i)
the aggregate amount of Attributable Debt of the Issuer or any Restricted
Subsidiary then outstanding in respect of other Sale and Leaseback Transactions,
(ii) the aggregate amount of Secured Debt of the Issuer or any Restricted
Subsidiary then outstanding (other than Secured Debt permitted under clause (a)
or (b) of Section 6.1) and (iii) the aggregate amount of Funded Debt and Short-
Term Debt of any Restricted Subsidiary then outstanding (not including Secured
Debt permitted under clause (a) or (b) of Section 6.1 other than Existing
Secured Debt described on Part II(a) of Schedule 7.17) does not exceed twenty
percent (20%) of Consolidated Net Tangible Assets at such time or (b) if the
Sale and Leaseback Transaction is not accounted for as a capital lease on the
financial statements of the Issuer or Restricted Subsidiary engaging in the Sale
and Leaseback Transaction, then (i) the Asset Disposition included in such Sale
and Leaseback Transaction is permitted under Section 6.6, (ii) the proceeds
received by the Issuer or Restricted Subsidiary in connection with the Asset
Disposition included in such Sale and Leaseback Transaction are at least equal
to the fair market value of such property, and (iii) at the time of or
immediately after the consummation of such Asset Disposition, and after giving
effect thereto, no Default or Event of Default would exist.
6.8 NATURE OF BUSINESS. The Issuer will not, and will not permit any
------------------
Subsidiary to, engage in any line of business in which it is not currently
engaged or otherwise alter its manner of conducting business if as a result
thereof the business of the Issuer and its Subsidiaries taken as a whole would
be substantially changed from the general nature of the business of the Issuer
and its Subsidiaries as of the date of the Memorandum, as described therein.
6.9 MAINTENANCE OF LEASES. The Issuer will not, and will not permit
---------------------
any Restricted Subsidiary to, change, waive, discharge or terminate any Existing
Lease or any
19
<PAGE>
provision thereof, except that the Issuer or any Restricted Subsidiary may
change or waive any provision of, and may discharge and terminate, an Existing
Lease if in the good faith judgment of the Independent Directors of the General
Partner such change or waiver, discharge or termination, is in the best interest
of the Issuer or such Restricted Subsidiary or is required to maintain the
Guarantor's status as a real estate investment trust under the Code and the
consequences of such change or waiver, discharge or termination, would not, in
the aggregate as to any one or more Existing Leases, be materially
disadvantageous to the holders of the Notes; provided, however, that in no event
-------- -------
may the Issuer or any Subsidiary change or waive any provision of any Existing
Lease relating to Assignment, Subletting or Change of Control (as each is
defined in the Existing Leases), expect for changes or waivers the consequences
of which would, in the aggregate as to any one or more Existing Leases, be more
favorable to the Issuer or such Restricted Subsidiary than would arise in the
absence of such changes or waivers and, provided further, that, any Existing
----------------------
Lease or any provision thereof may be changed, waived, discharged or terminated
in connection with the sale, transfer or other disposition of the related
property which is permitted under the terms hereof. The Issuer will not change
the designation of any Subsidiary in existence on the date hereof from an
Unrestricted Subsidiary to a Restricted Subsidiary unless any change to or
waiver of the provisions of, or discharge or termination of, any Existing Leases
of such Subsidiary would have been in compliance with the terms of this Section
6.9 had such Subsidiary been a Restricted Subsidiary on the date of such change,
waiver, discharge or termination.
6.10 RESTRICTED PAYMENTS. The Issuer will not, directly or indirectly,
-------------------
and will not permit any Restricted Subsidiary (other than a Wholly-Owned
Subsidiary) to, declare or make any Distribution unless, at the time of and
immediately after effect has been given to such declaration and the making of
such Distribution, no condition or event shall exist which constitutes a Default
or an Event of Default.
6.11 TRANSACTIONS WITH AFFILIATES. The Issuer will not, and will not
----------------------------
permit any Restricted Subsidiary to, directly or indirectly, engage in any
material transaction or material group of related transactions with any
Affiliate of the Issuer or any Affiliate of its Restricted Subsidiaries, other
than (i) transactions entered into in the ordinary course of business pursuant
to the reasonable requirements of the Issuer's or such Restricted Subsidiary's
business and upon fair and reasonable terms that are no less favorable to the
Issuer or such Restricted Subsidiary, as the case may be, than would be
obtainable at the time on an arms-length basis from Persons that are not
Affiliates, (ii) transactions solely between or among any of the Issuer or any
Restricted Subsidiary or Restricted Subsidiaries, (iii) Distributions otherwise
permitted hereunder, (iv) transactions effected pursuant to, and in accordance
with, any agreement or arrangement existing as of the date hereof, all of which
are described on Schedule 6.11 and (v) payments of reasonable compensation to
employees or directors of the Guarantor.
6.12 OWNERSHIP OF GOLF COURSES. The Issuer will cause (i) all
-------------------------
Existing Golf Courses to be owned by the Issuer or Restricted Subsidiaries of
which at least ninety percent of the Voting Stock (in the case of corporations
or limited liability companies) or other equity interests (in the case of other
Subsidiaries) is controlled, directly or indirectly, by the Issuer, except for
Existing Golf Courses (x) sold or otherwise disposed of in an Asset Disposition
or Sale and Leaseback Transaction subject to Section 6.6 or Section 6.7, (y)
owned by the Guarantor, the Guarantor Subsidiaries or Unrestricted Subsidiaries
as permitted under clause (iii) of this Section 6.12 or (z) owned by Royal Golf,
L.P. II, so long as the Issuer owns at least eighty-nine percent of its
outstanding equity interests; (ii) all Golf Courses other than Existing Golf
Courses, acquired or owned by the Issuer or any corporation or other business
entity of which the Issuer owns or controls, directly or indirectly, any Voting
Stock or other equity interests, to be owned by the Issuer or its
20
<PAGE>
Restricted Subsidiaries, except for Golf Courses sold or disposed of in an Asset
Disposition of Sale and Leaseback Transaction subject to Section 6.6 or Section
6.7 and except for Golf Courses owned by the Guarantor, the Guarantor
Subsidiaries or any Subsidiary that is an Unrestricted Subsidiary as permitted
under clause (iii) of this Section 6.12; and (iii) at least ninety percent of
all Golf Courses owned, in whole or in part, by the Guarantor, the Guarantor
Subsidiaries, the Issuer and the Subsidiaries at any time to be owned by the
Issuer and its Restricted Subsidiaries. For the purposes of this clause (iii) of
Section 6.12, the percentage of Golf Courses owned by the Issuer and its
Restricted Subsidiaries shall be calculated by dividing the total number of golf
course holes owned, in whole or in part, by the Issuer and its Restricted
Subsidiaries by the total number of golf course holes owned, in whole or in
part, by the Guarantor, the Guarantor Subsidiaries, the Issuer and the
Subsidiaries and then multiplying the quotient by 100. Notwithstanding the
foregoing, this Section 6.12 shall not be construed to prevent the Issuer or any
Subsidiary from obtaining a minor interest in a corporation or other business
entity for the sole purpose of obtaining water rights ancillary to the operation
of any Golf Course.
6.13 PAYMENT OF NOTES; MAINTENANCE OF BOOKS AND OFFICE. The Issuer
-------------------------------------------------
will duly and punctually pay the principal of, premium (if any) and interest on
the Notes in accordance with the terms of the Notes, this Agreement and the
Other Agreements. The Issuer will, and will cause each of its Subsidiaries to,
maintain a system of accounting established and administered in accordance with
GAAP, keep proper books of record and account in which full, true and correct
entries are made of its business transactions, and set aside appropriate
reserves, all in accordance with GAAP. The Issuer will maintain its principal
office at a location in the United States of America where notices,
presentations and demands in respect of this Agreement and the Notes may be made
upon it and will notify, in writing, each holder of a Note of any change of
location of such office; and such office shall be maintained at 1448 15th
Street, Suite 200, Santa Monica, California 90404, until such time as the Issuer
shall so notify the holders of the Notes of any such change.
6.14 PARTNERSHIP EXISTENCE AND TAX STATUS; PAYMENT OF TAXES;
--------------------------------------------------------
MAINTENANCE OF PROPERTIES; INSURANCE; COMPLIANCE WITH LAWS; MAINTENANCE OF
- --------------------------------------------------------------------------
PATENTS.
- -------
The Issuer will and will cause each Subsidiary to:
(a) do or cause to be done all things necessary to preserve
and keep in full force and effect its partnership or corporate existence,
as the case may be (except as otherwise permitted by Section 6.5), and its
licenses, permits, rights (charter and statutory) and franchises, except
that, subject to compliance with Sections 6.6 and 6.7, the licenses,
permits, rights and franchises of the Issuer or any Subsidiary may be
abandoned, modified or terminated if in the good faith judgment of the
General Partner such abandonment, modification or termination is in the
best interest of the Issuer or the Subsidiary and would not, individually
or in the aggregate, be disadvantageous to the holders of the Notes;
(b) do or cause to be done all things necessary to cause
the Issuer and any Subsidiary organized as a partnership to be treated as
partnerships for purposes of United States federal income taxation and,
with respect to any such partnership, the tax laws of any state or locality
in which such partnership is subject to taxation based on its income
except, with respect to such state or local tax laws, where the failure to
be so treated would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(c) file all tax returns required to be filed in any
jurisdiction;
21
<PAGE>
(d) pay and discharge or cause to be paid and discharge (i) all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or upon any of its property (real, personal or mixed), or
upon any part thereof, or upon any of its assets or franchises when due and (ii)
all lawful claims of landlords, carriers, warehousemen, mechanics, materialmen
and other similar Persons for labor, materials, supplies and rentals which, if
unpaid, might by law become a lien upon any of its property; provided, however,
that the failure of the Issuer or any Subsidiary to pay any such tax,
assessment, charge, levy or claim shall not constitute a default hereunder if
and for so long as the amount, applicability or validity thereof shall
concurrently be contested in good faith by appropriate and timely proceedings
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made therefor;
(e) implement and enforce reasonable requirements for lessees of
all properties used or useful in the business of the Issuer and its Subsidiaries
to maintain and keep, or cause to be maintained and kept, in good repair,
working order, appearance and condition all such properties and, from time to
time, with reasonable promptness, make or cause to be made all necessary or
appropriate repairs, renewals, replacements and improvements thereof,
(f) implement and enforce reasonable requirements for lessees of
all properties used or useful in the business of the Issuer and its Subsidiaries
to maintain or cause to be maintained with financially sound and reputable
insurers, authorized to do insurance business in the State in which the property
or business is located, insurance (including deductibles) in respect of such
properties and businesses against loss or damage of the kind customarily insured
against and of such type and in such amounts as are customarily maintained under
similar circumstances by prudent business entities of established reputation
engaged in the same or similar business, including, but not limited to (i)
physical damage insurance on all real and personal property on an all risks
basis, covering the repair and replacement cost of all such property, and
consequential loss coverage for business interruption and extra expense, (ii)
personal injury or property damage insurance under a policy of comprehensive
general liability insurance, (iii) flood (when the property is located in whole
or in material part in a designated flood plain area) and such other hazards as
may be customary for comparable properties in the area and (iv) adequate
workers' compensation insurance coverage for all Persons employed on any of the
properties in accordance with the requirements of applicable federal, state and
local laws;
(g) comply in all material respects with all applicable lawful
statutes, regulations and Orders of, and all applicable lawful restrictions
imposed by, any Governmental Body, or by any trade or professional organization
or other industry regulatory body in respect of the conduct of its business and
the ownership of its properties (including, without limitation, applicable
statutes, regulations and orders relating to equal employment opportunities),
except where the failure to so comply, individually or in the aggregate, would
not have a Material Adverse Effect;
(h) implement and enforce reasonable requirements to cause each
of the real properties and other assets of the Issuer or any Subsidiary, whether
now or hereafter owned, leased or operated, to be operated in compliance in all
material respects with all Environmental Laws; and
(i) maintain the validity of all patents, trademarks, service
marks, trade names, copyrights and the like necessary, individually or in the
aggregate, in
22
<PAGE>
any material respect for the conduct of its business as now conducted and
as proposed to be conducted.
6.15 COMPLIANCE WITH ERISA. The Issuer shall, and shall cause
---------------------
its ERISA Affiliates to comply with the provisions of ERISA and the Code with
respect to any Plan sponsored by or contributed to by it or any ERISA Affiliate.
The Issuer shall not (i) terminate or permit any ERISA Affiliate to terminate
any Plan in a manner that results in any material liability of the Issuer or any
ERISA Affiliate to the PBGC or any other person or (ii) permit the occurrence of
any Reportable Event or any other event or condition that presents a material
risk of a termination by the PBGC of any Plan pursuant to Section 4042 of ERISA.
The Issuer shall, and shall cause its ERISA Affiliates to make full and timely
payment of all amounts required to be contributed under the terms of each Plan
and each Multiemployer Plan and the laws applicable thereto.
7. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
represents and warrants to you that:
7.1 ORGANIZATION, AUTHORITY AND TAX STATUS OF THE ISSUER. THE
----------------------------------------------------
Issuer has been duly formed, is validly existing as a limited partnership in
good standing under the laws of the state of Delaware, and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, other than those jurisdictions as to which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Issuer has all
requisite power and authority to own or hold under lease the property it
purports to own or hold under lease, to carry on its business as now conducted
and as proposed to be conducted, to execute and deliver this Agreement, the
Other Agreements and the Notes and to perform its obligations hereunder and
thereunder. The Issuer is a partnership for purposes of United States federal
income taxation and for purposes of the tax laws of any state or locality in
which the Issuer is subject to taxation based on its income except, with respect
to such state or local tax laws, where the failure to be so treated would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
7.2 AUTHORIZATION. The Issuer has by all necessary action duly
-------------
authorized (i) the execution and delivery of this Agreement, the Other
Agreements and the Notes and (ii) the performance of its obligations under this
Agreement, the Other Agreements and the Notes. This Agreement and each of the
Other Agreements constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Issuer enforceable
against the Issuer in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.3 CAPITALIZATION. All of the Partnership Units are validly
--------------
issued and owned of record in the percentage amounts and by the entities or
persons described in Schedule 7.3. and, to the best of the Issuer's knowledge,
free and clear of any Lien. There are 19,285,460 partnership Units issued and
outstanding and such Partnership Units have been offered and sold in compliance
with all applicable laws (including, without limitation, federal and state
securities laws and rollup legislation). The Guarantor is the sole general
partner of the Issuer.
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<PAGE>
7.4 ORGANIZATION AND OWNERSHIP OF SUBSIDIARIES; AFFILIATES.
------------------------------------------------------
(a) Schedule 7.4 contains (except as noted therein) complete and
correct lists of (i) the Issuer's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Issuer and each other Subsidiary, (ii) the
Issuer's Affiliates, other than Subsidiaries and (iii) the directors and
executive officers of the General Partner of the Issuer.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 7.4 as being owned by the
Issuer and its Subsidiaries have been validly issued and are owned by the Issuer
or another Subsidiary free and clear of any Lien (except as otherwise disclosed
in Schedule 7.4).
(c) Each Subsidiary identified in Schedule 7.4 is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified as a
foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or other power
and authority to own or hold under lease the properties it purports to own or
hold under lease and to transact the business it transacts and proposes to
transact. Each Subsidiary organized as a partnership is a partnership for
purposes of United States federal income taxation and for purposes of the tax
laws of any state or locality in which the Subsidiary is subject to taxation
based on its income except, with respect to such state or local tax laws, where
the failure to be so treated would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
7.5 DISCLOSURE. The Issuer, through its agent, Morgan Stanley & Co.
----------
Incorporated, has delivered to you and each other Purchaser the Disclosure
Documents relating to the transactions contemplated hereby: The Disclosure
Documents fairly describe, in all material respects, the general nature of the
business and principal properties of the Issuer and its Subsidiaries. Except as
disclosed in Schedule 7.5, this Agreement, the Disclosure Documents and the
documents, certificates or other writings delivered to you by or on behalf of
the Issuer in connection with the transactions contemplated hereby, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading in
light of the circumstances under which they were made. There is no fact known to
the Issuer that could reasonably be expected to have a Material Adverse Effect
that has not been set forth herein or in the Disclosure Documents or in the
other documents, certificates and other writings delivered to you by or on
behalf of the Issuer specifically for use in connection with the transactions
contemplated hereby. Any projections contained in the Disclosure Documents were
based on assumptions the Issuer believes to be reasonable and were calculated or
arrived at, as the case may be, in a manner the Issuer believes to be
reasonable.
7.6 FINANCIAL STATEMENTS. The financial statements of the Issuer and
--------------------
any Subsidiaries included in the Memorandum present fairly the financial
position of the Issuer and any Subsidiaries as at the dates indicated and the
results of their operations and cash flows for the periods specified; except as
otherwise stated in the Memorandum, said financial statements have been prepared
in conformity with GAAP applied on a consistent basis; and the pro forma
financial statements included in the Memorandum comply in all material respects
with the applicable requirements of Rule 11-02 of Regulation S-X promulgated by
24
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the Commission and the pro forma adjustments have been properly applied to the
historical amounts in the compilation of such statements.
7.7 CHANGES, ETC. Except as disclosed in the Disclosure Documents or
------------
as expressly described in Schedule 7.5, or in one of the documents, certificates
or other writings identified therein, or in the financial statements referenced
in Section 7.6, since December 31, 1995, there has been on Material Adverse
Change. Subsequent to the respective dates as of which information is given in
the Memorandum and prior to the First Closing (i) neither the Issuer nor any
Subsidiary has incurred any material transaction not in the ordinary course of
business, except as disclosed in the quarterly report on Form 10-Q of the
Guarantor for the quarter ended March 31, 1996; (ii) neither the Issuer nor any
Subsidiary has purchased any of the Issuer's Partnership Units, nor declared,
paid or otherwise made a dividend or distribution of any kind on the Issuer's
Partnership Units except as required by Section 5.1 of the Partnership
Agreement; and (iii) there has not been any material change in the capital stock
or similar equity interests, short-term debt or long-term debt of the Issuer or
any Subsidiary except in each case as described in or contemplated by the
Memorandum.
7.8 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the Issuer nor
--------------------------------------
any Subsidiary is in violation of any term or provision of its corporate charter
or by-laws or certificate of partnership or partnership agreement, as the case
may be. Neither the Issuer nor any Subsidiary is in violation of any term or
provision of any agreement, indenture, mortgage or other instrument or agreement
to which it is a party or by which it or any of its properties may be bound or
affected, or in violation of any existing law, governmental rule or regulation
or any Order of any court, arbitrator or other Governmental Body applicable to
it, the consequences of which violation, either in any one case or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
Neither the execution and delivery of this Agreement, the Other Agreements and
the Notes nor the consummation of the transactions contemplated hereby and
thereby nor the performance of the terms and provisions hereof and thereof will
result in any breach of, or constitute a default under, or result in (or
require) the creation of any Lien in respect of any property of the Issuer or
any Subsidiary under any indenture, mortgage, bank loan, credit agreement, other
agreement or instrument, or partnership agreement, partnership certificate,
corporate charter or by-law to which the Issuer or any Subsidiary is a party or
by which the Issuer or any Subsidiaries or any of their respective properties
may be bound or affected, or violate any existing law, governmental rule or
regulation or any Order of any court, arbitrator or Governmental Body applicable
to the Issuer or any Subsidiaries.
7.9 GOVERNMENTAL AUTHORIZATIONS, ETC. Subject to the accuracy of your
--------------------------------
representations and warranties contained in Sections 1.5 to 1.8 and the
performance of your agreements contained in Section 1.9 hereof and the accuracy
of the representations and warranties of the Other Purchasers contained in
Sections 1.5 to 1.8 and the performance of the agreements of the Other Purchaser
contained in Section 1.9 of the Other Agreements, no consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Body is required for or in connection with the valid execution and delivery of
this Agreement, the Other Agreements or the Notes, or the consummation of the
transactions contemplated hereby and thereby, including the offer, issuance,
sale and delivery by the Issuer of the Notes to you, or the fulfillment of, or
compliance by the Issuer with, the terms and provisions hereof and thereof.
7.10 LITIGATION. Except as disclosed in Schedule 7.10, there are no
----------
actions, suits or proceedings pending or, to the knowledge of the Issuer,
threatened against or affecting the Issuer, any Subsidiary or any of their
respective properties before or by any Governmental Body (a) in which there is a
reasonable possibility of an adverse determination
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that could have a Material Adverse Effect or (b) that in any manner draws into
question the legality, validity or enforceability of this Agreement or the Other
Agreements.
7.11 TAXES. The Issuer and its Subsidiaries have properly prepared and
-----
timely filed all tax returns that are required by law to have been filed and
have paid all taxes, assessments, fees and charges of each Governmental Body
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent the same have become due and payable and before they have become
delinquent other than those presently payable without penalty or interest and
those being contested in good faith by appropriate proceedings as to which
adequate reserves have been established in accordance with GAAP with respect
thereto. The Issuer knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. In the opinion of the
Issuer, all tax liabilities are adequately provided for on the books of the
Issuer and its Subsidiaries in accordance with GAAP.
7.12 TITLE TO PROPERTIES AND LEASES. Except as set forth on Schedule
------------------------------
7.12, the Issuer and its Subsidiaries have good and marketable title to their
respective real properties and good title to their other properties reflected in
the most recent audited balance sheet contained in the Memorandum or purported
to have been acquired by the Issuer or any of its Subsidiaries after the date
thereof (except as sold or otherwise disposed of in the ordinary course of
business) in each case free and clear of Liens prohibited by this Agreement. The
Existing Leases and any Subsequent Leases are valid and subsisting and in full
force and effect, binding upon and enforceable against the lessees thereunder
and neither the Issuer nor any Subsidiary is aware of any Default or Event of
Default pursuant to the terms of any Existing or Subsequent Lease (as those
terms are defined therein). The Issuer and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all leases of personal and real
property under which it operates, and all such leases are valid and subsisting
and in full force and effect and neither the Issuer nor any of its Subsidiaries
is in default in any material respect in the performance and observance of their
respective obligations under any thereof. The Issuer has obtained title
insurance for all of its real properties in the amounts shown on Schedule 7.12,
with only customary exceptions, and such title insurance is in full force and
effect.
7.13 PATENTS, TRADEMARKS, AUTHORIZATIONS, ETC. The Issuer and its
----------------------------------------
Subsidiaries own, possess or have the right to use (without any known conflict
with the rights of others) all franchises, patents, trademarks, service
marks, trade names, copyrights, inventions, Know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems and procedures), licenses and authorizations (collectively,
"Proprietary Rights") which are necessary to the conduct of their respective
business as conducted on the date hereof and as proposed to be conducted, except
where the failure to so own, possess or have the right to use such Proprietary
Rights would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Proprietary Right is in full force and
effect, and, in the case of each such Proprietary Right, the Issuer or its
Subsidiaries (whichever shall own, possess or have the right to use the same),
has fulfilled and performed all of its material obligations with respect
thereto, except where the failure to so be in force and effect or to so fulfill
and perform such obligations would not, individually in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Issuer has nor
received any notice and is otherwise unaware of any infringement of or conflict
with asserted rights of others with respect to any Proprietary Right, or of any
facts which would render any Proprietary Right invalid or inadequate to protect
the interest of the Issuer or any of its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or
finding) or invalidity or inadequacy, in the aggregate, would result in a
Material Adverse Effect. To the best
26
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knowledge of the Issuer, there is no material violation by any person of any
right of the Issuer or any of its Subsidiaries with respect to any of their
Proprietary Information.
7.14 COMPLIANCE WITH ERISA. Except as set forth on Schedule 7.14,
---------------------
neither the Issuer nor any ERISA Affiliate sponsors, maintains or contributes
to, or has an obligation to contribute to, any Plan that is subject to Title IV
of ERISA or to any Multiemployer Plan. With respect to any such Plan or any
Multiemployer Plan that is or was previously sponsored, maintained or
contributed to, or with respect to which the Issuer or any of its ERISA
Affiliates has or had an obligation to contribute:
(a) No such Plan has been terminated so as to subject, directly
or indirectly, any assets of Issuer or its ERISA Affiliates to any
liability or the imposition of any liens under Title IV of ERISA;
(b) No proceeding has been initiated or threatened by any person
including the PBGC, to terminate any such Plan;
(c) No condition or event exists or is expected to occur with
respect to any such Plan that could subject, directly or indirectly, any
assets of the Issuer or its ERISA Affiliates to any liability, contingent
or otherwise, or the imposition of any lien under Title IV of ERISA,
whether to the PBGC or to any other person;
(d) No Reportable Event has occurred and is continuing with
respect to any such Plan;
(e) No such Plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred an accumulated funding deficiency, as
defined in Section 302 of ERISA and Section 412 of the Code, whether or not
such deficiency has been waived;
(f) Neither the Issuer nor any ERISA Affiliate has incurred or
reasonably expects to incur any Withdrawal Liability; and
(g) Neither the Issuer nor any ERISA Affiliate has been notified
by the sponsor of any Multiemployer Plan to which the Issuer or any ERISA
Affiliate is or was required to make or accrue a contribution that such
Multiemployer Plan is in reorganization or has been terminated within the
meaning of Title IV of ERISA.
Neither the Issuer nor any of its ERISA Affiliates has engaged in a
transaction in connection with which the Issuer or such ERISA Affiliate would be
subject to liability either for a civil penalty assessed pursuant to Section
502(i) of ERISA or tax imposed by Section 4975 of the Code. All Plans maintained
by the Issuer or any ERISA Affiliate have been administered in compliance with
ERISA and the applicable provisions of the Code.
7.15 PRIVATE OFFERING. Neither the Issuer nor any Person authorized or
----------------
employed by the Issuer to act on its behalf in connection with the offer and
sale of the Notes or any similar security of the Issuer has offered the Notes or
any similar securities of the Issuer for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with any Person other than you, the Other Purchasers and not more than 100 other
institutional investors, each of which has been offered the Notes at a private
sale for investment. Neither the Issuer nor anyone acting on its behalf has
taken, or will take, any action which would subject the offer, issuance or sale
27
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of the Notes to Section 5 of the Securities Act or to be registration or
qualification requirements of any securities or blue sky law of any applicable
jurisdiction.
7.16 USE OF PROCEEDS; MARGIN REGULATIONS. The Issuer will apply the
-----------------------------------
proceeds of the sale of the Notes hereunder as provided in Section 1.4. No part
of the proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR 207, as amended), or for the purpose of purchasing or carrying or
trading in any securities under such circumstances as to involve the Issuer in a
violation of Regulation X of said Board (12 CFR 224, as amended) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR 220,
as amended). None of the transactions contemplated by this Agreement (including,
without limitation, the direct or indirect use of the proceeds from the sale of
the Notes hereunder) will violate or result in a violation of Section 7 of the
Exchange Act or any regulations issued pursuant thereto, including, without
limitation, said Regulation G, Regulation T and Regulation X. As used in this
Section, the terms "margin stock" and "purpose of buying or carrying" shall have
the meanings assigned to them in said Regulation G.
7.17 EXISTING DEBT AND LONG TERM LEASES. Part One of Schedule 7.17
----------------------------------
sets forth a complete and correct list of all outstanding Debt (not including
Secured Debt) of the Issuer and its Subsidiaries as of the date hereof, and
shows as to each item of Debt listed thereon the obligor, the aggregate
principal amount outstanding on the date hereof and the final maturity thereof,
since which date there has been no material change in the amounts, interest
rates, sinking funds, installment payments or maturities of any such Debt. Part
Two of Schedule 7.17 sets forth a complete and correct list of all outstanding
Secured Debt of the Issuer and its Subsidiaries as of the date hereof and shows
as to each item of Secured Debt listed thereon the obligor, the aggregate
principal amount outstanding on the date hereof, the final maturity thereof, and
a brief description of any security therefor, since which date there has been no
material change in the amounts, interest rates, sinking funds, installment
payments or maturities of any such Secured Debt. Neither the Issuer nor any
Subsidiary is in default and no waiver of default is currently in effect in the
payment of any principal or interest on any such Debt, including the Secured
Debt, and no event or condition exists with respect to any such Debt, including
the Secured Debt, that would permit (or that with notice or the lapse of time,
or both, would permit) one or more Persons to cause such Debt, including the
Secured Debt, to become due and payable before its stated maturity or before its
regularly scheduled dates of payment. The Issuer has delivered to you and the
Other Purchasers true and correct copies of all agreements or other documents
pursuant to which the Issuer or any Subsidiary has Debt, including the Secured
Debt, outstanding. Part Three of Schedule 7.17 includes a list of all Long Term
Leases under which the Issuer or any of its Subsidiaries is lessee and sets
forth, with respect to each such Long Term Lease, the name of the lessor, the
lessee, the property leased, the annual rentals payable thereunder, the
expiration date and any provisions for earlier cancellation and options for
extension thereof.
7.18 STATUS UNDER CERTAIN STATUTES. Neither the Issuer nor any
-----------------------------
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
7.19 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as has been disclosed in Schedule 7.19, to the best
knowledge of the Issuer, the real properties now or formerly owned, leased
or operated by the Issuer or any Subsidiary or any other assets
(collectively, the
28
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"Properties") are presently operated in compliance in all material respects
with all Environmental Laws.
(b) Except as has been disclosed in Schedule 7.19, to the best
knowledge of the Issuer, there are no Environmental Laws requiring any
material remediation, clean up, repairs, construction or capital
expenditures (other than normal maintenance) with respect to the
Properties.
(c) Except as has been disclosed in Schedule 7.19, (A) no
notices of any violation or alleged violation of any Environmental Laws
relating to the Properties or their uses have been received by the Issuer
or any Subsidiary, or, to the best knowledge of the Issuer, by any prior
owner, operator or occupant of the Properties and (B) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions,
suits, claims, proceedings or investigations pending or threatened,
relating to the ownership of the Properties or, to the best knowledge of
the Issuer, relating to the use, maintenance or operation of the
Properties.
(d) Except as has been disclosed in Schedule 7.19, to the best
knowledge of the Issuer, all material permits and licenses required under
any Environmental Laws in respect of the operations of the Properties have
been obtained, and the Properties and the owners and operators thereof are
in compliance, in all material respects, with the terms and conditions of
such permits and licenses.
7.20 FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the
---------------------------------------
Notes by the Issuer hereunder nor its use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
7.21 INTERNAL ACCOUNTING CONTROLS. The Issuer and the Subsidiaries
----------------------------
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability and (iii) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
7.22 SOLVENCY. Neither the Issuer nor any of its Subsidiaries is
--------
insolvent. Neither the execution and delivery of this Agreement, the Other
Agreements, the Notes and the Assumption Agreements nor the consummation of the
transactions contemplated hereby and thereby, nor the performance of the terms
and provisions hereof and thereof will result in the insolvency of the Issuer or
any of its Subsidiaries, nor will the consummation of the transactions
contemplated by the Option Courses Agreement (including the repayment of amounts
owed pursuant to certain senior Participating Promissory Notes dated as of
August 18, 1993 and any other transactions related thereto), nor the performance
of the terms and provisions thereof result in the insolvency of the Issuer or
any of its Subsidiaries. For the purposes of this Section 7.22, the Issuer or
any of its Subsidiaries shall be deemed to be insolvent or an insolvency shall
be deemed to have resulted with respect to such Person if; (i) its liabilities
(including all claims against such Person, whether or not contingent,
unliquidated or disputed and regardless of whether such liabilities are required
to appear on a balance sheet prepared in accordance with GAAP) exceed the fair
market value of its assets; (ii) it retains unreasonably small capital for its
continuing business; or (iii) it intends to incur, or believes or reasonably
should believe it will incur, Debt beyond its ability to pay such Debt as it
becomes due.
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<PAGE>
7.23 ASSUMPTION OF ORIGINAL ISSUER NOTES FOR EQUIVALENT VALUE. The
--------------------------------------------------------
transfer of the Option Courses pursuant to the terms of the Option Courses
Agreement (including the repayment of amounts owed pursuant to certain Senior
Participating Promissory Notes dated as of August 18, 1993 and any other
transactions related thereto), on the one hand, and the assumption of the Trust
Notes and Black Lake Notes by the Issuer pursuant to the terms of the Assumption
Agreements and the issuance of OP Units pursuant to the terms of the Option
Courses Agreement, on the other hand, is an exchange for reasonably equivalent
value as such term is used in (S) 548 of the United States Bankruptcy Code.
8. EVENTS OF DEFAULT; REMEDIES.
---------------------------
8.1 EVENTS OF DEFAULT DEFINED; ACCELERATION OF MATURITY; RESCISSION
--------------------------------------------------------------
AND ANNULMENT. If any of the following conditions or events (herein called
- -------------
"Events of Default") shall occur and be continuing (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or come about
or be effected by operation of law or judicial or governmental or administrative
order, action or otherwise):
(a) default shall be made in the due and punctual payment of all
or any part of the principal of or Makewhole Amount (if any) on any Note
when and as the same shall become due and payable, whether on a date fixed
for required prepayment or purchase, at stated maturity, by acceleration or
declaration, on a date fixed for an optional prepayment by notice thereof
otherwise; or
(b) default shall be made in the due and punctual payment of any
interest on any Note when and as such interest shall become due and payable
or in the due and punctual payment of any other amounts due and payable
hereunder (other than a default pursuant to Section 8.1(a) hereof) and such
default shall have continued for a period of five days; or
(c) default shall be made in the performance or observance of
any covenant, agreement or condition contained in Section 4(f) or in
Sections 6.1, 6.5 or 6.6; or
(d) default shall be made in the performance or observance of
any other covenant, agreement or condition contained in this Agreement and
such default shall have continued for a period of 30 days after any Senior
Officer of the General Partner of the Issuer shall have first obtained
knowledge of such default (through notice or otherwise); or
(e) (i) default shall be made in the payment of any part of the
principal of, the premium (if any) or the interest on, or any other payment
of money due in respect of, Debt of the Issuer or any Restricted Subsidiary
for money borrowed in an aggregate principal amount of at least $15,000,000
(other than the Notes), beyond any period of grace provided with respect
thereto, or (ii) default shall be made in the performance or observance of
any other agreement, term or condition contained in any document or
documents evidencing or securing Debt, or in any agreement or agreements
under which Debt was issued or created, in each case, if the effect of any
one or more such defaults is to cause the holders of Debt (or a trustee on
behalf of such holders) to cause any payment or payments in respect of such
Debt aggregating not less than $15,000,000 (other than the Notes) to become
due prior to the Scheduled due date or dates thereof or (iii) as a
consequence of the occurrence or continuation of any event or condition
(other than the passage of time or the right of the holder or holders of
any Debt to convert such Debt into equity interests), (x) the
30
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Issuer or any Restricted Subsidiary has become obligated obligation to
purchase Debt (other than the Notes) before its regular maturity or before
its regularly scheduled dates of payment in an aggregate outstanding
principal amount of at least $15,000,000 or (y) one or more Persons
required the Issuer or any Restricted Subsidiary so to purchase any such
Debt in an aggregate principal amount of a least $15,000,000; or
(f) the Guarantor, the Issuer or any Restricted Subsidiary shall
(i) apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) be generally unable or admit in
writing its inability to pay its debts as such debts become due, (iii) make
a general assignment for the benefit of its creditors, (iv) commence a
voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (v) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law of any
jurisdiction, (vi) acquiesce in writing to, or fail to controvert in a
timely or appropriate manner, any petition filed against it in an
involuntary case under such Bankruptcy Code, (vii) take any action under
the laws of any jurisdiction analogous to any of the foregoing, (vii) is
adjudicated as insolvent or to be liquidated or (ix) take any corporate
action in furtherance of any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Guarantor, the Issuer or any Restricted
Subsidiary, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidation or the like of it or of all or
any substantial part of its assets, or (iii) similar relief in respect of
it under any law providing for the relief of debtors, and such proceeding
or case shall continue undismissed, or unstayed and in effect, for a period
of 60 days; or
(h) final judgement for the payment of money shall be rendered
by a court of competent jurisdiction against the Guarantor, the Issuer or
any Restricted Subsidiary and the Guarantor, the Issuer or such Restricted
Subsidiary, as the case may be, shall not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof within 60 days from the date of entry thereof and within said
period of 60 days, or such longer period during which execution of such
judgment shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal, and such judgment together with
all other such judgments not then discharged or then subject to such a stay
shall exceed in the aggregate U.S. $5,000,000 (or the equivalent amount of
any other currency); or
(i) any representation or warranty made by or on behalf of the
Issuer or by an officer of the Issuer in this Agreement or in any
certificate or other instrument delivered hereunder or pursuant hereto or
in connection with any provision hereof shall prove to be false or
incorrect or breached in any material respect on the date as of which made;
or
(j) the Guaranty, or any material provision therein, shall
cease to be in full force and effect for any reason other than a release or
termination thereof pursuant to the terms of the Guaranty or the Guarantor
shall contest or purport to repudiate or disavow any of its obligations
thereunder or the validity or enforceability thereof; or
(k) there shall occur any Guaranty Event of Default; or
31
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(l) there shall occur a Change of Control; or
(m) any ERISA Event shall have occurred with respect to any Plan
or Multiemployer Plan and, thirty days thereafter (i) such ERISA Event
shall still exist and (ii) the sum (determined as of the date of occurrence
of such ERISA Event) of the aggregate liabilities of the Issuer or any
ERISA Affiliate related to all such Plans and Multiemployer Plans with
respect to which an ERISA Event has occurred exceeds $3,000,000; or
(n) the Guarantor, the Issuer or any Restricted Subsidiary
organized as a partnership shall receive written notice from a Governmental
Body that it intends to treat the Issuer, or any Restricted Subsidiary
organized as a partnership, as an association taxable as a corporation
unless (i) such treatment, if sustained, would not have a Material Adverse
Effect or (ii) within 30 days following receipt of such notice, the Issuer
provides an opinion of nationally recognized tax counsel addressed to you
and the Other Purchasers, such opinion and counsel to be reasonably
satisfactory to the holders of at least 66-2/3% in unpaid principal amount
of the Notes then outstanding, to the effect that, notwithstanding such
notice, the Issuer of such Restricted Subsidiary will be treated as a
partnership for purposes of the tax to which such notice relates both as of
the date of such opinion and during the period to which such notice
relates;
then (i) upon the occurrence of any Event of Default described in clause (f) or
(g) as to the Issuer, the Guarantor or any Restricted Subsidiary having,
individually or in the aggregate, assets with a book value of at least
$5,000,000 or annual revenues of at least $2,500,000, the unpaid principal
amount of all Notes automatically become immediately due and payable together
with the interest accrued thereon (which interest shall be deemed matured), plus
(to the full extent permitted by applicable law) the Makewhole Amount determined
in respect of such principal amount of Notes, without presentment, demand,
protest, notice of intention to accelerate, notice of acceleration, or other
requirements of any kind, all of which are hereby expressly waived by the
Issuer, (ii) upon the occurrence and continuance of any Event of Default
described in clause (a) or (b), the holder or holders of at least 25% of the
unpaid principal amount of the Notes at the time outstanding may, by written
notice to the Issuer, declare the unpaid principal amount of all Notes to be,
and the same shall forthwith become, due and payable, together with the interest
accrued thereon (which interest shall be deemed matured), plus (to the full
extent permitted by applicable law) the Makewhole Amount determined in respect
of such principal amount of the Notes, without presentment, demand, protest,
notice of intention to accelerate, notice of acceleration, or other requirements
of any kind, all of which are hereby expressly waived by the Issuer, and
furthermore, upon the occurrence and continuance of such an Event of Default,
any holder may declare the unpaid principal amount of its own Notes to be due
and payable, together with the interest accrued thereon (which interest shall be
deemed matured), plus (to the full extent permitted by applicable law) the
Makewhole Amount determined in respect of such principal amount of the Notes,
without presentment, demand, protest, or other notice or other requirements of
any kind, all of which are hereby expressly waived by the Issuer without regard
to the actions of any other holder or holders or (iii) during the occurrence and
continuance of any other Event of Default, the holder or holders of at least 50%
of the unpaid principal amount of the Notes at the time outstanding may, by
written notice to the Issuer, declare the unpaid principal amount of all Notes
to be, and same shall forthwith become, due and payable, together with the
interest accrued thereon (which interest shall be deemed matured), plus (to the
extent permitted by applicable law) the Makewhole Amount determined in respect
of such principal amount of Notes, without presentment, demand, protest, or
other notice or other requirements of any kind, all of which are hereby
expressly waived by the Issuer. The Issuer acknowledges, and the parties hereto
agree, that each
32
<PAGE>
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Issuer (except as herein specifically provided for) and that
the provision for payment of a Makewhole Amount by the Issuer in the event that
the Notes are prepaid or are accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right under such
circumstances.
The provisions of this Section are subject, however, to the condition
that if, at any time after any Note shall have so become due and payable and
prior to the entry of any judgment for the payment of any monies due on the
Notes or pursuant to this Agreement, the Issuer shall pay all arrears of
interest on the Notes and all payments on account of the principal of and
Makewhole Amount (if any) on the Notes which shall have become due otherwise
than by acceleration (with interest on such principal, Makewhole Amount (if any)
and, to the extent permitted by law, overdue payments of interest, at the rate
specified in the Notes) and all Events of Default (other than nonpayment of
principal of and accrued interest on Notes due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 12, then, and in
every such case, the holder or holders of at least 66-2/3% in unpaid principal
amount of the Notes at the time outstanding, by written notice to the Issuer,
may rescind and annul any such acceleration and its consequences, but no such
action shall affect any subsequent Default or Event of Default or impair any
right consequent thereon, and furthermore, no such action shall affect, rescind
or annul the declaration by any holder, or the right of any holder or declare,
upon the occurrence and continuance of any Event of Default declared in clause
(a) or (b) of this Section 8.1, the unpaid principal amount of its own Notes to
be due and payable, together with the interest accrued thereon, plus the
Makewhole Amount, pursuant to clause (ii) of this Section 8.1.
8.2 SUITS FOR ENFORCEMENT. If any Event of Default shall have
---------------------
occurred and be continuing and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 8.1, the holder of
any Note may proceed to protect and enforce its rights, either by suit in equity
or by action at law, or both, whether for the specific performance of any
covenant or agreement contained in this Agreement or in any Note or in aid of
the exercise of any power granted in this Agreement, or the holder of any Note
may proceed to enforce the payment of all sums due upon such Note or under this
Agreement or to enforce any other legal or equitable right of the holder of such
Note. The Issuer covenants that, if it shall default in the making of any
payment due under any Note or in the performance or observance of any agreement
contained in this Agreement, it will pay to the holder thereof such further
amounts, to the extent lawful, as shall be sufficient to pay the costs and
expenses of collection or of otherwise enforcing such holder's rights,
including, without limitation, reasonable fees and expenses of counsel.
8.3 REMEDIES CUMULATIVE. No right, power or remedy herein conferred
-------------------
upon you or the holder of any Note is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or under the Notes or now or
hereafter existing at law or in equity or by statute otherwise.
8.4 REMEDIES NOT WAIVED. No course of dealing between the Issuer and
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you or the holder of any Note and no delay or failure in exercising any right,
power or remedy hereunder or under any Note in respect thereof shall operate as
a waiver of or otherwise prejudice any of your rights, powers or remedies or the
rights, powers or remedies of any holder of any Note.
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9. DEFINITIONS AND ACCOUNTING TERMS.
--------------------------------
9.1 DEFINITIONS. Except as otherwise specified or as the context
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may otherwise require, the following terms shall have the respective meanings
set forth below (or in the Section of this Agreement referred to below) whenever
used in this Agreement:
"AFFILIATE" of any specified Person shall mean any other Person (a)
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (b) which beneficially owns or holds,
directly or indirectly, 5% or more of any class of voting or equity interests of
such Person or (c) 5% or more of any class of voting or equity interests of
which are beneficially owned or held by such Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing, and, furthermore, for the purposes of this
definition, the Guarantor shall be deemed to be an Affiliate of the Issuer.
"AGC" shall mean American Golf Corporation, a California corporation.
"AGREED PURCHASE CONSIDERATION" shall mean, as of the date of purchase
by the Issuer in the event of a DGP Change of Control, the sum of:
(i) the principal amount of the Notes held by such holder subject
to purchase on such date, plus
(ii) all accrued and unpaid interest to such date on such Notes,
plus
(iii) the Makewhole Amount (if any) as of such date with respect to
such Notes.
"AGREEMENT" shall mean this Restated Note Agreement (together with the
Annex, Schedules and Exhibits hereto) as it may be from time to time amended,
modified or supplemented in accordance with its terms.
"ASSET DISPOSITION" shall mean any sale, lease, transfer or other
disposition of any property by the Issuer or any Restricted Subsidiary
(including any such disposition effected by way of any issuance or sale of
capital stock or partnership interests (but not including the issuance or sale
of capital stock or partnership interests of an Unrestricted Subsidiary) or by
way of a Sale and Leaseback Transaction or by the designation of a formerly
Restricted Subsidiary as an Unrestricted Subsidiary), other than (i)
dispositions of obsolete or surplus property no longer used or useful in the
operations of the Issuer and its Subsidiaries, (ii) dispositions of Golf Course
properties by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary
of which at least 90% of the equity interests is owned by the Issuer or a
Wholly-Owned Subsidiary, (iii) leases of Golf Course properties to operators in
the ordinary course of business, (iv) transfers of property by a Subsidiary to
the Issuer or a Wholly-Owned Subsidiary, (v) Sale and Leaseback Transactions
permitted under clause (a) of Section 6.7, (vi) transfers of no more than three
Existing Golf Courses by the Issuer or a Restricted Subsidiary to an
Unrestricted Subsidiary, (vii) transfers of Golf Course properties acquired
after the date hereof from the Issuer or a Restricted Subsidiary to an
Unrestricted Subsidiary, provided that any such transfer occurs no more than
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thirty days after the closing date of the acquisition of such Golf Course
properties and (viii) transfers by the Issuer to an Unrestricted Subsidiary of
any of the four Existing Golf Courses owned on the date hereof by the Guarantor.
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"ASSUMPTION AGREEMENTS" shall have the meaning specified in the
Recitals.
"ATTRIBUTABLE DEBT" shall mean, with respect to any Sale and Leaseback
Transaction (other than a Sale and Leaseback Transaction permitted under
clause(b) of Section 6.7), the lesser of (i) the fair market value of the
property sold or transferred in such Sale and Leaseback Transaction and (ii) the
present value (discounted in accordance with GAAP at the debt rate implicit in
the lease or leases constituting part of such Sale and Leaseback Transaction) of
the obligations of the lessee to pay rent during the term of such lease or
leases.
"BLACK LAKE" shall have the meaning specified in the Recitals.
"BLACK LAKE NOTE PURCHASE AGREEMENTS" shall have the meaning specified
in the Recitals.
"BLACK LAKE NOTES" shall have the meaning specified in the Recitals.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
other day on which commercial banks are authorized by law to be closed in New
York, New York.
"CANCELLATION NOTICE" shall have the meaning specified in Section 3.5.
"CAPITAL LEASE" shall mean, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee which would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of such Person or otherwise be disclosed as
such in a note to such balance sheet, other than, in the case of the Issuer or
any Subsidiary, any such lease under which the Issuer or a Wholly-Owned
Subsidiary is the lessor.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under GAAP, would be required to be capitalized on the books of the Issuer or
any Restricted Subsidiary taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such principles.
"CHANGE OF CONTROL" shall mean the occurrence of the following event:
the Guarantor shall cease to be the sole General Partner of the Issuer.
"CHANGE OF CONTROL PURCHASE OBLIGATION" shall have the meaning
specified in Section 3.6(a).
"CLOSING" shall have the meaning specified in Section 1.3.
"CLOSING DATES" shall have the meaning specified in Section 1.3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COMMISSION" shall mean the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act.
"CONSOLIDATED DEBT SERVICE" shall mean, for any period, the total
amount payable by the Issuer and its Restricted Subsidiaries (either directly
or, without duplication, by reason of a Contingent Obligation) during such
period for or in respect of interest charges
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on, required amortization of and payments on final maturity of Debt (other than
Intercompany Debt) and any Distributions on preferred stock as described in
clause (vii) of the definition of Debt hereunder. For the purposes of the
foregoing definition, (i) any extension, renewal or refinancing of Debt on or in
anticipation of final maturity shall be excluded from the calculation of
Consolidated Debt Service, except that an extension, renewal or refinancing of
Debt shall be included to the extent that such extension, renewal or refinancing
would be an Incurrence of Debt not permitted hereunder, (ii) payments of
principal of Debt required upon an Asset Disposition of property subject to a
Lien securing such Debt shall be excluded from the calculation of Consolidated
Debt Service, (iii) other optional prepayments of principal of Debt shall be
excluded from the calculation of Consolidated Debt Service except to the extent
such prepayments do not constitute an extension, renewal or refinancing of Debt
in anticipation of final maturity subject to clause (i) above and such
prepayments reduce the amount of amortizations or payments on final maturity of
Debt otherwise required during such period and (iv) payments on or in
anticipation of final maturity of Specified Debt shall in any event be excluded
from the calculation of Consolidated Debt Service to the extent such payments
are made with the proceeds of Asset Dispositions or equity contributions with
respect to partnership interests of the Issuer.
"CONSOLIDATED FUNDED DEBT" shall mean, as at any date of
determination, the aggregate principal amount of all Funded Debt of the Issuer
and its Restricted Subsidiaries outstanding on such date determined in
accordance with GAAP on a consolidated basis after eliminating all Intercompany
Debt.
"CONSOLIDATED NET INCOME" shall mean, for any period, the net income
(or deficit) of the Issuer and its Restricted Subsidiaries for such period
(taken as a cumulative whole), which shall be calculated after giving effect to
deductions for, without duplication, all operating expenses, interest charges,
rentals, provisions for all taxes and reserves (including reserves for deferred
income taxes) and all other proper deductions, all determined in accordance with
GAAP on a consolidated basis, after eliminating all intercompany items and after
deducting portions of income properly attributable to outside minority
interests, if any, in Restricted Subsidiaries; provided, however, that there
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shall in any event be excluded from Consolidated Net Income:
(a) any income (or deficit) or any other Person accrued prior to
the date it becomes a Restricted Subsidiary or merges into or consolidates
with the Issuer or another Restricted Subsidiary,
(b) the income (or deficit) of any Person (other than a
Subsidiary) in which the Issuer or any Restricted Subsidiary has any
ownership interest, except to the extent that any such income has been
actually received by the Issuer or such Restricted Subsidiary in the form
of cash dividends or similar distributions,
(c) any deferred credit or amortization thereof arising from the
acquisition of any properties or assets of any Person,
(d) (i) any gain (or loss) arising from the sale or other
disposition during such period (other than in the ordinary course of
business) of any capital assets (such term to include all fixed assets,
whether tangible or intangible, all inventory sold in conjunction with a
disposition of fixed assets, and all securities), to the extent the
aggregate amount of such gain (or loss) exceeds the aggregate amount of
losses (or gains) from the sale, abandonment or other disposition of
capital assets and (ii) any gain arising form (A) any write up of assets
during such period or (B) the
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acquisition by the Issuer or any Restricted Subsidiary during such period
of any of their securities,
(e) proceeds of life insurance policies, and
(f) any undistributed earnings of a Restricted Subsidiary to the
extent that the distribution thereof to the Issuer by such Restricted
Subsidiary (i) is not at the time permitted by the terms of its charter or
any agreement, instrument, order, statute, rule or governmental regulation
(including foreign exchange regulations) applicable to such Restricted
Subsidiary, or (ii) would result in the imposition of tax liabilities on
the Issuer or any Restricted Subsidiary which have not been provided for
and deducted in determining Consolidated Net Income for such period.
"CONSOLIDATED NET OPERATING INCOME" shall mean, for any period,
Consolidated Net Income for such period, plus the sum of the following amounts
to the extent deducted in determining Consolidated Net Income for such period:
(a) interest expense on Debt of the Issuer and its Restricted Subsidiaries, (b)
amortization of intangibles, (c) provision for depreciation, (d) provision for
income and franchise taxes, other than such taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales of
assets to the extent such gains or losses have been excluded from the
calculation of Consolidated Net Income pursuant to paragraph (d) of the
definition thereof and (e) non-cash restricted stock or other equity-based
compensation expense.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean at any time the total
assets of the Issuer and any Restricted Subsidiaries at such time, determined on
a consolidated basis in accordance with GAAP, less the sum (without duplication
and in each case determined on a consolidated basis in accordance with GAAP) of:
(i) all Intangible Assets of the Issuer and any Restricted
Subsidiaries at such time:
(ii) any write-up of fixed assets occurring after the date of this
Agreement, except any write-up of newly-acquired assets in connection with the
purchase thereof as permitted or required by GAAP; and
(iii) the total liabilities of the Issuer and any Restricted
Subsidiaries (other than Consolidated Funded Debt) at such time.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, as at any date,
Partnership Equity as of such date less all Intangible Assets of the Issuer and
its Restricted Subsidiaries recorded after the First Closing.
"CONTINGENT OBLIGATIONS" shall mean any guaranty or other contingent
liability, direct or indirect, with respect to any Debt of another Person,
through an agreement or otherwise, including, without limitation, (a) any
endorsement (other than of notes, bills and checks presented to banks and other
financial institutions for collection or deposit in the ordinary course of
business) or discount with recourse or undertaking substantially equivalent to
or having similar economic effect of a guaranty with respect to any such Debt,
(b) any agreement (i) to purchase, or to advance or supply funds for the payment
or purchase of, any such Debt, (ii) to purchase, sell or lease property,
products, materials or supplies, or transportation or services, primarily for
the purpose of enabling such other Person to pay such Debt or to insure the
owner thereof against loss regardless of the delivery or non-delivery of the
property, products, materials or supplies, or
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transportation or services, or (iii) to make any loan, advance, capital
contribution or other investment in such other Person to assure a minimum
equity, working capital or other balance sheet condition as of any date, or to
provide funds for the payment of any liability, dividend or stock liquidation
payment, or otherwise to supply funds to or in any manner invest in such other
Person, in each case, for the direct or indirect benefit of the holder or
obligee of such Debt, (c) obligations for which such Person is obligated
pursuant to or in respect of a letter of credit or similar instrument which is
issued upon the application of such Person or upon which such Person is an
account party or for which such Person is in any way liable, (d) repurchase
obligations or liabilities of such Person with respect to accounts or notes
receivable sold by such Person or (e) guaranties or obligations with respect to
(i) maintaining the value of any asset of any Person or (ii) protecting the
holder of such asset against loss in respect thereof. The amount of any
Contingent Obligation shall (subject to any limitation contained therein) be
equal to the outstanding principal amount of the Debt guarantied or subject
thereto or, in the case of (e) above, the guarantied value of the subject asset.
For purposes of determining Consolidated Debt or Consolidated Funded Debt, Debt
of a Subsidiary that is guaranteed by the Issuer or another Subsidiary shall not
be double counted.
"CONTRIBUTION AGREEMENTS" shall have the meaning specified in Section
2.14.
"DEBT" of a Person shall mean, without duplication, such Person's (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments (as such term is defined in
Article 9 of the Uniform Commercial Code as from time to time in effect in the
State of New York), (iii) obligations, whether or not assumed, secured by any
Lien or payable out of the proceeds or production from property now or hereafter
acquired by any such Person (other than any such obligation under the land lease
with respect to property in Harris County, Texas, set forth on part III of
Schedule 7.17), (iv) obligations to pay the deferred purchase price of property
or services (excluding trade accounts payable incurred in the ordinary course of
business and not overdue), (v) obligations as lessee under Capitalized Lease
Obligations, (vi) Contingent Obligations and (vii) equity securities of
Subsidiaries owned by Persons other than the Issuer and its Wholly-Owned
Subsidiaries that have preferred rights to distributions.
"DEFAULT" shall mean any default or other event which, with notice or
the lapse of time or both, would constitute an Event of Default.
"DESIGNATED SHORT-TERM DEBT" shall mean (i) with reference to any
Incurrence of Debt under Section 6.4, the daily average outstanding amount of
Short-Term Debt of the Issuer and its Restricted Subsidiaries during that 45-day
period during the 12-month period ending on the date of such Incurrence in
which the least daily average amount of Short-Term Debt was outstanding if
Short-Term Debt of the Issuer and its Restricted Subsidiaries has not been zero
for at least 45 consecutive days during the 12-month period ending on the date
of such Incurrence and (ii) with reference to Section 6.3, the daily average
outstanding amount of Short-Term Debt of the Issuer and its Restricted
Subsidiaries during that 45-day period in which the least daily average amount
of Short-Term Debt was outstanding during the four fiscal quarters most recently
ended at or before the time of determination in Section 6.3.
"DGP CHANGE OF CONTROL" shall mean the occurrence or continuation of
any of the following events:
(i) DGP Persons shall cease to beneficially own in the aggregate that
amount of REIT shares (as defined in the Partnership Agreement) and
Partnership
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Units, in each case treating REIT Shares and Partnership Units
(hereinafter, collectively, "Equity Interests") as identical for these
purposes (subject to adjustment in the event the exchange ratio of
Partnership Units for REIT Shares is no longer on a one-for-one basis), as
shall equal or exceed the Requisite Percentage of the Equity Interests
beneficially owned by DGP Persons on the date hereof except that, in the
event of the divorce of David G. Price and his spouse, the amount of Equity
Interests which DGP Persons shall thereafter be required to beneficially
own shall equal or exceed the Requisite Percentage of (i) the amount of
Equity Interests beneficially owned on the date hereof, multiplied by (ii)
the ratio of the amount of Equity Interest beneficially owned by DGP
Persons immediately after a transfer to such former spouse of David G.
Price in connection with the divorce, over the amount of Equity Interests
so owned by DGP Persons immediately before such transfer; or
(ii) any transaction or series of transactions (whether by purchase
of existing shares of common stock, issuance of shares of common stock,
merger, consolidation or otherwise) the result of which is that any Person
or Group other than DGP Persons (or a former spouse of David G. Price or a
Person acquiring shares from such former spouse and not owning any other
shares of capital stock of the Guarantor) becomes the Beneficial Owner,
directly or indirectly, of 15% or more of the total voting power in the
aggregate of all classes of capital stock of the Guarantor then outstanding
normally entitled to vote in the election of directors of the Guarantor (or
any surviving entity); or
(iii) any transaction or series of transactions (whether by purchase of
existing shares of common stock or OP Units, issuance of shares of common
stock or OP Units, merger, consolidation or otherwise) the result of which
is that any Person or Group other than DGP Persons (or a former spouse of
David G. Price or a Person acquiring shares from such former spouse and not
owning any other shares of capital stock of the Guarantor or any OP Units)
becomes the Beneficial Owner, directly or indirectly, of 30% or more of the
total voting power in the aggregate of all classes of capital stock of the
Guarantor then outstanding (including shares of common stock issuable upon
exchange of OP Units, whether or not such OP Units are immediately
exchangeable and without regard to the Ownership Limit) normally entitled
to vote in the election of directors of the Guarantor (or any surviving
entity).
As used in the foregoing definition:
"Beneficial Owner" shall have the same meaning as such term has for
purposes of Rule 13d-3 promulgated under the Exchange Act, except that a Person
shall be deemed to have beneficial ownership of all shares that a Person has the
right to acquire, whether or not such right is immediately exercisable, and that
notwithstanding such rule or the foregoing, except as expressly provided in
clause (iii), capital stock of the Guarantor shall not be deemed to be
beneficially owned by virtue of ownership of OP Units.
"Group" shall have the same meaning as such term has for purposes of
Sections 13(d) and 14(d) of the Exchange Act.
"Ownership Limit" shall have the same meaning as such term has in the
articles of incorporation of the Guarantor.
"Person" shall have the same meaning as such term has for purposes of
Sections 13(d) and 14(d) of the Exchange Act.
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"DGP PERSONS" shall mean David G. Price and his heirs, spouse,
children, sons- and daughters-in-law and grandchildren and any trust or estate,
all of the beneficiaries of which consist of David G. Price of David G. Price's
heirs, spouse, children, sons- and daughter-in-law or grandchildren.
"DISCLOSURE DOCUMENTS" shall mean the following documents delivered by
Morgan Stanley & Co. Incorporated to you and each Other Purchaser and relating
to the transactions contemplated hereby:
(i) the Memorandum;
(ii) the Historical Financial Statements, Standard Acquisition and
Lease Documents dated May 22 and 23, 1996 and Lender Due Diligence
Conference Binder dated May 22 and 23, 1996; and
(iii) all exhibits, appendices, annexes, schedules or the like attached
to each of the above.
"DISTRIBUTION" shall mean (i) distributions or dividends on or in
respect of the partnership interests or capital stock of the Issuer or any
Subsidiary (except distributions solely in such interests or stock and except to
the extent made to the Issuer or any Wholly-Owned Subsidiary) and (ii) the
repurchase, purchase, redemption or acquisition of partnership interests or
capital stock of the Issuer or any Subsidiary, or of warrants, rights or other
options to purchase such interests or stock (except when solely in exchange for
such interests or stock and except to the extent made from the Issuer or a
Wholly-Owned Subsidiary).
"ENVIRONMENTAL LAW" shall mean all applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, Orders, approvals, authorizations
and similar items of all Governmental Bodies relating to the protection of human
health or the environment as in effect as of the date hereof, including but not
limited to those pertaining to reporting, licensing, permitting, investigation
and remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials, substances, pollutants, contaminants or hazardous or toxic
substances, materials or wasters 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 by way of illustration and not by way of limitation, (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
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Federal Water Pollution Control Act (33 U.S.C. (S)(S) 1251), 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
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U.S.C. (S)(S) 11001 et seq.) and (y) analogous state and local provisions.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" of the Issuer shall mean any other person that,
together with the Issuer as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
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"ERISA EVENT" shall mean (i) the occurrence of a Reportable Event;
(ii) the provision by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in Section 4041(e) of
ERISA); (iii) the cessation of operations by the Issuer or an ERISA Affiliate at
a facility in the circumstances described in Section 4062(e) of ERISA; (iv) the
withdrawal by the Issuer or an ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (v) the failure by the Issuer or any ERISA
Affiliate to make a payment to a Plan required under Section 302(f)(l) of ERISA;
(vi) the adoption of an amendment to a Plan requiring the provision of security
to such Plan, pursuant to Section 307 of ERISA; (vii) the institution by the
PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of ERISA that
constitutes grounds for the termination of, or the appointment of a trustee to
administer, a Plan; (viii) the default, as defined in Section 4219(c)(5) of
ERISA, of the Issuer or any ERISA Affiliate with respect to any payment of
Withdrawal Liability thirty days after any dispute regarding such Withdrawal
Liability has been finally resolved; or (ix) the notification by the sponsor of
a Multiemployer Plan to which the Issuer or any ERISA Affiliate is or was
obliged to contribute that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA.
"EVENTS OF DEFAULT" shall have the meaning specified in Section 8.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"EXISTING GOLF COURSES" shall mean those Golf Courses owned by the
Guarantor, the Issuer or any Subsidiary on the date hereof, all of which are set
forth on Schedule 6.12.
"EXISTING LEASES" shall mean all leases for golf courses and related
facilities, pursuant to which the Issuer or any Subsidiary is the lessor, in
effect on the date hereof, all of which are set forth on Schedule A hereto.
"EXISTING SECURED DEBT" shall mean Debt secured by Liens described on
Schedule 7.17 and any extension, renewal or refinancing thereof provided that
the principal amount is not increased and such Liens shall not be extended to or
cover any property of the Issuer or any Subsidiary other than those properties
subject thereto (including after-acquired property) on the date hereof.
"FEDERAL BANKRUPTCY CODE" shall mean the United States Bankruptcy
Code, Title 11, United States Code, as amended from time to time.
"FIRST CLOSING" shall have the meaning specified in Section 1.3.
"FIRST CLOSING DATE" shall have the meaning specified in Section 1.3.
"FUNDED DEBT" of any Person shall mean and include, as of any date as
of which the amount thereof is to be determined, all Debt of such Person which
in accordance with GAAP would be classified on a balance sheet of such Person as
of such date as funded debt and shall also include (without duplication) all
indebtedness outstanding at all times under the Revolving Facility and all other
Debt of such Person, whether secured or unsecured, having a final maturity (or
which pursuant to its terms is renewable or extendible at the option of such
Person for a period ending or which originally had a final maturity)
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more than one year after the date of determination (but including, without
limitation, any portion of such Debt maturing in less than one year).
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States of America.
"GAIN HOLDER" shall mean a holder of Notes that, based on a reasonable
good faith determination of such holder, would recognize income for federal
income tax purposes in excess of 2% of the unpaid principal amount of the Notes
then held by such holder if such Notes were sold or exchanged, or deemed sold or
exchanged, by such holder as a result of a proposed transaction described in
Section 6.5. In the event of a proposed transaction described in Section 6.5,
the Issuer shall notify all holders of Notes of its intention to engage in such
a transaction within 20 days prior to any such transaction. Each holder shall
then have 15 days thereafter to notify the Issuer, based on a reasonable good
faith determination of such holder, that it is a Gain Holder and to provide the
Issuer with a description of how such determination was made. Any holder who
does not provide timely notice that it is a Gain Holder along with such
description shall be deemed not to be a Gain Holder.
"GENERAL PARTNER" shall mean National Golf Properties, Inc., a
Maryland corporation which is the general partner of the Issuer.
"GOLF COURSE" shall mean a tract of land developed for the playing of
the game of golf, together with all related recreational, operational or
required ancillary facilities pertaining thereto.
"GOVERNMENTAL BODY" shall mean any federal, state, municipal or other
governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign.
"GUARANTOR" shall have the meaning specified in Section 2.12.
"GUARANTOR SUBSIDIARY" shall mean any corporation or limited liability
company of which the Guarantor owns or controls, directly or indirectly, more
than 50% of the Voting Stock or any partnership joint venture or other entity
in which the Guarantor owns or controls, directly or indirectly, more than a 50%
equity interest and shall include, whether or not otherwise included in this
definition, the Issuer and its Subsidiaries.
"GUARANTY" shall have the meaning specified in Section 2.12.
"GUARANTY EVENT OF DEFAULT" shall mean any Event of Default under and
as defined in the Guaranty.
"HAZARDOUS MATERIAL" shall mean 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; or
(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 date hereof, or as hereafter
amended, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability
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Act (42 U.S.C. Section 9601 et seq.) and or the Resource Conservation and
------
Recovery Act (42 U.S.C. Section 6901 et seq.); or
------
(iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Body having or asserting jurisdiction over
any of the Properties; or
(iv) the presence of which on any of the Properties causes a nuisance
upon such Properties or to adjacent properties or poses a hazard to the
health or safety of persons on or about any of the Properties; or
(v) the presence of which on adjacent properties constitutes a
trespass by any owner or operator of the Properties; or
(vi) which contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos or asbestos-
containing materials or urea formaldehyde foam insulation; or
(vii) radon gas.
"HOLDER" shall mean, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Issuer pursuant
to Section 10.
"INCUR" when used with respect to any Debt shall mean to directly or
indirectly create, incur, assume, agree to purchase or provide funds in respect
of, or otherwise become directly or indirectly (by way of a Contingent
Obligation or otherwise) liable in respect of such Debt, and the term
"Incurrence" shall have a correlative meaning, provided that (i) in the event
the Issuer or any Subsidiary shall extend, renew or refinance any Debt, the
Issuer or such Subsidiary, as the case may be, shall be deemed to have Incurred
such Debt at the time of such extension, renewal or refinancing, (ii) any Person
becoming a Subsidiary after the date of this Agreement shall be deemed to have
Incurred all of its then outstanding Debt at the time it becomes a Subsidiary,
(iii) in the event that the Issuer changes the designation of an Unrestricted
Subsidiary to that of a Restricted Subsidiary, such Restricted Subsidiary shall
be deemed to have Incurred all of the then outstanding Debt of the Unrestricted
Subsidiary at the time of the redesignation, and (iv) any Debt Incurred by the
Issuer or a Subsidiary to another Subsidiary shall be deemed Incurred anew by
the Issuer or such Subsidiary, as the case may be, upon the transfer of such
Debt by such other Subsidiary to a Person not a Subsidiary or upon such other
Subsidiary ceasing to be a Subsidiary.
"INDEPENDENT DIRECTORS" shall have the same meaning as such term has
in the bylaws of the Guarantor, as in effect on the date hereof.
"INTANGIBLE ASSETS" shall mean at any time all assets that would be
classified as intangible assets under GAAP at such time, including, without
limitation, goodwill (whether presenting the excess of cost over book value of
assets acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises, unamortized debt discount and expense, organization costs, research
and development costs and other deferred charges (other than prepaid insurance
and taxes).
"INTERCOMPANY DEBT" shall mean Debt owned by the Issuer or any
Restricted Subsidiary to the Issuer or any Wholly-Owned Subsidiary.
"ISSUER" shall have the meaning specified in the introductory
paragraph.
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"ISSUER NOTE PURCHASE AGREEMENTS" shall have the meaning specified in
the Recitals.
"LIEN" shall mean, as to any Person, any mortgage, lien, pledge,
adverse right, charge, security interest or other encumbrance in favor of any
vendor, lessor, lender or other secured party in or on, or any interest or title
of any such vendor, lessor, lender or other secured party under any conditional
sale or other title retention agreement or capital lease with respect to, any
property or asset of any nature whatsoever of Such Person, or the signing or
filing of a financing statement which names such Person as debtor, or the
signing of any security agreement authorizing any other party as the secured
party thereunder to file any such financing statement.
"LONG TERM LEASE" shall mean a lease of real or personal property
having an unexpired term (including terms of renewal or extension at the option
of the lessee or lessor, whether or not such option has been exercised) of more
than one year, other than, in the case of the Issuer or any Subsidiary, a
Capital Lease.
"MAKEWHOLE AMOUNT" applicable in respect of any prepayment of all or
any portion of the principal amount of any Note pursuant to Section 3.2(b) or
pursuant to Section 3.6 or any acceleration of the principal amount of any Note
pursuant to Section 8.1 (such prepaid, put or accelerated principal amount, as
the case may be, being hereinafter referred to as the "Prepaid Principal") shall
mean, as at any date of determination, the greater of (a) zero and (b) the
excess of:
(i) the sum of the respective present values as of the date such
Makewhole Amount becomes due and payable of:
(A) each prepayment of principal (if any) required to be
made with respect to such Prepaid Principal pursuant to Section
3.1 during the remaining term to maturity of the Notes,
(B) the payment of principal balance required to be made
at final maturity with respect to such Prepaid Principal,and
(C) each payment of interest which would be required to be
paid during the remaining term to maturity of the Notes with
respect to such Prepaid Principal from time to time outstanding,
determined, in the case of each such required prepayment, principal payment
at final maturity and interest payment, by discounting the amount thereof
(on a semiannual basis) from the date fixed therefor back to the date such
Makewhole Amount becomes due and payable at the Reference Rate (assuming
for such purpose that all such payments and prepayments of principal and
payments of interest with respect to such Prepaid Principal were made
when due pursuant to the terms thereof and hereof, and that no other
payment or prepayment with respect to such Prepaid Principal was made).
0ver
- ----
(ii) the amount of such Prepaid Principal.
For purposes hereof, "Reference Rate" shall mean in connection with
any determination of the Makewhole Amount a per annum rate equal to 50 basis
points above the annual yield for United States Treasury securities having a
term to maturity equal to the
44
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Weighted Average Life to Maturity of the Notes at the time such Makewhole Amount
becomes due and payable, as determined by reference to the display designated as
"Page 500" on the Telerate Access Service (or such other display as may replace
Page 500 on the Telerate Access Service) at 11.00 a.m. New York City time on the
third Business Day preceding the date of such payment, or, if the Telerate
Access Service is no longer available (or if such yield is not reported as of
such time or the yield reported as of such time is not ascertainable), such
annual yield for such United States Treasury securities as determined by
reference to Federal Reserve Statistical Release H.15 (519) published most
recently prior to such Business Day, or, if that is no longer published (or
such yield is not reported or ascertainable) as determined, at the Issuer's
expense, by an independent investment banking firm acceptable to the Issuer and
the holder of such Note, provided that, if there shall be no actual United
States Treasury security having a term to maturity equal to such remaining
average life of the Notes, the annual yield for an actively-traded United States
Treasury securities as determined in accordance with accepted financial practice
by reference to Telerate Access Service, Federal Reserve Statistical Release
H.15 (519) or as determined by an independent investment banking firm, as the
case may be. For purposes hereof, "actively-traded" means an "on the run bond".
"MATERIAL ADVERSE CHANGE (OR EFFECT)" shall mean a material adverse
change (or effect) on (a) the business, operations, properties, financial
condition or prospects of the Guarantor and the Guarantor Subsidiaries or the
Issuer and its Restricted Subsidiaries taken as a whole, (b) the ability of the
Issuer to perform its obligations under this Agreement or the Notes or the
ability of the Guarantor to perform its obligations under the Guaranty or (c)
the validity or enforceability of this Agreement, the Notes or the Guaranty.
"MEMORANDUM" shall mean the Private Placement Memorandum, dated April
1996, delivered by Morgan Stanley & Co. Incorporated to you and each Other
Purchaser and relating to the transactions contemplated hereby.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA, to which the Issuer or any ERISA Affiliate is
making or accruing, or has made or accrued, an obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, which is or was maintained for employees of Issuer
or an ERISA Affiliate and at least one person other than the Issuer and any
ERISA Affiliate and in respect the Issuer or any ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such Plan has been
or were to be terminated.
"NOTES" shall have the meaning specified in the Recitals.
"NOTICE OF CC PURCHASE WAIVER" shall have the meaning specified in
Section 3.6.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
Issuer's name by any one of the Senior Officers.
"OP UNITS" shall mean units of limited partnership in the Issuer.
"OPTION COURSES AGREEMENT" shall mean that certain Option Courses
Agreement, as amended, dated as of August 18, 1993, among David G. Price,
certain of his
45
<PAGE>
affiliates, AGC and the Issuer pursuant to which the Issuer has the option to
acquire four golf courses form David G. Price and his affiliates.
"ORDER" shall mean any order, writ, injunction, decree, judgment,
award, determination, direction or demand.
"OTHER AGREEMENTS" shall have the meaning specified in Section 1.2.
"OTHER PURCHASERS" shall have the meaning specified in Section 1.2.
"PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited
Partnership of National Golf Operating Partnership, L.P. dated as of August 18,
1993, as it may be from time to time amended, modified or supplemented in
accordance with its terms.
"PARTNERSHIP EQUITY" shall mean, as at any date, the aggregate of the
amounts which would, in accordance with GAAP, appear on a consolidated balance
sheet of the Issuer and its Restricted Subsidiaries as of such date (after
exclusion of outside minority interests in such Subsidiaries as (i) the
contributions with respect to partnership interests (net of distributions)
plus(ii) retained earnings.
"PARTNERSHIP UNITS" shall have the meaning set forth in the
Partnership Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERMITTED LIENS" shall mean (i) Liens for taxes, assessments or
charges of and Governmental Body for claims not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with the provisions of GAAP; (ii) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other Liens (other
than any Lien imposed under ERISA) imposed by law and created in the ordinary
course of business and Liens on deposits made to obtain the release of such
Liens if (x) the underlying obligations are not overdue for a period of more
than 60 days or (y) such Liens are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with the provisions of GAAP; (iii)
Liens (other than any Lien imposed under ERISA) incurred on deposits made in the
ordinary course of business (including, without limitation, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment insurance
and other types of social security benefits or to secure the performance of
tenders, bids, leases, contracts (other than the repayment of Debt), statutory
obligations and other similar obligations or arising as a result of progress
payments under contracts; (iv) easements (including, without limitation,
reciprocal easement agreements and utility agreements), rights-of-way,
covenants, consents, reservations, encroachments, variations and other
restrictions, charges or encumbrances (whether or not recorded), which do not
interfere materially with the ordinary conduct of the business of the Issuer or
its Restricted Subsidiaries and which do not materially detract from the value
of the property to which they attach or materially impair the use thereof to the
Issuer or its Restricted Subsidiaries; (v) building restrictions, zoning laws
and other statutes, laws, rules, regulations, ordinances and restrictions, and
any amendments thereto, now or at any time hereafter adopted by any Governmental
Body having jurisdiction; (vi) any attachment or judgment Lien unless it
constitutes an Event of Default; and (vii) other Liens incidental to the conduct
of the business or the ownership of the property of the Issuer or a Restricted
Subsidiary which were not incurred in connection with borrowed money and which
do not in the aggregate
46
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materially detract the value of the property or materially impair the use
thereof in the operation of the business and which, in any event, do not secure
obligations aggregating in excess of $250.000.
"PERSON" shall include an individual, a corporation, an association, a
partnership, a trust or estate, a government, foreign or domestic, and any
agency or political subdivision thereof, or any other entity.
"PLAN" shall mean any employee benefit plan, as defined in Section
3(3) of ERISA, other than a Multiemployer plan.
"PROPERTIES" shall have the meaning specified in Section 7.19.
"PROPRIETARY RIGHTS" shall have the meaning specified in Section 7.13.
"REPORTABLE EVENT" shall mean a reportable event, as defined in
Section 4043 of ERISA, to the extent that the reporting of such event to the
PBGC has not been waived.
"REQUISITE PERCENTAGE" shall mean 60% during the period from the date
hereof through December 15, 1996, 40% during the period from December 16, 1996
through December 15, 1997, 20% from December 16, 1997 through December 15, 1998
and zero thereafter.
"RESTRICTED SUBSIDIARIES" shall mean all Subsidiaries of the Issuer
except for those Subsidiaries designated by the Issuer as Unrestricted
Subsidiaries.
"REVOLVING FACILITY" shall mean the $40 million credit facility
extended to the Issuer by Bank of America National Trust and Savings Association
under a Credit Agreement dated as of September 29, 1993, bearing interest at any
one of three interest rate bases as elected at the time the facility is drawn,
maturing (as of the date hereof) on September 1, 1996 and any other revolving
facility extended to the Issuer in addition thereto or in substitution therefor.
"SALE AND LEASE BACK TRANSACTION" shall mean any arrangement with any
Person providing for the leasing by the Issuer or any Restricted Subsidiary of
any real or tangible personal property (or providing for the liability of the
Issuer or any Restricted Subsidiary as guarantor or surety with respect to the
lessee's obligations under any such lease), which property (or comparable
property) has been or is to be sold or transferred by the Issuer or such
Restricted Subsidiary in contemplation of such leasing.
"SECOND CLOSING" shall have the meaning specified in Section 1.3.
"SECOND CLOSING DATE" shall have the meaning specified in Section 1.3.
"SECRETARY'S CERTIFICATE" shall mean a certificate signed by the
Secretary of the Issuer.
"SECURED DEBT" shall mean any Debt of the Issuer or any Subsidiary of
the character described in clause (i), (iii) or (vi) of the definition of Debt
set forth in this Section secured by any Lien or payable out of the proceeds or
production from property now owned or hereafter acquired by the Issuer or any
Restricted Subsidiary.
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<PAGE>
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"SENIOR OFFICERS" shall mean the Chairman (if an officer),
President, Executive Vice President, Chief Financial Officer or Treasurer of the
General Partner of the Issuer or any Senior Officer as defined in the Guaranty.
"SERIES A NOTES" shall have the meaning specified in the Recitals.
"SERIES A-1 NOTES" shall have the meaning specified in the Recitals.
"SERIES A-2 NOTES" shall have the meaning specified in the Recitals.
"SERIES A-3 NOTES" shall have the meaning specified in the Recitals.
"SERIES B NOTES" shall have the meaning specified in the Recitals.
"SHORT-TERM DEBT" of any Person shall mean and include, as of any date
as of which the amount thereof is to be determined, all Debt of such Person,
whether secured or unsecured, which matures on demand or has a final maturity
less than one year after the date of determination unless such Debt constitutes
Funded Debt pursuant to the terms hereof.
"SPECIFIED DEBT" shall mean the Notes, the Revolving Facility, the
Debt owned to NationsBank described in Part II(b) of Schedule 7.17 and the Debt
owed to HCI(America), Inc. described in Part II(a) of Schedule 7.17.
"STATE" shall mean the State or Commonwealth in which the property is
located.
"SUBSEQUENT LEASES" shall mean all leases for golf courses and related
facilities, pursuant to which the Issuer or any Subsidiary is the lessor, that
are not Existing Leases.
"SUBSIDIARY" shall mean any corporation or limited liability company
of which the Issuer owns or controls, directly or indirectly, more than 50% of
the Voting Stock or any partnership, joint venture or other entity in which the
Issuer owns or controls, directly or indirectly, more than a 50% equity
interest.
"TRUST" shall have the meaning specified in the Recitals.
"TRUST NOTE PURCHASE AGREEMENTS" shall have the meaning specified in
the Recitals.
"TRUST NOTES" shall have the meaning specified in the Recitals.
"UNRESTRICTED SUBSIDIARIES" shall mean all Subsidiaries of the Issuer
designated as Unrestricted Subsidiaries in a written notice to you
and the Other Purchasers.
"VOTING STOCK" as applied to any corporation or limited liability
company shall mean all shares of any class or classes (however designated), or
other securities of such corporation or limited liability company, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
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"WEIGHTED AVERAGE LIFE TO MATURITY." as applied to any Debt at any
date, shall mean the number of years obtained by dividing (a) the then
outstanding principal amount of such Debt into (b) the total of the products
obtained by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one twelfth) which will elapse between such date and the date on
which such payment is to be made.
"WHOLLY-OWNED SUBSIDIARY" shall mean any Restricted Subsidiary all of
the equity interests of which are owned by the Issuer or another Wholly-Owned
Subsidiary.
"WITHDRAWAL LIABILITY" shall have the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
9.2 ACCOUNTING TERMS. All accounting terms herein which are not
----------------
expressly defined in this Agreement have the meanings respectively given to them
in accordance with GAAP, all computations made pursuant to this Agreement shall
be made in accordance with GAAP and all balance sheets and other financial
statements shall be prepared in accordance with GAAP.
10. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES. The Issuer shall keep
--------------------------------------------
at its expense at its office maintained pursuant to Section 6.13 a register for
the registration and registration of transfers of Notes. The name and address
of each holder of one or more Notes, each transfer thereof and the name and
address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Issuer shall give to any
holder of Notes that is an institutional investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
Subject to Section 1.9 hereof, whenever any Note or Notes shall be
surrendered at such office of the Issuer for transfer or exchange, accompanied
(if so required by the Issuer) by an appropriate written instrument of transfer
duly executed by the registered holder of such Note or its attorney duly
authorized in writing, the Issuer will execute and deliver within five Business
Days, at the Issuer's expense, in exchange therefor a new Note or Notes, in
denominations of at least $500,000 (except one Note may be issued in a lesser
principal amount if the unpaid principal amount of the surrendered Note is not
evenly divisible by, or is less than, $500,000), as may be requested by such
holder, in the same aggregate unpaid principal amount as the aggregate unpaid
principal amount of the Note or Notes so surrendered. Each such new Note shall
be payable to such Person as such issued in exchange for any other Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, and neither
gain nor loss of interest shall result from any such transfer or exchange.
The Issuer and any agent of the Issuer may treat the Person in whose
name any Note is registered as the owner and holder of such Note for the purpose
of receiving payment of the principal of and premium (if any) and interest on
such Note and for all other purposes whatsoever, whether or not such Note shall
be overdue.
11. LOST NOTES, ETC. Upon receipt by the Issuer of evidence reasonably
---------------
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any
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Note and (in case of loss, theft or destruction) of indemnity reasonably
satisfactory to it, and upon surrender of such Note for cancellation, if
mutilated, the Issuer will deliver within five Business Days in lieu of such
Note a new Note in a like unpaid principal amount, dated so that there will be
no loss of interest on such lost, stolen, destroyed or mutilated Note.
Notwithstanding the foregoing provisions of this Section, if any Note
of which you or any other institutional holder is the owner is lost, stolen or
destroyed, then your or such holder's written statement as to such ownership of
and loss, theft or destruction shall be accepted as satisfactory evidence
thereof, and no indemnity shall be required as a condition to the execution and
delivery by the Issuer of a new Note in lieu of such Note (or as a condition to
the payment thereof, if due and payable) other than your or such holder's
unsecured written agreement to indemnify the Issuer.
12. AMENDMENT AND WAIVER. (a) Any term, covenant, agreement or condition
--------------------
of this Agreement or of the Notes may, with the consent of the Issuer, be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the holder or holders of
at least 66-2/3% in aggregate unpaid principal amount of all Notes at the time
outstanding (exclusive of Notes held by the Issuer, its Subsidiaries or
Affiliates), except as otherwise provided in clause (b) of this Section 12,
provided, however, that:
- -------- -------
(i) no such amendment or waiver shall change the rate,
extend the time of payment or change the method of computation of interest
on any of the Notes, or change the time or amount of any prepayment or
payment of principal or otherwise modify any of the provisions of this
Agreement, the Other Agreements or of the Notes with respect to the payment
or prepayment or purchase thereof, or release or terminate the Guaranty, or
change the percentage of holders of Notes required to approve any such
amendment or effectuate any such waiver, without the consent of the holders
of all the Notes then outstanding;
(ii) no amendment or waiver of any of the provisions of
Section 1, 2, 3, 7, 12(a) 13 or 15.10 hereof, or any defined term (as it is
used therein), will be effective as to you unless consented to by you in
writing; and
(iii) no such waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon.
(b) The holder or holders of at least 51% in aggregate unpaid
principal amount of all Notes at the time outstanding (exclusive of Notes
held by the Issuer, its Subsidiaries or Affiliates) may waive the
provisions of Section 6.10 hereof to the extent necessary to permit (i) the
payment of any dividend or distribution in such amount as may be necessary
to maintain the Guarantor's status as a real estate investment trust as
required by the Code or to avoid the imposition of federal or state income
or excise tax on the Guarantor, or (ii) the redemption or repurchase of any
partnership interest or shares of capital stock so as to preclude
concentration of ownership potentially disqualifying the Guarantor as a
real estate investment trust or potentially disqualifying income as rents
from real property; provided, that, no such amendment or waiver shall be
-------- ----
effective unless, at the time of and immediately after effect has been
given to such declaration and the making of such Distribution as referred
to in Section 6.10, no condition or event shall exist which constitutes a
Default or Event of Default under the terms of Sections 8.1(a),(b),(f) or
(g) hereof.
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(c) Any amendment or waiver pursuant to clause (a) or (b) of this
Section shall apply equally to all the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Issuer,
in each case whether or not a notation thereof shall have been placed on
any Note.
(d) The Issuer will not, directly or indirectly, pay or cause to be
paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of the Notes as consideration for
or as an inducement to the entering into by any holder of the Notes of any
waiver or amendment of any of the terms and provisions of this Agreement
unless such remuneration is concurrently paid, on the same terms, ratably
to the holders of all of the Notes then outstanding even if such holders
did not consent to such waivers or amendments.
(e) The Issuer will provide each holder of the Notes (irrespective of
the amount of Notes then owned by it) with sufficient information,
sufficiently far in advance of the date a decision is required, to enable
such holder to make an informed and considered decision with respect to any
proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Issuer will deliver executed or true and
correct copies of each amendment, waiver or consent effected pursuant to
the provisions of this Section 12 to each holder of outstanding Notes
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Notes.
13. PAYMENTS ON NOTES.
-----------------
13.1 PLACE OF PAYMENT. Subject to Section 13.2, payments of
----------------
principal, Makewhole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York City at the Citibank in such jurisdiction.
The Issuer may at any time, by notice to each holder of a Note, change the place
of payment of the Notes so long as such place of payment shall be either the
principal office of the Issuer in such jurisdiction or the principal office of a
bank or trust company in such jurisdiction.
13.2 HOME OFFICE PAYMENT. Notwithstanding anything to the contrary
-------------------
in this Agreement or the Notes, so long as you or any nominee designated by you
shall be the holder of any Note, the Issuer shall punctually pay all amounts
which become due and payable on such Note to you at your address and in the
manner set forth in Annex 1, or at such other place within the United States and
in such other manner as you may designate for the purpose by notice to the
Issuer, without presentation or surrender of such Note or the making of any
notation thereon, except that any Note paid or prepaid in full shall, following
such payment or prepayment, be surrendered to the Issuer for cancellation, upon
its request therefor, at the office maintained by the Issuer pursuant to Section
6.13 or at the place of payment specified in the Notes. You agree that prior to
the sale, transfer or other disposition of any such Note, you will make a
notation thereon of the portion of the principal amount paid or prepaid and the
date to which interest has been paid thereon, or surrender the same in exchange
for a Note or Notes aggregating the same principal amount as the unpaid
principal amount of the Note so surrendered. The Issuer shall enter into an
agreement similar to that contained in the first sentence of this Section with
any other institutional holder of outstanding Notes (or nominee thereof) who
shall make with the Issuer an agreement similar to that contained in the second
sentence of this Section.
14. LIABILITIES OF PURCHASER. Neither this Agreement nor any disposition
------------------------
of any of the Notes shall be deemed to create any liability or obligation on
your part or that of any other holder of any Note to enforce any provision
hereof or of any of the Notes for the benefit or on behalf of any other Person
who may be the holder of any Note.
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15. MISCELLANEOUS.
-------------
15.1 EXPENSES. Whether or not the transactions contemplated hereby
--------
are consummated, the Issuer shall (a) pay the reasonable fees and disbursements
of your special counsel and of any local counsel for any services rendered in
connection with such transactions or in connection with any actual or proposed
amendment, waiver or consent (whether or not the same becomes effective) with
respect to this Agreement, the Other Agreements or the Notes, and all other
reasonable expenses in connection therewith (including, without limitation,
document production and reproduction expenses); (b) reimburse you for your
reasonable out-of-pocket expenses in connection with such transactions and the
exercise of your rights hereunder and thereunder, and each such actual or
proposed amendment, waiver or consent (whether or not the same becomes
effective), and any items of the character referred to in clause (a) which shall
have been paid by you and pay the cost of transmitting the Notes (insured to
your satisfaction) to your principal office upon the issuance thereof; (c) pay,
and save you and each subsequent holder of any Note harmless from and against,
any and all liability and loss with respect to or resulting from the non-payment
or delayed payment of any and all placement fees and other liability to pay any
agent or finder in connection with the sale of the Notes to you; (d) pay all
taxes (including interest and penalties but exclusive of any and all franchise,
income or gross receipt taxes imposed upon you or any other holder of any Notes)
which may be payable in respect of the execution and delivery (but not the
transfer) of any of the Notes or of any amendment of, or waiver or consent under
or with respect to, this Agreement, the Other Agreements or of any of the Notes
and save you and all subsequent holders of the Notes harmless against any loss
or liability resulting from nonpayment or delay in payment of any such tax; (e)
the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement, the Other
Agreements or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement, the
Other Agreements or the Notes, or by reason of being a holder of any Note; and
(f) the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Issuer or any Subsidiary or
in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The obligations of the Issuer under this
Section shall survive payment and transfer of any Notes.
15.2 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS. All agreements,
-------------------------------------------
representations and warranties of the Issuer herein and in any certificates or
other instruments delivered pursuant to this Agreement and all representations
and warranties of the Issuer contained in the Assumption Agreements and in any
certificate or other instruments delivered pursuant thereto shall (a) be deemed
to be material and to have been relied upon by you, notwithstanding any
investigation heretofore or hereafter made by you or on your behalf and (b)
survive the execution and delivery of this Agreement and the delivery of the
Notes to you. Your representations set forth in Sections 1.5 and 1.7 shall also
survive the execution and delivery of this Agreement and shall be deemed to have
been relied upon by the Issuer.
15.3 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
----------------------
Agreement by or on behalf of the respective parties hereto shall bind and inure
to the benefit of their respective successors and assigns (including, without
limitation, any subsequent holder of a Note), except that, in the case of a
successor to the Issuer by consolidation or merger or a transfer of its assets,
this Agreement shall inure to the benefit of such successor or transferee only
if it becomes such in accordance with Section 6.5(c); provided, however, that
-------- -------
you shall not be obligated to purchase any Notes on either of the Closing Dates
from any Person other than the existing National Golf Operating Partnership,
L.P., a Delaware limited partnership. The provisions of this Agreement are
intended to be for the benefit of all
52
<PAGE>
holders from time to time of the Notes, and shall be enforceable by any such
holder, whether or not an express assignment to such holder of rights under
this Agreement has been made by you or your successor or assign.
15.4 NOTICES. All notices and communications provided for hereunder
-------
shall be in writing and sent by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or by registered or certified mail with return receipt
requested (postage prepaid), or by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:.
(i) if to you or your nominee, to you or it at the address
specified for such communications in Annex I, or at such other address
as you or it shall have specified to the Issuer in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Issuer in
writing, or
(iii) if to the Issuer, to the Issuer at its address set forth at
the beginning hereof to the attention of the President, or at such
other address as the Issuer shall have specified to the holder of each
Note in writing.
Notices under this Section 15.4 will be deemed given only when actually
received.
15.5 LAW GOVERNING. This Agreement and the Notes shall be governed by
-------------
and construed in accordance with the laws of the State of New York.
15.6 FORUM.
-----
(a) Pursuant to Section 5-1402 of the New York General
Obligations Law, all actions or proceedings arising in connection with this
Agreement shall be tried and litigated in state or federal courts located in the
Borough of Manhattan, New York City, State of New York, unless such actions or
proceedings are required to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy. THE ISSUER, YOU AND EACH OF THE
OTHER PURCHASERS WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
-----
NON CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH
- --------------
COURTS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
(b) Nothing contained in this Section shall preclude you or any
of the Other Purchasers from bringing any action or proceeding arising out of or
relating to this Agreement in the courts of any place where the Issuer or any of
its assets may be found or located. TO THE EXTENT PERMITTED BY THE APPLICABLE
LAWS OF ANY SUCH JURISDICTION, THE ISSUER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR
HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE
AVAILABLE TO IT.
15.7 WAIVER OF JURY TRIAL. EACH OF THE ISSUER, YOU AND THE OTHER
--------------------
PURCHASERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR
53
<PAGE>
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
15.8 HEADINGS, ETC. The headings in this Agreement are for
-------------
convenience of reference only and shall not limit or otherwise affect any of the
terms hereof.
15.9 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
----------------
and understanding between you and the Issuer regarding the Notes and supersedes
all prior agreements and understandings relating to the subject matter hereof,
including the Issuer Note Purchase Agreements, the Trust Note Purchase
Agreements and Black Lake Note Purchase Agreements each of which shall be or
deemed fully performed, with the exception that the covenant of each of the
Trust and Black Lake to maintain its existence in Section 4.4(a), the covenant
of each of the Trust and Black Lake to maintain an office in the last sentence
of Section 4.3 and the covenants of each of the Trust and Black Lake in Section
8 of each of the Trust Note Purchase Agreements and Black Lake Note Purchase
Agreements, as the case may be, shall survive and continue in full force and
effect, that all representations and warranties made by the Trust or Black Lake
shall survive and that the obligations of the Trust and Black Lake under the
Trust Notes and the Black Lake Notes shall continue in full force and effect.
15.10 SUBSTITUTE OF PURCHASER. You shall have the right to substitute
-----------------------
a subsidiary wholly-owned by you as a purchaser of any or all of the Notes to be
purchased by you on any of the Closing Dates by written notice delivered to the
Issuer, which notice shall be signed by both you and such subsidiary and shall
contain such subsidiary's agreement to be bound by this Agreement and a
confirmation by such subsidiary of the accuracy with respect to it of the
representations set forth in Sections 1.5 to 1.8; provided, however, that such
-------- -------
agreement may contain a statement to the effect that such subsidiary at all
times has the right to sell the Notes being purchased by it to you. The Issuer
agrees that, upon receipt of such notice and except to the extent otherwise
specified therein, wherever the word "you" is used in this Agreement, such word
shall be deemed to refer to such subsidiary in lieu of you. If any subsidiary
has been substituted as a purchaser of any Notes and shall subsequently transfer
such Notes to you, then you will thereafter be liable for all obligations and
entitled to all the rights and benefits of the purchaser of the Notes under this
Agreement.
15.11 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
15.12 PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement,
---------------------------------
the Other Agreements or the Notes to the contrary notwithstanding, any payment
of principal of or Makewhole Amount or interest on any Note that is due on a
date other than a Business Day shall be made on the next succeeding Business Day
without including the additional days elapsed in the computation of the
interest payable on such next succeeding Business Day, unless such payment is
the payment due on the maturity date of any Note, in which case the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
15.13 REPRODUCTION OF DOCUMENTS. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents received by you at
the Closings (except the Notes themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to you, may
be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Issuer agrees and stipulates that, to the extent.
54
<PAGE>
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 15.13 shall not prohibit the
Issuer or any other holder of Notes from contesting any such reproduction to the
same extent that it could contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
15.14 SEVERABILITY. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
15.15 CONSTRUCTION. Each covenant contained herein shall be construed
------------
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
55
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties Inc.,
as General Partner
By: /s/ Edward R. Sause
--------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted as of
the date first above written:
AUSA LIFE INSURANCE COMPANY, INC.
By: /s/ Gregory W. Theobald
--------------------------------------
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties Inc.,
as General Partner
By: /s/ Edward R. Sause
--------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted as of
the date first above written:
PFL LIFE INSURANCE COMPANY
By: /s/ Gregory W. Theobald
--------------------------------------
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space the provided below on the accompanying counterparts of
this Agreement and return one of the same to the Issuer, whereupon this
instrument shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted as of
the date first above written:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By: /s/ Robert E. Whalen
------------------------------------
Name: Robert E. Whalen, II
Title: Second Vice President
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R.Sause
---------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted as of
the date first above written.
JOHN ALDEN LIFE INSURANCE
COMPANY
By: /s/ Michael E. Halligan
--------------------------------------
Name: MICHAEL E. HALLIGAN
Title: VICE PRESIDENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
---------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted as of
the date first above written:
JOHN ALDEN ASSET MANAGEMENT COMPANY AS INVESTMENT ADVISOR FOR
OXFORD LIFE INSURANCE COMPANY
By: /s/ Michael E. Halligan
-----------------------------------
Name: MICHAEL E. HALLIGAN
Title: VICE PRESIDENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
-------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted
as of the date first above written:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Guy M. de Lambert
------------------------------
Name: Guy M. de Lambert
Title: Second Vice President
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
-------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted
as of the date first above written:
NATIONAL LIFE INSURANCE COMPANY
By: /s/ Scott Higgins
------------------------------
Name: R. Scott Higgins
Title: Vice President,
National Life Investment Management
Company, Inc.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
-------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted
as of the date first above written:
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By: /s/ Scott Higgins
------------------------------
Name: R. Scott Higgins
Title: Vice President
Natioanl Life Investment
Management Company, Inc.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
----------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted as of
the date first above written:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ G. W. MacCORDY
-----------------------------------
Name: GREGORY W. MacCORDY
Title: DIRECTOR-PRIVATE PLACEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below on the accompanying counterparts of this
Agreement and return one of the same to the Issuer, whereupon this instrument
shall become a binding agreement between you and the Issuer.
Very truly yours,
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By: /s/ Edward R. Sause
-------------------------------
Name: Edward R. Sause
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted
as of the date first above written:
THE TRAVELLERS INSURANCE COMPANY
By: /s/ T.M. Torrey
------------------------------
Name: TERESA M. TORREY
Title: SECOND VICE PRESIDENT
<PAGE>
EXHIBIT 10.31
THIS GUARANTIED SENIOR PROMISSORY NOTE HAS BEEN ISSUED BY NATIONAL GOLF
OPERATING PARTNERSHIP, L.P. WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933 PURSUANT TO THE EXEMPTION PROVIDED BY SECTION 4(2) OF THAT ACT AND CANNOT
BE RESOLD WITHOUT REGISTRATION UNDER SAID ACT OR AN EXEMPTION THEREFROM.
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
7.9% GUARANTIED SENIOR PROMISSORY NOTE DUE JUNE 15, 2006
Note No. R- New York, New York
$ [Date]
Private Placement Number:
FOR VALUE RECEIVED, the undersigned, National Golf Operating
Partnership, L.P., a limited partnership organized and existing under the laws
of the State of Delaware (herein called the "Issuer"), hereby promises to pay to
or registered assigns, the principal amount of
DOLLARS ($____)
(or so much thereof as shall not have been prepaid) on June 15, 2006, with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal balance hereof at the rate of 7.9% per annum from the date
hereof, payable semiannually on June 15 and December 15 in each year and at
maturity, commencing on December 15, 1996, until said unpaid principal balance
shall have become due and payable (whether at maturity, at a date fixed for
prepayment, or by declaration, acceleration or otherwise), and to pay interest
(so computed) at the rate of 8.9% per annum on any overdue principal (including
any overdue prepayment of principal) and, to the extent permitted by applicable
law, on any overdue premium and interest, until paid. Payments of principal,
premium, if any, and interest on this Guarantied Senior Promissory Note shall be
made in lawful money of the United States of America at Citibank, N.A., 111 Wall
Street, New York, New York 10043 or at such other place as may be provided
pursuant to the Note Purchase Agreements referred to below or, in certain
circumstances, to the holder of this Guarantied Senior Promissory Note as
provided in Section 13 of such Note Purchase Agreements.
This Guarantied Senior Promissory Note is one of the 7.9% Guarantied
Senior Promissory Notes due June 15, 2006, originally issued in the aggregate
principal amount of $40,000,000 pursuant to separate Note Purchase Agreements,
dated as of June __, 1996 (as amended from time to time, the "Note Purchase
Agreements"), between the Issuer and the respective Purchasers named therein,
and is entitled to the benefits thereof. As provided in said Note Purchase
Agreements, this Guarantied Senior Promissory Note is subject to mandatory
prepayments in whole or in part, in certain cases with a premium, all as
specified in said Note Purchase Agreements.
<PAGE>
The Issuer agrees to make prepayments of the principal of this Guarantied
Senior Promissory Note on the dates specified and in the amounts determined as
provided in said Note Purchase Agreements.
Subject to Section 10 of the Note Purchase Agreements, upon surrender of
this Guarantied Senior Promissory Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Guarantied Senior Promissory Note or Notes aggregating a like
outstanding principal amount will be issued to, and, at the option of the
holder, registered in the name of, the transferee. The Issuer may deem and
treat the Person in whose name this Guarantied Senior Promissory Note is
registered as the holder and owner hereof for the purpose of receiving payments
and for all other purposes whatsoever, and the Issuer shall not be affected by
any notice to the contrary.
In case an Event of Default (as defined in said Note Purchase Agreements)
shall occur and be continuing, the principal of this Guarantied Senior
Promissory Note in certain circumstances shall become due and payable and in
other circumstances may be declared and become due and payable in the manner and
with the effect provided in said Note Purchase Agreements.
This Guarantied Senior Promissory Note is made and delivered in New York,
New York, and shall be governed by the laws of the State of New York.
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By; National Golf Properties, Inc.,
as General Partner
By;
--------------------------------
Name: Richard C. Price
Title: President
The undersigned guarantor acknowledges
and agrees that the obligations hereunder
and under the Note Purchase Agreements
are guarantied pursuant to a General
Continuing Guaranty, dated as of June _____,
1996.
National Golf Properties, Inc.
By;
------------------------------------
Name: Richard C. Price
Title: President
2
<PAGE>
THIS GUARANTIED SENIOR PROMISSORY NOTE HAS BEEN ISSUED BY THE NATIONAL GOLF
OPERATING PARTNERSHIP, L.P. WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933 PURSUANT TO THE EXEMPTION PROVIDED BY SECTION 4(2) OF THAT ACT AND CANNOT
BE RESOLD WITHOUT REGISTRATION UNDER SAID ACT OR AN EXEMPTION THEREFROM.
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
8% GUARANTIED SENIOR PROMISSORY NOTE DUE 10 YEARS FROM THE
DATE OF ISSUANCE
Note No. R- New York, New York
$ [Date]
Private placement Number:
FOR VALUE RECEIVED, the undersigned, National Golf Operating Partnership,
L.P., a limited partnership organized and existing under the laws of the State
of Delaware (herein called the "Issuer"), hereby promises to pay to
or registered assigns, the principal amount of
DOLLARS ($__________)
(or so much thereof as shall not have been prepaid) on the date that is ten
years from the date of issuance hereof, with interest (computed on the basis of
a 360-day year of twelve 30-day months) on the unpaid principal balance hereof
at the rate of 8% per annum from the date hereof, payable semiannually on the
same dates in each year and at maturity, commencing on the date that is six
months from the date of issuance hereof, until said unpaid principal balance
shall have become due and payable (whether at maturity, at a date fixed for
prepayment, or by declaration, acceleration or otherwise), and to pay interest
(so computed) at the rate of 9% per annum on any overdue principal (including
any overdue prepayment of principal) and, to the extent permitted by applicable
law, on any overdue premium and interest, until paid. Payments of principal,
premium, if any, and interest on this Guarantied Senior Promissory Note shall be
made in lawful money of the United States of America at Citibank, N.A., 111 Wall
Street, New York, New York 10043, or at such other place as may be provided
pursuant to the Note Purchase Agreements referred to below or, in certain
circumstances, to the holder of this Guarantied Senior Promissory Note as
provided in Section 13 of such Note Purchase Agreements.
This Guarantied Senior Promissory Note is one of the 8% Guarantied Senior
Promissory Notes due ten years from the date of issuance hereof, originally
issued in the aggregate principal amount of $35,000,000 pursuant to separate
Note Purchase Agreements, dated as of June ____, 1996 (as amended from time to
time, the "Note Purchase Agreements"), between the Issuer and the respective
Purchasers named therein, and is entitled to the benefits thereof. As provided
in said Note Purchase Agreements, this Guarantied Senior Promissory Note is
subject to mandatory and optional prepayments in
<PAGE>
whole or in part, in certain cases with a premium, all as specified in said Note
Purchase Agreements.
The Issuer agrees to make prepayments of the principal of this
Guarantied Senior Promissory Note on the dates specified and in the amounts
determined as provided in said Note Purchase Agreements.
Subject to Section 10 of the Note Purchase Agreements, upon surrender of
this Guarantied Senior Promissory Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Guarantied Senior Promissory Note or Notes aggregating a like
outstanding principal amount will be issued to, and, at the option of the
holder, registered in the name of, the transferee. The Issuer may deem and
treat the Person in whose name this Guarantied Senior Promissory Note is
registered as the holder and owner hereof for the purpose of receiving payments
and for all other purposes whatsoever, and the Issuer shall not be affected by
any notice to the contrary.
In case an Event of Default (as defined in said Note Purchase Agreements)
shall occur and be continuing, the principal of this Guarantied Senior
Promissory Note in certain circumstances shall become due and payable and in
other circumstances may be declared and become due and payable in the manner and
with the effect provided in said Note Purchase Agreements.
This Guarantied Senior Promissory Note is made and delivered in New York,
New York, and shall be governed by the laws of the State of New York.
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.,
as General Partner
By:
------------------------------------
Name: Richard C. Price
Title: President
The undersigned guarantor acknowledges
and agrees that the obligations hereunder
and under the Note Purchase Agreements
are guarantied pursuant to a General
Continuing Guaranty, dated as of June __,
1996.
National Golf Properties, Inc.
By:
---------------------------
Name: Richard C. Price
Title: President
2
<PAGE>
EXHIBIT 10.32
AMENDED AND RESTATED GENERAL CONTINUING GUARANTY
------------------------------------------------
OF NATIONAL GOLF PROPERTIES, INC.
---------------------------------
AMENDED AND RESTATED GENERAL CONTINUING GUARANTY, dated as of July 1,
------------------------------------------------
1996 (as amended from time to time, the "Guaranty"), of National Golf
--------
Properties, Inc., a Maryland corporation (the "Guarantor"), in favor of the
---------
Persons listed on Schedule A and such other institutions and other Persons that
either now or in the future are parties to any of the Note Agreements referred
to below or holders of any of the Notes referred to below (the "Beneficiaries").
-------------
R E C I T A L S
- - - - - - - -
WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Issuer Note Purchase Agreements") by and between the Issuer and
-------------------------------
each of the Beneficiaries listed on Schedule A hereto, the Beneficiaries have
purchased the Issuer's 7.9% guarantied senior promissory notes due June 15, 2006
in the aggregate principal amount of $14,758,700 (together with all notes issued
in substitution or exchange therefor in accordance with the terms of the Issuer
Note Purchase Agreements, the "Series A-1 Notes"), and the Beneficiaries have
----------------
severally agreed to purchase the Issuer's 8% guarantied senior promissory notes
due ten years from the date of issuance thereof in the aggregate principal
amount of $35,000,000 (together with all notes issued in substitution or
exchange therefor in accordance with the terms of this Agreement, the "Series B
--------
Notes");
- -----
WHEREAS, the Guarantor, contemporaneously with the issuance of the
Series A-1 Notes, executed and delivered a General Continuing Guaranty dated as
of July 1, 1996 (the "Original Guaranty"), in favor of the Beneficiaries listed
-----------------
on Schedule A thereto pursuant to which the Guarantor agreed to guaranty
unconditionally any and all obligations of the Issuer to the Beneficiaries (as
defined in the Original Guaranty) under the Issuer Note Purchase Agreements and
the Series A-1 Notes and Series B Notes;
WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Trust Note Purchase Agreements") by and between David G. Price,
------------------------------
individually and as trustee of the Price Revocable Trust Amendment in Entirety
dated February 9, 1987 (the "Trust"), and each of the Beneficiaries listed on
-----
Schedule A hereto, the Beneficiaries have purchased the Trust's 7.9% senior
promissory notes due June 15, 2006 in the aggregate principal amount of
$13,794,200 (the "Trust Notes");
-----------
WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Black Lake Note Purchase Agreements") by and between
-----------------------------------
Black Lake/Penasquitos, a California general partnership ("Black Lake"), and
----------
each of the Beneficiaries listed on Schedule A hereto, the Beneficiaries have
purchased Black Lake's 7.9% senior promissory notes due June 15, 2006 in the
aggregate principal amount of $11,447,100 (the "Black Lake Notes");
----------------
WHEREAS, pursuant to Assumption Agreements dated as of July 1, 1996
(the "Assumption Agreements") by and between the Issuer and each of the
---------------------
Beneficiaries listed on Schedule A hereto, the Issuer agreed to assume all of
the liabilities, obligations, covenants, duties and indebtedness of the Trust
and Black Lake to the Beneficiaries evidenced by the Trust Notes and Black Lake
Notes, respectively, with the same effect as if such Notes had been executed and
delivered by the Issuer to the respective Beneficiaries (the Trust Notes and the
Black Lake Notes assumed by the Issuer being referred to herein as the Issuer's
"Series A-2 Notes" and "Series A-3 Notes", respectively, and, together with
---------- ----------
<PAGE>
all notes issued in substitution or exchange therefor in accordance with the
terms of the Agreements and together with the Series A-1 Notes, the "Series A
--------
Notes" and the Series A Notes together with the Series B Notes being referred to
- -----
as the "Notes");
-----
WHEREAS, in consideration of the agreement by the Beneficiaries listed
on Schedule A hereto to purchase the Notes and for the purpose of including
within the Obligations of the Guarantor the Series A-2 Notes and Series A-3
Notes, the Guarantor has agreed, at the request of the Issuer, contemporaneously
with the execution and delivery of the Assumption Agreements, to execute and
deliver this Guaranty and to guaranty unconditionally any and all obligations of
the Issuer to the Beneficiaries under the Note Documents and the Notes as
provided herein.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor agrees as follows:
ARTICLE I
DEFINITIONS AND RELATED MATTERS
SECTION 1.01 DEFINITIONS. Terms with initial capital letters not
-----------
otherwise defined herein have the respective meanings set forth in the
Agreements (as defined below). In addition, the following terms with initial
capital letters have the following meanings:
"AGREEMENTS" shall mean those certain Restated Note Agreements dated
----------
as of July 1, 1996 by and between the Issuer and the Beneficiaries listed on
Schedule A hereto, amending and restating the Issuer Note Purchase Agreements
and governing the Issuer's rights and obligations with respect to all of the
Notes, including without limitation, the Series A-2 and A-3 Notes.
"ASSUMPTION AGREEMENTS" is defined in the Recitals.
---------------------
"BANKRUPTCY CODE" shall mean Title 11 of United States Code, as
---------------
amended from time to time.
"BENEFICIARIES" is defined in the Preamble.
-------------
"BLACK LAKE" is defined in the Recitals.
----------
"BLACK LAKE NOTE PURCHASE AGREEMENTS" is defined in the Recitals.
-----------------------------------
"BLACK LAKE NOTES" is defined in the Recitals.
----------------
"COLLATERAL" is defined in Section 2.02.
----------
"DEFAULT" shall mean any default or other event which, with notice or
-------
the lapse of time or both, would constitute an Event of Default.
"EVENTS OF DEFAULT" shall have the meaning specified in Section 5.01.
-----------------
2
<PAGE>
"GUARANTOR" is defined in the Preamble.
---------
"GUARANTY" is defined in the Preamble.
--------
"ISSUER" is defined in the Recitals.
------
"ISSUER NOTE PURCHASE AGREEMENTS" is defined in the Recitals.
-------------------------------
"ISSUER SUBSIDIARIES" shall mean any Subsidiaries as defined in the
-------------------
Agreements.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (i) a
----------------------- -----------------------
material adverse effect on or (ii) a material adverse change in, as the case may
be, any one or more of the following: (A) the business, operations, properties,
financial condition or prospects of the Guarantor and its Subsidiaries taken as
a whole, (B) the ability of the Guarantor to perform its obligations hereunder
or (C) the validity or enforceability of this Guaranty.
"NOTE DOCUMENTS" shall mean the Agreements together with the Notes and
--------------
the Assumption Agreements.
"NOTES" is defined in the Recitals.
-----
"OBLIGATIONS" is defined in Section 2.01.
-----------
"OBLIGOR" is defined in Section 2.02.
-------
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
---------------------
Guarantor's name by any one of its Senior Officers.
"ORIGINAL GUARANTY" is defined in the Recitals.
-----------------
"OTHER GUARANTOR" is defined in Section 2.02.
---------------
"OTHER GUARANTY" is defined in Section 2.02.
--------------
"PARTNERSHIP UNITS" shall have the meaning set forth in the
-----------------
Partnership Agreement.
"SENIOR OFFICERS" shall mean the Chairman (if an officer), President,
---------------
Executive Vice President or Chief Financial Officer of the Guarantor or the most
senior officer of the Guarantor who reports to the independent committee of the
Board of Directors under the Bylaws of the Guarantor.
"SERIES A NOTES" is defined in the Recitals.
--------------
"SERIES A-1 NOTES" is defined in the Recitals.
----------------
"SERIES A-2 NOTES" is defined in the Recitals.
----------------
"SERIES A-3 NOTES" is defined in the Recitals.
----------------
"SERIES B NOTES" is defined in the Recitals.
--------------
3
<PAGE>
"SUBORDINATED DEBT" is defined in Section 2.08.
-----------------
"SUBSIDIARIES" shall mean the Issuer and any corporation or limited
------------
liability company of which the Guarantor or the Issuer owns or controls,
directly or indirectly, more than 50% of the Voting Stock or any partnership,
joint venture or other entity in which the Guarantor or the Issuer owns or
controls, directly or indirectly, more than a 50% equity interest and shall
include, whether or not otherwise included in this definition, the Issuer and
its Subsidiaries.
"TRUST NOTE PURCHASE AGREEMENTS" is defined in the Recitals.
------------------------------
"TRUST NOTES" is defined in the Recitals.
-----------
SECTION 1.02 RELATED MATTERS.
---------------
(a) CONSTRUCTION. Unless the context of this Guaranty clearly
------------
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting,
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Guaranty
refer to this Guaranty as a whole (including the Preamble, the Recitals, the
Schedules and the Exhibits) and not to any particular provision of this
Guaranty. Article, section, subsection, exhibit, schedule, recital and preamble
references in this Guaranty are to this Guaranty unless otherwise specified.
References in this Guaranty to any agreement, other document or law "as amended"
or "as amended from time to time," or to amendments of any document or law,
shall include any amendments, supplements, replacements, renewals, waivers or
other modifications.
(b) ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified
-----------------------------------
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP.
(c) HEADINGS. The Article and Section headings used in this Guaranty
--------
are for convenience of reference only and shall not affect the construction
hereof.
(d) SEVERABILITY. If any provision of this Guaranty shall be held to
------------
be invalid, illegal or unenforceable under applicable law in any jurisdiction,
such provision shall be ineffective only to the extent of such invalidity,
illegality or unenforceability, which shall not affect any other provisions
hereof or the validity, legality or enforceability of such provision in any
other jurisdiction.
(e) INDEPENDENCE OF COVENANTS. All covenants under this Guaranty
-------------------------
shall each be given independent effect so that if a particular action or
condition is not permitted by any such covenant, the fact that it would be
permitted by another covenant, by an exception thereto, or be otherwise within
the limitations thereof, shall not avoid the occurrence of a Default or an Event
of Default if such action is taken or condition exists.
(f) EXHIBITS, ETC. All of the appendices, exhibits and schedules
-------------
attached to this Guaranty shall be deemed incorporated herein by reference.
4
<PAGE>
ARTICLE II
GUARANTY
--------
SECTION 2.01 GUARANTY. The Guarantor unconditionally, absolutely
--------
and irrevocably guaranties and promises to perform and pay to the order of the
Beneficiaries, on demand, in lawful money of the United States of America, any
and all Obligations of the Issuer from time to time owed to the Beneficiaries;
provided that (a) no payment by the Guarantor shall be required hereunder with
- -------------
respect to any of the Obligations unless and until the Issuer has failed to pay
such Obligation as and when due (whether by acceleration, lapse of time or
otherwise); (b) no demand, resort or other action against the Issuer, any other
Person or any Collateral shall be required before payment by the Guarantor is
required hereunder and (c) this Guaranty is a continuing guaranty of performance
and payment (and not merely of collection). The term "Obligations" is used
-----------
herein in its most comprehensive sense and includes any and all present and
future obligations and liabilities of the Issuer of every type and description
to any Beneficiary, or any of its successors or assigns, or any Person entitled
to indemnification, under the Agreements or the Notes (including, without
limitation, the Series A-2 and Series A-3 Notes assumed by the Issuer pursuant
to the terms of the Assumption Agreements), whether relating to the performance
of any covenant, undertaking or any other agreement, or whether for principal,
interest, Makewhole Amount, reimbursement obligations, fees, expenses,
indemnities or other amounts (including attorneys' fees and expenses), in each
case whether due or not due, direct or indirect, joint or several, absolute or
contingent, voluntary or involuntary, liquidated or unliquidated, determined or
undetermined, now or hereafter existing, renewed or restructured, whether or not
from time to time decreased or extinguished and later increased, created or
incurred, whether or not arising after the commencement of a proceeding under
the Bankruptcy Code (including post-petition interest) and whether or not
allowed or allowable as a claim in any such proceeding, and whether or not
recovery of any such obligation or liability may be barred by a statute of
limitations or such obligation or liability may otherwise be unenforceable. All
Obligations shall be conclusively presumed to have been created in reliance on
this Guaranty. All payments hereunder shall be made free and clear of any and
all deductions, withholdings and setoffs, including withholdings on account of
taxes.
SECTION 2.02 CONTINUING AND IRREVOCABLE GUARANTY. This is a
-----------------------------------
continuing guaranty of the Obligations and may not be revoked and shall not
otherwise terminate unless and until the Obligations have been indefeasibly paid
and performed in full. If notwithstanding the foregoing the Guarantor shall have
any unwaivable right under applicable law to terminate this Guaranty prior to
indefeasible payment in full of the Obligations, no such termination shall be
effective until noon the next Business Day after the Beneficiaries shall receive
written notice thereof, signed by the Guarantor. Any such termination shall not
affect this Guaranty in relation to (a) any Obligation that was incurred or
arose prior to the effective time of such notice, (b) any Obligation incurred or
arising after such effective time where such Obligation is incurred or arises
either pursuant to commitments existing at such effective time or incurred for
the purpose of protecting or enforcing rights against the Issuer, the Guarantor
or other guarantor of or any portion thereof (an "Other Guarantor"; each of the
---------------
Issuer, the Guarantor, the Other Guarantors and each other Person directly or
indirectly liable on the Obligations, or any portion thereof, including, without
limitation, the Trust in respect of the Trust Notes and Black Lake in respect of
the Black Lake Notes, is referred to herein as an "Obligor") or any security
-------
("Collateral") given for the Obligations or any other guaranties of the
----------
Obligations or any portion thereof (an "Other"
-----
5
<PAGE>
Guaranty") or (c) any renewals, extensions, readvances, modifications or
- ---------
rearrangements of any of the foregoing.
SECTION 2.03 NATURE OF GUARANTY. The liability of the Guarantor
------------------
hereunder is independent of and not in consideration of or contingent upon the
liability of the Issuer or any other Obligor and a separate action or actions
may be brought and prosecuted against the Guarantor, whether or not any action
is brought or prosecuted against the Issuer or any other Obligor or whether the
Issuer or any other Obligor is joined in any such action or actions. This
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
of performance and payment (and not merely of collection) without regard to:
(a) the legality, validity or enforceability against any Obligor of
the Note Documents or the Notes, any of the Obligations, any Lien or Collateral
or any Other Guaranty;
(b) any defense (other than payment), set-off or counterclaim that
may at any time be available to the Issuer or any other Obligor against, and any
right of setoff at any time held by, any Beneficiary; or
(c) any other circumstance whatsoever (other than payment) (with or
without notice to or knowledge of the Guarantor or any other Obligor), whether
or not similar to any of the foregoing, that constitutes, or might be construed
to constitute, an equitable or legal discharge of the Issuer or any other
Obligor, in bankruptcy or in any other instance.
Any payment by any Obligor or other circumstance that operates to toll
any statute of limitations applicable to such Obligor shall also operate to toll
the stature of limitations applicable to the Guarantor. When making any demand
hereunder (including by commencement or continuance of any legal proceeding),
the Beneficiaries may, but shall be under no obligation to, make a similar
demand on all or any of the other Obligors, and any failure by any Beneficiary
to make any such demand shall not relieve the Guarantor of its obligations
hereunder.
SECTION 2.04 AUTHORIZATION. The Guarantor, solely in its capacity as
-------------
Guarantor hereunder and not as a partner, authorizes each Beneficiary, without
notice to or further assent by the Guarantor, and without affecting the
Guarantor's liability hereunder (regardless of whether any subrogation or
similar right that the Guarantor may have or any other right or remedy of the
Guarantor is extinguished or impaired), from time to time to:
(a) permit the Issuer to increase or create Obligations, or
terminate, release, compromise, subordinate, extend, accelerate or otherwise
change the amount or time, manner or place of payment of, or rescind any demand
for payment or acceleration of, the Obligations or any part thereof (including
increasing or decreasing the rate of interest thereon), or otherwise amend the
terms and conditions of the Note Documents and the Notes or any provision
thereof;
(b) take and hold Collateral from the Issuer or any other Person,
perfect or refrain from perfecting a Lien on such Collateral, and exchange,
enforce, subordinate, release (whether intentionally or unintentionally), or
take or fail to take any other action in respect of, any such Collateral or Lien
or any part thereof;
6
<PAGE>
(c) exercise in such manner and order as it elects in its sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration of,
any of the remedies or rights of such Beneficiary against the Issuer or any
other Obligor in respect of any Obligations or any Collateral;
(d) release, add or settle with any Obligor in respect of this
Guaranty, any Other Guaranty or the Obligations;
(e) accept partial payments on the Obligations and apply any and all
payments or recoveries from any Obligor or collateral to such of the Obligations
as any Beneficiary may elect in its sole discretion, whether or not such
Obligations are secured or guaranteed;
(f) refund at any time, at such Beneficiary's sole discretion, any
payments or recoveries received by such Beneficiary in respect of any
Obligations or Collateral; and
(g) otherwise deal with the Issuer, any other Obligor and any
Collateral as such Beneficiary may elect in its sole discretion.
SECTION 2.05 CERTAIN WAIVERS. The Guarantor waives:
---------------
(a) the right to require the Beneficiaries to proceed against the
Issuer or any other Obligor, to proceed against or exhaust any Collateral or to
pursue any other remedy in any Beneficiary's power whatsoever and the right to
have the property of the Issuer or any other Obligor first applied to the
discharge of the Obligations;
(b) all rights and benefits under applicable law purporting to reduce
a guarantor's obligations in proportion to the obligation of the principal or
providing that the obligation of a surety or guarantor must neither be larger
nor in other respects more burdensome than that of the principal;
(c) the benefit of any statute of limitations affecting the
Obligations or the Guarantor's liability hereunder;
(d) any requirement of marshalling or any other principle of election
of remedies;
(e) any right to assert against any Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that the Guarantor may now or
any time hereafter have against the Issuer or any other Obligor;
(f) presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or nonperformance,
protest, acceptance and notice of acceptance of this Guaranty, and all other
notices of any kind, including (i) notice of the existence, creation or
incurrence of new or additional Obligations, (ii) notice of any action taken or
omitted by the Beneficiaries in reliance hereon, (iii) notice of any default by
the Issuer or any other Obligor, (iv) notice that any portion of the Obligations
is due, and (iv) notice of any action against the Issuer or any other Obligor,
or any enforcement of other action with respect to any Collateral, or the
assertion of any right of any Beneficiary hereunder;
(g) all defenses that at any time may be available to the Guarantor
by virtue of any valuation, stay, moratorium or other law now or hereafter in
effect; and
7
<PAGE>
(h) without limiting the generality of the foregoing or any other
provision hereof, all rights and benefits under California Civil Code Sections
2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899, and 3433 and comparable
provisions of other applicable law.
SECTION 2.06 SUBROGATION; CERTAIN AGREEMENTS.
-------------------------------
(a) The Guarantor waives any and all rights of subrogation,
indemnity, contribution or reimbursement, and any and all benefits of and rights
to enforce any power, right or remedy that any Beneficiary may now or hereafter
have in respect of the Obligations against the Issuer or any other Obligor, any
and all benefits of and rights to participate in any Collateral, whether real or
personal property, now or hereafter held by any Beneficiary, and any and all
other rights and claims (as defined in the Bankruptcy Code) the Guarantor may
have against the Issuer or any other Obligor, under applicable law or otherwise,
at law or in equity, by reason of any payment hereunder, unless and until the
Obligations shall have been paid in full.
(b) The Guarantor assumes the responsibility for being and keeping
itself informed of the financial condition of the Issuer and each other Obligor
and of all other circumstances bearing upon the risk of nonpayment of the
Obligations that diligent inquiry would reveal, agrees that the Beneficiaries
shall have no duty to advise the Guarantor of information regarding such
condition or any such circumstances and waives any defense that at any time may
otherwise be available to Guarantor based on any failure by the Guarantor to be
informed, or any failure by any Beneficiary to advise the Guarantor, of
information regarding such condition or any such circumstances.
SECTION 2.07 BANKRUPTCY NO DISCHARGE.
-----------------------
(a) Without limiting Section 2.03, this Guaranty shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against the Issuer or any other Obligor, including
(i) any discharge of, or bar or stay against collecting, all or any part of the
Obligations in or as a result of any such proceeding, whether or not assented to
by any Beneficiary, (ii) any disallowance of all or any portion of any
Beneficiary's claim for repayment of the Obligations, (iii) any failure by any
Beneficiary to file or enforce a claim against the Issuer or any other Obligor
or its estate in any bankruptcy or reorganization case, (iv) any amendment,
modification, stay or cure of any Beneficiary's rights that may occur in any
such proceeding or (v) any borrowing or grant of a Lien under Section 364 of the
Bankruptcy Code. The Guarantor understands and acknowledges that by virtue of
this Guaranty, it has specifically assumed any and all risks of any such
proceeding with respect to the Issuer and each other Obligor.
(b) Any Event of Default under Section 8.1(f) or (g) of the
Agreements as to the Issuer, the Guarantor or any Restricted Subsidiary having,
individually or in the aggregate, assets with a book value of at least
$5,000,000 or annual revenues of at least $2,500,000 shall render all
Obligations automatically due and payable for purposes of this Guaranty.
(c) Notwithstanding anything to the contrary herein contained, this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment, or any part thereof, of any or all of the Obligations
is rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be restored or returned by any Beneficiary in connection
with any bankruptcy, reorganization or similar proceeding involving the Issuer,
any other Obligor or
8
<PAGE>
otherwise or if any Beneficiary elects to return any such payment or proceeds or
any part thereof in its sole discretion, all as though such payment had not been
made or such proceeds not been received. Without limiting the generality of the
foregoing, if prior to any such rescission, invalidation, declaration,
restoration or return, this Guaranty shall have been cancelled or surrendered,
this Guaranty shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the Guarantor in respect of the amount of the affected payment or
application of proceeds.
SECTION 2.08 SUBORDINATION
-------------
(a) The Guarantor hereby absolutely subordinates, both in right of
payment and in time of payment, any and all present or future obligations and
liabilities of the Issuer and each other Obligor to the Guarantor ("Subordinated
------------
Debt"), to the prior payment in full in cash of the Obligations, whether or not
- ----
such Subordinated Debt constitutes or arises out of any subrogation,
reimbursement, contribution, indemnity or similar right attributable to this
Guaranty: provided that, as long as no Event of Default has occurred and is
continuing (or would arise as a result of such payment), this provision shall
not prevent payment of Subordinated Debt by the Issuer or any other Obligor not
made in anticipation of an Event of Default. Upon the occurrence and during the
continuation of an Event of Default, if, whether or not at any Beneficiary's
request, the Guarantor shall receive, prior to payment in full in cash of all
Obligations, payment of any sum from the Issuer or any other Obligor upon any
Subordinated Debt, any such sum shall be received by the Guarantor as trustee
for the Beneficiaries and shall forthwith be paid over to the Beneficiaries on
account of the Obligations, without reducing or affecting in any manner the
liability of the Guarantor under this Guaranty.
(b) The Guarantor shall file in any bankruptcy or reorganization or
similar proceeding in which the filing of claims is required by applicable law,
all claims that the Guarantor may have against the Issuer or other Obligor (or
its nominee) relating to any Subordinated Debt. If the Guarantor does not file
any such claim, the Beneficiaries (or their nominee) as attorney-in-fact for the
Guarantor are each hereby authorized to do so in the name of the Guarantor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor makes the following representations and warranties, as
of the date hereof and as of the time of the applicable Closing, all of which
shall survive until termination of this Guaranty pursuant to Section 2.02:
SECTION 3.01 ORGANIZATION, POWERS, GOOD STANDING AND COMPLIANCE. The
--------------------------------------------------
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all requisite
corporate power and authority and the legal right to own and operate its
properties and to carry on its business as heretofore conducted and proposed to
be conducted. The Guarantor has all requisite corporate power and authority to
enter into this Guaranty and to carry out the transactions contemplated hereby.
The Guarantor is duly qualified and in good standing as a foreign corporation
and authorized to do business in each state where the nature of its business
activities conducted or properties owned or leased requires it to be so
qualified and where the failure to be so qualified would not have a Material
Adverse Effect. Neither the Guarantor nor any of its Subsidiaries is in
violation of any law, governmental rule or regulation or any Order of
9
<PAGE>
any court, arbitrator or other Governmental Body applicable to it, the
consequences of which violation, either in any one case or in the aggregate,
would reasonably be expected to have a Material Adverse Effect.
SECTION 3.02 AUTHORIZATION, BINDING EFFECT, NO CONFLICT, ETC. The
-----------------------------------------------
execution, delivery and performance by the Guarantor of this Guaranty have been
duly authorized by all necessary corporate action. This Guaranty has been duly
executed and delivered by the Guarantor and is the legal, valid and binding
obligation of the Guarantor, enforceable against it in accordance with its
terms, except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally. The execution, delivery and performance by the
Guarantor of this Guaranty, and the consummation of the transactions
contemplated hereby, do not and will not (a) violate any provision of the
charter or bylaws of the Guarantor, (b) conflict with, result in a breach of or
constitute (or, with the giving of notice or lapse of time, or both, would
constitute) a default under, or require the approval or consent (not otherwise
obtained) of any Person pursuant to, any indenture, mortgage, bank loan, credit
agreement or other agreement or instrument of the Guarantor or any of its
Subsidiaries that is material to the Guarantor and its Subsidiaries taken as a
whole, or violate or provision of applicable law binding on the Guarantor, (c)
violate any Order of any Governmental Body having jurisdiction over the
Guarantor or any of its Subsidiaries or (d) result in the creation or imposition
of any Lien of any nature whatsoever upon any of the Guarantor's assets. Subject
to the accuracy of the representations and warranties of the Beneficiaries
contained in Sections 1.5 to 1.8 of the Agreements and the performance by the
Beneficiaries of the agreements contained in Section 1.9 of the Agreements, no
consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Body is required for or in connection with the execution,
delivery and performance by the Guarantor of this Guaranty, or the consummation
of transactions contemplated hereby, or to ensure the legality, validity or
enforceability hereof.
SECTION 3.03 FINANCIAL CONDITION. The financial statements of the
-------------------
Guarantor included in the Memorandum present fairly the financial position of
the Guarantor and its Subsidiaries as at the dates indicated and the results of
their operations and cash flow, for the periods specified; except as otherwise
stated in the Memorandum, such financial statements have been prepared in
conformity with GAAP applied on a consistent basis. The Guarantor has no
material Contingent Obligations, liabilities for taxes or long-term leases,
unusual forward or long-term commitments or unrealized or unanticipated losses
from any unfavorable commitments that are not reflected in the foregoing
financial statements or in the notes thereto. The pro forma financial statements
included in the Memorandum comply in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X promulgated by the Commission and
the pro forma adjustments have been properly applied to the historical amounts
in the compilation of such statements. Except as disclosed in the Disclosure
Documents or as expressly described on Schedule 3.03, since December 31, 1995
there has been no Material Adverse Change.
SECTION 3.04 DISCLOSURE. The Disclosure Documents fairly describe,
----------
in all material respects, the general nature of the business and principal
properties of the Guarantor and its Subsidiaries. There is no fact known to the
Guarantor that could reasonably be expected to have a Material Adverse Effect
that has not been set forth herein or in the Disclosure Documents or in the
other documents, certificates and other writings delivered to the Beneficiaries
by or on behalf of the Guarantor or the Issuer specifically for use in
connection with the transactions contemplated hereby. Except as disclosed in
Schedule 3.04, this Guaranty, the Disclosure Documents, the documents,
10
<PAGE>
certificates or other writings delivered to the Beneficiaries by or on behalf of
the Guarantor or the Issuer in connection with the transactions contemplated
hereby and the financial statements described in Section 3.03, taken as a whole,
do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances under which they were made. Any projections
contained in the Disclosure Documents were based on assumptions the Guarantor
believes to be reasonable and were calculated or arrived at, as the case may be,
in a manner the Guarantor believes to be reasonable.
SECTION 3.05 LITIGATION, ETC. Except as disclosed on Schedule 3.05,
---------------
there are no actions, suits or proceedings pending or, to the knowledge of the
Guarantor, threatened against or affecting the Guarantor, the Issuer, any
Subsidiary or any of their respective properties before any Governmental Body
(a) in which there is a reasonable possibility of an adverse determination that
could have a Material Adverse Effect or (b) that in any manner draws into
question the legality, validity or enforceability of this Guaranty. The
Guarantor is not in default under any applicable law or indenture, mortgage,
bank loan, credit agreement or other agreement or instrument to which the
Guarantor is a party or by which its properties are bound, except where such
violation or default would not have a Material Adverse Effect.
SECTION 3.06 TAXES. The Guarantor has properly prepared and timely
-----
filed all United States Federal income tax returns and all other tax returns
required to be filed by it and has paid all taxes shown to be due on the returns
so filed as well as all other taxes, assessments and governmental charges that
have become due, except such taxes, assessments or charges, if any, as are being
contested in good faith and as to which adequate reserves have been established
in accordance with GAAP.
SECTION 3.07 TITLE TO PROPERTY: LIMITED PARTNERSHIP. The Guarantor
--------------------------------------
has good title to, or valid and subsisting leasehold interests in, all of the
property, whether real or personal, reflected in its financial statements as
being owned or leased by it and none of such property is subject to any Liens,
except for Liens described on Schedule 3.07. The Guarantor is the sole general
partner of the Issuer. As of the date of this Guaranty 19,285,460 Partnership
Units are issued and outstanding and 55% of such Partnership Units are owned by
the Guarantor. The Partnership Agreement has been duly and validly authorized,
executed and delivered by the parties thereto and is a valid and binding
agreement, enforceable in accordance with its terms.
SECTION 3.08 GOLF COURSE PROPERTIES. At least ninety percent of all
----------------------
Golf Courses owned, in whole or in part, by the Guarantor and its Subsidiaries
are owned by the Issuer and the Restricted Subsidiaries. For the purposes of
this Section 3.08, the percentage of Golf Courses owned by the Issuer and the
Restricted Subsidiaries shall be calculated by dividing the total number of golf
course holes owned, in whole or in part, by the Issuer and the Restricted
Subsidiaries by the total number of golf course holes owned, in whole or in
part, by the Guarantor and its Subsidiaries and then multiplying the quotient by
100.
SECTION 3.09 NO INVESTMENT COMPANY. Neither the Guarantor nor the
---------------------
Issuer is an "investment company" or, to the best of their knowledge, an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
SECTION 3.10 REIT STATUS. The Guarantor is organized as a real
-----------
estate investment trust under the Code and its ownership and method of operation
enables it to meet the requirements for taxation as a real estate investment
trust under the Code.
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SECTION 3.11 INTERNAL ACCOUNTING CONTROLS. The Guarantor and its
----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; and (iii) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 3.12 FINANCIAL BENEFIT: REVIEW OF DOCUMENTS. The Guarantor
--------------------------------------
hereby acknowledges and warrants it has derived or expects to derive a financial
advantage from each purchase of a Note or other extension of credit or
relinquishment of legal rights, made or granted or to be made or granted by the
Beneficiaries in connection with the Obligations. The Guarantor hereby
acknowledges that it has copies of and is fully familiar with the Note Documents
and the Notes.
ARTICLE IV
COVENANTS
---------
The Guarantor covenants that it shall perform each and all of the
following until termination of this Guaranty pursuant to Section 2.02:
SECTION 4.01 CORPORATE EXISTENCE, PROPERTIES, ETC. The Guarantor
------------------------------------
will:
(a) do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence (except as otherwise permitted
by Section 4.05) and its licenses, permits, rights (charter and statutory) and
franchises, except that such licenses, permits, rights and franchises may be
abandoned, modified, or terminated if in the good faith judgment of the
Guarantor such abandonment, modification or termination is in the best interest
of the Guarantor and would not, individually or in the aggregate, be
disadvantageous to the Issuer, the Restricted Subsidiaries or the Beneficiaries;
(b) file all tax returns required to be filed in any jurisdiction;
(c) pay and discharge or cause to be paid and discharged (i) all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or upon any of its property (real, personal or mixed), or
upon any part thereof, or upon any of its assets or franchises when due, and
(ii) all lawful claims of landlords, carriers, warehousemen, mechanics,
materialmen and other similar Persons for labor, materials, supplies and rentals
which, if unpaid, might by law become a Lien upon any of its property; provided,
however, that the failure of the Guarantor to pay any such tax, assessment,
charge, levy or claim shall not constitute a default hereunder if and for so
long as the amount, applicability or validity thereof shall concurrently be
contested in good faith by appropriate and timely proceedings diligently
conducted, and if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor;
(d) implement and enforce reasonable requirements for lessees of all
properties used or useful in the business of the Guarantor and its Subsidiaries
to maintain and keep, or cause to be maintained and kept, in good repair,
working order, appearance and condition all properties used or useful in the
business of the Guarantor,
12
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and from time to time, with reasonable promptness make or cause to be made all
necessary or appropriate repairs, renewals, replacements and improvements
thereof;
(e) implement and enforce reasonable requirements for lessees of all
properties used or useful in the business of the Guarantor and its Subsidiaries
to maintain or cause to be maintained with financially sound and reputable
insurers, authorized to do insurance business in the State in which such
property or business is located, insurance (including deductibles) in respect of
its properties and businesses against loss or damage of the kind customarily
insured and of such type and in such amounts as are customarily maintained under
similar circumstances by prudent business entities of established reputation
engaged in the same or similar business, including insurance described in
Section 6.14(f) of the Agreements);
(f) comply in all material respects with all applicable lawful
statutes, regulations and Orders of, and all applicable lawful restrictions
imposed by, any Governmental Body, or by any trade or professional organization
or other industry regulatory body in respect of the conduct of its business and
the ownership of its properties (including, without limitation, applicable
statutes, regulations and orders relating to equal employment opportunities),
except where the failure to so comply, individually or in the aggregate, would
not have a Material Adverse Effect;
(g) implement and enforce reasonable requirements to cause each of
the real properties of the Guarantor and its Subsidiaries, whether now or
hereafter owned, leased or operated, to be operated in compliance in all
material respects with all Environmental Laws;
(h) continue to be the sole general partner of the Issuer; and
(i) maintain the validity of all patents, trademarks, service marks,
trade names, copyrights and the like necessary, individually or in the
aggregate, in any material respect for the conduct of its business as now
conducted and as proposed to be conducted.
SECTION 4.02 CHANGES TO ARTICLES OF INCORPORATION. The Guarantor
------------------------------------
shall not amend or otherwise change any provision of its Articles of
Incorporation relating to restrictions on ownership and transfer if such changes
could impair the tax status of the Guarantor.
SECTION 4.03 FINANCIAL STATEMENTS: INFORMATION. The Guarantor will
---------------------------------
furnish to each of the Beneficiaries, so long as it or its nominee shall be
obligated to purchase or shall hold any of the Notes:
(a) as soon as practicable and in any event within 45 days after the
end of each of the first three quarterly fiscal periods in each fiscal year of
the Guarantor, the unaudited consolidated balance sheet of the Guarantor and its
Subsidiaries, and the unaudited consolidating balance sheet of the Guarantor,
the Issuer and each Issuer Subsidiary, as of the end of such quarterly period
and the related unaudited consolidated statements of income, retained earnings
and cash flows of the Guarantor and its Subsidiaries, and the related unaudited
consolidating statement of income of the Guarantor, the Issuer and each Issuer
Subsidiary for such quarterly period and (in the case of the second and third
such quarterly periods) for the portion of the fiscal year ended with the last
day of such quarterly period, setting forth in each case in comparative form the
respective figures for the corresponding periods of the previous fiscal year,
all in reasonable detail and certified as complete and correct in all
13
<PAGE>
material respects in conformity with GAAP (except in respect of consolidating
statements and footnotes), subject to changes resulting from year-end audit
adjustments, by the principal financial officer of the Guarantor;
(b) as soon as practicable and in any event within 90 days after the
end of each fiscal year of the Guarantor, the consolidated balance sheet of the
Guarantor and its Subsidiaries, and the unaudited consolidating balance sheet of
the Guarantor, the Issuer and each Issuer Subsidiary, as of the end of such
fiscal year and the related consolidated statements of income, retained earnings
and cash flows of the Guarantor and its Subsidiaries, and the related unaudited
consolidating statement of income of the Guarantor, the Issuer and each Issuer
Subsidiary, for such fiscal year, setting forth in each case in comparative form
the respective figures for the previous fiscal year, all in reasonable detail
and (i) in the case of such consolidated statements, accompanied by a report
thereon of Coopers & Lybrand L.L.P. or other independent certified public
accountants of recognized national standing selected by the Guarantor, which
report shall, unless a waiver of the provisions of this Section 4.03(b) has been
obtained pursuant to Section 6.2, be made without qualification as to or by
reason of (x) changes in accounting principles and methods (other than changes
therein in which such accountants express their concurrence), (y) the
unavailability of sufficient competent evidential matter on which to base an
audit or the inadequacy of accounting records or (z) restrictions on the scope
of the audit conducted and shall comply with generally accepted auditing
standards at the time in effect and shall state that such financial statements
present fairly the financial position of the companies being reported upon as at
the dates indicated and the results of their operations and cash flows for the
periods indicated and have been prepared in accordance with GAAP consistently
applied (except for changes in application in which such accountants concur) on
a basis consistent with prior years, and that the examination of such
accountants has been made in accordance with generally accepted auditing
standards, and accordingly included such tests of pertinent accounting records
and such other auditing procedures as were considered necessary in the
circumstances, and (ii) in the case of such consolidating balance sheets and
statements of income of the Guarantor, the Issuer and each Issuer Subsidiary,
certified as complete and correct in all material respects in conformity with
GAAP by the principal financial officer of the Guarantor;
(c) concurrently with each delivery of financial statements pursuant
to clause (a) or (b) of this Section 4.03, an Officer's Certificate
substantially in the form of Exhibit A stating that such officer has reviewed
the terms of this Guaranty, the Agreements and the Notes and has made, or caused
to be made under such officer's supervision, a review in reasonable detail of
the transactions and conditions of the Guarantor and the Subsidiaries during the
accounting period covered by such financial statements, and that such review has
not disclosed the existence during, or at the end of such accounting period, and
that such officer does not have knowledge of the existence as at the date of
such Officer's Certificate, of any condition or event which constitutes a
Default or an Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
the Guarantor has taken or is taking or proposes to take with respect thereto;
(d) together with each delivery of annual financial statements
pursuant to clause (b) of this Section 4.03, a written statement of the
accountants giving the report thereon:
(i) stating that they have read the Officer's Certificate
delivered in connection with the annual financial statements pursuant to clause
(c) of this Section 4.03 for such fiscal year and the Officer's Certificate
delivered in
14
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connection with the annual financial statements pursuant to clause (c) of
Section 4 of the Agreements for such fiscal year and based upon their annual
audit examination of the financial statements delivered pursuant to clause (b)
of this Section nothing has come to their attention which causes them to believe
that the matters set forth in such written statement pursuant to subclauses
(ii), (iii) and (iv) of such clause (c) of Section 4 of the Agreements in
connection with such annual financial statements have not been properly stated
in accordance with the terms of this Guaranty or the Agreements, and
(ii) stating that in making the examination necessary for their
report on such financial statements they obtained no knowledge of the existence
of any condition or event which constitutes a Default or an Event of Default or,
if such accountants shall have obtained knowledge of any such Default or Event
of Default, specifying all such Defaults and Events of Defaults and the nature
and status thereof;
(e) promptly upon their becoming available (and in any event within
ten Business Days thereafter), copies of (i) all financial statements, reports,
notices, proxy statements and other information sent or made available generally
by the Guarantor to any class of its security holders, (ii) all regular and
periodic reports (including reports on Form 8-K) and any registration statements
(other than on Form S-8 or a similar form) and prospectuses filed by the
Guarantor or any of its Subsidiaries with any securities exchange or with the
Commission and (iii) all press releases and other statements made available
generally by the Guarantor to the public concerning material developments in the
business of the Guarantor or its Subsidiaries;
(f) promptly upon receipt thereof (and in any event within five
Business Days thereafter), copies of all management letters or other reports
submitted to the Guarantor by independent public accountants in connection with
any annual, interim or special audit of the books of the Guarantor or its
Subsidiaries made by such accountants;
(g) promptly upon (and in any event within three Business Days
thereafter) any Senior Officer of the Guarantor obtaining knowledge of any
condition or event which constitutes a Default or an Event of Default, or
becoming aware that the holder of any Note has given any notice or taken any
other action with respect to a claimed Default or Event of Default an Officer's
Certificate specifying the nature and period of existence thereof and what
action the Guarantor or the Issuer has taken or is taking or proposes to take
with respect thereto;
(h) promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Guarantor from any Federal or state Governmental
Body relating to any Order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect; and
(i) promptly upon request therefor (and in any event within five
Business Days thereafter), such other information as to the business,
operations, properties, financial condition or prospects of the Guarantor, the
Issuer or any Subsidiary as may from time to time be reasonably requested.
SECTION 4.04 INSPECTION. The Guarantor shall permit, subject to
----------
confidentiality provisions comparable to the provisions of Section 5.2 of the
Agreements, the representatives of each holder of Notes that is an institutional
investor:
(a) No Default - If no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the Guarantor, to
visit the
15
<PAGE>
principal executive office of the Guarantor, to discuss the affairs, finances
and accounts of the Guarantor, the Issuer and any Subsidiaries with the
Guarantor's officers, and (with the consent of the Guarantor, which consent will
not be unreasonably withheld) its independent public accountants, and (with the
consent of the Guarantor, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Guarantor, the Issuer and each
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Guarantor to visit and inspect any of the offices or properties
of the Guarantor, the Issuer or any Subsidiary, to examine all their respective
books of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Guarantor authorizes said accountants to discuss the affairs,
finances and accounts of the Guarantor, the Issuer and its Subsidiaries), all
at such times and as often as may be requested.
SECTION 4.05 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The
------------------------------------------
Guarantor will not voluntarily liquidate or dissolve, or (whether in a single
transaction or a series of transactions) consolidate or merge with any other
Person, or permit any other Person to consolidate or merge with it, or sell,
lease, transfer or otherwise dispose of all or substantially all of its
properties or assets (whether now owned or hereafter acquired) to any other
Person, except that (as long as the successor formed by such consolidation or
the survivor of such merger or the Person that acquires such assets is an entity
organized as a real estate investment trust, a partnership or a limited
liability company under the Code and whose ownership and method of operation
enables it to meet the requirements for taxation as a real estate investment
trust or a partnership under the Code) the Guarantor may consolidate with or
merge into, or sell its assets as an entirety or substantially as an entirety
to, any other Person if the successor formed by such consolidation or the
survivor of such merger or the Person that acquires such assets is a solvent
corporation, partnership or limited liability company which shall be organized
under the laws of any state of the United States of America and, if the
Guarantor is not such corporation, partnership or limited liability company (i)
such corporation, partnership or limited liability company shall have executed
and delivered to each Beneficiary its assumption of the due and punctual payment
and performance of this Guaranty and shall have caused to be delivered to each
Beneficiary a favorable opinion of Latham & Watkins or other counsel, such
opinion and counsel to be reasonably satisfactory to the holders of at least 66-
2/3% in unpaid principal amount of the Notes then outstanding, to the effect
that all agreements and instruments effecting such assumption are enforceable in
accordance with their terms (subject to customary exceptions) and comply with
the terms hereof; provided, however, that at the time of and immediately after
------- -------
giving effect to any such merger, consolidation, sale, lease or other
disposition no Event of Default or Default shall have occurred and be
continuing. No sale or other disposition permitted by this Section 4.05 shall in
any event release the Guarantor or any successor corporation, partnership or
limited liability company that shall theretofore have become such in the manner
prescribed in this Section 4.05 from any of its obligations and liabilities
under this Guaranty, except that a sale of all assets shall release the
Guarantor or any successor corporation, partnership or limited liability company
that shall theretofore have become such in the manner prescribed in this Section
4.05 from all of its obligations under this Guaranty.
SECTION 4.06 OWNERSHIP OF GOLF COURSE PROPERTIES. The Guarantor shall
-----------------------------------
cause at least ninety percent of all Golf Courses owned, in whole or in part, by
16
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the Guarantor and its Subsidiaries at any time to be owned by the Issuer and the
Restricted Subsidiaries. For the purposes of this Section 4.06 the percentage of
Golf Course owned by the Issuer and the Restricted Subsidiaries shall be
calculated using the same methodology set forth in Section 3.08 hereof.
ARTICLE V
EVENTS OF DEFAULT
-----------------
5.01 EVENTS OF DEFAULT. If any of the following conditions or events
-----------------
shall occur (herein called "Events of Default"), then as long as such condition
-----------------
or event is continuing there shall be an outstanding Event of Default for
purposes of this Guaranty and the Agreement:
(a) there shall occur any Event of Default (as defined in the
Agreements); or
(b) default shall be made in the due and punctual payment of any
amounts due and payable hereunder and such default shall have continued for a
period of five days; or
(c) default shall be made in the performance or observance of any
covenant, agreement or condition contained in Section 4.10(a)(insofar as it
applies to corporate existence), 4.01(h), 4.02, 4.03(g) or 4.05; or
(d) default shall be made in the performance or observance of any
other covenant, agreement or condition contained in this Guaranty and such
default shall have continued for a period of 30 days after any Senior Officer of
the Guarantor shall have first obtained knowledge of such default (through
notice or otherwise); or
(e) (i) default shall be made in the payment of any part of the
principal of, the premium (if any) or the interest on, or any other payment of
money due in respect of, any Debt of the Guarantor for money borrowed in an
aggregate principal amount of at least $15,000,000 (other than the Guaranty),
beyond any period of grace provided with respect thereto, or (ii) default shall
be made in the performance or observance of any other agreement, term or
condition contained in any document or documents evidencing or securing Debt, or
in any agreement under which Debt was issued or created, in each case, if the
effect of any one or more such defaults is to cause the holders of Debt (or a
trustee on behalf of such holders) to cause any payment or payments in respect
of such Debt aggregating not less than $15,000,000 (other than the Guaranty) to
become due prior to the scheduled due date or dates thereof or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder or holders of any Debt to
convert such Debt into equity interests), (x) the Guarantor or any Subsidiary
has become obligated to purchase Debt (other than the Guaranty) before its
regular maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $15,000,000 or (y) one or
more Persons require the Guarantor or any Subsidiary so to purchase any such
Debt in an aggregate principal amount of at least $15,000,000; or
(f) any representation or warranty made by or on behalf of the
Guarantor or by an officer of the Guarantor in this Guaranty or in any
certificate or other instrument delivered hereunder or pursuant hereto or in
connection with any
17
<PAGE>
provision hereof shall prove to be false or incorrect or breached in any
material respect on the date as of which made; or
(g) the Guarantor shall not be organized as a real estate investment
trust under the Code or meet the requirements for taxation as a real estate
investment trust under the Code.
ARTICLE VI
MISCELLANEOUS
-------------
SECTION 6.01 EXPENSES. The Guarantor shall pay to the Beneficiaries
--------
any and all costs and expenses (including reasonable attorneys' fees and
expenses), that any Beneficiary may incur after an Event of Default in
connection with (a) the collection of all sums guarantied hereunder or (b) the
exercise or enforcement of any of the rights, powers or remedies of the
Beneficiaries under this Guaranty or applicable law. All such amounts and all
other amounts payable hereunder shall be payable on demand, together with
interest at a rate equal to the lesser of (i) 9% per annum (based on a year of
360 days and twelve 30-day months), or (ii) the maximum rate allowed by
applicable law, from and including the due date to and excluding the date of
payment.
SECTION 6.02 AMENDMENTS AND OTHER MODIFICATIONS. No amendment of any
----------------------------------
provision of this Guaranty (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
holders of at least 66-2/3% in unpaid principal amount of the Notes then
outstanding or, in the case of any amendment, waiver or consent modifying of
affecting Article II, Section 6.05 or this Section 6.02, each Beneficiary. Any
waiver or consent relating to any provision of this Guaranty shall be effective
only in the specific instance and for the specific purpose for which given. No
notice to or demand on the Guarantor in any case shall entitle the Guarantor to
any other or further notice or demand in similar or other circumstances.
SECTION 6.03 CUMULATIVE REMEDIES: FAILURE OR DELAY. The rights and
-------------------------------------
remedies provided for under this Guaranty are cumulative and are not exclusive
of any rights and remedies that may be available to the Beneficiaries under
applicable law or otherwise. No failure or delay on the part of any Beneficiary
in the exercise of any power, right or remedy under this Guaranty shall impair
such power, right or remedy or shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude other or
further exercise of such or any other power, right or remedy.
SECTION 6.04 NOTICES, ETC. All notices and other communications under
------------
this Guaranty shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid),
or by telecopy, and shall be deemed given when received by the intended
recipient thereof. Unless otherwise specified in a notice given in accordance
with the foregoing provisions of this Section, all notices and other
communications shall be given to the parties hereto at their respective
addresses (or to their respective telecopier numbers) indicated on Schedule
6.04.
SECTION 6.05 SUCCESSORS AND ASSIGNS. This Guaranty and each amendment
----------------------
hereof shall be binding upon and, subject to the next sentence, inure to the
benefit of the Guarantor, the Beneficiaries and their respective successors and
assigns. The Guarantor shall not assign any of its rights or obligations
hereunder without the
18
<PAGE>
prior written consent of the Beneficiaries. The benefit of this Guaranty shall
automatically pass with any assignment of the Obligations (or any portion
thereof), to the extent of such assignment.
SECTION 6.06 CHOICE OF FORUM.
---------------
(a) Pursuant to Section 5-1402 of the New York General
Obligations Law, all actions or proceedings arising in connection with this
Agreement shall be tried and litigated in state or Federal courts located in the
Borough of Manhattan, New York City, State of New York, unless such actions or
proceedings are required to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy. THE GUARANTOR AND EACH OF THE
BENEFICIARIES WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
----- ---
CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS
- ----------
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.
(b) Nothing contained in this Section shall preclude the
Beneficiaries from bringing any action or proceeding arising out of or relating
to this Guaranty in the courts of any place where the Guarantor or any of its
assets may be found or located. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS
OF ANY SUCH JURISDICTION, THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR
HEREAFTER, BY REASON OF SUCH PARTY'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE,
MAY BE AVAILABLE TO IT.
SECTION 6.07 SET OFF. In addition to any rights now or
-------
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Beneficiary set forth on Schedule A and each holder or transferee of any
Obligations or any Person with any interest therein (provided that such holder
or transferee or other Person has notified the Guarantor in writing of its
status as such) is hereby irrevocably authorized by the Guarantor, at any time
or from time to time, without notice to the Guarantor or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate and
to apply any and all deposits (general or special, including certificates of
deposit, whether matured or unmatured, but not including trust accounts) and any
other indebtedness, in each case whether direct or indirect or contingent or
matured or unmatured at any time held or owing by such Beneficiary, such holder,
such transferee or such other Person, to or for the credit or the account of the
Guarantor, against and on account of the obligations of the Guarantor to such
Beneficiary, such holder, such transferee, or such other Person under this
Guaranty, irrespective of whether or not such Beneficiary, such holder, such
transferee or such other Person shall have made any demand for payment and
although such obligations may be contingent and unmatured.
SECTION 6.08 COMPLETE AGREEMENT. This Guaranty, together with
------------------
the exhibits and schedules hereto, is intended by the parties as the final
expression of their agreement regarding the subject matter hereof and as a
complete and exclusive statement of the terms and conditions of such agreement.
19
<PAGE>
SECTION 6.09 LIMITATION OF LIABILITY. No claim shall be made by the
-----------------------
Guarantor against any Beneficiary or the Affiliates, directors, officers,
employees or agents of any Beneficiary for any special, indirect, consequential
or punitive damages in respect of any claim for breach of contract or under any
other theory of liability arising out of or related to the transactions
contemplated by this Guaranty, or any act, omission or event occurring in
connection therewith; and the Guarantor waives, releases and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
SECTION 6.10 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS. All
-------------------------------------------
agreements, representations and warranties of the Guarantor herein and in any
certificates or other instruments delivered pursuant to this Guaranty shall (a)
be deemed to be material and to have been relied upon by the Beneficiaries,
notwithstanding any investigation heretofore or hereafter made by the
Beneficiaries or on their behalf, and (b) survive the execution and delivery of
this Guaranty.
SECTION 6.11 REPRODUCTION OF DOCUMENTS. The Guarantor acknowledges the
-------------------------
provisions pertaining to reproduction of documents and related matters set forth
in Section 15.13 of the Agreements and agrees that the same provisions shall
apply with respect to this Guaranty and all documents related hereto.
SECTION 6.12 GOVERNING LAW. This Guaranty shall be governed by, and
-------------
construed in accordance with, the laws (other than the rules regarding conflicts
of laws except those contained in New York General Obligations Law Section
5-1401) of the State of New York. No reference herein to any provision of
California law shall be construed as a waiver of or otherwise impair the
foregoing choice of New York law.
SECTION 6.13 WAIVER OF TRIAL BY JURY. THE GUARANTOR AND THE
-----------------------
BENEFICIARIES (BY ACCEPTANCE HEREOF) WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION UNDER THIS GUARANTY OR ANY ACTION ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
20
<PAGE>
IN WITNESS WHEREOF, the Guarantor has duly executed this Guaranty
as of the date set forth above.
GUARANTOR:
---------
NATIONAL GOLF PROPERTIES, INC.
-----------------------------
By:/s/ Edward R. Sause
--------------------------
Name: EDWARD R. SAUSE
------------------------
Title: EXECUTIVE VICE PRESIDENT
-----------------------
21
<PAGE>
Exhibit 10.33
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Agreement") is made and entered into as
of July 1, 1996 by National Golf Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), and each of the Purchasers listed on the
signature pages hereto. Capitalized terms used herein without definition shall
have the meanings assigned to those terms in the Note Agreement (as hereinafter
defined).
WITNESSTH
WHEREAS, David G. Price, individually and as Trustee of the Price
Revocable Trust Amendment in Entirety dated February 9, 1987 (the "Trust") and
each of the Purchasers have entered into certain Note Purchase Agreements, dated
as of June 28, 1996 (the "Note Purchase Agreements"), pursuant to which the
Trust issued $13,794,200 aggregate principal amount of its 7.9% Senior
Promissory Notes due June 15, 2006 (the "Notes") to the Purchasers; and
WHEREAS, the Trust has used the proceeds of the Notes to repay the amounts
owed to the Partnership pursuant to certain Senior Secured Participating
Promissory Notes secured by properties known as Ancala Country Club and Black
Lake Golf Course, dated as of August 18, 1993; and
WHEREAS, pursuant to certain option agreements, the Trust will transfer
certain golf courses to the Partnership and the Partnership will by this
Agreement concurrently assume the obligations of the Trust under the Notes, and
National Golf Properties, Inc., a Maryland corporation (the "Guarantor") will
guaranty the repayment of such Notes; and
WHEREAS, on account of the transactions described in the preceding
clauses, the Partnership has been directly and substantially benefited, and in
assuming the Trust's obligations with respect to the Notes, does not intend to
assume such obligations as an accommodation to the Trust or otherwise as a
surety, but intends to become primarily liable with respect thereto with the
same effect as though the Partnership had issued the Notes;
NOW THEREFORE, in consideration of the foregoing and to induce the
Purchasers to consent to the assumption of the Notes by the Partnership, the
Partnership agrees, for the benefit of the Purchasers, as follows:
AGREEMENT
SECTION 1 Assumption of Obligations. (a) The Partnership hereby
--------------------------
irrevocably and unconditionally assumes and agrees and hereby promises to pay,
perform and discharge, as its direct and primary obligation, all of the
liabilities, covenants, duties and indebtedness of the Trust to each of the
respective Purchasers evidenced by the Notes with the same effect as if the
Notes had been executed by the Partnership and delivered to the respective
Purchasers .
<PAGE>
(b) Without limitation, the Partnership hereby promises to pay principal
of, and interest on, the Notes, as and when due, in lawful money of the United
States of America. No demand upon, resort to or other action against the Trust
shall be required before payment in full of principal of and interest on the
Notes is required hereunder.
The liability of the Partnership under the Notes arising hereunder is
independent of and not in consideration of or contingent upon the liability of
the Trust upon the Notes, and a separate action or actions in respect of the
Notes may be brought and prosecuted against the Partnership, whether or not any
action in respect of the Notes is brought or prosecuted against the Trust and
whether or not the Trust is joined in any such action or actions. The liability
of the Partnership in respect of the Notes shall be absolute and unconditional,
without regard to the legality, validity or enforceability of the Notes or the
Note Purchase Agreement as against the Trust, any defense, setoff or
counterclaim that may at any time be available to the Trust; or any other
circumstance whatsoever (with or without notice to or knowledge of the
Partnership), whether or not similar to any of the foregoing, that constitutes,
or might be construed to constitute, an equitable or legal discharge or
exoneration of the Partnership in respect of its obligations with respect to the
Notes arising hereunder.
The Partnership authorizes the holders from time to time of the Notes, or
any of them, without notice to or further assent by the Partnership and without
affecting the Partnership's liability in respect of the Notes arising hereunder
(regardless of whether any subrogation, reimbursement, contribution or other
similar right that the Partnership may have, or any other right or remedy of the
Partnership, against the Trust or otherwise, is extinguished or impaired), from
time to time to: terminate, release, compromise, subordinate, extend, accelerate
or otherwise change the time, manner or place of payment of the Notes or
otherwise amend the terms and conditions of the Notes or the Note Purchase
Agreements, or any provision thereof; take and hold collateral from the Trust or
any other person, perfect or fail to perfect a lien on such collateral, or
exchange, enforce, subordinate, release (intentionally or unintentionally), or
take or fail to take any other action in respect of, any such collateral or lien
or any part thereof; exercise in such manner and order as it elects in its sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration of,
any of the remedies or rights of the holders of the Notes, or any of them,
against the Trust or any other obligor in respect of the Notes; release, add or
settle with the Trust in respect of the Notes; accept partial payment on the
Notes and apply any and all payment or recoveries from the Trust or any
collateral for the Notes to such obligations of the Partnership under the Notes
as the holder may elect in its sole discretion; and otherwise deal with the
Trust, any other obligor in respect of the Notes and any collateral for the
Notes as the holders of the Notes from time to time, or any of them, may elect
in its or their sole discretion.
SECTION 2 Certain Waivers. The Partnership waives:
---------------
2.1 any right to require the holders of the Notes to proceed
against the Trust or any other obligor in respect of the Notes, to proceed
against or exhaust any collateral or to pursue any other remedy in any holder's
power whatsoever and the right to have the property of any other obligor first
applied to the discharge of the Notes;
<PAGE>
2.2 all rights and benefits under any applicable law purporting to
reduce a guarantor's obligations in proportion to the obligation of the
principal or providing that the obligation of a surety or guarantor must neither
be larger nor in other respects more burdensome than that of the principal;
2.3 the benefit of any statute of limitations affecting the Notes or
the Partnership's liability thereunder or hereunder;
2.4 any requirement of marshalling or any other principle of election
of remedies and all rights and defenses arising out of an election of remedies
by any holder of the Notes, or any of them, even though that election of
remedies, such as nonjudicial foreclosure with respect to the security for a
guaranteed obligation, has destroyed any right of subrogation, reimbursement or
contribution, to the rights of or against any person;
2.5 any right to assert against the holders of the Notes, or any of
them, any defense (legal or equitable), set-off, counterclaim and other right
that the Partnership may now or any time hereafter have against the Trust or any
other obligor in respect of the Notes;
2.6 presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or nonperformance,
protest, acceptance and notice of acceptance of this assumption of the Notes
and the undertaking of the Partnership provided herein, and all other notices of
any kind, including (i) notice of any action taken or omitted by any holder of
the Notes, or any of them, reliance hereon, (ii) notice of any default by the
Trust or any other obligor in respect of the Notes, (iii) notice that any
portion of the Notes is due, (iv) notice of any action against the Trust or any
other obligor in respect of the Notes, or any enforcement of other action with
respect to any collateral for the Notes, or the assertion of any right of any
holder of the Notes, or any of them, hereunder; provided, however,
notwithstanding the foregoing, the Partnership shall be entitled to all notices
of any kind provided for in the Note Agreement attached hereto as Annex 1;
2.7 all defenses that at any time may be available to the Partnership
by virtue of any valuation, stay, moratorium or other law now or hereafter in
effect;
2.8 without limiting the generality of the foregoing or any other
provision hereof, the effect of any and all events and circumstances that would
exonerate or create a defense to the obligation of a surety, and any and all
defenses to the obligation of a surety that may exist from time to time.
SECTION 3 Restated Note Agreement; Guaranty. The parties hereto agree
---------------------------------
that from and after the effectiveness hereof, the Notes will be governed by the
terms of the Restated Note Agreement attached hereto as Annex 1 (the "Note
Agreement") and the Guaranty attached hereto as Annex 2 (the "Guaranty"), and
the Note Purchase Agreements, and all rights and obligations, of all parties
thereunder, shall be terminated, canceled and voided in their entirety
(provided that all representations and warranties made by the Trust, the
covenant to maintain its existence in Section 4.4(a), the covenant to maintain
an office in
3
<PAGE>
the last sentence of Section 4.3, and the covenants in Section 8, in the Note
Purchase Agreements shall survive and continue in full force and effect).
SECTION 4 Effectiveness. This Agreement shall become effective, as of the
-------------
date first set forth above (the "Effective Date"), when the Partnership and each
of the Purchasers shall have executed and delivered this Agreement, and the
Partnership and each of the Purchasers shall have executed the Note Agreement in
the form attached hereto as Annex 1 and the Guarantor shall have executed and
delivered to each Purchaser a Guaranty in the form of Annex 2 hereto, and such
Guaranty shall be in full force and effect. The effectiveness hereof is
additionally subject to the fulfillment to each of the Purchaser's satisfaction,
on or prior to the date hereof, of each of the following conditions:
4.1 Satisfactory Proceedings. All partnership, corporate, trust and
------------------------
other proceedings taken in connection with the consummation of the transactions
contemplated hereby and all documents and papers relating thereto, including the
Guaranty, shall be reasonably satisfactory to you and your special counsel, and
you and your special counsel shall have received counterpart originals or
certified or other copies of such documents and papers, all in form and
substance reasonably satisfactory to you and your special counsel, as you or
they may reasonably request in connection therewith.
4.2 Opinions of Counsel; REIT Letters. You shall have received
---------------------------------
favorable opinions, each dated the Effective Date, addressed to you and
satisfactory in form, scope and substance to you, from (a) Latham & Watkins,
special counsel of the Partnership, substantially in the form of Exhibit A-1,
(b) Scott S. Thompson, Esq., in-house counsel to the Partnership, substantially
in the form of Exhibit A-2 and (c) Gibson, Dunn & Crutcher LLP, your special
counsel, in form and substance satisfactory to you and covering such other
matters incident to such transactions as you may reasonably request. You shall
also have received a letter dated the Effective Date from each of Edward R.
Sause, Chief Financial Officer of the Partnership, substantially in the form of
Exhibit A-3, and Coopers and Lybrand, auditors and tax consultants for the
Guarantor, substantially in the form of Exhibit A-4, each with respect to
certain real estate investment trust matters.
4.3 Representations and Warranties. All representations and warranties
------------------------------
of the Partnership contained in this Agreement and in the Note Agreement or
otherwise made in writing by or on behalf of the Partnership in connection with
the transactions contemplated hereby shall be true and correct when made and
(except as affected by the consummation of such transactions) as of the
Effective Date with the same effect as though such representations and
warranties had been made on and as of such Effective Date.
4.4 Performance; No Default. The Partnership shall have performed all
-----------------------
agreements and complied with all conditions contained herein required to be
performed or complied with by it on or prior to the Effective Date. At the
Effective Date (and after giving effect to the assumption of the Notes by the
Partnership) no Default or Event of Default shall have occurred and be
continuing. Neither the Partnership nor any Restricted Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Sections 6.6 through 6.11 of the Note Agreement, inclusive,
had such Sections applied since such date.
4
<PAGE>
4.5 Compliance Certificates.
-----------------------
(a) Officer's Certificate. The Partnership shall have delivered to
---------------------
you an Officer's Certificate substantially in the form of Exhibit B, dated
the Effective Date, certifying that the conditions specified in Sections 4.3,
4.4 and 4.6 have been fulfilled.
(b) Secretary's Certificate. The Partnership shall have delivered to
-----------------------
you a Secretary's Certificate substantially in the form of Exhibit C,
certifying as to the resolutions attached thereto and other proceedings
relating to the authorization, execution and delivery of this Agreement.
4.6 Absence of Certain Events. There shall not have occurred any
-------------------------
Material Adverse Change since the date of the most recent audited financial
statements included in the Memorandum. Subsequent to the respective dates as of
which information is given in the Memorandum and prior to the Effective Date,
neither the Partnership nor any Restricted Subsidiary shall have consolidated
with, merged into, or sold, leased or otherwise disposed of its assets and
properties as an entirety or substantially as an entirety to any Person or
succeeded to all or substantially all or any substantial part of the liabilities
of any other Person, except as disclosed on Schedule 4.6 hereto.
SECTION 5 Representations and Warranties. The Partnership hereby represents
------------------------------
and warrants to the Purchasers that:
5.1 Organization, Authority and Tax Status of the Partnership. The
---------------------------------------------------------
Partnership has been duly formed, is validly existing as a limited partnership
in good standing under the laws of the State of Delaware, and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, other than those jurisdictions as to which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Partnership has
all requisite power and authority to own or hold under lease the property it
purports to own or hold under lease, to carry on its business as now conducted
and as proposed to be conducted, to execute and deliver this Agreement and the
Note Agreement and to perform its obligations hereunder and thereunder and under
the Notes it is assuming hereby. The Partnership is a partnership for purposes
of United States federal income taxation and for purposes of the tax laws of any
state or locality in which the Partnership is subject to taxation based on its
income except, with respect to such state or local tax laws, where the failure
to be so treated would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.2 Authorization. The Partnership has by all necessary action duly
-------------
authorized (i) the execution and delivery of this Agreement and the Note
Agreement and (ii) the performance of its obligations under this Agreement, the
Note Agreement and the Notes. This Agreement and the Note Agreement constitutes,
and each Note will constitute upon the effectiveness hereof, a legal, valid and
binding obligation of the Partnership enforceable against the Partnership in
accordance with its terms, except as such enforceability
5
<PAGE>
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Capitalization. All of the Partnership Units are validly issued
--------------
and owned of record in the percentage amounts and by the entities or persons
described in Schedule 7.3, and, to the best of the Partnership's knowledge, free
and clear of any Lien. There are 19,285,460 Partnership Units issued and
outstanding and such Partnership Units have been offered and sold in compliance
with all applicable laws (including, without limitation, federal and state
securities laws and rollup legislation). The Guarantor is the sole general
partner of the Partnership.
5.4 Compliance with Other Instruments, etc. Neither the Partnership
--------------------------------------
nor any Subsidiary is in violation of any term or provision of its corporate
charter or by-laws or certificate of partnership or partnership agreement, as
the case may be. Neither the Partnership nor any Subsidiary is in violation of
any term or provision of any agreement, indenture, mortgage or other instrument
or agreement to which it is a party or by which it or any of its properties
may be bound or affected, or in violation of any existing law, governmental rule
or regulation or any Order of any court, arbitrator or other Governmental Body
applicable to it, the consequences of which violation, either in any one case or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect. Neither the execution and delivery of this Agreement, and the Note
Agreement nor the consummation of the transactions contemplated hereby and
thereby nor the performance of the terms and provisions hereof and thereof will
result in any breach of, or constitute a default under, or result in (or
require) the creation of any Lien in respect of any property of the Partnership
or any Subsidiary under any indenture, mortgage, bank loan, credit agreement,
other agreement or instrument, or partnership agreement, partnership
certificate, corporate charter or by-law to which the Partnership or any
Subsidiary is a party or by which the Partnership or any Subsidiaries or any of
their respective properties may be bound or affected, or violate any existing
law, governmental rule or regulation or any Order of any court, arbitrator or
Governmental Body applicable to the Partnership or any Subsidiaries.
5.5 Governmental Authorizations. Subject to the accuracy of the
---------------------------
Purchasers representations and warranties contained in Sections 1.5 to 1.8 of
the Note Purchase Agreements and the performance of your agreements contained in
Section 1.9 of the Note Agreement, no consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Body is required for
or in connection with the valid execution and delivery of this Agreement or the
Note Agreement, or the consummation of the transactions contemplated hereby and
thereby, including the assumption of the Notes by the Partnership, or the
fulfillment of, or compliance by the Partnership with, the terms and provisions
hereof and thereof.
5.6 Solvency. Neither the Partnership nor any of its Subsidiaries
--------
is insolvent. Neither the execution and delivery of this Agreement, or the Note
Agreement, or the assumption of the Notes nor the consummation of the
transactions contemplated hereby and thereby, nor the performance of the terms
and provisions hereof and thereof will result in the insolvency of the
Partnership or any of its Subsidiaries, nor will the consummation of
6
<PAGE>
the transactions contemplated by the Option Courses Agreement (including the
repayment of amounts owned pursuant to certain Senior Participating Promissory
Notes dated as of August 18, 1993 and any other transactions related thereto),
nor the performance of the terms and provisions thereof result in the insolvency
of the Partnership or any of its Subsidiaries. For the purposes of this Section
5.6, the Partnership or any of its Subsidiaries shall be deemed to be insolvent
or an insolvency shall be deemed to have resulted with respect to such Person
if: (i) its liabilities (including all claims against such Person, whether or
not contingent, unliquidated or disputed and regardless of whether such
liabilities are required to appear on a balance sheet prepared in accordance
with GAAP) exceed the fair market value of its assets; (ii) it retains
unreasonably small capital for its continuing business; or (iii) it intends to
incur, or believes or reasonably should believe it will incur, Debt beyond its
ability to pay such Debt as it becomes due.
5.7 Assumption of Original Partnership Notes For Equivalent Value.
_____________________________________________________________
The transfer of the Option Courses pursuant to the terms of the Option Courses
Agreement (including the repayment of amounts owed pursuant to certain Senior
Participating Promissory Notes dated as of August 18, 1993 and any other
transactions related thereto), on the one hand, and the assumption of the Notes
and Black Lake Notes by the Partnership pursuant to the terms hereof and the
issuance of OP Units pursuant to the Option Courses Agreement, on the other
hand, is an exchange for reasonably equivalent value as such term is used in /s/
548 of the United States Bankruptcy Code.
SECTION 6 Consent. Each Purchaser hereby (i) consents to the assumption of
_______
the Notes by the Partnership and (ii) agrees that the Partnership shall have all
of the rights and interests of the Trust under the Notes with the same effect as
if such Notes had been initially issued by the Partnership .
SECTION 7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
_____________
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 8 Counterparts. This Agreement may be executed in any number of
____________
counterparts, and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute one and the same instrument.
SECTION 9 Severability. The provisions of this Agreement are severable, and
____________
if any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or enforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
SECTION 10 Headings. The headings in this Agreement are for purposes of
________
reference only and shall not otherwise affect the meaning or construction of any
provision of this Agreement .
7
<PAGE>
SECTION 11 Final Expression. This Agreement, together with the Note Purchase
----------------
Agreements (as amended hereby), embodies the final, entire agreement among the
parties hereto and thereto and supersedes any and all prior commitments,
agreements, representations and understandings, whether written or oral,
relating to the subject matter hereof and thereof and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto. There are no oral agreements among the
parties hereto.
8
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly executed and delivered by it as of the day and year first above written.
"COMPANY"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.
By: /s/
------------------------------
Edward R. Sause,
Executive Vice President
"PURCHASERS"
AUSA LIFE INSURANCE COMPANY, INC.
BY:
------------------------------
Name:
Title:
JOHN ALDEN LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By: /s/
-------------------------------
Name: Robert E. Whalen, II
Title: Second Vice President
S-1
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly executed and delivered by it as of the day and year first above written.
"COMPANY"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.,
By: National Golf Properties, Inc.
By: /s/ Edward R. Sause
-----------------------------------
Edward R. Sause,
Executive Vice President
"PURCHASERS"
AUSA LIFE INSURANCE COMPANY, INC.
By: /s/ Gregory W. Theobald
-----------------------------------
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
JOHN ALDEN LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By:
-----------------------------------
Name:
Title:
S-1
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly executed and delivered by it as of the day and year first above written.
"COMPANY"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.,
By: National Golf Properties, Inc.
/s/
By: _____________________________
Edward R. Sause,
Executive Vice President
"PURCHASERS"
AUSA LIFE INSURANCE COMPANY, INC.
BY:______________________________
Name:
Title:
JOHN ALDEN LIFE INSURANCE COMPANY
/s/
By:_______________________________
Name: Michael E. Halligan
Title: Vice President
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By:______________________________
Name:
Title:
S-1
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By: /s/
--------------------------------
Name: R. Scott Higgins
Title: Vice President
National Life Investment
Management Company, Inc.
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
BY:
--------------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
OXFORD LIFE INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
S-1
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By: /s/
------------------------------
Name: Lynne M. Mills
Title: Second Vice President
NATIONAL LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
OXFORD LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By: /s/
------------------------------
Name: R. Scott Higgins, VP
Title: National Life Investment
Management Company, Inc.
OXFORD LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
-------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By:
------------------------------
Name: John Alden
Title: Asset Management Company
as Investment Advisor for
OXFORD LIFE INSURANCE COMPANY
By: /s/
------------------------------
Name: Michael E. Halligan
Title: Vice President
PFL LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By:
------------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
OXFORD LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By: /s/
------------------------------
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
S-2
<PAGE>
TEACHERS INSURANCE AND ANNNUITY
ASSOCIATION OF AMERICA
By: /s/ Gregory W. MacGORDY
-----------------------
Name: Gregory W. MacGORDY
Title: Director-Private
Placement
THE TRAVELERS INSURANCE COMPANY
By: /s/ Name
-----------------------
Name:
Title:
S-3
<PAGE>
TEACHERS INSURANCE AND ANNNUITY
ASSOCIATION OF AMERICA
By:
----------------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By: /s/ T. M. Torrey
----------------------------------
Name: TERESA M. TORREY
Title: SECOND VICE PRESIDENT
S-3
<PAGE>
Acknowledged
------------
DAVID G. PRICE, Trustee of the
Price Revocable Trust Amendment
in Entirety dated February 9, 1987
By: /s/ David G. Price
-----------------------------
David G. Price
DAVID G. PRICE, an individual
/s/ David G. Price
---------------------------------
David G. Price
S-1
<PAGE>
EXHIBIT 10.34
ASSUMPTION AGREEMENT
--------------------
THIS ASSUMPTION AGREEMENT (this "Agreement") is made and entered into as
of July 1, 1996 by National Golf Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), and each of the Purchasers listed on the
signature pages hereto. Capitalized terms used herein without definition shall
have the meanings assigned to those terms in the Note Agreement (as hereinafter
defined).
WITNESSTH
---------
WHEREAS, Black Lake/Penasquitos, a California general partnership ("Black
Lake") and each of the Purchasers have entered into certain Note Purchase
Agreements, dated as of June 28, 1996 (the "Note Purchase Agreements"), pursuant
to which Black Lake issued $11,447,100 aggregate principal amount of its 7.9%
Senior Promissory Notes due June 15, 2006 (the "Notes") to the Purchasers; and
WHEREAS, Black Lake has used the proceeds of the Notes to repay the
amounts owed to the Partnership pursuant to certain Senior Secured Participating
Promissory Notes secured by properties known as Arrowhead Country Club and
Painted Desert Golf Course, dated as of August 18, 1993; and
WHEREAS, pursuant to certain option agreements, Black Lake will transfer
certain golf courses to the Partnership and the Partnership will by this
Agreement concurrently assume the obligations of Black Lake under the Notes, and
National Golf Properties, Inc., a Maryland corporation (the "Guarantor") will
guaranty the repayment of such Notes; and
WHEREAS, on account of the transactions described in the preceding
clauses, the Partnership has been directly and substantially benefited, and in
assuming Black Lake's obligations with respect to the Notes, does not intend to
assume such obligations as an accommodation to Black Lake or otherwise as a
surety, but intends to become primarily liable with respect thereto with the
same effect as though the Partnership had issued the Notes;
NOW THEREFORE, in consideration of the foregoing and to induce the
Purchasers to consent to the assumption of the Notes by the Partnership, the
Partnership agrees, for the benefit of the Purchasers, as follows:
AGREEMENT
---------
SECTION 1 Assumption of Obligations. (a) The Partnership hereby
--------------------------
irrevocably and unconditionally assumes and agrees and hereby promises to pay,
perform and discharge, as its direct and primary obligation, all of the
liabilities, covenants, duties and indebtedness of Black Lake to each of the
respective Purchasers evidenced by the Notes with the same effect as if the
Notes had been executed by the Partnership and delivered to the respective
Purchasers.
(b) Without limitation, the Partnership hereby promises to pay principal
of, and interest on, the Notes, as and when due, in lawful money of the United
States of America. No
<PAGE>
demand upon, resort to or other action against Black Lake shall be required
before payment in full of principal of and interest on the notes is required
hereunder.
The liability of the Partnership under the Notes arising hereunder is
independent of and not in consideration of or contingent upon the liability of
Black Lake upon the Notes, and a separate action or actions in respect of the
Notes may be brought and prosecuted against the Partnership, whether or not any
action in respect of the Notes is brought or prosecuted against Black Lake and
whether or not Black Lake is joined in any such action or actions. The liability
of the Partnership in respect of the Notes shall be absolute and unconditional,
without regard to the legality, validity or enforceability of the Notes or the
Note Purchase Agreement as against Black Lake, any defense, setoff or
counterclaim that may at any time be available to Black Lake; or any other
circumstance whatsoever (with or without notice to or knowledge of the
Partnership), whether or not similar to any of the foregoing, that constitutes,
or might be construed to constitute, an equitable or legal discharge or
exoneration of the Partnership in respect of its obligations with respect to the
notes arising hereunder.
The Partnership authorizes the holders from time to time of the Notes,
or any of them, without notice to or further assent by the Partnership and
without affecting the Partnership's liability in respect of the Notes arising
hereunder (regardless of whether any subrogation, reimbursement, contribution or
other similar right that the Partnership may have, or any other right or remedy
of the Partnership, against Black Lake or otherwise, is extinguished or
impaired), from time to time to: terminate, release, compromise, subordinate,
extend, accelerate or otherwise change the time, manner or place of payment of
the Notes or otherwise amend the terms and conditions of the Notes or the Note
Purchase Agreements, or any provision thereof; take and hold collateral from
Black Lake or any other person, perfect or fail to perfect a lien on such
collateral, or exchange, enforce, subordinate, release (intentionally or
unintentionally), or take or fail to take any other action in respect of, any
such collateral or lien or any part thereof, exercise in such manner and order
as it elects in its sole discretion, fail to exercise, waive, suspend, terminate
or suffer expiration of, any of the remedies or rights of the holders of the
Notes, or any of them, against Black Lake or any other obligor in respect of the
Notes; release, add or settle with Black Lake in respect of the Notes; accept
partial payment on the Notes and apply any and all payment or recoveries from
Black Lake or any collateral for the Notes to such obligations of the
Partnership under the Notes as the holder may elect in its sole discretion; and
otherwise deal with Black Lake, any other obligor in respect of the Notes and
any collateral for Notes as the holders of the Notes from time to time, or any
of them, may elect in its or their sole discretion.
SECTION 2 Certain Waivers. The Partnership waives:
---------------
2.1 any right to require the holders of the Notes to proceed
against Black Lake or any other obligor in respect of the Notes, to proceed
against or exhaust any collateral or to pursue any other remedy in any holder's
power whatsoever and the right to have the property of any other obligor first
applied to the discharge of the Notes;
2.2 all rights and benefits under any applicable law purporting
to reduce a guarantor's obligations in proportion to the obligation of the
principal or providing that the obligation of a surety or guarantor must neither
be larger nor in other respects more burdensome than that of the principal;
2
<PAGE>
2.2 all rights and benefits under any applicable law purporting to
reduce a guarantor's obligations in proportion to the obligation of the
principal or providing that the obligation of a surety or guarantor must neither
be larger nor in other respects more burdensome than that of the principal;
2.3 the benefit of any statute of limitations affecting the Notes or
the Partnership's liability thereunder or hereunder;
2.4 any requirement of marshalling or any other principle of election
of remedies and all rights and defenses arising out of an election of remedies
by any holder of the Notes, or any of them, even though that election of
remedies, such a nonjudicial foreclosure with respect to the security for a
guaranteed obligation, has destroyed any right of subrogation, reimbursement or
contribution to the rights of or against any person;
2.5 any right to assert against the holders of the Notes, or any of
them, any defense (legal or equitable), set-off, counterclaim and other right
that the Partnership may now or any time hereafter have against Black Lake or
any other obligor in respect of the Notes;
2.6 presentment, demand for payment or performance (including diligence
in making demands hereunder), notice of dishonor or nonperformance, protest,
acceptance and notice of acceptance of this assumption of the Notes and the
undertaking of the Partnership provided herein, and all other notices of any
kind, including (i) notice of any action taken or omitted by any holder of the
Notes, or any of them, reliance hereon, (ii) notice of any default by Black Lake
or any other obligor in respect of the Notes, (iii) notice that any portion of
the Notes is due, (iv) notice of any action against Black Lake or any other
obligor in respect of the Notes, or any enforcement of other action with respect
to any collateral for the Notes, or the assertion of any right of any holder of
the Notes, or any of them, hereunder; provided, however, notwithstanding the
foregoing, the Partnership shall be entitled to all notices of any kind provided
for in the Note Agreement attached hereto as Annex 1;
2.7 all defenses that at any time may be available to the Partnership
by virtue of any valuation, stay, moratorium or other law now or hereafter in
effect;
2.8 without limiting the generality of the foregoing or any other
provision hereof, the effect of any and all events and circumstances that would
exonerate or create a defense to the obligation of a surety, and any and all
defenses to the obligation of a surety that may exist from time to time.
SECTION 3 Restated Note Agreement; Guaranty. The parties hereto agree
---------------------------------
that from and after the effectiveness hereof, the Notes will be governed by the
terms of the Restated Note Agreement attached hereto as Annex 1 (the "Note
Agreement") and the Guaranty attached hereto as Annex 2 (the "Guaranty"), and
the Note Purchase Agreements, and all rights and obligations, of all parties
thereunder, shall be terminated, canceled and voided in their entirety (provided
that all representations and warranties made by Black Lake, the covenant to
maintain its existence in Section 4.4(a), the covenant to maintain an office in
3
<PAGE>
the last sentence of Section 4.3, and the covenants in Section 8, in the Note
Purchase Agreements shall survive and continue in full force and effect).
SECTION 4 Effectiveness. This Agreement shall become effective, as of
-------------
the date first set forth above (the "Effective Date"), when the Partnership and
each of the Purchasers shall have executed and delivered this Agreement, and the
Partnership and each of the Purchasers shall have executed the Note Agreement in
the form attached hereto as Annex 1 and the Guarantor shall have executed and
delivered to each Purchaser a Guaranty in the form of Annex 2 hereto, and such
Guaranty shall be in full force and effect. The effectiveness hereof is
additionally subject to the fulfillment to each of the Purchaser's satisfaction,
on or prior to the date hereof, of each of the following conditions:
4.1 Satisfactory Proceedings. All partnership, corporate, and
------------------------
other proceedings taken in connection with the consummation of the transactions
contemplated hereby and all documents and papers relating thereto, including the
Guaranty, shall be reasonably satisfactory to you and your special counsel, and
you and your special counsel shall have received counterpart originals or
certified or other copies of such documents and papers, all in form and
substance reasonably satisfactory to you and your special counsel, as you or
they may reasonably request in connection therewith.
4.2 Opinions of Counsel; REIT Letters. You shall have received
---------------------------------
favorable opinions, each dated the Effective Date, addressed to you and
satisfactory in form, scope and substance to you, from (a) Latham & Watkins,
special counsel of the Partnership, substantially in the form of Exhibit A-1,
(b) Scott S. Thompson, Esq., in-house counsel to the Partnership, substantially
in the form of Exhibit A-2 and (c) Gibson, Dunn & Crutcher LLP, your special
counsel, in form and substance satisfactory to you and covering such other
matters incident to such transaction as you reasonably request. You shall also
have received a letter dated the Effective Date from each of Edward R. Sause,
Chief Financial Officer of the Partnership, substantially in the form of Exhibit
A-3, and Coopers and Lybrand, auditors and tax consultants for the Guarantor,
substantially in the form of Exhibit A-4, each with respect to certain real
estate investment trust matters.
4.3 Representations and Warranties. All representations and
------------------------------
warranties of the Partnership contained in this Agreement and in the Note
Agreement or otherwise made in writing by or on behalf of the Partnership in
connection with the transactions contemplated hereby shall be true and correct
when made and (except as affected by the consummation of such transactions) as
of the Effective Date with the same effect as though such representations and
warranties had been made on and as of such Effective Date.
4.4 Performance; No Default. The Partnership shall have performed
-----------------------
all agreements and complied with all conditions contained herein required to be
performed or complied with by it on or prior to the Effective Date. At the
Effective Date (and after giving effect to the assumption of the Notes by the
Partnership) no Default or Event of Default shall have occurred and be
continuing. Neither the Partnership nor any Restricted Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Sections 6.6 through 6.11 of the Note Agreement, inclusive,
had such Sections applied since such date.
4
<PAGE>
4.5 Compliance Certificates.
-----------------------
(a) Officer's Certificate. The Partnership shall have delivered to you
---------------------
an Officer's Certificate substantially in the form of Exhibit B, dated the
Effective Date, certifying that the conditions specified in Sections 4.3, 4.4,
and 4.6 have been fulfilled.
(b) Secretary's Certificate. The Partnership shall have delivered to
-----------------------
you a Secretary's Certificate substantially in the form of Exhibit C, certifying
as to the resolutions attached thereto and other proceedings relating to the
authorization, execution and delivery of this Agreement.
4.6 Absence of Certain Events. There shall not have occurred any
-------------------------
Material Adverse Change since the date of the most recent audited financial
statements included in the Memorandum. Subsequent to the respective dates as of
which information is given in the Memorandum and prior to the Effective Date,
neither the Partnership nor any Restricted Subsidiary shall have consolidated
with, merged into, or sold, leased or otherwise disposed of its assets and
properties as an entirety or substantially as an entirety to any Person or
succeeded to all or substantially all or any substantial part of the liabilities
of any other Person, except as disclosed on Schedule 4.6 hereto.
SECTION 5 Representations and Warranties. The Partnership hereby represents
------------------------------
and warrants to the Purchasers that:
5.1 Organization, Authority and Tax Status of the Partnership. The
---------------------------------------------------------
Partnership has been duly formed, is validly existing as a limited partnership
in good standing under the laws of the State of Delaware, and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, other than those jurisdictions as to which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Partnership has
all requisite power and authority to own or hold under lease the property it
purports to own or hold under lease, to carry on its business as now conducted
and as proposed to be conducted, to execute and deliver this Agreement and the
Note Agreement and to perform its obligations hereunder and thereunder and under
the Notes it is assuming hereby. The Partnership is a partnership for purposes
of United States federal income taxation and for purposes of the tax laws of any
state or locality in which the Partnership is subject to taxation based on its
income except, with respect to such state or local tax laws, where the failure
to be so treated would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.2 Authorization. The Partnership has by all necessary action duly
-------------
authorized (i) the execution and delivery of this Agreement and the Note
Agreement and (ii) the performance of its obligations under this Agreement, the
Note Agreement and the Notes. This Agreement and the Note Agreement constitutes,
and each Note will constitute upon the effectiveness hereof, a legal, valid and
binding obligation of the Partnership enforceable against the Partnership in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the
<PAGE>
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Capitalization. All of the Partnership Units are validly
--------------
issued and owned of record in the percentage amounts and by the entities or
persons described in Schedule 7.3, and, to the best of the Partnership's
knowledge, free and clear of any Lien. There are 19,285,460 Partnership Units
issued and outstanding and such Partnership Units have been offered and sold in
compliance with all applicable laws (including, without limitation, federal and
state securities laws and rollup legislation). The Guarantor is the sole general
partner of the Partnership.
5.4 Compliance with Other Instruments, etc. Neither the
---------------------------------------
Partnership nor any Subsidiary is in violation of any term or provision of its
corporate charter or by-laws or certificate of partnership or partnership
agreement, as the case may be. Neither the Partnership nor any Subsidiary is in
violation of any term of any agreement, indenture, mortgage or other instrument
of agreement to which it is a party or by which it or any of its properties may
be bound or affected, or in violation of any existing law, governmental rule or
regulation or any Order of any court, arbitrator or other Governmental Body
applicable to it, the consequences of which violation, either in any one case or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect. Neither the execution and delivery of this Agreement, and the Note
Agreement nor the consummation of the transactions contemplated hereby and
thereby nor the performance of the terms and provisions hereof and thereof will
result in any breach of, or constitute a default under, or result in (or
require) the creation of any Lien in respect of any property of the Partnership
or any Subsidiary under any indenture, mortgage, bank loan, credit agreement,
other agreement or instrument, or partnership agreement, partnership
certificate, corporate charter or by-law to which the Partnership or any
Subsidiary is a party or by which the Partnership or any Subsidiaries or any or
their respective properties may be bound or affected, or violate any existing
law, governmental rule or regulation or any Order of any court, arbitrator of
Governmental Body applicable to the Partnership or any Subsidiaries.
5.5 Governmental Authorizations. Subject to the accuracy of the
---------------------------
Purchasers representations and warranties contained in Sections 1.5 to 1.8 of
the Note Purchase Agreements and the performance of your agreements contained in
Section 1.9 of the Note Agreement, no consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Body is required for
or in connection with the valid execution and delivery of this Agreement or the
Note Agreement, or the consummation of the transactions contemplated hereby and
thereby, including the assumption of the Notes by the Partnership, or the
fulfillment of, compliance by the Partnership with, the terms and provisions
hereof and thereof.
5.6 Solvency. Neither the Partnership nor any of its Subsidiaries
--------
is insolvent. Neither the execution and delivery of this Agreement, or the Note
Agreement, or the assumption of the Notes nor the consummation of the
transactions contemplated hereby and thereby, nor the performance of the terms
and provisions hereof and thereof will result in the insolvency of the
Partnership or any or its Subsidiaries, nor will the consummation of
6
<PAGE>
Section 5.6, the Partnership or any of its Subsidiaries shall be deemed to be
insolvent or an insolvency shall be deemed to have resulted with respect to such
Person if: (i) its liabilities (including all claims against such Person,
whether or not contingent, unliquidated or disputed and regardless of whether
such liabilities are required to appear on a balance sheet prepared in
accordance with GAAP) exceed the fair market value of its assets; (ii) it
retains unreasonably small capital for its continuing business; or (iii) it
intends to incur, or believes or reasonably should believe it will incur, Debt
beyond its ability to pay such Debt as it becomes due.
5.7 Assumption of Original Partnership Notes For Equivalent Value. The
-------------------------------------------------------------
transfer of the Option Courses pursuant to the terms of the Option Courses
Agreement (including the repayment of amounts owed pursuant to certain Senior
Participating Promissory Notes dated as of August 18, 1993 and any other
transactions related thereto), on the one hand, and the assumption of the Notes
and Trust Notes by the Partnership pursuant to the terms hereof and the issuance
of OP Units pursuant to the Option Courses Agreement, on the other hand, is an
exchange for reasonably equivalent value as such term is used in (S)548 of the
United States Bankruptcy Code.
SECTION 6 Consent. Each Purchaser hereby (i) consents to the assumption
-------
of the Notes by the Partnership and (ii) agrees that the Partnership shall have
all of the rights and interests of Black Lake under the Notes with the same
effect as if such Notes had been initially issued by the Partnership.
SECTION 7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
--------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute one and the same instrument.
SECTION 9 Severability. The provisions of this Agreement are severable,
------------
and if any clause or provision shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
SECTION 10 Headings. The headings in this Agreement are for purposes of
--------
reference only and shall not otherwise affect the meaning or construction of any
provision of this Agreement.
SECTION 11 Final Expression. This Agreement, together with the Note
----------------
Purchase Agreements (as amended hereby), embodies the final, entire agreement
among the parties hereto and thereto and supersedes any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the subject matter hereof and thereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or
7
<PAGE>
subsequent oral agreements or discussions of the parties hereto. There are no
oral agreements among the parties hereto.
8
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
duly executed and delivered by it as of the day and year first above written.
"COMPANY"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.
By:
---------------------------------
Edward R. Sause
Executive Vice President
"PURCHASERS"
AUSA LIFE INSURANCE COMPANY, INC.
By:
---------------------------------
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
JOHN ALDEN LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By:
---------------------------------
Name:
Title:
S-1
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
duly executed and delivered by it as of the day and year first above written.
"COMPANY"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.
By:
----------------------------------
Edward R. Sause,
Executive Vice President
"PURCHASERS"
AUSA LIFE INSURANCE COMPANY, INC.
By:
----------------------------------
Name:
Title:
JOHN ALDEN LIFE INSURANCE COMPANY
By:
----------------------------------
Name: Michael E. Halligan
Title: Vice President
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By:
----------------------------------
Name:
Title:
S-1
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly executed and delivered by it as of the day and year first above written.
"COMPANY"
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P.
By: National Golf Properties, Inc.
By: /s/
---------------------------------
Edward R. Sause,
Executive Vice President
"PURCHASERS"
AUSA LIFE INSURANCE COMPANY, INC.
BY:
---------------------------------
Name:
Title:
JOHN ALDEN LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By: /s/
---------------------------------
Name: Robert E. Whalen, II
Title: Second Vice President
S-1
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By: /s/
---------------------------------
Name: R. Scott Higgins
Title: Vice President
National Life Investment
Management Company, Inc.
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
BY:
---------------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
OXFORD LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
---------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
BY: /s/
---------------------------------
Name: Lynne M. Mills
Title: Second Vice President
NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
OXFORD LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
---------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
BY:
---------------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By: /s/
---------------------------------
Name: R. Scott Higgins
Title: Vice President
National Life Investment
Management Company, Inc.
OXFORD LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
---------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------
Name: John Alden
Title: Asset Management Company
as Investment Advisor for
OXFORD LIFE INSURANCE COMPANY
By: /s/
---------------------------------
Name: Michael E. Halligan
Title: Vice President
PFL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
S-2
<PAGE>
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
By:
---------------------------------
Name:
Title:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
OXFORD LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By: /s/
---------------------------------
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
S-2
<PAGE>
TEACHERS INSURANCE AND ANNNUITY
ASSOCIATION OF AMERICA
By: /s/ Gregory W. MacGORDY
-----------------------
Name: Gregory W. MacGORDY
Title: Director-Private
Placement
THE TRAVELERS INSURANCE COMPANY
By: /s/ Name
-----------------------
Name:
Title:
S-3
<PAGE>
TEACHERS INSURANCE AND ANNNUITY
ASSOCIATION OF AMERICA
By:
-----------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By: [SIGNATURE APPEARS HERE]
-----------------------------
Name: Teresa M. Torrey
Title: Second Vice President
S-3
<PAGE>
Acknowledged
------------
BLACK LAKE/PENASQUITOS,
a California general partnership
By: PENASQUITOS LTD., a California
limited partnership, General Partner
By: DAVID G. PRICE, Trustee of the
Price Revocable Trust Amendment in
Entirety dated February 9, 1987
General Partner
By: /s/ David G. Price
-----------------------------
David G. Price
S-1
<PAGE>
EXHIBIT 10.35
================================================================================
EXECUTION ORIGINAL
------------------
Colonial Charters Golf Course
Longs
Horry County
South Carolina
L E A S E
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
Landlord
and
THE LINKS GROUP, INC.
Tenant
Dated as of July 11, 1996
================================================================================
<PAGE>
Colonial Charters Country Club
Longs
Horry County
State of South Carolina
LEASE
-----
THIS LEASE ("Lease"), dated for reference purposes only July 11, 1996,
-----
is entered into by and between NATIONAL GOLF OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership ("Landlord"), and THE LINKS GROUP, INC., a Delaware
--------
corporation ("Tenant"). This Lease consists of the Basic Lease Provisions, the
------
Detailed Lease Provisions and Exhibits A through E, 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 the Leased Property consisting of an 18-hold golf course,
clubhouse, driving range and related facilities located on the Land.
2. Commencement Date: Means July 11, 1996.
3. Term: Approximately twenty years, commencing on the Commencement Date and
ending on December 31, 2016.
4. Initial Base Rent: Means $478,068.
5. 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.
6. Annual Base Rent: Means, with respect to the Fiscal Year commencing on the
Commencement Date, the Initial Base Rent. On January 1, 1997, and on
January 1 of each following Fiscal Year through and including January 1,
2006, the Annual Base Rent shall be equal to the Annual Base Rent
applicable to the immediately preceding Fiscal Year multiplied by the
annual percentage increase in the Consumer Price Index ("CPI") from the
---
immediately preceding Fiscal Year; provided, however, the CPI increase in
Annual Base Rent for any Fiscal Year pursuant to the terms of this Section
-------
6 shall not exceed five percent per annum. The Annual Base Rent for the
-
Fiscal Year commencing on January 1, 2007, and continuing for each Fiscal
Year for the balance of the Term of this Lease shall be the amount of the
Annual Base Rent for Fiscal Year ending December 31, 2006, with no CPI
increase.
-i-
<PAGE>
7. Applicable Percentage:
With respect to Course Revenue, means:
For the first and second Fiscal Years: 36%
For the third and fourth Fiscal Years: 37%
For the fifth Fiscal Year and for each Fiscal Year
throughout the Term: 38%
With respect to Other Revenue, means 8% for each Fiscal Year
throughout the Term.
8. 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 of Course Revenue; plus
(ii) all Other Revenue for any Fiscal Year multiplied by the
Applicable Percentage of Other Revenue
exceeds (b) the Annual Base Rent for such Fiscal Year. (See Section 3.3
-----------
of the Detailed Lease Provisions.)
9. 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.)
-----------
10. Addresses for Notices:
Tenant:
The Links Group
5001 North Kings Highway
Suite 203
Myrtle Beach, South Carolina 29577
Attention: Kenneth L. Folkes
President
with a copy to:
The Links Group
5001 North Kings Highway
Suite 203
Myrtle Beach, South Carolina 29577
Attention: Controller
-ii-
<PAGE>
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, Esq.
General Counsel
(See Section 26.8 of the Detailed Lease Provisions.)
------------
11. Within 45 days after the end of each Fiscal Year of the Term, Tenant
shall fund the capital Improvement Account by an amount calculated as 2%
of the Total Revenue for such Fiscal Year. Tenant hereby grants to
Landlord a security interest in the Capital Improvement Account. Tenant
shall keep the Capital Improvement Account and all funds therein separate
from Tenant's other accounts and funds. Tenant and Landlord shall enter
into a separate agreement between themselves and the depository bank to
effectuate such security interest. Tenant may submit an annual detailed
budget for capital improvements (collectively, "Capital Expenditures") it
--------------------
proposes to make to the Leased Property, which budget will be subject to
approval by Landlord not to be unreasonably withheld or delayed (the
"Approved Cap Ex Budget"). The Approved Cap Ex Budget shall set forth
----------------------
maximum line item allowances for each project category within the Approved
Cap Ex Budget (each, a "Line Item Allowance"). Tenant shall use funds from
-------------------
the Capital Improvement Account only to fund Capital Expenditures to the
Facility. Tenant may withdraw funds from Capital Improvement Account only:
(i) to the extent consistent with the Approved Cap Ex Budget and within
110% of the amount specified in each Line Item Allowance or (ii) as
otherwise approved in writing by Landlord, which approval shall not to be
unreasonably withheld or delayed. Tenant shall provide Landlord with such
information as Landlord may reasonably request to confirm the application
of funds as provided in this Section 11. Tenant shall cause all amounts
----------
in the Capital Improvement Account to be expended prior to the expiration
of the Term or the earlier termination of this Lease. Tenant shall pay to
Landlord any unused amounts remaining in the Capital Improvement Account
upon the expiration of the Term or earlier termination of this Lease.
12. Reference is made to that certain Purchase and Sale Agreement and Joint
Escrow Instructions dated as of May 9, 1996 (the "Purchase Agreement") by
------------------
and between Landlord (as Buyer thereunder) and Golf Enterprises, Inc., a
South Carolina corporation ("Seller"). Landlord agrees, upon request of
------
Tenant, to use reasonable efforts to enforce on Tenant's behalf the
indemnities, covenants, representations and warranties made by Seller in
favor of Landlord under the Purchase Agreement.
-iii-
<PAGE>
13. Title Commitment: Shall mean that certain Title Insurance Commitment No.
C-16650 issued by Investors Title Insurance Company ("Title Company") in
connection with Landlord's purchase of the Leased Property from Seller.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
as of the date first above written.
NATIONAL GOLF OPERATING THE LINKS GROUP, INC.,
PARTNERSHIP, L.P., a Delaware corporation
a Delaware limited partnership
By: NATIONAL GOLF PROPERTIES, INC.,
a Maryland corporation,
Its General Partner
By: /s/ Richard C. Price By: /s/ Kenneth L. Folkes
------------------------------ -------------------------------
Its: President Its: President
----------------------------- ------------------------------
"Landlord" "Tenant"
LIST OF ATTACHMENTS AND EXHIBITS:
- --------------------------------
Detailed Lease Provisions
Exhibit A Defined Terms; Interpretation
Exhibit B Legal Description of the Land
Exhibit C Other Lease Properties
Exhibit D Operating Standards
Exhibit E Landlord's Personal Property
-iv-
<PAGE>
DETAILED LEASE PROVISIONS
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 - LEASED PROPERTY .......................................... -1-
ARTICLE 2 - TERM ..................................................... -1-
- ----------------
ARTICLE 3 - RENT ..................................................... -1-
- ----------------
3.1 Rent ..................................................... -1-
----
3.2 Base Rent ................................................ -2-
---------
3.3 Additional Rent .......................................... -2-
---------------
3.4 Additional Charges ....................................... -3-
------------------
3.5 Late Payment of Rent ..................................... -4-
--------------------
3.6 Net Lease ................................................ -4-
---------
3.7 Marketing Programs ....................................... -4-
------------------
3.8 Income/Expense Prorations ................................ -5-
-------------------------
ARTICLE 4 - IMPOSITIONS .............................................. -5-
4.1 Payment of Impositions ................................... -5-
----------------------
4.2 Information and Reporting ................................ -5-
-------------------------
4.3 Assessment Challenges .................................... -6-
---------------------
4.4 Prorations ............................................... -6-
----------
4.5 Refunds .................................................. -6-
-------
4.6 Utility Charges .......................................... -6-
---------------
4.7 Reassessments Upon Transfer .............................. -6-
---------------------------
4.8 Assessment Districts ..................................... -7-
--------------------
ARTICLE 5 - TENANT WAIVERS ........................................... -7-
5.1 No Termination, Abatement, Etc. .......................... -7-
------------------------------
5.2 Condition of the Leased Property ......................... -8-
--------------------------------
ARTICLE 6 - OWNERSHIP OF PROPERTY .................................... -9-
6.1 Leased Property .......................................... -9-
---------------
6.2 Landlord's Personal Property ............................. -9-
----------------------------
6.3 Tenant's Personal Property ............................... -9-
--------------------------
6.4 Purchase of Tenant's Personal Property ................... -10-
--------------------------------------
6.5 Removal of Personal Property ............................. -10-
----------------------------
6.6 Landlord's Waivers ....................................... -11-
------------------
6.7 Water Rights ............................................. -11-
------------
6.8 Liquor License ........................................... -12-
--------------
ARTICLE 7 - USE OF LEASED PROPERTY................................... -12-
7.1 Use ...................................................... -12-
---
7.2 Specific Prohibited Uses ................................. -12-
------------------------
ARTICLE 8 - HAZARDOUS MATERIALS....................................... -13-
8.1 Remediation .............................................. -13-
-----------
8.2 Tenant's Indemnification of Landlord ..................... -13-
------------------------------------
8.3 Landlord's Indemnification of Tenant ..................... -14-
------------------------------------
8.4 Survival of Indemnification Obligations .................. -14-
---------------------------------------
i
<PAGE>
Page
----
8.5 Environmental Violations at Expiration or Termination
-----------------------------------------------------
of Lease ................................................. -14-
--------
ARTICLE 9 - MAINTENANCE AND REPAIR ................................... -15-
9.1 Tenant's Sole Obligation ................................. -15-
------------------------
9.2 Waiver of Statutory Obligations .......................... -15-
-------------------------------
9.3 Mechanic's Liens ......................................... -16-
----------------
9.4 Surrender of Leased Property ............................. -16-
----------------------------
ARTICLE 10 - TENANT'S IMPROVEMENTS ................................... -16-
10.1 Tenant's Right to Construct .............................. -16-
---------------------------
10.2 Scope of Right ........................................... -16-
--------------
10.3 Cooperation of Landlord .................................. -17-
-----------------------
10.4 Commencement of Construction ............................. -17-
----------------------------
10.5 Rights in Tenant Improvements ............................ -18-
-----------------------------
ARTICLE 11 - LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS ............ -18-
11.1 Liens .................................................... -18-
-----
11.2 Encroachments and Other Title Matters .................... -19-
-------------------------------------
ARTICLE 12 - PERMITTED CONTESTS ...................................... -20-
ARTICLE 13 - INSURANCE ............................................... -21-
13.1 General Insurance Requirements ........................... -21-
------------------------------
13.2 Replacement Cost ......................................... -22-
----------------
13.3 Waiver of Subrogation .................................... -22-
---------------------
13.4 Form Satisfactory, Etc. .................................. -22-
-----------------------
13.5 Change in Limits ......................................... -23-
----------------
13.6 Blanket Policy ........................................... -23-
--------------
ARTICLE 14 - APPLICATION OF INSURANCE PROCEEDS ....................... -24-
14.1 Insurance Proceeds ....................................... -24-
------------------
14.2 Reconstruction Covered by Insurance ...................... -25-
-----------------------------------
14.3 Reconstruction Not Covered by Insurance .................. -27-
---------------------------------------
14.4 Waiver ................................................... -28-
------
14.5 Damage Near End of Term .................................. -28-
-----------------------
ARTICLE 15 - CONDEMNATION ............................................ -28-
15.1 Total Taking ............................................. -28-
------------
15.2 Partial Taking ........................................... -28-
--------------
15.3 Restoration .............................................. -28-
-----------
15.4 Award-Distribution ....................................... -28-
------------------
15.5 Temporary Taking ......................................... -29-
----------------
ARTICLE 16 - EVENTS OF DEFAULT........................................ -29-
16.1 Events of Default ........................................ -29-
-----------------
16.2 Payment of Costs ......................................... -31-
----------------
16.3 Exceptions ............................................... -31-
----------
16.4 Certain Remedies ......................................... -31-
----------------
16.5 Damages .................................................. -32-
-------
16.6 Additional Remedies ...................................... -33-
-------------------
16.7 Appointment of Receiver .................................. -33-
-----------------------
ii
<PAGE>
Page
----
16.8 Application of Funds ..................................... -33-
--------------------
16.9 Impounds ................................................. -33-
--------
16.10 Breach by Landlord ....................................... -34-
------------------
ARTICLE 17 - LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT ............... -34-
ARTICLE 18 - LEGAL REQUIREMENTS ...................................... -34-
ARTICLE 19 - HOLDING OVER ............................................ -34-
ARTICLE 20 - RISK OF LOSS ............................................ -35-
21.1 Tenant's Indemnification of Landlord ..................... -35-
------------------------------------
21.2 Landlord's Indemnification of Tenant ..................... -36-
------------------------------------
21.3 Mechanics of Indemnification ............................. -36-
----------------------------
21.4 Survival of Indemnification Obligations .................. -36-
---------------------------------------
ARTICLE 22 - SUBLETTING AND ASSIGNMENT ............................... -37-
22.1 Prohibition Against Subletting and Assignment ............ -37-
---------------------------------------------
22.2 Changes of Control ....................................... -37-
------------------
22.3 Subleases ................................................ -38-
---------
22.4 Assignment ............................................... -39-
----------
22.5 REIT Limitations ......................................... -39-
----------------
22.6 Leasehold Mortgages ...................................... -40-
-------------------
(a) Mortgage Consent .................................. -40-
----------------
(b) Notices to Mortgagee .............................. -40-
--------------------
(c) Insurance ......................................... -40-
---------
(d) New Lease ......................................... -40-
---------
ARTICLE 23 - OFFICER'S CERTIFICATES AND OTHER STATEMENTS .............. -42-
23.1 Officer's Certificates ................................... -42-
----------------------
23.2 Annual Financial Statements of Tenant .................... -42-
-------------------------------------
23.3 Quarterly Financial Statements of Tenant ................. -43-
----------------------------------------
23.4 Monthly Course Statements ................................ -43-
-------------------------
23.5 Annual Course Statements ................................. -44-
------------------------
23.6 Budgets .................................................. -44-
-------
23.7 Environmental Statements ................................. -44-
------------------------
23.8 Confidentiality .......................................... -44-
---------------
ARTICLE 24 - LANDLORD MORTGAGES ....................................... -45-
24.1 Landlord May Grant Liens ................................. -45-
------------------------
24.2 Tenant's Non-Disturbance Rights .......................... -45-
-------------------------------
24.3 Facility Mortgage Protection ............................. -45-
----------------------------
ARTICLE 25 - FINANCIAL COVENANTS ..................................... -46-
25.1 Financial Covenants ...................................... -46-
-------------------
25.2 Provision of Letter of Credit ............................. -46-
----------------------------
25.3 Terms of Letter of Credit ................................ -46-
-------------------------
25.4 Draws Against Letter of Credit; Application of Proceeds... -47-
-------------------------------------------------------
25.5 Renewal of Letter of Credit .............................. -47-
---------------------------
25.6 Liquidated Damages ....................................... -47-
------------------
iii
<PAGE>
Page
----
ARTICLE 26 - MISCELLANEOUS ........................................... -47-
26.1 Landlord's Right to Inspect .............................. -47-
---------------------------
26.2 No Waiver ................................................ -48-
---------
26.3 Remedies Cumulative ...................................... -48-
-------------------
26.4 Acceptance of Surrender .................................. -48-
-----------------------
26.5 No Merger of Title ....................................... -48-
------------------
26.6 Conveyance by Landlord.................................... -48-
----------------------
26.7 Quiet Enjoyment........................................... -48-
---------------
26.8 Notices................................................... -49-
-------
26.9 Survival of Claims........................................ -49-
------------------
26.10 Invalidity of Terms or Provisions......................... -49-
---------------------------------
26.11 Prohibition Against Usury................................. -49-
-------------------------
26.12 Amendments to Lease....................................... -49-
-------------------
26.13 Successors and Assigns.................................... -49-
----------------------
26.14 Titles.................................................... -49-
------
26.15 Governing Law............................................. -49-
-------------
26.16 Memorandum of Lease....................................... -49-
-------------------
26.17 Attorneys' Fees........................................... -49-
---------------
26.18 Non-Recourse as to Landlord............................... -50-
---------------------------
26.19 No Relationship........................................... -50-
---------------
26.20 Signs; Reletting.......................................... -50-
----------------
26.21 Golf Course Name.......................................... -50-
----------------
iv
<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 described in Exhibit B attached hereto (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, driving ranges, 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 E
---------
attached hereto, but not including any (i) pro shop inventories,
-----------------
(ii) food and beverage consumables, or (iii) copies of books and
records related to the Leased Property ("Landlord's Personal
-------------------
Property").
--------
(e) any other property conveyed to Landlord pursuant to the terms
of the Purchase Agreement, including, but not limited to, all
property, included in the term "Property" as defined therein.
Upon the Commencement Date, Landlord shall deliver exclusive
possession of the Leased Property to Tenant.
ARTICLE 2 - TERM
----------------
The Term of this Lease shall commence on the Commencement Date,
and shall expire on December 31, 2016.
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
-1-
<PAGE>
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 Tenant's option, either (i) remit to
Tenant its check in an amount equal to such difference, or (ii) grant
Tenant a credit against the payment of Additional Rent next coming due. The
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 accrual basis accounting principles (applied on a
basis consistent with the Other Leased Properties, if any) which
-2-
<PAGE>
will accurately record all Course Revenue and Other Revenue. Tenant shall
utilize cash basis accounting principles in accounting for the amounts to
be deposited into the Capital Improvement Account. 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 upon reasonable prior written notice 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 an overpayment of Additional Rent, Landlord shall apply
such overpayment as a credit toward the payment of Rent next due. 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. Landlord shall not conduct
more than two audits in any calendar year; provided that for purposes of
such limitation any audit in which there were discrepancies in Course
Revenue or Other Revenue in excess of $5,000 shall not count towards such
limitation.
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 otherwise provided in this Lease, including Article 12, all
- ------- ----------
Additional Charges shall be due and payable 30 days after either
-3-
<PAGE>
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 amy 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, deferment, 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.
------------------
3.7.1 Tenant Conflicts. Landlord and Tenant recognize that Tenant or
----------------
its affiliates already has, and may in the future acquire the ownership or
operation of other courses which compete with the Leased Property. Subject
to Tenant's compliance with this Section 3.7, Landlord acknowledges this
-----------
potential conflict of interest and agrees that it does not constitute a
breach or default of any term, condition, representation or warranty under
the Lease, express
-4-
<PAGE>
or implied. Provided, however, Tenant agrees that it shall operate the
Leased Property on an arm's-length and non-preferential basis with respect
to other courses owned or operated by Tenant or its affiliates ("Tenant's
--------
Properties") (i.e. Tenant shall not operate the Leased Property or Tenant's
----------
Properties so as to exhibit preferential treatment of Tenant's Properties
at the expense of the Leased Property).
3.7.2 Approval of Joint Usage Programs. Subject to Landlord's prior
-------------------------------
written approval and the provisions of this Section 3.7, Tenant may have
-----------
the Leased Property participate in joint usage programs involving the
Leased Property and properties of the Tenant other than the Leased Property
(collectively, "Programs") that Tenant may sponsor from time to time.
--------
Landlord agrees that it will not unreasonably withhold or delay its consent
to such Programs if Landlord is reasonably satisfied that such Programs
would not adversely affect the amount of Additional Rent to be payable
hereunder nor otherwise adversely affect the Leased Property relative to
Tenant's Properties. Tenant agrees as a condition to any such consent by
Landlord to such Programs, that Landlord may require Tenant to provide to
Landlord during the duration of such Programs such information (including
rounds played and average green fees) regarding the Tenant Properties
included in such Programs as Landlord may reasonably request to monitor
that there are no discriminatory impacts of the Programs approved.
3.8 Income/Expense Prorations. Income and expense items 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 date of the
commencement or expiration of the Term or earlier termination of this Lease, as
applicable.
ARTICLE 4 -- IMPOSITIONS
------------------------
4.1 Payment of Impositions. Subject to Sections 4.7, 16.9 and 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. Notwithstanding
the foregoing, Tenant shall not be liable for the payment of any fine, penalty,
interest or cost resulting from its
-5-
<PAGE>
failure to pay in a timely manner any unforeseen and non-recurring charge of
which it has not been timely notified by Landlord or notified otherwise in a
timely manner. 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 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
assessment 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 the obligation of each party 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
-6-
<PAGE>
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, (i) Tenant, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the consent of Landlord to modify, surrender or terminate the
same, nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or set-off against the Rent by reason of, and (ii) the respective
obligations of Landlord and Tenant shall not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Leased Property or any portion
thereof from whatever cause or any taking of the Leased Property or any portion
thereof;
(b) the lawful or unlawful prohibition of, or restriction upon, Tenant's
use of the Leased Property, or any portion thereof, the interference with such
use by any Person or by reason of eviction by paramount title;
(c) any claim which Tenant has or might have against Landlord or by
reason of any default or breach of any warranty by Landlord under this Lease or
any other agreement between Landlord and Tenant (provided that Tenant does not
waive its rights to pursue its remedies with respect to any defenses raised by
Tenant in any legal action by Landlord against Tenant);
(d) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution or winding up of Landlord or any assignee or transferee
of Landlord except to the extent provided in the Federal bankruptcy laws or any
other applicable law or statute of the United States of America or any state
thereof; or
(e) for any other cause whether similar or dissimilar to any of the
foregoing other than a discharge of Tenant from any such obligations as a matter
of law.
Except as otherwise specifically provided in this Lease, 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
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entitle Tenant to any abatement, reduction, suspension or deferment of the Rent
or other sums payable by Tenant hereunder. The obligation of Landlord and
Tenant hereunder shall be seperate 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, (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, (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 LIABILTY 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.
Tenant acknowledges that (i) Tenant has been operating and managing the
Leased Property commencing on March 16, 1996 pursuant to a management agreement
with Seller and that Tenant has superior knowledge of the condition of the
Leased Property than does Landlord, (ii) Tenant has only the leasehold right of
possession and use of the Leased Property as provided herein, (iii) to Tenant's
actual knowledge the improvements and operation
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of the Leased Property comply with all Legal Requirements and all material
insurance requirements, (iv) to Tenant's actual knowledge all easements and
licenses necessary or appropriate for the use or operation of the Leased
Property have been obtained, (v) to Tenant's actual knowledge all contractors
and subcontractors who have performed work on or supplied materials to the
Leased Property have been fully paid, and all materials to the Leased Property
have been fully paid for, (vi) to the best of Tenant's knowledge the
improvements have been completed in all material respects in a workmanlike
manner of first class quality, and (vii) to Tenant's actual knowledge all
equipment necessary or appropriate for the use or operation of the Leased
Property has been installed and is presently operative in all material respects.
ARTICLE 6 - OWNERSHIP OF PROPERTY
---------------------------------
6.1 Leased Property. Tenant acknowledge 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 prior to the Commencement Date.
6.2 Landlord's Personal Property. If Landlord has provided any Landlord's
----------------------------
Personal Property (as described in Exhibit E), 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 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.
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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, but not less than all, of tangible
Tenant's Personal Property (which shall not include software):
(i) if owned by Tenant and not subject to any secured financing entered
into in good faith by Tenant with an unaffiliated Person, at the fair
market value thereof (subject to Section 6.2);
-----------
(ii) if owned by Tenant, but subject to such 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 in good faith from an unaffiliated Person, 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 free of liens) 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 to the extent of any cash payment otherwise owed by Tenant to Landlord.
6.5 Removal of Personal Property. All items of Tenant's Personal Property
----------------------------
not removed by Tenant within 30 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 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
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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 30 day period provided
for herein. Landlord hereby grants to Tenant a temporary license to remove
Tenant's Personal Property (subject to Section 6.4 above) within said 30 day
------------
period.
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
------------
6.7.1 Landlord Rights. If and to the extent Landlord has any Water Rights
----------------
by virtue of its ownership of the Leased Property or to the extent Landlord
otherwise acquires Water Rights specifically for use by 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 make no assurances
whatsoever as to the existence, quantity, priority or price of any Water Rights
owned by Landlord. Landlord shall have no obligation to acquire or expend funds
to maintain the ownership of any Water Rights.
6.7.2 Tenant Rights. If and 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 shall 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.
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<PAGE>
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.
6.8 Liquor License. Tenant shall take whatever steps are commercially
necessary to keep a Liquor License in effect during the Term. Upon the
expiration of the Term or earlier termination of this Lease, Tenant shall
transfer the Liquor License to Landlord (or its designee), subject to applicable
law, for a purchase price of $1.00; provided, however, Landlord shall pay all
costs and expenses with respect to the transfer of the Liquor License to
Landlord. Tenant shall cooperate in all respects with Landlord (and its
designee) in order to affect an orderly transfer of the Liquor License to
Landlord (or its designee) including, without limitation, completing all
application forms, providing such information and documents as may be required
by applicable governmental agencies, and appearing and testifying at any public
hearings in connection with the transfer of the Liquor License to Landlord (or
its designee).
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
incorporated in the Facility or any improvements
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<PAGE>
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.
ARTICLE 8 - HAZARDOUS MATERIALS
8.1 Remediation. If Tenant becomes aware of the presence of any
Hazardous Material in a quantity sufficient to require remediation or reporting
under any applicable 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; provided, however, that Tenant shall have the right to
contest in good faith such requirements in accordance with applicable law as
long as Tenant has notified Landlord of such contest and Landlord reasonable
consents to such contest. 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 (after exhausting its right to contest such
requirement), Landlord shall have the right, but not the obligation after
written notification to Tenant and Tenant's failure to cure as provided herein
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. Tenant shall pay, protect,
indemnify, save, hold harmless and 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 involuntarily 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,
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<PAGE>
(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
otherwise be required to indemnify Landlord (or any Facility Mortgagee) from and
against any matters, conditions or events that arose, existed or occurred prior
to the Commencement Date or that arise or first occur after the expiration or
earlier termination of the Term, or that are caused by Landlord or a Facility
Mortgagee; provided, that this sentence shall not relieve Tenant of its
obligation to operate the Leased Property during the Term in compliance with
Environmental Laws including Tenant's obligation to maintain, repair, remove or
replace any underground storage tanks.
8.3 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; provided, that this sentence shall not relieve Tenant
of its obligation to operate the Leased Property during the Term in compliance
with Environmental Laws including Tenant's obligation to maintain, repair,
remove or replace any underground storage tanks.
8.4 Survival of Indemnification Obligations. The obligations and/or
liability of the parties under this Article 8 arising during the Term hereof
shall survive any termination of this Lease.
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<PAGE>
8.5 Environmental Violations at Expiration or Termination of Lease.
Notwithstanding any other provision of this Lease, 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 leaseability of the Leased Property upon the expiration of the Term,
and if Tenant is responsible for such violation under the provisions of Sections
8.1 or 8.2, 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 beyond such date with respect to the Leased Property until
the earlier to occur of (i) the completion of all remedial action in accordance
with applicable Environmental Laws or (ii) 12 months beyond such expiration or
termination date; provided, that Tenant may, upon any such extension of the
Term, terminate the Term by paying to the Landlord such amount as is necessary
in the reasonable judgment of Landlord to complete or perform such remedial
action.
ARTICLE 9 - MAINTENANCE AND REPAIR
9.1 Tenant's Sole Obligation. Subject to Unavoidable Delays, 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). Subject to
Unavoidable Delays, 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 or
as may be appropriate to comply with Legal Requirements. 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. Subject to the terms and conditions
of Article 14, 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,
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<PAGE>
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 Mechanic's Liens. Nothing contained in this Lease and no action or
inaction by Landlord shall be construed as (i) constituting the consent or
request of Landlord expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the 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) and except for casualty or damage not required to be repaired by
Tenant.
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 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 $100,000 in the first Fiscal Year
(and increased by three 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:
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(a) seek any governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need that
Tenant requires to construct any Tenant Improvement;
(b) 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 in any material respect 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.
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;
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(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 mechanic's liens,
materialmen's liens or liens of a similar nature;
(d) Tenant shall not suffer or permit any mechanic's 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;
(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;
(d) liens for those taxes of Landlord, if any, which Tenant is not
required to pay hereunder;
(e) subleases and leasehold mortgages permitted by Article 22;
(f) liens for Impositions or for sums resulting from noncompliance with
Legal Requirements so long as (1) the
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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 or liens arising from the acts of Landlord's
employees or authorized agents or any Person (other than Tenant) whose
claim arose under Landlord.
11.2 Encroachments and Other Title Matters. Excepting any matters
granted or created by Landlord or otherwise existing on the Commencement Date,
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 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
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(i) any such policy of title or other insurance, or (ii) any suit or action
against any Person involved in said matter. If Landlord is a necessary party to
any such action, Tenant shall, at Tenant's expense and with such indemnification
as Landlord shall reasonably request, have the right to pursue claims against
Landlord's title insurance or any other Person involved in said matter.
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 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 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
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(f) if such contest be finally resolved against Landlord or Tenant,
Tenant shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
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 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 Mortgage, not to be unreasonably withheld. 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:
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 commercial general liability insurance with amounts not
less than $10,000,000 per occurrence and in the aggregate.
13.1.3 Flood. Flood and such other hazards and in such amounts
as may be customary for comparable properties in the area; provided
however, the Tenant shall not be
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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 Mortgage 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, given 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 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
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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 in any
material respect, 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 to Landlord its ability to
satisfy such deductible or amount of such self-retained insurance.
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 shall 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
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"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
$100,000, be paid to Landlord and held by Landlord and (ii) if less than such
amount, be paid to Tenant and held by Tenant. All such proceeds shall be held in
trust and shall be made available for reconstruction or repair, as the case may
be, of any damage to or destruction of the 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 as requested by Tenant, not more
frequently than monthly, upon not less than 15 days' notice 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 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;
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(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
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 first to Tenant to reimburse
Tenant for any deductible amount previously paid by Tenant, and the balance
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
and provided that insurance proceeds are disbursed for that purpose in the
manner provided in Section 14.1.1, Tenant shall diligently restore the
Facility to substantially the same 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 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
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destruction and Landlord diligently commences and prosecutes such
restoration and completes such restoration within 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. 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 8 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, and provided that insurance proceeds are disbursed
for that purpose in the manner provided in Section 14.1.1, 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 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 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 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
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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 8 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
opon 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 (i) Tenant's
personal Property, (ii) the Tenant Improvements and (iii) subject to
inclusion in Course Revenue, Tenant's business interruption insurance.
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 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 immediately before the damage and
destruction and Landlord diligently commences and prosecutes such restoration
and completes such restoration within 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 8
of the Basic Lease Provisions and the Additional Charges as required by the
Detailed Lease Provisions.
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14.4 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.
14.5 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 (i) Tenant's Personal Property, (ii) Tenant Improvements
and (iii) subject to the inclusion in Course Revenue, Tenant's business
interruption insurance.
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.
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
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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, provided however
that notwithstanding the preceding, to the extent that Tenant successfully
prevails against the condemning authority on a claim that the Leased Property
would have generated a given level of revenues which would have produced
Additional Rent during the period of such taking, then the appropriate portion
of the Award which is attributable to revenue that would have generated
Additional Rent for said period shall be paid to Landlord, if due and payable,
as Additional Rent.
ARTICLE 16 - EVENT 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 seven 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;
(b) if Tenant shall fail to obtain, maintain or replace a Letter of
Credit as required by Article 25 and such default continues for five (5)
business days after written notice to Tenant;
(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 30 days
after receipt by Tenant of notice thereof from Landlord, 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 Tenant
proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof; provided further, however, that
the cure period shall not extend beyond 30 days as otherwise provided by
this Section
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<PAGE>
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
than 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
and order or decree appointing, without the consent of Tenant, a
receiver of Tenant or of the whole or substantially all of its property,
or approving a petition filed against it seeking reorganization or
arrangement of Tenant under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof, and such judgment, order or decree shall not be vacated or set
aside or stayed within 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 90 days
after commencement thereof or 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
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<PAGE>
in lieu of and not in addition to any notice required under
applicable law;
(h) if, except as a result of damage, destruction or partial or
complete Condemnation or other Unavoidable Delays, Tenant
voluntarily ceases operations on the Leased Property for a
period in excess of 45 consecutive days other than relating to
the closure of up to nine holes at a time or the clubhouse in
order for Tenant to carry out renovations so long as Tenant is
diligently performing such renovations;
(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 30 days after Tenant becomes aware of, or is
notified by Landlord of the fact of, such misrepresentation or
breach of warranty; or
(j) with respect to any of the Other Property Leases, either an
Event of Default has occurred and is continuing after the
expiration of the applicable cure period or such leases have
been terminated by reason of an Event of Default.
THEN, Landlord may terminate this Lease by giving Tenant not
less than 10 days' notice (or no notice for clauses (d), (e) and (f) with
respect to Tenant) 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) 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
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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, not (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 reletting; provided that Landlord
shall use reasonable efforts to mitigate its damages hereunder. 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
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<PAGE>
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.
16.7 Appointment of Receiver. Upon the entry of a court order that
-----------------------
an Event of Default has occurred, 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 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.
16.9 Impounds. Landlord shall have the right during the continuance
--------
of an Event of Default to require Tenant to pay to Landlord an additional
monthly sum (each an "Impound Payment") sufficient to pay the Impound Charges
---------------
(as hereinafter defined) as they become due. As used herein, "Impound Charges"
---------------
shall mean real estate taxes on the 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 on their respective due dates. Any Impound Payments which have not been
applied to Impound Charges shall be released to Tenant within 30 days after the
Event of Default is cured. 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.
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<PAGE>
16.10 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 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.
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
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 on 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, other than a valid court order, 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
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<PAGE>
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
-------------------------
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 or Landlord's employees, authorized agents or
contractors, and those claiming from, through or under Landlord) is assumed by
Tenant. In the absence of Landlord's negligence (and subject to Article 8), acts
---------
of Landlord or Landlord's employees, authorized agents or contractors, or those
claiming from, through or under Landlord, or breach of this Lease by Landlord,
which in any of the foregoing cases causes such loss or decrease in the
enjoyment and beneficial use of the Leased Property, (i) Landlord shall in no
event be answerable or accountable for any of the events mentioned in the first
sentence of this Article 20 and (ii) none of such events shall entitle Tenant to
----------
any abatement of Rent except as otherwise provided in the Lease.
ARTICLE 21 - INDEMNIFICATION
----------------------------
21.1 Tenant's Indemnification of Landlord. Subject to Article 8,
------------------------------------ ---------
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)
(collectively, "Claims"), 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;
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<PAGE>
(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 Claims 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. Subject to Article 8,
------------------------------------ ---------
Landlord shall protect, indemnify, save harmless and defend Tenant from and
against all Claims imposed upon or incurred by, or asserted against Tenant as a
result of (i) Landlord's or Landlord's employees, authorized agents' or
contractors' negligence, or (ii) any acts of Landlord or Landlord's employees,
authorized agents or contractors, or those claiming from, through or under
Landlord (other than such acts which are authorized under the Lease or
applicable law).
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 made in
----------
writing by a third party, regardless of whether an actual loss has been
suffered, so long as the indemnified party shall in good faith determine that
such claim is not frivolous and that the indemnified party may be liable for, or
otherwise incur, a loss as a result thereof and shall give notice of such
determination to the indemnifying party. The indemnified party shall permit the
indemnifying party, at its option and expense, to assume the defense of any such
claim by counsel selected by the indemnifying party and reasonably satisfactory
to the indemnified party, and to settle or otherwise dispose of the same;
provided, however, that the indemnified party may at all times participate in
- -------- -------
such defense at its expense; and provided further, however, that the
-------- ------- -------
indemnifying party shall not, in defense of any such claim, except with the
prior written consent of the indemnified party, consent to the entry of any
judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in question
to the indemnified party and its affiliates a release of all liabilities in
respect of such claims, or that does not result only in the payment of money
damages by the
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<PAGE>
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
---------------------------------------------
Sections 22.3 and 22.6, 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. Notwithstanding the first sentence of
this Section 22.1, an assignment of this Lease in connection with the sale,
------------
conveyance or other transfer of all or substantially all of the assets of Tenant
(whether by operation of law or otherwise) shall be treated as a Change in
Control (and therefore will be permitted if the requirements of Section 22.2.1
--------------
through Section 22.2.3 hereof are met).
--------------
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");
--------
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or
otherwise), which may include a transfer of assignment of this Lease;
(c) 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;
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<PAGE>
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
-------------------
specified in Section 25.3 is posted in favor of Landlord 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
$25,000,000 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 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 12 total golf courses (or less if acceptable
to Landlord) under management or lease, which minimum 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;
(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.
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<PAGE>
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 to be a waiver of the
prohibition set forth in this 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 this
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 require-
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<PAGE>
ments of this Section 22.5 shall likewise apply to any further subleasing by any
------------
subtenant.
22.6 Leasehold Mortgages. Tenant and every successor and assign of
-------------------
Tenant is hereby given the right by Landlord, with Landlord's prior written
consent which shall not be unreasonably withheld or delayed, to mortgage its
interest in this Lease and assign its interest in this Lease as collateral
security for such mortgage, upon the conditions set forth in this Section 22.6.
------------
All rights acquired under such mortgage shall be subject to each and all of the
covenants, conditions and restrictions set forth in this Lease, and to all
rights and interests of Landlord under this Lease, none of which is or shall be
waived by Landlord by reason of the rights given Tenant to mortgage its interest
in this Lease, except as expressly provided in this Section 22.6. The mortgagee
------------
or beneficiary of any such leasehold mortgage or assignment shall be an
Institution. For such purposes of this Section 22.6, an "Institution" shall mean
------------ -----------
a bank, savings and loan association, trust company, insurance company, public
pension fund or retirement fund, or any subsidiary of any of the foregoing, or
any other entity or governmental agency regularly engaged in commercial lending.
If Tenant and/or Tenant's successors and assigns shall mortgage all or part of
its interest in this Lease and if the holder of such mortgage shall, within
thirty (30) days of its execution, send to Landlord a true copy thereof together
with written notice specifying the name and address of the mortgagee and the
pertinent recording data with respect to such mortgage, Landlord agrees that so
long as the leasehold mortgage remains unsatisfied of record or until written
notice of satisfaction is given by the holder to Landlord, the following
provisions shall apply:
(a) Mortgagee Consent. There shall be no cancellation,
-----------------
surrender or modification of this Lease by joint action of Landlord
and Tenant without the prior written consent of the leasehold
mortgagee.
(b) Notices to Mortgagee. Landlord shall, upon serving Tenant
--------------------
with any notice of default, simultaneously serve a copy of such notice
upon the holder of the leasehold mortgage. The leasehold mortgagee
shall have the same period, after service of such notice upon it, to
remedy or cause to be remedied the defaults complained of, and
Landlord shall accept such leasehold mortgagee's acts if they had been
performed by Tenant.
(c) Insurance. Landlord agrees that the name of the leasehold
---------
mortgagee may be added to the "Loss Payable Endorsement" of any and
all insurance policies required to be carried by Tenant under this
Lease on the condition that the insurance proceeds be applied in the
manner specified in this Lease and that the leasehold mortgage or
collateral document so provide.
(d) New Lease. Landlord agrees that in the event of termination
---------
of this Lease by reason of any default by
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<PAGE>
Tenant, Landlord will enter into a new lease for the Leased Property
with a nominee acceptable to Landlord for the remainder of the Term
effective as of the date of such termination, at the Base Rent,
Additional Rent and Additional Charges, and upon all of the terms,
provisions, covenants and agreements contained in this Lease, subject
only to the rights, if any, of the parties then in possession of any
part of the Leased Property, provided:
1. The nominee shall make written request upon Landlord
for the new lease within fifteen (15) days after the date of
termination and the written request shall be accompanied by
any then due payment of Base Rent, Additional Rent and
Additional Charges under this Lease; and the nominee shall
execute and deliver the new lease within fifteen (15) days
after Landlord as delivered it.
2. The nominee shall pay to Landlord, at the time of
execution and delivery of the new lease, any and all sums
which would then be due pursuant to this Lease but for such
termination and, in addition thereto, any reasonable
expenses, including reasonable attorney's fees, which
Landlord shall have incurred by reason of such default,
including the costs of reviewing the financials of the
proposed nominee, and the negotiation, approval and
recording of the new lease.
3. The nominee shall perform and observe all covenants in
this Lease to be performed by Tenant and shall further
remedy any other conditions which Tenant was obligated to
perform under the terms of this Lease.
4. Landlord shall not warrant possession of the Leased
Property to Tenant or the leasehold mortgagee under the new
lease.
5. The new lease shall be expressly made subject to the
rights, if any, of Tenant under this Lease.
6. The tenant under the new lease shall have the same
right, title and interest in and to the Leased Property as
Tenant has under this Lease.
(e) Confirming Documentation. Landlord shall, upon request,
------------------------
execute, acknowledge and deliver to each leasehold mortgagee an
agreement prepared at the sole cost and expense of Tenant, in form
satisfactory to the leasehold mortgagee and to Landlord, between
Landlord,
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<PAGE>
Tenant and the leasehold mortgagee confirming the provisions of this
Section 22.6. Any additional reasonable costs incurred by Landlord in
------------
connection with the agreement, including reasonable attorneys fees,
shall be paid by Tenant or the leasehold mortgagee.
The term "mortgage," as used in this Section 22.6, shall including
-------- ------------
whatever security instruments are used in the State of South Carolina, as well
as financing statements, security agreements and other documentation required
pursuant to the Uniform Commercial Code.
ARTICLE 23 - OFFICER'S CERTIFICATES AND OTHER STATEMENTS
--------------------------------------------------------
23.1 Officer's Certificates. At any time, and from time to time
----------------------
upon receipt of not less than 10 days' prior written request by either party,
the other party will furnish to the requesting party an Officer's Certificate
certifying that:
(a) this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth
the modifications);
(b) the dates to which the Rent has been paid;
(c) whether or not to the best knowledge of the certifying party,
the other party 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 the certifying party may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against the
certifying party before or by any court or administrative agency
which, if adversely decided, would materially and adversely affect the
financial condition and operations of the certifying party; and
(e) responding to such other questions or statements of fact as the
requesting party shall reasonably request.
The failure of either party to deliver such statement within such time
constitute an acknowledgment by it that this Lease is unmodified and in full
force and effect except as may be represented to the contrary by the requesting
party, the requesting party is not in default in the performance of any
covenant, agreement or condition contained in this Lease and the other matters
set forth in such request, if any, are true and correct. Any such certificate
furnished pursuant to this Section 23.1 may be relied upon by the requesting
------------
party.
23.2 Annual Financial Statements of Tenant. Tenant will furnish to
-------------------------------------
Landlord, within 90 days after the end of Tenant's fiscal year, a copy of its
audited consolidated balance sheet as of
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<PAGE>
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 Quarterly Financial Statements of Tenant. Tenant will furnish
---------------------------------------
to Landlord, within 45 days after the end of each of the first three fiscal
quarters of Tenant's fiscal year, a copy of its unaudited consolidated balance
sheet as of the end of such fiscal quarter, and related unaudited consolidated
statement of income and statement of cash flows for such fiscal quarter (each
with footnotes), prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the period
involved and certified as true and correct by the Chief Financial Officer of
Tenant. All quarterly 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 as occurred and is continuing under the 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, (ii) except as otherwise specified in such certificate, that to
the best of such officers' knowledge, Tenant has fulfilled all of its
obligations under the Lease which are required to be fulfilled on a prior date
to such certificate, and (iii) Tenant's Tangible Net Worth and supporting
calculations.
23.4 Monthly Course Statements. Tenant will furnish to Landlord,
-------------------------
within 15 days after the end of each month during each fiscal year, a copy of
its operating statements for the Property and each of the Other Leased
Properties which shall include, without limitation, profit and loss statements,
including departmental revenue and expense analysis including rounds data and
membership data prepared on a modified accrual basis in accordance with
generally accepted accounting principles, except for depreciation, taxes,
capitalized interest and corporate and certain expense allocations, applied on a
basis consistently maintained throughout the period involved. Significant
departures from modified accrual basis will be identified in balance sheet
analysis
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<PAGE>
(i.e., accounts receivable, property, plant and equipment, capital spending and
capitalized interest).
23.5 Annual Course Statements. Tenant will furnish to Landlord within
------------------------
90 days after the end of its fiscal year a copy of its operating statements for
the Property and each of the Other Leased Properties which shall include,
without limitation, profit and loss statements, including departmental revenue
and expense analysis including rounds data and membership data prepared on a
modified accrual basis in accordance with generally accepted accounting
principles, except for depreciation, taxes, capitalized interest and corporate
and certain expense allocations, applied on a basis consistently maintained
throughout the period involved. Significant departures from modified accrual
basis will be identified in balance sheet analysis (i.e., accounts receivable,
property, plant and equipment, capital spending and capitalized interest).
23.6 Budgets. Tenant shall furnish to Landlord copies of annual
-------
budgets, including monthly breakdowns for the Property and each of the Other
Leased Properties no later than 30 days prior to the applicable fiscal year of
Tenant. Such annual budgets shall include, without limitation, repairs, capital
budgets and marketing plans for each of the Properties. If prepared by Tenant,
Tenant shall also promptly deliver to Landlord any quarterly and annual
reforecasts of the budgets.
23.7 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.
23.8 Confidentiality. Landlord represents, warrants and agrees that
---------------
all such information furnished to it by Tenant or its representatives under this
Article 23 (the "Confidential Information") will be kept confidential by
- ---------- ------------------------
Landlord in accordance with the following provisions. Landlord, its directors,
officer, employees, agents and representatives of its advisors (collectively
referred to as the "representatives") will not disclose any of the Confidential
---------------
Information now or hereafter received or obtained from Tenant or its
representatives to any third party, except as required by applicable law, legal
process or otherwise as part of the customary disclosures of the general partner
of Landlord, or except as may be required to enforce Tenant's obligations under
this Lease, without the prior written consent of Tenant; provided,
--------
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<PAGE>
however, that any such information may be disclosed to representatives of
- -------
Landlord who need to know such Confidential Information and who agree to keep
such information confidential and to be bound by this Section 23.8 to the same
------------
extent as if they were a party to this Lease. Landlord will have no obligation
hereunder with respect to any information within the Confidential Information to
the extent that such information has been made public by Tenant. Landlord
understands and acknowledges that unauthorized disclosure or use of the
Confidential Information will cause irreparable harm to Tenant, and Tenant
reserves all rights and remedies that it may have as a result of any such use of
disclosure, including injunctive and other equitable relief.
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 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 not 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. Landlord shall obtain from any holder of a Landlord
Encumbrance a nondisturbance agreement in a form reasonably acceptable to such
holder and shall deliver such nondisturbance agreement to Tenant. The
nondisturbance agreement shall protect Tenant's possession and other rights
under this Lease absent an Event of Default by Tenant hereunder.
24.3 Facility Mortgage Protection. Tenant agrees that the holder
----------------------------
of any Landlord Encumbrance shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease (unless and until it
becomes the owner of the Leased Property), 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 30 days following receipt of
such notice for the cure
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<PAGE>
of said default before invoking any remedies Tenant may have by reason thereof.
ARTICLE 25 - FINANCIAL COVENANTS
---------------------------------
25.1 Financial Covenants. Subject to Section 25.2, at all times
------------------- ------------
during the Term Tenant shall post and maintain a Letter of Credit unless and
until Tenant: (a) maintains a minimum Tangible Net Worth of at least $1,000,000
or, following a Change in Control, $1,000,000 increased by four percent per
annum compounded annually from the Commencement Date to the date of such Change
in Control; (b) maintains a Rent Coverage Ratio of not less than 1.35 to 1 for
any period encompassing four consecutive Fiscal Quarters; (c) maintains a Fixed
Charge Coverage Ratio of not less than 1.25 to 1 for any period encompassing
four consecutive Fiscal Quarters; and (d) increases for each Fiscal Quarter
during the Term the Tangible Net Worth by the amount of at least fifty percent
(50%) of Tenant's net income on a consolidated basis after taxes (without
subtracting losses) (collectively, the "Financial Covenants"). Tenant shall
-------------------
provide an Officer's Certificate to Landlord not later than 30 days after the
end of each Fiscal Quarter of Tenant as to Tenant's compliance or noncompliance
with the Financial Covenants, which certificate shall include a calculation in
reasonable detail of such compliance or noncompliance.
25.2 Provision of Letter of Credit. If any certificate delivered
-----------------------------
pursuant to Section 25.1 shall disclose that Tenant is not in compliance with
------------
the Financial Covenants at any time after the initial Letter of Credit has been
released, Tenant shall deliver to Landlord a new Letter of Credit within 30 days
after the date of such certificate, but in no event after the end of Tenant's
subsequent Fiscal Quarter. Upon delivery of such new Letter of Credit to
Landlord, no breach or default under this Lease shall arise as a result of
Tenant's failure to meet the Financial Covenants. The new Letter of Credit shall
be maintained and delivered to Landlord until such date as Tenant shall
subsequently be in compliance with the Financial Covenants for two consecutive
Fiscal Quarters.
25.3 Terms of Letter of Credit. The Letter of Credit shall:
-------------------------
(i) be 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) have 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) have a term of not less than one year;
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<PAGE>
(iv) provide 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) provide that Landlord had given not less than three Business
Day's notice to Tenant prior to submitting the Letter of Credit to the bank
for presentation; and
(vi) permit 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.
25.4 Draws Against Letter of Credit; Application of Proceeds.
-------------------------------------------------------
Landlord may draw against the Letter of Credit upon any monetary default under
this Lease or any other Event of Default hereunder. Landlord may apply any
amounts drawn under the Letter of Credit to the satisfaction of any obligations
owed to Landlord under this Lease or the Other Property Leases. Any proceeds
from the Letter of Credit drawn but not so applied shall be held by Landlord as
a security deposit.
25.5 Renewal of Letter of Credit. If the Letter of Credit shall
---------------------------
expire at a time when the Letter of Credit is still required under Section 25.1
------------
or Section 25.2, Tenant shall renew the Letter of Credit at least 30 days prior
------------
to its expiration. If Tenant shall fail to renew the Letter of Credit prior to
such time, Landlord may draw against the same and hold the proceeds thereof as a
security deposit until such time as Tenant shall renew the Letter of Credit.
Landlord shall hold such security deposit in a separate account in trust for
Tenant and shall account to Tenant for any interest earned thereon.
25.6 Liquidated Damages. The requirement for the delivery of the
------------------
Letter of Credit as required by Tenant under this Article 25 herein shall not
----------
create liquidated damages on behalf of Landlord for a default by Tenant under
this Article 25. Tenant shall be liable for Landlord's actual damages calculated
----------
as of the time of the default caused by Tenant's failure to deliver and maintain
the Letter of Credit as required under this Article 25.
----------
ARTICLE 26 - MISCELLANEOUS
--------------------------
26.1 Landlord's Right to Inspect. Upon reasonable prior notice to
---------------------------
Tenant, 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. Notwithstanding the foregoing, no prior notice to
Tenant shall be required for casual Landlord visits not imposing any
unreasonable burdens upon Tenant. Landlord shall indemnify Tenant for all
liabilities, obligations,
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<PAGE>
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Tenant by reason of Landlord's inspection pursuant to
this Section 26.1.
------------
26.2 No Waiver. No failure by either party 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 by Landlord 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.
26.3 Remedies Cumulative. To the extent permitted by law, each
-------------------
legal, equitable or contractual right, power and remedy of either party 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 either party of any
one or more of such rights, powers and remedies shall not prelude the
simultaneous or subsequent exercise by such party of any or all of such other
rights, powers and remedies.
26.4 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.
26.5 No Merger of Title. There shall be no merger of this Lease or
------------------
of the leasehold estate created hereby 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.
26.6 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.
26.7 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 Landlord or anyone claiming by, through or under Landlord,
but
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<PAGE>
subject to all liens and encumbrances contained in the title policy as of the
date hereof.
26.8 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.
26.9 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.
26.10 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.
26.11 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.
26.12 Amendments to Lease. Neither this Lease nor any provision
-------------------
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by Landlord and Tenant.
26.13 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.
26.14 Titles. The headings in this Lease are for convenience of
------
reference only and shall not limit or otherwise affect the meaning hereof.
26.15 Governing Law. This Lease shall be governed by and construed
-------------
in accordance with the internal laws of the State of South Carolina.
26.16 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 laws
of 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.
26.17 Attorney's 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
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<PAGE>
this Lease, the prevailing party shall be entitled to recover against the other
party reasonable attorneys' fees and court costs.
26.18 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; provided that the
provisions of this Section 26.18 shall not apply with respect to fraud or
-------------
intentional misconduct by Landlord.
26.19 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.
26.20 Signs; Reletting. During the last two (2) years of the Term,
----------------
Landlord shall have the right (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, subject to any security, health, safety or confidentiality requirements
of Tenant, and provided that Landlord does not materially interfere with the
operation of Tenant's business.
26.21 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
Tenant, subject to Landlord's approval which shall not be unreasonably withheld.
Tenant may identify the Leased Property as a golf course managed and operated by
Tenant and may use Tenant's logo alone or in conjunction with other words or
names or designs owned by Tenant or any of its affiliates.
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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.
Capital Expenditures: As defined in the Basic Lease Provisions.
--------------------
Capital Improvement Account: Means a deposit account in the name of
---------------------------
Tenant maintained in South Carolina with a major bank selected by Tenant.
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.
<PAGE>
Condemnation Threshold: Means $4,800,000.
----------------------
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 all Urban
--------------------
Consumers, U.S. City Average (1982-84=100), as published by the Bureau of Labor
Statistics of the United States Department of Labor.
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), initiation fees (to the extent the membership was sold on or
after 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 proceeds of
any business interruption or similar insurance actually received by Tenant;
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 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;
<PAGE>
(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;
(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;
<PAGE>
(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;
------------
(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 markup or premium; and
(s) Revenue received by any golf professional who is an employee
at the Facility for golf instruction services at the Facility
(excluding any golf school or golf seminar activities) provided
that Tenant receives no fee, mark-up or premium for such
services.
For purposes of this definition of Course Revenue, all references to
Tenant in clauses (a) through (s) 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 from
Hazardous Materials (as defined in this Exhibit "A") 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 into the air, surface water, ground water or
land, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials 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.
<PAGE>
Escalated: Means, as to any dollar amount and any date of
---------
determination, such amount as increased annually by the annual increase in the
Consumer Price Index from the month in which the Commencement Date occurs to the
month in which the date of determination occurs.
Event of Default: As defined in Section 16.1.
---------------- ------------
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.
Financial Covenants: As defined in Section 25.1.
------------------- ------------
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, 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 (including capitalized equipment
leases) 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 (including capitalized equipment leases) and rent
obligations (including percentage rent obligations) of Tenant and its
subsidiaries for such period plus (iii) all principal debt payments plus (iv)
capital improvement obligations.
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,
<PAGE>
modifications, alterations and additions thereto, but specifically excluding all
items included within the category of Tenant's Personal Property and any Tenant
Improvements.
Full Replacement Cost: Means the actual replacement cost 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) of 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:
-----------
<PAGE>
(a) all taxes (including all real and personal property, ad
valorem, sales and use, single business, gross receipts,
transaction privilege, rent or similar taxes);
(b) assessments and levies (including all assessments for public
improvements or benefits, whether or not commenced or completed
prior to the date hereof and whether or not to be completed
within the Term);
(c) excises;
(d) fees (including license, permit, inspection, authorization
and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the 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 16.9.
--------------- ------------
Impound Payment: As defined in Section 16.9.
--------------- ------------
Initial Base Rent: As defined in the Basic Lease Provisions.
-----------------
<PAGE>
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 (ii) require the cleanup or other
treatment of any Hazardous Material.
Letter of Credit: Means a letter of credit which satisfies the
----------------
requirements of Sections 25.2 and 25.3.
----------------------
Letter of Credit Amount: Means, for any Fiscal Year, an amount equal
-----------------------
to 12 months of Base Rent for such Fiscal Year.
Net From Operations: Means, for any period, Total Revenue minus the
-------------------
sum of: (a) the cost of goods sold at the Leased Property, plus (b) all
operating expenses (including all equipment and capital lease costs and property
taxes but excluding Rent, Capital Expenditures and depreciation) associated with
the operation of the Leased Property.
Officer's Certificate: A certificate of Tenant signed by an officer
---------------------
authorized to so sign by the board of directors or by-laws.
Official Records: means the Official Records of the County of Horry,
----------------
South Carolina.
<PAGE>
Other Leased Properties: Mean the properties, if any, 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 (if any).
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 (s) of the
definition of Course Revenue shall also include any subtenants, concessionaires
and licensees) and (2) gross revenue received by any provider of golf 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
trust, 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 public golf course,
--------------------
consisting of the Facility, and other activities customarily associated with or
incidental to the operation of the Facility, including sale or rental of
golf-related merchandise at a golf professional's shop, furnishing of lessons by
a golf professional, operation of a driving range, and sales of food and
beverages, including liquor sales and operation of tennis courts, athletic
facilities or overnight rental units.
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.
<PAGE>
Programs: As defined in Section 3.7.2.
-------- -------------
Related Rights: As defined in Article 1.
-------------- ---------
Rent: Collectively, the Base Rent, Additional Rent and Additional
----
Charges, all as defined in Article 3.
---------
Rent Coverage Ratio: Means, for any period, the ratio of (A) Net From
-------------------
Operations over (B) Rent for such period.
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, organizational
expense and loans to affiliates) less all liabilities and preferred stock.
Tenant: As defined in the preamble.
------
Tenant Improvement: As defined in Section 10.1.
------------------ ------------
Tenant's Original Water Rights: As defined in Section 6.7.2.
------------------------------ -------------
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.
Tenant's Properties: As defined in Section 3.7.1.
------------------- -------------
Term: As defined in the Basic Lease Provisions.
----
Total Revenue: Course Revenue plus Other Revenue.
-------------
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
<PAGE>
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 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.
<PAGE>
EXHIBIT 10.36
EXECUTIVE ORIGINAL
------------------
================================================================================
SAN GERONIMO GOLF COURSE
SAN GERONIMO
MARIN COUNTY
CALIFORNIA
L E A S E
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
Landlord
and
EVERGREEN ALLIANCE GOLF LIMITED
Tenant
Dated as of December 17, 1996
================================================================================
<PAGE>
SAN GERONIMO GOLF COURSE
SAN GERONIMO
MARIN COUNTY
CALIFORNIA
LEASE
-----
THIS LEASE ("Lease"), dated for reference purposes only December 17,
-----
1996 is entered into by and between NATIONAL GOLF OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership ("Landlord"), and EVERGREEN ALLIANCE GOLF LIMITED,
--------
a Texas limited partnership ("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 the Leased Property consisting of an 18-hole golf course,
clubhouse, driving range and related facilities located on the Land. The
Facility may also be referred to herein as the "Golf Club" or "Golf
--------- ----
Course".
------
2. Commencement Date: Means December 18, 1996.
3. Term: Twenty (20) years commencing on the Commencement Date.
4. Initial Base Rent: Means $624,691.
5. 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.
6. Annual Base Rent: Means, with respect to the Fiscal Year commencing on the
Commencement Date, the Initial Base Rent. On January 1, 1998, and on
January 1 of each following Fiscal Year through and including January 1,
2002, the Annual Base Rent shall be equal to the Annual Base Rent
applicable to the immediately preceding Fiscal Year multiplied by the
annual percentage increase in the Consumer Price Index ("CPI") from the
---
immediately preceding Fiscal Year; provided, however, the CPI increase in
Annual Base Rent for any Fiscal Year pursuant to the terms of this Section
-------
7 shall not exceed five percent per annum. The Annual Base Rent for the
-
Fiscal Year commencing on January 1, 2003, and continuing for each Fiscal
Year for the balance of the Term of this Lease shall be the amount of the
Annual Base Rent for Fiscal Year ending December 31, 2002, with no CPI
increase.
i
<PAGE>
7. Applicable Percentages:
With respect to Course Revenue, means:
For the first Fiscal Year (1996): 30%
For the second Fiscal Year (1997): 30%
For the third Fiscal Year (1998): 31%
For the fourth Fiscal Year (1999): 32%
For the fifth Fiscal Year (2000): 33%
For the sixth Fiscal Year (2001) and for each Fiscal Year
throughout the Term: 34%
With respect to Other Revenue, means 8% for each Fiscal Year
throughout the Term:
8. 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 of Course Revenue; plus
(ii) all Other Revenue for any Fiscal Year multiplied by the
Applicable Percentage of Other Revenue
exceeds (b) the Annual Base Rent for such Fiscal Year. (See Section 3.3 of
-----------
the Detailed Lease Provisions.)
9. 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.)
-----------
10. Addresses for Notices:
Tenant:
Evergreen Alliance Golf Limited
8505 Freeport Parkway, Suite 380
Irving, Texas 75063
Attention: Michael D. Lohner
Chairman and CEO
ii
<PAGE>
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, Esq.
General Counsel
(See Section 26.8 of the Detailed Lease Provisions.)
------------
11. Within 45 days after the end of the third Fiscal Year of the Term and
within 45 days after the end of each Fiscal Year thereafter, Tenant shall
fund the Capital Improvement Account by an amount calculated as 2% of the
Total Revenue for such Fiscal Year. Tenant hereby grants to Landlord a
security interest in the Capital Improvement Account. Tenant shall keep the
Capital Improvement Account and all funds therein separate from Tenant's
other accounts and funds. Tenant and Landlord shall enter into a separate
agreement between themselves and the depository bank to effectuate such
security interest. Tenant may submit an annual detailed budget for capital
improvements or capital replacements (collectively, "Capital Expenditures")
--------------------
it proposes to make to the Leased Property, which budget will be subject to
approval by Landlord not to be unreasonably withheld or delayed (the
"Approved Cap Ex Budget"). Tenant shall only use funds from the Capital
----------------------
Improvement Account to fund Capital Expenditures to the Facility. Tenant
may withdraw funds from the Capital Improvement Account only: (i) to the
extent consistent with the Approved Cap Ex Budget preserving line item
integrity on a per project basis within 110% of the amount specified or
(ii) as otherwise approved in writing by Landlord, which approval shall not
to be unreasonably withheld or delayed. Tenant shall provide Landlord with
such information as Landlord may reasonably request to confirm the
application of funds as provided in this Section 11. Tenant shall cause all
----------
amounts in the Capital Improvement Account to be expended prior to the
expiration of the Term or the earlier termination of this Lease. Tenant
shall pay to Landlord any unused amounts remaining in the Capital
Improvement Account upon the expiration of the Term or earlier termination
of this Lease.
12. Reference is made to that certain Purchase and Sale Agreement by and
between Landlord (as successor-in-interest to Tenant) and C&N Corporation,
a California corporation ("Seller"), dated as of August 19, 1996, as
------
amended (the "Purchase Agreement"). Landlord agrees to reasonably enforce
------------------
on Tenant's behalf the indemnities, covenants, representations and
warranties made by Seller in favor of Landlord under the Purchase
Agreement. Tenant and Landlord acknowledge that Tenant negotiated the
material terms and conditions of the Purchase Agreement and, except with
respect to the structural engineering condition of the improvements
located at the Leased Property, Tenant has conducted its own due diligence
in connection with the ownership and operation of the Leased Property and
that Landlord is relying on Tenant's due diligence and investigations with
respect to the ownership and operation of the Leased Property. Tenant
hereby represents and warrants to Landlord that Tenant has disclosed to
Landlord all material
iii
<PAGE>
reports, analyses, reports, studies and information obtained by Tenant in
connection with its due diligence investigations of the Leased Property.
13. Title Policy: Shall mean that certain ALTA Owner's Policy of Title
Insurance (Reference No. 216444) ("Title Policy") issued by Old Republic
------------
Title Company ("Title Company") in connection with Landlord's purchase of
-------------
the Leased Property from Seller. Tenant may elect to cause the Title
Company to issue, at Tenant's cost, a leasehold policy of title insurance
in a form substantially similar to the Title Policy insuring Tenant's
interest in the leasehold estate created by this Lease.
14. Notwithstanding any other provision in this Lease to the contrary, Tenant
shall complete those certain initial capital improvements listed on Exhibit
-------
"F" attached hereto ("Initial Capital Improvements") in accordance with the
- ----------------------------
"Budget" set forth on Exhibit "F." The Budget shall not exceed the amounts
------ ----------
set forth on Exhibit "F" 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 completion 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 by Landlord, and Landlord shall deliver to Tenant written notice of
this increased amount of the Annual Base Rent.
15. Notwithstanding any provision set forth in this Lease and any Exhibits
hereto, Tenant hereby expressly recognizes and agrees to assume all
obligations to hold the tournaments, banquets, meetings and other functions
scheduled to take place at the Leased Property after the Commencement
Date, as listed on Exhibit "G" attached hereto and incorporated herein by
----------
this reference (the "Booked Contracts"). Tenant agrees to execute any
----------------
customary assignment or assumption instrument to evidence Tenant's
assumption of the Booked Contracts and all deposits and advance payments
for the Booked Contracts shall be paid to Tenant upon the Closing (as
defined in this Purchase Agreement).
16. Tenant hereby expressly assumes all of the obligations of the Golf Course
under the contracts and agreements set forth on Exhibit "H" attached hereto
----------
and incorporated herein by this reference.
17. Upon the Commencement Date, Landlord shall sell and convey to Tenant the
professional shop merchandise, food and beverage and consummables
(collectively, the "Inventories") purchased by Landlord from Seller in
-----------
connection with Landlord's purchase of the Leased Property. Tenant shall
pay to Landlord upon the Commencement Date an amount for the conveyance of
the Inventories to Tenant, which amount (the "Inventory Payment Amount")
------------------------
shall be determined on the Closing. For purposes of calculating the Initial
Base Rent. Landlord's investment in acquiring the Leased Property shall be
reduced by the Inventory Payment Amount.
iv
<PAGE>
18. Tenant acknowledges that prior to the Commencement Date, a 550-gallon
gasoline underground storage tank was removed ("Tank Removal") from an area
------------
adjacent to the maintenance facility located on the Leased Property. In
connection with the Tank Removal, a closure permit and approval ("Closure
-------
Permit") was required to be issued by the Marin County Health and Human
------
Services Department ("Health Department") but that as of the Commencement
-----------------
Date, the Closure Permit has not been issued by the Health Department.
Tenant agrees that obtaining the Closure Permit is the obligation of Tenant
and not Landlord, and Tenant shall expeditiously and at its sole cost and
expense obtain the Closure Permit and otherwise comply with all other Legal
Requirements in connection with the Tank Removal. Tenant shall provide
Landlord with quarterly written updates as to the progress in obtaining the
closure Permit. Notwithstanding Section 8.3 of the Detailed Lease
-----------
Provisions, Tenant shall indemnify and hold harmless Landlord from any
claims, costs, expenses or actions in connection with the Tank Removal and
in obtaining the Closure Permit. Landlord's obligations under Section 8.6
-----------
of the Detailed Leased Provisions shall not apply to any matters related to
the Tank Removal or the Closure Permit.
19. Reference is made to the title insurance exception under Schedule B to the
Title Policy (the "Tunnel Exception") with respect to the golf cart tunnel
----------------
located beneath Sir Francis Drake Boulevard ("Tunnel"). The purpose of the
------
Tunnel is to provide access for golf carts between the clubhouse and the
first nine holes at the Leased Property. As referenced in the Tunnel
Exception, the Tunnel is subject to that certain Encroachment Permit
pursuant to which the County of Marin may cause the removal or relocation
of the Tunnel upon notice to the owner of the Leased Property. Tenant
acknowledges that the effect of the Tunnel Exception is that the Title
Company will not provide affirmative title insurance coverage under the
Title Policy in the event that the Tunnel is removed or relocated or if the
Tenant is otherwise prevented from using the Tunnel. If the Tunnel is
required to be removed or relocated or if Tenant is otherwise prevented
from using the Tunnel, as between Landlord and Tenant, Tenant shall bear
all costs and expenses associated with the relocation of the Tunnel and the
design, approval and construction of a new tunnel or overhead bridge
necessary or required to provide reasonable access between the clubhouse
and the first nine holes at the Leased Property (collectively, "Tunnel
------
Relocation Costs"). Tenant may use the funds held in the Capital
----------------
Improvement Account in accordance with the provisions of Section 11 of
----------
these Basic Lease Provisions for the payment of Tunnel Relocation Costs
provided that the aggregate of such costs paid with funds held in the
Capital Improvement Account shall not exceed $50,000. Landlord shall
reasonably cooperate with Tenant in exercising any rights or remedies of
Landlord or Tenant with respect to the relocation of such Tunnel.
20. Reference is made to Appropriative Application 29905 ("Application 29905")
-----------------
filed with the California State Water Resources Control Board ("Water
-----
Board") on January 19, 1991 with respect to the diversion of water flow
-----
from Larson Creek onto a portion of the Leased Property. Tenant
acknowledges and agrees that Application 29905 was recommended for approval
subject to certain conditions imposed by the Water Board. Tenant agrees
that complying with the conditions imposed by the Water Board in connection
with the approval of Application 29905 ("Water Board Conditions") is the
----------------------
v
<PAGE>
obligation of Tenant and not Landlord, and Tenant shall expeditiously and
at its sole cost and expense satisfy the Water Board Conditions and
otherwise comply with all other Legal Requirements in connection with
Application 29905. Tenant may use the funds held in the Capital Improvement
Account in accordance with the provisions of Section 11 of these Basic
----------
Lease Provisions for the payment of the costs and expenses to satisfy the
Water Board Conditions and otherwise comply with the Legal Requirements in
connection with Application 29905 provided that the aggregate of such costs
paid with funds held in the Capital Improvement Account shall not exceed
$50,000. Landlord shall reasonably cooperate with Tenant in exercising any
rights or remedies of Landlord or Tenant with respect to satisfying the
Water Board Conditions.
21. Landlord acknowledges that Tenant periodically makes distributions of its
consolidated net income to Tenant's limited partners ("Partner
-------
Distributions"). Tenant agrees that Tenant's obligation to pay Rent (as
-------------
defined in Exhibit "A") and all other obligations hereunder shall be fully
----------
satisfied on a current basis in accordance with the terms of this Lease
prior to the payment of any Partner Distributions other than the payment of
sums necessary for its limited partners to pay federal and state income
taxes on Tenant's consolidated net income.
22. As a condition to the Closing of Escrow (as defined in the Purchase
Agreement), Seller is obligated to obtain from at least 80% of the existing
members at the Golf Club executed releases in order to terminate such
memberships on or prior to the Close of Escrow. In addition, Seller is
obligated to deposit in the Holdback Account (as defined in Section 15 of
the Purchase Agreement) that was established in connection with the
Holdback Agreement (the form of which is set forth as Exhibit "K" to the
Purchase Agreement) an amount equal to the refundable portion of the
membership deposits paid by each member whose membership is not terminated
as of the Close of Escrow. The primary purpose of the Holdback Agreement is
for Seller to establish a source of funds available for the payment of
membership deposit refunds in connection with the termination of
memberships after the Close of Escrow. Landlord hereby assigns its interest
under the Holdback Agreement to Tenant in order for Tenant to have an
available source of funds for the payment of refundable membership deposits
in connection with the termination of memberships after the Close of
Escrow. Tenant hereby assumes Landlord's obligations under the Holdback
Agreement and shall otherwise satisfy the obligations of the "Buyer" under
the Holdback Agreement. All funds released from the Holdback Account and
paid to Tenant under the Holdback Agreement and not to a resigning member
shall be included within the definition of "Course Revenue" under this
Lease.
23. Tenant acknowledges that up to approximately 20% of the existing members at
the Golf Club may remain members at the Golf Club after the Commencement
Date. Tenant shall assume all of the obligations of the Golf Club under the
terms and conditions of the membership agreements and documents pursuant to
which any memberships were created ("Membership Agreements"), including
---------------------
without limitation, the obligation to pay all membership deposit and
initiation fee refunds due and payable to all members at the Golf Club in
accordance with the terms and conditions of the respective Membership
vi
<PAGE>
Agreements. Upon the Commencement Date, Tenant shall discontinue the sale
of memberships at the Golf Club pursuant to which a member would be
entitled to a refund of his or her membership deposit or initiation fee.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the date first above written.
"LANDLORD" "TENANT"
NATIONAL GOLF OPERATING EVERGREEN ALLIANCE GOLF
PARTNERSHIP, L.P., LIMITED,
a Delaware limited partnership a Texas limited partnership
By: NATIONAL GOLF PROPERTIES, INC., By: EVERGREEN ALLIANCE GOLF
a Maryland corporation MANAGEMENT, INC.,
Its General Partner a Texas corporation
Its General Partner
By: /s/ Scott S. Thompson By: /s/ Michael D. Lohner
--------------------- ---------------------
Scott S. Thompson Michael D. Lohner
General Counsel Chairman and CEO
LIST OF ATTACHMENTS AND EXHIBITS:
- --------------------------------
Detailed Lease Provisions
Exhibit A Defined Terms; Interpretation
Exhibit B Legal Description of the Land
Exhibit C Other Leased Properties
Exhibit D Operating Standards
Exhibit E Landlord's Personal Property
Exhibit F Initial Capital Improvements
Exhibit G Booked Contracts
Exhibit H Contracts to be Assumed by Tenant
vii
<PAGE>
DETAILED LEASE PROVISIONS
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 - LEASED PROPERTY.................................................. -1-
- ---------------------------
ARTICLE 2- TERM.............................................................. -1-
- ---------------
ARTICLE 3- RENT.............................................................. -1-
- ---------------
3.1 Rent................................................................ -1-
----
3.2 Base Rent........................................................... -1-
---------
3.3 Additional Rent..................................................... -2-
---------------
3.4 Additional Charges.................................................. -3-
------------------
3.5 Late Payment of Rent................................................ -3-
--------------------
3.6 Net Lease........................................................... -4-
---------
3.7 Marketing Programs.................................................. -4-
------------------
3.8 Income/Expense Prorations........................................... -5-
-------------------------
ARTICLE 4 - IMPOSITIONS...................................................... -5-
4.1 Payment of Impositions.............................................. -5-
----------------------
4.2 Information and Reporting........................................... -5-
-------------------------
4.3 Assessment Challenges............................................... -5-
--------------------
4.4 Prorations.......................................................... -6-
----------
4.5 Refunds............................................................. -6-
-------
4.6 Utility Charges..................................................... -6-
---------------
4.7 Reassessments Upon Transfer......................................... -6-
---------------------------
4.8 Assessment Districts................................................ -6-
--------------------
ARTICLE 5 - TENANT WAIVERS................................................... -6-
5.1 No Termination, Abatement, Etc. .................................... -6-
-------------------------------
5.2 Condition of the Leased Property.................................... -7-
--------------------------------
ARTICLE 6 - OWNERSHIP OF PROPERTY............................................ -8-
6.1 Leased Property..................................................... -8-
---------------
6.2 Landlord's Personal Property........................................ -8-
----------------------------
6.3 Tenant's Personal Property.......................................... -9-
--------------------------
6.4 Purchase of Tenant's Personal Property.............................. -9-
--------------------------------------
6.5 Removal of Personal Property........................................ -10-
----------------------------
6.6 Landlord's Waivers.................................................. -10-
------------------
6.7 Water Rights........................................................ -10-
------------
6.8 Liquor License...................................................... -11-
--------------
ARTICLE 7 - USE OF LEASED PROPERTY........................................... -11-
7.1 Use................................................................. -11-
---
7.2 Specific Prohibited Uses............................................ -12-
------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7.3 Membership Matters, Fees and Charges............................... -12-
------------------------------------
ARTICLE 8 - HAZARDOUS MATERIALS............................................. -13-
8.1 Representations.................................................... -13-
---------------
8.2 Remediation........................................................ -13-
-----------
8.3 Tenant's Indemnification of Landlord............................... -13-
------------------------------------
8.4 Survival of Indemnification Obligations............................ -14-
---------------------------------------
8.5 Environmental Violations at Expiration or Termination of Lease..... -14-
--------------------------------------------------------------
8.6 Landlord's Indemnification of Tenant............................... -14-
------------------------------------
ARTICLE 9 - MAINTENANCE AND REPAIR.......................................... -15-
9.1 Tenant's Sole Obligation........................................... -15-
------------------------
9.2 Waiver of Statutory Obligations.................................... -15-
-------------------------------
9.3 Mechanic's Liens................................................... -16-
----------------
9.4 Surrender of Leased Property....................................... -16-
----------------------------
ARTICLE 10- TENANT'S IMPROVEMENTS........................................... -16-
10.1 Tenant's Right to Construct....................................... -16-
---------------------------
10.2 Scope of Right.................................................... -16-
--------------
10.3 Cooperation of Landlord........................................... -17-
-----------------------
10.4 Commencement of Construction...................................... -17-
----------------------------
10.5 Rights in Tenant Improvements..................................... -18-
-----------------------------
ARTICLE 11 - LIENS, ENCROACHMENTS AND OTHER TITLE MATTERS................... -18-
11.1 Liens............................................................. -18-
-----
11.2 Encroachments and Other Title Matters............................. -19-
-------------------------------------
ARTICLE 12 - PERMITTED CONTESTS............................................. -20-
ARTICLE 13 - INSURANCE...................................................... -21-
13.1 General Insurance Requirements.................................... -21-
------------------------------
13.2 Replacement Cost.................................................. -22-
----------------
13.3 Waiver of Subrogation............................................. -22-
---------------------
13.4 Form Satisfactory, Etc. .......................................... -22-
-----------------------
13.5 Change in Limits.................................................. -23-
----------------
13.6 Blanket Policy.................................................... -23-
--------------
ARTICLE 14 - APPLICATION OF INSURANCE PROCEEDS.............................. -24-
14.1 Insurance Proceeds................................................ -24-
------------------
14.2 Reconstruction Covered by Insurance............................... -25-
-----------------------------------
14.3 Reconstruction Not Covered by Insurance........................... -27-
---------------------------------------
14.4 Waiver............................................................ -27-
------
14.5 Damage Near End of Term........................................... -28-
-----------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 15 - CONDEMNATION................................................... -28-
15.1 Total Taking...................................................... -28-
------------
15.2 Partial Taking.................................................... -28-
--------------
15.3 Restoration....................................................... -28-
-----------
15.4 Award-Distribution................................................ -28-
------------------
15.5 Temporary Taking.................................................. -29-
----------------
ARTICLE 16 - EVENTS OF DEFAULT.............................................. -29-
16.1 Events of Default................................................. -29-
-----------------
16.2 Payment of Costs.................................................. -31-
----------------
16.3 Exceptions........................................................ -31-
----------
16.4 Certain Remedies.................................................. -31-
----------------
16.5 Damages........................................................... -32-
-------
16.6 Additional Remedies............................................... -33-
-------------------
16.7 Appointment of Receiver........................................... -33-
-----------------------
16.8 Waiver............................................................ -33-
------
16.9 Application of Funds.............................................. -33-
--------------------
16.10 Impounds......................................................... -33-
--------
ARTICLE 17 - LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT...................... -34-
ARTICLE 18 - LEGAL REQUIREMENTS............................................. -34-
ARTICLE 19 - HOLDING OVER................................................... -34-
ARTICLE 20 - RISK OF LOSS................................................... -35-
ARTICLE 21 - INDEMNIFICATION................................................ -35-
21.1 Tenant's Indemnification of Landlord.............................. -35-
------------------------------------
21.2 Landlord's Indemnification of Tenant.............................. -36-
------------------------------------
21.3 Mechanics of Indemnification...................................... -36-
----------------------------
21.4 Survival of Indemnification Obligations........................... -37-
---------------------------------------
ARTICLE 22 - SUBLETTING AND ASSIGNMENT...................................... -37-
22.1 Prohibition Against Subletting and Assignment..................... -37-
---------------------------------------------
22.2 Changes of Control................................................ -37-
------------------
22.3 Subleases......................................................... -38-
---------
22.4 Assignment........................................................ -39-
----------
22.5 REIT Limitations.................................................. -39-
----------------
ARTICLE 23 - OFFICER'S CERTIFICATES AND OTHER STATEMENTS.................... -40-
23.1 Officer's Certificates............................................ -40-
----------------------
23.2 Annual Financial Statements of Tenant............................. -40-
-------------------------------------
23.3 Quarterly Financial Statements of Tenant.......................... -41-
----------------------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
23.4 Monthly Course Statements......................................... -41-
-------------------------
23.5 Annual Course Statements.......................................... -41-
------------------------
23.6 Budgets........................................................... -42-
-------
23.7 Environmental Statements.......................................... -42-
------------------------
23.8 Confidential Information.......................................... -42-
------------------------
ARTICLE 24 - LANDLORD MORTGAGES............................................. -43-
24.1 Landlord May Grant Liens.......................................... -43-
------------------------
24.2 Tenant's Non-Disturbance Rights................................... -43-
-------------------------------
24.3 Breach by Landlord................................................ -44-
------------------
24.4 Facility Mortgage Protection...................................... -44-
----------------------------
ARTICLE 25 - FINANCIAL COVENANTS............................................ -44-
25.1 Financial Covenants............................................... -44-
-------------------
25.2 Provision of Letter of Credit..................................... -45-
-----------------------------
25.3 Terms of Letters of Credit........................................ -45-
--------------------------
25.4 Draws Against Letters of Credit; Application of Proceeds.......... -46-
--------------------------------------------------------
25.5 Renewals of Letter of Credit...................................... -46-
----------------------------
25.6 Distributions by Tenant and Other Credit Impairments.............. -46-
----------------------------------------------------
25.7 Liquidated Damages................................................ -47-
------------------
25.8 Letters of Credit Not Additive.................................... -48-
------------------------------
ARTICLE 26 - MISCELLANEOUS.................................................. -48-
26.1 Landlord's Right to Inspect....................................... -48-
---------------------------
26.2 No Waiver......................................................... -48-
---------
26.3 Remedies Cumulative............................................... -48-
-------------------
26.4 Acceptance of Surrender........................................... -48-
-----------------------
26.5 No Merger of Title................................................ -49-
------------------
26.6 Convevance by Landlord............................................ -49-
----------------------
26.7 Quiet Enjoyment................................................... -49-
---------------
26.8 Notices........................................................... -49-
-------
26.9 Survival of Claims................................................ -49-
------------------
26.10 Invalidity of Terms or Provisions................................ -49-
---------------------------------
26.11 Prohibition Against Usury........................................ -49-
-------------------------
26.12 Amendments to Lease.............................................. -50-
-------------------
26.13 Successors and Assigns........................................... -50-
----------------------
26.14 Titles........................................................... -50-
------
26.15 Governing Law.................................................... -50-
-------------
26.16 Memorandum of Lease.............................................. -50-
-------------------
26.17 Attorneys' Fees.................................................. -50-
---------------
26.18 Non-Recourse as to Landlord...................................... -50-
---------------------------
26.19 No Relationship.................................................. -50-
---------------
26.20 Signs; Reletting................................................. -51-
----------------
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
26.21 Golf Course Name.................................................-51-
----------------
26.22 Judicial Reference...............................................-51-
------------------
</TABLE>
v
<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 the following real
property, improvements and related rights (collectively the "Leased Property"):
---------------
(a) the land described in Exhibit B attached hereto (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, driving ranges, 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 E
---------
attached hereto ("Landlord's Personal Property").
----------------------------
(e) any other property conveyed to Landlord pursuant to the terms of
the Purchase Agreement, including, but not limited to, all property,
included in the term "Property" as defined therein (but excluding the
Inventory).
ARTICLE 2 - TERM
----------------
The Term of this Lease shall commence on the Commencement Date.
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.
1
<PAGE>
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 Tenant's option, either (i) remit to
Tenant its check in an amount equal to such difference, or (ii) grant
Tenant a credit against the payment of Additional Rent next coming due. The
amount of the reconciliation payment, whether in favor of Landlord or
Tenant, shall bear interest from the date of such overpayment or
underpayment 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.
If the timing of the annual reconciliation as set forth in this Section
-------
3.3.2 presents an unreasonable burden on Tenant, Landlord shall consider
-----
reasonable modifications to the provisions of this Section 3.3.2 in order
-------------
to reduce such burden.
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 accrual basis accounting principles
(applied on a basis consistent with the Other Leased Properties, if any)
which will accurately record all Course Revenue and Other Revenue. Tenant
shall utilize cash basis accounting principles in accounting for the
amounts to be deposited into the Capital Improvement Account. 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
2
<PAGE>
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. Landlord shall not conduct more than two audits in any
calendar year; provided that for purposes of such limitation any audit in
which there were discrepancies in excess of $5,000 shall not count towards
such limitation.
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 otherwise provided in this Lease, including Article 12, 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 this 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
3
<PAGE>
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, deferment, 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.
------------------
3.7.1 Tenant Conflicts. Landlord and Tenant recognize that
----------------
Tenant or its affiliates may in the future acquire the ownership or
operation of other courses which compete with the Leased Property. Subject
to Tenant's compliance with this Section 3.7, Landlord acknowledges this
-----------
potential conflict of interest and agrees that it does not constitute a
breach or default of any term, condition, representation or warranty under
the Lease. Provided, however, Tenant agrees that it shall operate the
Leased Property on an arm's-length and non-discriminatory basis with
respect to other courses owned or operated by Tenant or its affiliates
("Tenant's Properties").
-------------------
3.7.2 Approval of Joint Usage Programs. Subject to Landlord's
--------------------------------
prior written approval and the provisions of this Section 3.7, Tenant may
-----------
have the Leased Property participate in joint usage programs involving the
Leased Property and properties of the Tenant other than the Leased Property
(collectively, "Programs") that Tenant may sponsor from time to time.
--------
Landlord agrees that it will not unreasonably withhold or delay its consent
to such Programs if Landlord is satisfied that such Programs would not
adversely affect the amount of Additional Rent to be payable hereunder nor
otherwise adversely affect the Leased Property relative to Tenant's
Properties. Tenant agrees as a condition to any such consent by Landlord to
such Programs, that Landlord may require Tenant to provide to Landlord
during the duration of such Programs such information (including rounds
played and average green fees) regarding the Tenant Properties included in
such Programs as Landlord may request to monitor that there are no
discriminatory impacts of the Programs approved.
3.8 Income/Expense Prorations. Income and expense items 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 date of the
commencement or expiration of the Term or earlier termination of this Lease, as
applicable.
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
- ----------
4
<PAGE>
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 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 or ownership in Landlord after the date of this
Lease.
5
<PAGE>
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, (i) Tenant, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the consent of Landlord to modify, surrender or terminate the
same, nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or set-off against the Rent by reason of, and (ii) the respective
obligations of Landlord and Tenant shall not be otherwise affected by reason of:
(a) any damage to, or destruction of, any Leased Property or any
portion thereof from whatever cause or any taking of the Leased Property or any
portion thereof;
(b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Leased Property, or any portion thereof, the interference
with such use by any Person or by reason of eviction by paramount title (other
than as provided in Section 5.3);
-----------
(c) any claim which Tenant has or might have against Landlord or by
reason of any default or breach of any warranty by Landlord under this Lease or
any other agreement between Landlord and Tenant;
(d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or
(e) for any other cause whether similar or dissimilar to any of the
foregoing other than a discharge of Tenant from any such obligations as a matter
of law.
Except as otherwise specifically provided in this Lease, 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. 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
6
<PAGE>
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, (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, (xvii) COMPLIANCE OF
THE LEASED PROPERTY WITH ANY LAW (INCLUDING ENVIRONMENTAL LAWS) OR LEGAL
REQUIREMENTS OR (xviii) LANDLORD'S TITLE THERETO. 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. Tenant acknowledges that the Leased Property is
subject to certain exceptions as referenced in the Title Policy.
6.2 Landlord's Personal Property. If Landlord has provided any
----------------------------
Landlord's Personal Property (as described in Exhibit E), 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 during the remainder of the Term.
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 (the "Replacement Property"), provided that the
Replacement Property shall be high-quality
7
<PAGE>
equipment in good working order and condition and shall be reasonably comparable
in quality and quantity to the property provided to Tenant by Landlord at the
Commencement Date. Notwithstanding Section 6.4, at the expiration or sooner
-----------
termination of this Lease, Landlord shall not be obligated to purchase from
Tenant the Replacement Property and the Replacement Property shall be conveyed
to Landlord by Tenant at no cost to Landlord.
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 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. Subject to Section 6.2,
-------------------------------------- -----------
upon the expiration or sooner termination of this Lease, Landlord shall have the
right (but not the obligation) to purchase from Tenant all, but not less than
all, of tangible Tenant's Personal Property (which shall not include software):
(i) if owned by Tenant and not subject to any secured financing
entered into in good faith by Tenant with an unaffiliated Person, at
the fair market value thereof (subject to Section 6.2);
-----------
(ii) if owned by Tenant, but subject to such 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 in good faith from an unaffiliated Person,
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 Landlord'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
upon Landlord's payment in cash to Tenant of any equity value under
the applicable lease (or portion thereof);
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 free of liens) upon concurrent payment in cash by Landlord; provided,
---------
however, if Landlord has any unpaid damages resulting from any
- -------
8
<PAGE>
Event of Default, Landlord may make payment by delivery of a receipt for an
offset against such damages to the extent of any cash payment otherwise owed by
Tenant to Landlord.
6.5 Removal of Personal Property. Subject to applicable law: (i) 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 obligation to account therefor; (ii) 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; and (iii)
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 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
------------
6.7.1 Landlord Rights. To the extent Landlord has any Water
---------------
Rights by virtue of its ownership of the Leased Property or to the extent
Landlord otherwise acquires Water Rights specifically for use by 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 existence, quantity, priority or price of any
Water Rights owned by Landlord. Landlord shall have no obligation to acquire or
expend funds to maintain the ownership of any Water Rights.
6.7.2 Tenant Rights. 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
9
<PAGE>
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.
6.8 Liquor License. Tenant shall take whatever steps are
--------------
commercially necessary to obtain a license for serving liquor at the Facility
("Liquor License") and shall keep the Liquor License in effect during the Term.
--------------
Upon the expiration of the Term or earlier termination of this Lease, Tenant
shall transfer the Liquor License to Landlord (or its designee), subject to
applicable law, for a purchase price of $1.00; provided, however, Landlord shall
pay all costs and expenses with respect to the transfer of the Liquor License to
Landlord. Tenant shall cooperate in all respects with Landlord (and its
designee) in order to effect an orderly transfer of the Liquor License to
Landlord (or its designee) including, without limitation, completing all
application forms, providing such information and documents as may be required
by applicable governmental agencies, and appearing and testifying at any public
hearings in connection with the transfer of the Liquor License to Landlord (or
its designee).
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.
Landlord and Tenant acknowledge that Landlord has acquired the Leased Property
subject to the terms of the Existing Instruments and that Tenant will be
obligated to perform all obligations under the Existing Instruments during the
Term.
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 or the
Existing Instruments, (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
10
<PAGE>
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. The Leased Property shall
------------------------------------
be operated as a "daily fee" golf course and not as a non-equity membership
country club. Subject to the limitations of this Section 7.3, (i) Tenant shall
-----------
have the right to convert the operation of the Leased Property to a non-equity
membership country club without the prior approval of Landlord and (ii) 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. Prior to the sale of any
memberships (other than annual memberships), Tenant shall notify Landlord about
its plans to adopt a membership program and shall, if requested by Landlord,
meet with Landlord to provide any information reasonably requested by Landlord
about the proposed membership program and Tenant's reasons for so doing.
Notwithstanding any other provision of this Section 7, (i) no membership shall
---------
extend beyond the expiration of the Term without Landlord's prior written
approval, which approval may be withheld at Landlord's sole and absolute
discretion and (ii) the membership applications (or other appropriate
documentation) to be signed by the members must disclose in writing the
limitation on the duration of the membership interest and of Tenant's interest
in the Leased Premises, the form of which disclosure shall be subject to the
approval of Landlord, which approval shall not be unreasonably withheld or
delayed. Tenant shall have the right to determine all fees, rates and other
charges 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.
ARTICLE 8 - HAZARDOUS MATERIALS
-------------------------------
8.1 Representations. Tenant hereby represents and warrants to
---------------
Landlord that it has disclosed to Landlord all material information with respect
to the environmental conditions of the Leased Property that Tenant obtained
prior to the Commencement Date. Landlord hereby represents and warrants to
Tenant that it has disclosed to Tenant all material information with respect to
the environmental conditions of the Leased Property that Landlord obtained prior
to the Commencement Date.
8.2 Remediation. If Tenant becomes aware of the presence of any
-----------
Hazardous Material in a quantity sufficient to require remediation or reporting
under any Environmental Law in, on or under the 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
11
<PAGE>
shall have the right, but not the obligation after written notification to
Tenant and Tenant's failure to cure as provided herein to carry out such action
and to recover all of the reasonable costs and expenses from Tenant as
Additional Charges.
8.3 Tenant's Indemnification of Landlord. Tenant shall pay, protect,
------------------------------------
indemnify, save, hold harmless and 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 to any other Person, or damages from injury to or destruction
or loss of natural resources, including the reasonable costs of assessing such
injury, destruction or loss, incurred pursuant to any Environmental Law, (b)
liability for costs and expenses of abatement, investigation, removal,
remediation, correction or clean-up, fines, damages, response costs or penalties
which arise from the provisions of any Environmental Law, or (c) liability for
personal injury or property damage arising under any statutory or common-law
tort theory, including damages assessed for the maintenance of a public
or private nuisance or for carrying on of a dangerous activity, or (d) by reason
of a breach of the representation and warranty in Section 8.1. 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 otherwise be required to indemnify Landlord (or any Facility
Mortgagee) from and against any matters, conditions or events that arose,
existed or occurred prior to the Commencement Date; provided, that this sentence
shall not relieve Tenant of its obligation to operate the Leased Property in
compliance with Environmental Laws including Tenant's obligation to maintain,
repair, remove or replace any underground storage tanks.
8.4 Survival of Indemnification Obligations. Tenant's obligations
---------------------------------------
and/or liability under this Article 8 arising during the Term hereof shall
---------
survive any termination of this Lease.
8.5 Environmental Violations at Expiration or Termination of Lease.
--------------------------------------------------------------
Notwithstanding any other provision of this Lease, 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 beyond such date with respect to the Leased Property until the
earlier to occur of (i) the completion of all remedial action in accordance with
applicable Environmental Laws or (ii) 12 months beyond such expiration or
termination date; provided, that Tenant may, upon any such extension of the
--------
Term, terminate the Term by paying to the
12
<PAGE>
Landlord such amount as is necessary in the reasonable judgment of Landlord to
complete or perform such remedial action.
8.6 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 to any other Person, or damages
from injury to or destruction or loss of natural resources, including the
reasonable costs of assessing such injury, destruction or loss, incurred
pursuant to any Environmental Law, (b) liability for costs and expenses of
abatement, investigation, removal, remediation, correction or clean-up, fines,
damages, response costs or penalties which arise from the provisions of any
Environmental Law, or (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying on
of a dangerous activity; provided, however: (i) the foregoing shall not relieve
Tenant of its obligation to operate the Leased Property in compliance with
Environmental Laws including Tenant's obligation to maintain, repair, remove or
replace any underground storage tanks installed by Tenant or at the direction of
Tenant; and (ii) nothing herein shall create in favor of Tenant a right of
set-off to be applied against the payment of Rent hereunder. Notwithstanding the
foregoing or any other provision of this Lease (including, without limitation,
Section 8.2 and Article 21), Landlord shall not be liable, or otherwise be
- ----------- ----------
required to indemnify Tenant from and against any matters, conditions or events
that arose, existed or occurred on or after the Commencement Date unless such
matters, conditions or events are caused by Landlord.
ARTICLE 9 - MAINTENANCE AND REPAIR
----------------------------------
9.1 Tenant's Sole Obligation. Subject to Unavoidable Delays, 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
unforseen or arising by reason of a condition existing prior to the commencement
of the Term of this Lease (concealed or otherwise). Subject to Unavoidable
Delays, 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 or
as may be appropriate to comply with Legal Requirements. Nothing in this Article
-------
9 shall obligate Tenant to make any
- -
13
<PAGE>
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, replacement, 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
Leased, 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
Leased or hereafter enacted.
9.3 Mechanic's Liens. Nothing contained in this Leased 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
fashions 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 be Landlord in writing, any such
- ------------
Tenant Improvement shall be made at Tenant's sole expense and shall become the
property of Landlord upon termination of this Lease. Unless made on an emergency
basis to prevent injury to Person or property, Tenant will submit plans for any
Tenant Improvement with a value of more than $100,000 in the first Fiscal Year
(and increased by three percent per annum for each subsequent Fiscal Year) to
Landlord for Landlord's prior approval, such approval not to be unreasonably
withheld or delayed. The construction and installation of any Tenant
Improvements shall be subject to the terms and conditions set forth in the
Existing Instruments.
14
<PAGE>
10.2 Scope of Right. Subject to Section 10.1 and the terms and
-------------- ------------
conditions set forth in the Existing Instruments, 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
- -----------------
Landlords's reasonable judgment, impair in any material respect 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.
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;
15
<PAGE>
(c) Landlord shall have the right at any time 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:
(a) this Lease;
(b) the matters, if any, that existed as of the Commencement Date
or which are consented to in writing by Landlord;
(c) restrictions, liens and other encumbrances which are consented
to in writing by Landlord, or any easements granted pursuant to the
provisions of Section 7.4 of this Lease;
-----------
(d) liens for those taxes of Landlord, if any, which Tenant is not
required to pay hereunder;
(e) subleases permitted by Article 24;
----------
(f) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or
payable without
16
<PAGE>
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 or liens arising from the acts of
----------
Landlord's employees or authorized agents or any Person (other than
Tenant) whose claim arose under Landlord.
11.2 Encroachments and Other Title Matters. Excepting any matters
-------------------------------------
granted or created by Landlord, 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 any adverse final determination,
either (i) obtain valid and effective waivers or settlements of all claims,
liabilities and damages resulting from each such encroachment, violation or
impairment, whether the same shall affect Landlord or Tenant; or (ii) make such
changes in the Leased Improvements, and take such other actions, as Tenant in
the good faith exercise of its judgement 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
(i) any such policy of title or other insurance, or (ii) any suit or action
against any Person involved in said matter. If Landlord is a necessary party to
any such action, Tenant shall, at Tenant's expense and with such indemnification
as Landlord shall reasonably request, have the right to pursue claims against
Landlord's title insurance or any other Person involved in said matter.
17
<PAGE>
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 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 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
18
<PAGE>
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 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, not to be unreasonably withheld. 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:
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 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
19
<PAGE>
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 or insurance. All insurance policies carried
by either party covering the Leased Property including contents, fire and
casualty insurance, shall expressly waive any right of subrogation on the part
of the insurer against the other party (including any Facility Mortgagee). The
parties hereto agree that their policies will include such waiver clause or
endorsement so long as the same are obtainable without extra cost, and in the
event of such an extra charge the other party, at its election, may pay the
same, but shall not be obligated to do so.
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 or 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
20
<PAGE>
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 to Landlord its ability to satisfy such deductible or
amount of such self-retained insurance.
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 $100,000, be paid to Landlord and held by Landlord and (ii) if less
than such amount, be paid to Tenant and held by Tenant. All such proceeds shall
be held in trust and shall be made available for reconstruction or repair, as
the case may be, of any damage to or destruction of the 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 as requested by Tenant, not more
frequently than monthly, upon not less than 15 days' notice in an
amount not exceeding the cost of the work completed since the last
disbursement, upon receipt of (A)
21
<PAGE>
satisfactory evidence of the stage of completion, the estimated total
cost of completion and performance of the work to date in a good and
workmanlike manner in accordance with the contracts, plans and
specifications, (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; and
(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.
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
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 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
22
<PAGE>
prosecutes such restoration and completes such restoration within 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 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 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 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 (i) Tenant's Personal Property
(ii) the Tenant
23
<PAGE>
Improvements and (iii) subject to inclusion in Course Revenue, Tenant's
business interruption insurance.
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 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
immediately before the damage and destruction and Landlord diligently commences
and prosecutes such restoration and completes such restoration within 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 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.
14.5 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 (i) Tenant's Personal Property, (ii) Tenant Improvements
and (iii) subject to the inclusion in Course Revenue. Tenant's business
interruption insurance.
24
<PAGE>
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.
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. To 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, provided however
that notwithstanding the preceding, to the extent that Tenant successfully
prevails against the condemning authority on a claim that the Leased Property
would have generated a given level of revenues which would have produced
Additional Rent during the period of such taking, then the appropriate portion
of the Award which is attributable to revenue that would have generated
Additional Rent for said period shall be paid to Landlord, if due and payable,
as Additional Rent.
25
<PAGE>
(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 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 90
days after commencement thereof or 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 partial or
complete Condemnation or other Unavoidable Delays, Tenant voluntarily
ceases operations on the Leased Property for a period in excess of 45
consecutive days other than relating to the closure of up to nine
holes at a time or the clubhouse in order for Tenant to carry out
renovations so long as Tenant is diligently performing such
renovations:
(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 30 days after
Tenant becomes aware of, or is notified by Landlord of the fact of,
such misrepresentation or breach of warranty;
(j) with respect to any 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;
(k) if Tenant shall make a Distribution and shall have failed to
post the Distribution Letter of Credit if and as required by Section
-------
25.6 and such default continues for five days after written notice to
----
Tenant; or
27
<PAGE>
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 seven 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;
(b) if Tenant shall fail to obtain, maintain or replace a Letter of
Credit or a Distribution Letter of Credit as required by Article 25
----------
and such default continues for three business days after written
notice to Tenant;
(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
30 days after receipt by Tenant of written notice thereof from
Landlord, 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 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
26
<PAGE>
(l) if Tenant pays any Partner Distributions prior to the payment
of Rent currently owing under this Lease.
THEN, Landlord may terminate this Lease by giving Tenant not less than
10 days' written notice (or no notice for clauses (d), (e) and (f) with respect
to Tenant) 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 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
28
<PAGE>
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.
16.7 Appointment of Receiver. Upon the entry of a court order that
-----------------------
an Event of Default has occurred, 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.
29
<PAGE>
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 on their respective due dates. Any Impound Payments which have not been
applied to Impound Charges shall be released to Tenant six months after the
Event of Default is cured without any reoccurring Event of Default. 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
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. 150% of
30
<PAGE>
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
-------------------------
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 or Landlord's employees, authorized agents or
contractors, and those claiming from, through or under Landlord) is assumed by
Tenant. In the absence of Landlord's negligence (and subject to Article 8), acts
---------
of Landlord or Landlord's employees, authorized agents or contractors, or those
claiming from, through or under Landlord, or breach of this Lease by Landlord,
which in any of the foregoing cases causes such loss or decrease in the
enjoyment and beneficial use of the Leased Property, (i) Landlord shall in no
event be answerable or accountable for any of the events mentioned in the first
sentence of this Article 20 and (ii) none of such events shall entitle Tenant
----------
to any abatement of Rent except as otherwise provided in the Lease.
ARTICLE 21 - INDEMNIFICATION
----------------------------
21.1 Tenant's Indemnification of Landlord. Subject to Article 8,
------------------------------------ ---------
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)
(collectively, "Claims"), 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):
31
<PAGE>
(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;
(f) any Claims Landlord may incur or suffer as a result of any
permitted contest by Tenant pursuant to Article 12; and
----------
(g) any Claims Landlord may incur or suffer in connection with the
Existing Instruments.
21.2 Landlord's Indemnification of Tenant. Subject to Article 8,
------------------------------------ ---------
Landlord shall protect, indemnify, save harmless and defend Tenant from and
against all Claims imposed upon or incurred by, or asserted against Tenant as a
result of (i) Landlord's or Landlord's employees, authorized agents' or
contractors' negligence, or (ii) any acts of Landlord or Landlord's employees,
authorized agents or contractors, or those claiming from, through or under
Landlord (other than such acts which are authorized under the Lease or
applicable law), or (iii) breach of this Lease by Landlord, including any Claims
Tenant may incur or suffer in connection with the Existing Instruments as a
result of any breach of this Lease by Landlord.
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 made in
----------
writing by a third party, regardless of whether an actual loss has been
suffered, so long as the indemnified party shall in good faith determine that
such claim is not frivolous and that the indemnified party may be liable for, or
otherwise incur, a loss as a result thereof and shall give notice of such
determination to the indemnifying party. The indemnified party shall permit the
indemnifying party, at its option and expense, to assume the defense of any such
claim by counsel selected by the indemnifying party and reasonably satisfactory
to the indemnified party, and to settle or otherwise dispose of the same;
provided, however, that the indemnified party may at all times participate in
- -------- -------
such defense at its expense; and provided further, however, that the
-------- ------- -------
indemnifying party shall not, in defense of any such claim, except with the
prior written consent of the indemnified party, consent to the entry of any
judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in question
to the indemnified party and its affiliates a release of all liabilities in
respect of such claims, or that does not result only in the payment of money
damages by the indemnifying party. If the indemnifying party shall fail to
undertake such defense within 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.
32
<PAGE>
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. Notwithstanding the first sentence of
this Section 22.1, an assignment of this Lease in connection with the sale,
------------
conveyance or other transfer of all or substantially all of the assets of Tenant
(whether by operation of law or otherwise) shall be treated as a Change in
Control (and therefore will be permitted if the requirements of Section 22.2.1
--------------
through Section 22.2.3 hereof are met).
--------------
22.2 Changes of Control. A Control 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");
--------
(b) the sale, conveyance or other transfer of all or substantially
all of the assets of Tenant (whether by operation of law or
otherwise), which may include a transfer of assignment of this Lease;
(c) 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 Distribution Letter of
-------------------
Credit in an amount specified in Section 25.6 is posted in favor of
------------
Landlord 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 $4,000.000 and (ii) a Fixed Charge
Coverage Ratio of not less than 1.3 to 1.0 for four consecutive Fiscal
Quarters.
33
<PAGE>
22.2.2 Operating Standards. The surviving entity shall
-------------------
operate the Leased Property at a standard at least as high 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 20 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;
(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
34
<PAGE>
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 to 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 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:
35
<PAGE>
22.2.2 Operating Standards. The surviving entity shall
-------------------
operate the Leased Property at a standard at least as high 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 20 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;
(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 Sublease. 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
34
<PAGE>
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 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;
35
<PAGE>
(c) whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of
which Tenant may have knowledge;
(d) that, except as otherwise specified, there are no proceedings
pending or, to the knowledge of the signatory, threatened, against
Tenant before or by any court or administrative agency which, if
adversely decided, would materially and adversely affect the financial
condition and operations of Tenant; and
(e) responding to such other questions or statements of fact as
Landlord shall reasonably request.
Tenant's failure to deliver such 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 90 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 regional recognized
accounting firm approved by Landlord, provided that Landlord's approval shall
not be unreasonably withheld or delayed. The financial statements shall be
prepared in accordance with generally accepted accounting principles applied on
a basis consistently maintained throughout the period involved, except with
respect to such deviations as indicated in the notations to the financial
statements. All annual financial statements shall be accompanied by a
certificate of the Chief Financial Officer (or equivalent officer) of Tenant
delivered with such statements, stating (i) that the officer knows 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 officer's 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 Quarterly Financial Statements of Tenant. Tenant will furnish to
----------------------------------------
Landlord, within 45 days after the end of each of the first three fiscal
quarters of Tenant's fiscal year, a copy of its unaudited consolidated balance
sheet as of the end of such fiscal quarter, and related unaudited consolidated
statement of income and statement of cash flows for such fiscal quarter (each
with footnotes), prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the period
involved (except with respect to such deviations as indicated in the notations
to the financial statements) and certified as true and correct by the Chief
Financial Officer (or equivalent officer) of Tenant. All quarterly financial
statements shall be accompanied by a certificate of the Chief Financial Officer
(or equivalent officer) of Tenant, delivered with such statements, stating (i)
that the officer knows of no Event of Default, or event which, upon notice or
the passage of time or both, would
36
<PAGE>
become an Event of Default, which as occurred and is continuing under the 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, (ii) except as otherwise specified in such certificate,
that to the best of such officer's knowledge. Tenant has fulfilled all of its
obligations under the Lease which are required to be fulfilled on a prior date
to such certificate, and (iii) Tenant's Tangible Net Worth and supporting
calculations.
23.4 Monthly Course Statements. Tenant will furnish to Landlord,
-------------------------
within 20 days after the end of each month during each fiscal year, a copy of
its operating statements for the Property and each of the Other Leased
Properties which shall include, without limitation, profit and loss statements,
including departmental revenue and expense analysis including rounds data and
membership data prepared on a modified accrual basis in accordance with
generally accepted accounting principles, except for depreciation, taxes,
capitalized interest and corporate and certain expense allocations, applied on a
basis consistently maintained throughout the period involved. Significant
departures from modified accrual basis will be identified in balance sheet
analysis (i.e., accounts receivable, property, plant and equipment, capital
spending and capitalized interest).
23.5 Annual Course Statements. Tenant will furnish to Landlord within
------------------------
90 days after the end of its fiscal year a copy of its operating statements for
the Property and each of the Other Leased Properties which shall include,
without limitation, profit and loss statements, including departmental revenue
and expense analysis including rounds data and membership data prepared on a
modified accrual basis in accordance with generally accepted accounting
principles, except for depreciation, taxes, capitalized interest and corporate
and certain expense allocations, applied on a basis consistently maintained
throughout the period involved. Significant departures from modified accrual
basis will be identified in balance sheet analysis (i.e., accounts receivable,
property, plant and equipment, capital spending and capitalized interest).
23.6 Budgets. Tenant shall furnish to Landlord copies of annual
-------
budgets, including monthly breakdowns for the Property and each of the Other
Leased Properties no later than 30 days prior to the applicable fiscal year of
Tenant. Such annual budgets shall include, without limitation, repairs, capital
budgets and marketing plans for each of the Properties. If prepared by Tenant,
Tenant shall also promptly deliver to Landlord any quarterly and annual
reforecasts of the budgets.
23.7 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.
37
<PAGE>
23.8 Confidential Information.
------------------------
(a) Except as otherwise provided in this Section 23.8, Landlord
------------
agrees that all financial statements, budgets, reports, and business plans
relating to Tenant (as opposed to golf course level information) (collectively,
the "Information") shall be kept confidential and shall not be disclosed by
-----------
Landlord to any other party (including without limitation, any affiliate of
Landlord) without Tenant's prior written consent, which consent may be withheld
at Tenant's sole discretion. Landlord agrees that (i) the Information shall be
disclosed only to the officers, employees, authorized representatives of
Landlord, prospective bona fide purchasers of the Leased Property and their
authorized representatives who need access to the Information (all such persons
hereinafter referred to as the "Authorized Representatives"), (ii) all of the
--------------------------
Authorized Representatives shall be informed of the confidential nature of the
Information and shall maintain the confidentiality of the Information as
provided herein, and (iii) Landlord shall exercise the same degree of care to
preserve the confidentiality of Information as Landlord and a reasonable prudent
person would to protect its own confidential information.
(b) If Landlord receives a request to disclose any Information
under subpoena or order, it shall (i) promptly notify Tenant thereof, (ii)
consult with Tenant on the advisability of taking steps to resist or narrow such
request, and (iii) if disclosure is required or deemed advisable, cooperate with
Tenant in any attempt that Tenant may make to obtain an order or other reliable
assurance that confidential treatment will be accorded to designated portions of
the Information. Landlord shall be entitled to reimbursement for its expenses,
including the fees and expenses of its counsel, in connection with action taken
pursuant to this Section 23.8(b). If Landlord is required (by oral
--------------
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar legal process) to disclose any Information
supplied to it in the course of its dealing with Tenant or its representatives.
Landlord shall provide Tenant with prompt notice of such request(s) so Tenant
may seek an appropriate protective order and/or waive Landlord's compliance with
the provisions of this Lease. If in the absence of a protective order or the
receipt of a waiver hereunder, Landlord is nonetheless, in the opinion of
Landlord's counsel, compelled to disclose any Information to any tribunal or
else stand liable for contempt or to suffer other censure or penalty, Landlord
may disclose such Information pursuant to such legal process without liability
hereunder.
(c) This Section 23.8 shall not apply to: (i) disclosures which legal
------------
counsel for Landlord advises are reasonably necessary to meet reporting or
disclosure requirements to which Landlord or its affiliates are subject,
including reporting obligations under the Securities Exchange Act of 1934, as
amended, (ii) Information which is publicly available or which is obtained by
Landlord from third party sources other any person who Landlord would have
reasonable basis to believe is bound by a confidentiality agreement with Tenant
and (iii) disclosures in connection with an exercise by Landlord of remedies
hereunder.
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 interest therein, whether to secure any borrowing
38
<PAGE>
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.
Landlord shall obtain from any holder of a Landlord Encumbrance a nondisturbance
agreement in a form reasonably acceptable to such holder and shall deliver such
nondisturbance agreement to Tenant. The nondisturbance agreement shall protect
Tenant's possession and other rights under this Lease absent an Event of Default
by Tenant hereunder.
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 or if Landlord shall have
breached any material representation or warranty made by Landlord and such
failure or beach shall continue for a period of 30 days after notice thereof
from Tenant, unless such failure or breach cannot with due diligence be cured
within a period of 30 days, in which case such failure or breach 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 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 - FINANCIAL COVENANTS
--------------------------------
25.1 Financial Covenants. Tenant shall post and maintain a Letter of
-------------------
Credit unless and until Tenant: (a) maintains a minimum Tangible Net Worth of at
least $4,000,000 or, following a Change in Control, $4,000.000 increased by the
annual increase in the CPI (not to exceed four percent per annum) compounded
annually from the Commencement Date to the date of such Change in Control; (b)
maintains a Rent Coverage Ratio of not less than 1.25 to 1.0 for any period
encompassing four consecutive Fiscal Quarters; (c) maintains a Fixed Charge
Coverage Ratio of not less than 1.3 to 1.0 for any period encompassing four
consecutive Fiscal Quarters; and (d) increases for the second Fiscal Year
through and including the eighth Fiscal
39
<PAGE>
Year the Tangible Net Worth (including within such definition for purposes of
this Section 25.1(d) any loans to affiliates of Tenant) by an amount equal to at
---------------
least fifty percent (50%) of Tenant's positive net income on a consolidated
basis after making distributions to Tenant's limited partners for the payment of
federal and state income taxes (collectively, the "Financial Covenants") in the
-------------------
Letter of Credit Amount as provided in this Article 25 and subject to the
----------
provisions set forth in the definition of "Letter of Credit Amount" in Exhibit A
----------------------- ---------
attached hereto. Tenant shall provide an Officer's Certificate to Landlord not
later than 30 days after the end of each Fiscal Quarter of Tenant as to Tenant's
compliance or noncompliance with the Financial Covenants, which certificate
shall include a calculation in reasonable detail of such compliance or
noncompliance. In addition, Tenant shall set forth any Distribution or Partner
Distribution to be made by Tenant.
25.2 Provision of Letter of Credit. If any certificate delivered
-----------------------------
pursuant to Section 25.1 shall disclose that Tenant is not in compliance with
------------
the Financial Covenants, Tenant shall deliver to Landlord a Letter of Credit
within 30 days after the date of such certificate, but in no event after the end
of Tenant's subsequent Fiscal Quarter. Upon delivery of such new Letter of
Credit to Landlord, no breach or default under this Lease shall arise as a
result of Tenant's failure to meet the Financial Covenants. The Letter of Credit
shall be maintained and delivered to Landlord until such date as: (i) Tenant
shall be in compliance with the Financial Covenants set forth in Section 25.1;
------------
and (ii) there shall be no Event of Default hereunder.
25.3 Terms of Letters of Credit. The Letter of Credit or Distribution
--------------------------
Letter of Credit shall:
(i) be 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) have a stated amount equal to the Letter of Credit Amount or
Distribution LC Amount plus, if such letters of credit are intended to
satisfy Tenant's obligations under the Other Property Leases with Landlord,
the amounts required under such other leases;
(iii) have a term of not less than one year;
(iv) provide 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 as a result of an Event of Default, and shall require no
signature or statement from any party other than Landlord;
(v) provide that Landlord had given not less than three Business Day's
notice to Tenant prior to submitting the Letter of Credit to the bank for
presentation; and
(vi) permit 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
40
<PAGE>
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.
25.4 Draws Against Letters of Credit: Application of Proceeds.
--------------------------------------------------------
Landlord may draw against the Letter of Credit or the Distribution Letter of
Credit upon any Event of Default in an amount equal to Landlord's reasonable
estimate of its damages at the time of the draw, with a right to make future
draws if such estimate proves to be inadequate. Landlord may apply any amounts
drawn under such letters of credit to the satisfaction of any obligations owed
to Landlord under this Lease or the Other Property Leases. Any proceeds from
such letters of credit drawn but not so applied shall be held by Landlord as a
security deposit and if not utilized to satisfy obligations owed to Landlord
under the Lease or Other Property Leases shall be released to Tenant six months
after the Event of Default is cured without any reoccurring Event of Default.
25.5 Renewal of Letter of Credit. If the Letter of Credit shall
---------------------------
expire at a time when the Letter of Credit is still required under Section 25.2,
------------
Tenant shall renew the Letter of Credit at least 30 days prior to its
expiration. If Tenant shall fail to renew the Letter of Credit prior to such
time, Landlord may draw against the same and hold the proceeds thereof as a
security deposit until such time as Tenant shall renew the Letter of Credit.
Landlord shall hold such security deposit in a separate account in trust for
Tenant and shall account to Tenant for any interest earned thereon.
25.6 Distributions by Tenant and
Other Credit Impairments
---------------------------
25.6.1 Posting of Distribution Letter of Credit. In addition to
----------------------------------------
Tenant's obligation to post the Letter of Credit under Section 25.2 (but
------------
subject to Section 25.8), if during the Term any of the following occurs:
------------
(i) Tenant makes a Distribution and after giving effect to the
Distribution the Tangible Net Worth is less than $4,000,000; or
(ii) a default by Tenant in any payment of principal or interest on
any obligations for borrowed money having a principal balance of
$250,000 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 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
(iii) a final, non-appealable judgment or judgments for the payment of
money in excess of $250.000 in the aggregate not fully covered
(excluding deductibles) by insurance shall be rendered against Tenant
and the same shall remain undischarged, unvacated, unbounded, or
unstayed for a period of 60 consecutive days; or
41
<PAGE>
(iv) if Tenant elects to post a Distribution Letter of Credit in lieu
of satisfying the financial covenants set forth in Section 22.2.1.
--------------
THEN Tenant shall deliver to Landlord a Distribution Letter of Credit in a
stated amount equal to the Distribution LC Amount. Tenant shall deliver to
Landlord the Distribution Letter of Credit as required by clause (i) no
later than 10 Business Days prior to making such Distribution and as
required by clause (ii) or (iii) immediately upon the occurrence thereof.
25.6.2 Cancellation or Reduction of Distribution Letter of
---------------------------------------------------
Credit. The Distribution Letter of Credit shall be:
------
(i) surrendered to the issuing bank for cancellation upon such date
that (a) the Tangible Net Worth for two consecutive Fiscal
Quarters exceeds $4,000,000, (b) no Event of Default shall have
occurred during such Fiscal Quarters and (c) neither of the
events set forth in clauses (ii) or (iii) of Section 25.6.1
--------------
shall have occurred during such Fiscal Quarters.
(ii) surrendered to the issuing bank for adjustment to the
Distribution LC Amount which would then be applicable under
Section 25.6.1 upon such date that (a) the Tangible Net Worth
--------------
equals an amount for two consecutive Fiscal Quarters such that a
higher or lower Distribution LC Amount would then be applicable
pursuant to Section 25.6.1; provided however that such
--------------
Distribution LC Amount shall only be adjusted downward if (b) no
Event of Default shall have occurred during such Fiscal Quarters
and (c) neither of the events set forth in clauses (ii) or (iii)
of Section 25.6.1 shall have occurred during such Fiscal
--------------
Quarters.
25.6.3 Renewal of Distribution Letter of Credit. If the
----------------------------------------
Distribution Letter of Credit shall expire at a time when the Distribution
Letter of Credit is still required under Section 25.6, Tenant shall renew
------------
the Distribution Letter of Credit at least 30 days prior to its expiration.
If Tenant shall fail to renew the Distribution Letter of Credit prior to
such time, Landlord may draw against the same and hold the proceeds thereof
as a security deposit until such time as Tenant shall renew the
Distribution Letter of Credit. Landlord shall hold such security deposit in
a separate account in trust for Tenant and shall account to Tenant for any
interest earned thereon.
25.7 Liquidated Damages. The requirement for the delivery of a Letter
------------------
of Credit or Distribution Letter of Credit as required by Tenant under this
Article 25 herein shall not create liquidated damages on behalf of Landlord for
- ----------
a default by Tenant under this Article 25. Tenant shall be liable for Landlord's
----------
actual damages calculated as of the time of the default caused by Tenant's
failure to deliver and maintain the Letter of Credit or Distribution Letter of
Credit as required under this Article 25.
----------
25.8 Letters of Credit Not Additive. Notwithstanding the other
------------------------------
provisions of this Article 25, if Tenant is required by the terms of this Lease
----------
to provide and maintain a Letter of Credit and a Distribution Letter of Credit.
Tenant will only be obligated to provide and
42
<PAGE>
maintain a letter of credit in the stated amount equal to the greater of the two
requirements and not the sum of the two requirements.
ARTICLE 26 - MISCELLANEOUS
--------------------------
26.1 Landlord's Right to Inspect. Upon reasonable prior notice to
---------------------------
Tenant, 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. Notwithstanding the foregoing, no prior notice to
Tenant shall be required for casual Landlord visits not imposing any
unreasonable burdens upon Tenant. Landlord shall indemnify Tenant for all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Tenant by reason of Landlord's
inspection pursuant to this Section 26.1.
------------
26.2 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.
26.3 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.
26.4 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.
26.5 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.
26.6 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 by 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.
43
<PAGE>
26.7 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 Landlord or anyone claiming by, through or under Landlord,
but subject to all liens and encumbrances contained in the title policy as of
the date hereof.
26.8 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.
26.9 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.
26.10 Invalidity of Terms of 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.
26.11 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.
26.12 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.
26.13 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.
26.14 Titles. The headings in this Lease are for convenience of
------
reference only and shall not limit or otherwise affect the meaning hereof.
26.15 Governing Law. This Lease shall be governed by and construed in
-------------
accordance with the internal laws of the State of California (but not including
its conflict of laws rules).
26.16 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.
26.17 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
44
<PAGE>
of this Lease, the prevailing party shall be entitled to recover against the
other party reasonable attorneys' fees and court costs.
26.18 Non-Resource 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 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.
26.19 No Relationship. Landlord shall in no event be construed for
---------------
any purpose to be a partner, joint venture 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 the respective business.
26.20 Signs; Relating. During the last two (2) years of the Term,
---------------
Landlord shall have the right (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.
26.21 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
Tenant, subject to Landlord's approval which shall not be unreasonably withheld.
Tenant may identify the Leased Property as a golf course managed and operated by
Tenant and may use Tenant's logo alone or in conjunction with other words or
names or designs owned by Tenant or any of its Affiliates ("Tenant-Owned
------------
Names").
- -----
26.22 Judicial Reference. Landlord and Tenant agree to waive and give
------------------
up the right to a jury trial and to submit all disputes, controversies,
differences, claims or demands, whether of fact or of law or both, relating to
or arising out of this contract, to be resolved at the request of any party, by
a trial on Order of Reference conducted by a retired judge or justice from the
panel of Judicial Arbitration & Medication Services, Inc. (JAMS) appointed
pursuant to the provisions of CCP (S) 638(1) or any amendment, addition or
successor section thereto to hear the case and report a statement of decision
thereon. The parties intend this general reference agreement to be specifically
enforceable in accordance with said section. The following procedures shall be
followed in any such reference:
26.22.1 Petition to Compel Reference. Any party seeking to
----------------------------
enforce the provision for reference contained in this agreement shall file a
petition to enforce the reference agreement in any court of competent
jurisdiction, or if an action has already been commenced
45
<PAGE>
respecting any dispute covered by this reference agreement, a motion for
reference pursuant to the provisions of CCP (S) 638.
26.22.2 Selection of Referee. The parties will attempt to
--------------------
agree on a retired judge from the JAMS panel. If they are unable to agree, JAMS
will provide a list of three available judges and each party may strike one
name from the list. The remaining judge will serve as the referee (unless he or
she is disqualified after appropriate objection pursuant to CCP (S)(S) 641 and
642). If the parties strike the same judge, leaving two remaining judges, the
parties will flip a coin. The winner of such coin flip shall strike one
additional judge, leaving one remaining judge who will serve as the referee
(unless he or she is disqualified after appropriate objection pursuant to CCP
(S)(S) 641 and 642). If any referee is disqualified under CCP (S)(S) 641 and
642, the foregoing process shall be repeated to select a new referee.
26.22.3 Prehearing Conference. The referee shall schedule a
---------------------
prehearing conference to reach agreement on procedural matters, arrange for the
exchange of information, obtain stipulations, and attempt to narrow the issues.
26.22.4 Discovery. The parties will submit a proposed
---------
discovery schedule to the referee at the prehearing conference. All discovery
methods (and sanctions and other remedies for noncompliance with same) available
to litigants under the Civil Discovery Act (CCP (S) 2016, et seq.) and means of
production permitted under CCP (S) 1985, et seq. shall be available to parties
in such reference. Such discovery may include exchanges to expert trial witness
information pursuant to CCP (S) 2034. Absent other agreement by the parties, the
parties shall be afforded not less than two months and not more than four months
to complete discovery.
26.22.5 The Hearing.
-----------
(a) Unless otherwise agreed by the parties, the hearing
shall commence within six months if the court's order for
reference.
(b) The parties shall file briefs with the referee at least
three days before the hearing, specifying the facts each
intends to prove and analyzing the applicable law.
(c) The parties shall have the right to representation by
legal counsel throughout the reference proceedings.
(d) California Evidence Code rules of evidence and
procedure relating to the conduct of the hearing, examination
of witnesses, and presentation of evidence shall apply.
(e) Any party desiring a stenographic record may secure a
court reporter to attend the proceedings. The requesting party
must notify the other parties of the arrangements in advance of
the hearing and must pay for the cost incurred.
46
<PAGE>
(f) Any party may request oral evidence to be given under
oath.
26.22.6 The Decision.
------------
(a) The referee shall issue a written statement of decision
which shall be reported to the court in accordance with CCP (S)
643 and mailed promptly to the parties.
(b) Judgment may be entered on the decision of the referee
in accordance with CCP (S) 644, and the decision may be
expected to, challenged and appealed according to law.
26.22.7 Fees and Expenses. The referee must award costs,
-----------------
including reasonable attorneys fees, to the prevailing party, if any, and may
order the referee's fees to be paid or shared by the parties in such manner as
the referee deems just.
26.22.8 Extraordinary and Interim Relief. Notwithstanding the
--------------------------------
foregoing, in the event that extraordinary or interim relief is necessary and no
referee has been appointed, Landlord or Tenant may resort to any court of
competent jurisdiction for purposes of seeking such extraordinary or interim
relief including an injunction. In the event it becomes necessary to file a
legal action or proceeding to enforce this agreement, the prevailing party in
such action or proceeding shall be entitled to recover all costs and expenses
incurred in connection with such action or proceeding, including reasonable
attorneys fees and courts costs.
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.
Capital Improvement Account: Means a deposit account in the name
---------------------------
of Tenant maintained in Texas with a major bank selected by Tenant.
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 $6,700,00.
----------------------
A-1
<PAGE>
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 all Urban
--------------------
Consumers for U.S. City Average.
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 Cash Flow: Means for any trailing twelve-month period, Total
----------------
Revenue minus the sum of: (a) the cost of goods sold, (b) all operating expenses
(including an administrative fee equal to 3% of Total Revenue, all lease costs
and property taxes but excluding depreciation and amortization), (c) an amount
for capital improvement reserves equal to 2% of Total Revenue and (d) a
management fee/lease payment to an operator of the Facility equal to the
following amounts for the respective Fiscal Year:
<TABLE>
<S> <C>
first Fiscal Year (1996): $ 50,000
second Fiscal Year (1997): $ 50,000
third Fiscal Year (1998): $100,000
fourth Fiscal Year (1999): $150,000
fifth Fiscal Year (2000): $175,000
sixth Fiscal Year (2001) and each
Fiscal Year thereafter: $225,000
</TABLE>
provided that for the first 12 months after the Commencement Date, the "trailing
twelve-month period" shall be deemed to be the projections set forth in the
column "1997" in the final pro forma signed by Landlord and Tenant, a copy of
which is attached hereto as Exhibit I.
---------
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), initiation fees (to the extent the membership was sold on or after 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), proceeds released from the
Holdback Account and paid to Tenant under the Holdback Agreement (as defined in
Section 23 of the Basic Lease Provisions) and proceeds of any business
- ----------
interruption or similar insurance actually received by Tenant; provided,
--------
however, that Course Revenues shall not include:
- -------
A-2
<PAGE>
(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 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;
A-3
<PAGE>
(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;
(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;
------------
(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; and
(s) Revenue received by any golf professional who is an employee
at the Facility for golf instruction services at the Facility
(excluding any golf school or golf seminar activities) provided
that Tenant receives no fee, mark-up or premium for such
services.
For purposes of this definition of Course Revenue, all references to
Tenant in clauses (a) through (s) above shall also include any subtenants,
concessionaires and licensees.
Course Value: Means Course Cash Flow multiplied by the following
------------
multiples depending on the respective Fiscal Year:
first Fiscal Year (1996): 10 X
second Fiscal Year (1997): 10 X
third Fiscal Year (1998): 9 X
fourth Fiscal Year (1999): 8 X
fifth Fiscal Year (2000): 7.5X
sixth Fiscal Year (2001) and
each Fiscal Year thereafter: 7 X
Date of Taking: Means the date the Condemnor has the right to
--------------
possession of the property being condemned.
A-4
<PAGE>
Distribution: Means any dividend, distribution, stock repurchase,
------------
recapitalization, affiliate loan or other similar transaction, other than
payment of sums necessary for Tenant's limited partners to pay federal and state
income taxes on Tenant's consolidated net income as permitted under Section 21
----------
of the Basic Lease Provisions, the effect of which is to reduce the Tangible Net
Worth.
Distribution Letter of Credit: Means a letter of credit which
-----------------------------
satisfies the requirements of Section 25.6.
------------
Distribution LC Amount: Means the amount, if any, by which the Course
----------------------
Value is less than $6,700,000, but in any event the Distribution LC Amount shall
be not less than 12 months of Base Rent.
Escalated: Means, as to any dollar amount and any date of
----------
determination, such amount as increased annually by the annual increase in the
Customer Price Index from the month in which the Commencement Date occurs to
the month in which the date of determination occurs.
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.
------
Event of Default: As defined in Section 16.1.
---------------- ------------
Existing Instruments: Means: (i) the easements and other matters of
--------------------
record referenced in Schedule B to the Title Policy: (ii) the Holdback
Agreement: and (iii) the Membership Agreements.
Facility: As defined in the Basic Lease Provisions.
--------
A-5
<PAGE>
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.
Financial Covenants: As defined in Section 25.1.
------------------- ------------
Financial 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, 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 local 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.
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;
A-6
<PAGE>
(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.
Holdback Agreement: As defined in the Basic Lease Provisions.
------------------
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 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
A-7
<PAGE>
(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.
-----------------
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.
------------------- ---------
A-8
<PAGE>
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 satisfies the
----------------
requirements of Section 25.3 and 25.4.
------------ ----
Letter of Credit Amount: Means, for any Fiscal Year, an amount equal
-----------------------
to one year of Base Rent for such Fiscal Year. Notwithstanding the previous
sentence, if Tenant is not required to post the Letter of Credit because Tenant
has satisfied the Financial Covenants in accordance with Section 25.1, and
------------
thereafter Tenant fails to satisfy the Financial Covenants in accordance with
Section 25.1 such that Tenant is required to re-post the Letter of Credit, the
- ------------
Letter of Credit Amount shall be reduced from an amount equal to one year of
Base Rent to an amount equal to six months of Base Rent as long as: (i) the Rent
Coverage Ratio is not less than 1.25 to 1.0: and (ii) the Fixed Charge Coverage
Ratio is greater than 1.1 to 1.0.
Membership Agreements: As defined in the Basic Lease Provision.
---------------------
Net From Operations: Means, for any period, Total Revenue minus the
-------------------
sum of: (a) the cost of goods sold at the Leased Property, plus (b) all
operating expenses (including all equipment and capital lease costs, property
taxes and corporate administrative expenses of Tenant in an amount equal to four
percent of the Total Revenue, but excluding Rent, Capital Expenditures and
depreciation) associated with the operation of the Leased Property.
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
A-9
<PAGE>
professionals' shops on the Leased Property, (iii) parking, (iv) fitness
centers, (v) tennis facilities, (vi) day care, (vii) non-golf 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 (s) of the definition of Course
Revenue (for purposes of this definition of Other Revenue, all references to
Tenant in clauses (a) through (s) of the definition of Course Revenue shall also
include any subtenants, concessionaires and licensees) and (2) gross revenue
received by any provider of golf 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.
Partner Distributions: As defined in the Basic Lease Provision.
---------------------
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 public golf course,
--------------------
consisting of the Facility, and other activities customarily associated with or
incidental to the operation of the Facility, including, without limitation, sale
or rental of golf-related merchandise at a golf professional's shop, furnishing
of lessons by a golf professional, operation of a driving range, operation of a
clubhouse and restaurant, and sale 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.
Programs: As defined in Section 3.7.2.
-------- -------------
Purchase Agreement: As defined in the Basic Lease Provisions.
------------------
Related Rights: As defined in Article 1.
-------------- ---------
Rent: Collectively, the Base Rent, Additional Rent and Additional
----
Charges, as defined in Article 3.
---------
Rent Coverage Ratio: Means, for any period, the ratio of (A) Net From
-------------------
Operations over (B) Rent for such period.
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
A-10
<PAGE>
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
------------------
(on a consolidated basis) (excluding intangibles, goodwill, patents, trademarks,
trade names, organizational expense and loans to affiliates) 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 6.7.2.
------------------------------ -------------
Tenant-Owned Names: As defined in Section 26.21.
------------------ -------------
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.
Tenant's Properties: As defined in Section 3.7.1.
------------------- -------------
Term: As defined in the Basic Lease Provisions.
----
Title Policy: As defined in the Basic Lease Provisions.
------------
Total Revenue: Course Revenue plus Other Revenue.
-------------
Unavoidable Delays: Delays due to strikes, lockouts, inability to
------------------
procure materials, power failure, acts of God, earthquake, 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.
A-11
<PAGE>
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-12
<PAGE>
EXHIBIT 10.39
AMENDMENT OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
THIS AMENDMENT OF AGREEMENT OF LIMITED PARTNERSHIP (this "Amendment"),
dated as of July 25, 1996, is entered into by National Golf Properties, Inc., a
Maryland corporation, as the general partner (the "General Partner") of National
Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership").
WHEREAS, the General Partner and the limited partners of the
Partnership (the "Limited Partners") are parties to that certain Agreement of
Limited Partnership (the "Agreement"), dated a of August 18, 1993;
WHEREAS, the General Partner has entered into an Asset Purchase
Agreement and Agreement and Plan of Merger (the "Acquisition Agreement"), dated
as of February 2, 1996 and amended on February 16, 1996, among the General
Partner, Golf Enterprises, Inc., a Kansas corporation, and GEI Acquisition
Corporation, a Kansas corporation, pursuant to which Acquisition Agreement,
among other things, the General Partner has agreed to purchase the Purchased
Assets described therein, and has the right to assign such agreement in whole or
in part to the Partnership;
WHEREAS, the General Partner intends to assign to the Partnership the
right to acquire an undivided partial interest in each of the Purchased Assets
and to pay cash therefor;
WHEREAS, the General Partner intends to acquire the remaining interest
in the Purchased Assets and contribute them to the Partnership on the terms set
forth herein;
WHEREAS, certain other changes to the definition of "Certificate of
Incorporation" and Sections 4.6 and 8.6.F of the Partnership Agreement are
necessary to reflect the General Partner's reincorporation as a Maryland
corporation and otherwise clarify and update such provisions; and
WHEREAS, the General Partner has obtained the written consent to this
Amendment of Limited Partners representing at least the minimum number of
Partnership Interests (as defined in the Partnership Agreement) required to
amend the Partnership Agreement pursuant to Section 7.3 and Article 14 of the
Partnership Agreement, which written consent is attached as Exhibit A to this
Amendment.
THEREFORE, pursuant to Section 7.3 and Article 14 of the Partnership
Agreement, the General Partner hereby amends the Partnership Agreement as
follows, effective as of the date of this Amendment. Defined terms used in this
Amendment and not otherwise defined herein shall have the same meanings as such
terms have in the Partnership Agreement.
The definition of "Certificate of Incorporation" in Article 1 is
hereby amended in its entirety as follows:
<PAGE>
""Certificate of Incorporation" means the Articles of Incorporation of
----------------------------
the General Partner file in the state of Maryland on August 31, 1995 as amended
or restated from time to time."
Section 4.5 of the Partnership Agreement is hereby amended by adding
the following at the end of such section:
"G. Special Supplemental Capital Contribution by General Partner.
------------------------------------------------------------
Notwithstanding the other provisions contained in this Article 4, immediately
following the closing of the General Partner's acquisition of an interest in
certain golf course properties and related assets (the "Purchased Assets") from
Golf Enterprises, Inc., a Kansas corporation ("GEI"), pursuant to that certain
Asset Purchase Agreement and Agreement and Plan of Merger (the "Acquisition
Agreement"), dated as of February 2, 1996 and amended on February 16, 1996 by
that certain First Amendment to the Asset Purchase Agreement and Plan of Merger,
among the General Partner, GEI Acquisition Corporation, a Kansas corporation
("Newco") and GEI, the General Partner may contribute all of its interest in the
Purchased Assets collectively as a special supplemental Capital Contribution to
the Partnership. Upon such Capital Contribution, (i) the General Partner shall
be issued that number of Partnership Units equal to the number of shares of
Purchaser Common Stock (as defined in the Acquisition Agreement) issued as
Acquisition Consideration (as defined in the Acquisition Agreement) pursuant to
the Acquisition Agreement, (ii) the Agreed Value and the Gross Asset Value of
the Contributed Property shall be equal to $40,786,649 (except in the event that
the number of shares of Purchaser Common Stock to be issued as Acquisition
Consideration has been limited by the maximum or minimum share issuance
provisions of Section 1.5(a)(i) of the Acquisition Agreement, in which case the
Agreed Value and the Gross Asset Value of the Contributed Property shall be
equal to the number of shares of Purchaser Common Stock issued as Acquisition
Consideration times the Average Purchaser Common Stock Price (as defined in the
Acquisition Agreement)), (iii) Exhibit A to this Agreement shall be
appropriately amended to reflect such issuance and the corresponding adjustments
in the Percentage Interest of each of the Partners, as well as the Agreed Value
and the Gross Asset Value of the Contributed Property, and (iv) the Capital
Account of the General Partner shall be appropriately adjusted. Following the
General Partner's contribution of its interest in the Purchased Assets to the
Partnership, the General Partner shall promptly give each Partner written notice
of its Percentage Interest and their Percentage Interests as adjusted. This
Paragraph G of Section 4.5 shall not be construed to permit any Capital
Contribution other than the contribution of the General Partner's interest in
the Purchased Assets by the General Partner."
Section 4.6 of the Partnership Agreement is hereby amended in its
entirety as follows:
"Section 4.6 Stock Option Plan
-----------------
If at any time or from time to time the General Partner is required,
pursuant to the Stock Incentive Plan, to make a contribution of REIT Shares to
the Partnership, such contribution shall be treated as an additional Capital
Contribution as provided in Section 4.5, in an amount equal to the Value
(provided, that, for these purposes, only the trading day on which
--------
2
<PAGE>
the General Partner contributes such REIT Shares to the Partnership shall be
considered) multiplied by the number of REIT Shares contributed by the General
---------- --
Partner to the Partnership. In consideration for such contribution, the General
Partner's Capital Account shall be adjusted as provided in this Agreement and
the General Partner shall be issued a number of Partnership Units equal to the
number of REIT Shares so contributed. Furthermore, if at any time or from time
to time the General Partner issues or sells REIT Shares pursuant to the Stock
Incentive Plan (other than a contribution to the Partnership as provided above),
it may contribute the proceeds therefrom to the Partnership as an additional
Capital Contribution as provided in Section 4.5. In consideration for such
contribution, the General Partner's Capital Account shall be adjusted as
provided in this Agreement and the General Partner shall be issued a number of
Partnership Units equal to the number of REIT Shares so issued or sold.
Notwithstanding the foregoing, the preemptive rights provided in Section 4.5.E.
shall not apply to the Capital Contributions described above in this Section
4.6."
Section 7.6.C of the Partnership Agreement is hereby amended by adding
the following at the end of such section:
"The General Partner also is expressly authorized to cause the
Partnership to issue to it Partnership Units corresponding to REIT Shares issued
or sold by the General Partner pursuant to the Stock Option Plan or any similar
or successor plan and to repurchase such Partnership Units from the General
Partner to the extent necessary to permit the General Partner to repurchase such
REIT Shares in accordance with such plan."
Section 8.6.F of the Partnership Agreement is hereby amended in its
entirety as follows:
"F. Notwithstanding the provisions of this Section 8.6 or any
other provision of this Agreement, a Limited Partner (i) shall not be entitled
to effect an Exchange to the extent the ownership or right to acquire REIT
Shares pursuant to such Exchange) by such Partner would cause such Partner or
any other Person to violate the restrictions on ownership and transfer of REIT
Shares set forth in the Certificate of Incorporation and (ii) shall have no
rights under this Agreement to acquire REIT Shares which would otherwise be
prohibited under the Certificate of Incorporation. To the extent any attempted
Exchange would be in violation of this Section 8.6.F., it shall be null and void
ab initio and such Limited Partner shall not acquire any rights or economic
interest in the REIT Shares otherwise issuable upon such Exchange."
The definition of "Stock Option Plan" in the Partnership Agreement is
hereby amended in its entirety as follows:
""Stock Option Plan" means the 1993 Stock Option and Incentive Plan
-----------------
for Key Employees of National Golf Properties, Inc., National Golf Operating
Partnership, L.P. and American Golf Corporation and The 1995 Independent
Director Equity Participation Plan of National Golf Properties, Inc. or any
similar or successor plans."
3
<PAGE>
Except as modified by the preceding paragraphs, the Partnership
Agreement shall continue in effect in accordance with all of the terms and
conditions contained therein.
IN WITNESS WHEREOF, the General Partner has executed this Amendment as
of the date first written above.
NATIONAL GOLF PROPERTIES, INC.
By: /s/ Richard C Price
-------------------
Richard C. Price
President
4
<PAGE>
EXHIBIT A
---------
WRITTEN CONSENT
OF THE LIMITED PARTNERS
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
The undersigned, as the limited partners (the "Limited Partners") of
National Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), hereby consent to the proposed Amendment of Agreement of Limited
Partnership of National Golf Operating Partnership, L.P., dated as of July 25,
1996, to be entered into by National Golf Properties, Inc., a Maryland
corporation, as the general partner of the Partnership (the "General Partner").
This Written Consent also shall constitute a Consent (pursuant to
Section 7.5 of the Partnership Agreement) by the Limited Partners to the General
Partner's purchase of certain properties owned by Golf Enterprises, Inc., a
Kansas corporation ("GEI"), pursuant to that certain Asset Purchase Agreement
and Agreement and Plan of Merger, dated as of February 2, 1996 and amended on
February 16, 1996, among the General Partner, GEI and GEI Acquisition
Corporation.
This Written Consent may be executed in two or more counterparts, all
of which shall be considered one and the same agreement and it being understood
that all parties need not sign the same counterpart.
__________________________________
David G. Price
The Joan P. Anawalt Revocable Trust
dated July 29, 1985, as amended
/s/ Joan P. Anawalt Ttee
----------------------------------
By:
Its:
A-1
<PAGE>
The Joan P. Anawalt Income Trust
dated August 23, 1988, as amended
/s/ Joan P. Anawalt Ttee
------------------------
By:
Its:
The Joan P. Anawalt 1993 Annuity Trust
dated August 3, 1993, as amended
/s/ Joan P. Anawalt Ttee
------------------------
By:
Its:
AMERICAN GOLF CORPORATION,
a California corporation
________________________
By:
Its:
SUPERMARINE AVIATION, LIMITED,
a California corporation
________________________
By:
Its:
A-2
<PAGE>
RSJ GOLF, INC.,
a California corporation
_______________________
By:
Its:
/s/ Richard C. Price
------------------------
Richard C. Price
/s/ Sheri L. Price
------------------------
Sheri L. Price
/s/ Edward R. Sause
------------------------
Edward R. Sause
/s/ Barbara M. Colton
------------------------
Barbara M. Colton
________________________
Richard Bermudez
/s/ Ernst C. Burns
------------------------
Ernst C. Burns
/s/ Robert H. Williams
------------------------
Robert H. Williams
A-3
<PAGE>
EXHIBIT A
---------
WRITTEN CONSENT
OF THE LIMITED PARTNERS
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
The undersigned, as the limited partners (the "Limited Partners") of
National Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), hereby consent to the proposed Amendment of Agreement of Limited
Partnership of National Golf Operating Partnership, L.P., dated as of July 25,
1996, to be entered into by National Golf Properties, Inc., a Maryland
corporation, as the general partner of the Partnership (the "General Partner").
This Written Consent also shall constitute a Consent (pursuant to
Section 7.5 of the Partnership Agreement) by the Limited Partners to the General
Partner's purchase of certain properties owned by Golf Enterprises, Inc., a
Kansas corporation ("GEI"), pursuant to that certain Asset Purchase Agreement
and Agreement and Plan of Merger, dated as of February 2, 1996 and amended on
February 16, 1996, among the General Partner, GEI and GEI Acquisition
Corporation.
This Written Consent may be executed in two or more counterparts, all
of which shall be considered one and the same agreement and it being understood
that all parties need not sign the same counterpart.
/s/ David G. Price
-----------------------
David G. Price
The Joan P. Anawalt Revocable Trust
dated July 29, 1985, as amended
_______________________
By:
Its:
A-1
<PAGE>
The Joan P. Anawalt Income Trust
dated August 23, 1988, as amended
_______________________
By:
Its:
The Joan P. Anawalt 1993 Annuity Trust
dated August 3, 1993
_______________________
By:
Its:
AMERICAN GOLF CORPORATION,
a California corporation
/s/ David G. Price
-----------------------
By:
Its:
SUPERMARINE AVIATION, LIMITED,
a California corporation
/s/ David G. Price
-----------------------
By:
Its:
A-2
<PAGE>
RSJ GOLF, INC.,
a California corporation
/s/ David G. Price
-----------------------
By:
Its:
/s/ Richard C. Price
------------------------
Richard C. Price
________________________
Sheri L. Price
/s/ Edward R. Sause
------------------------
Edward R. Sause
________________________
Barbara M. Colton
________________________
Richard Bermudez
________________________
Ernst C. Burns
________________________
Robert H. Williams
A-3
<PAGE>
EXHIBIT 10.40
SECOND AMENDMENT OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
THIS AMENDMENT OF AGREEMENT OF LIMITED PARTNERSHIP (this "Amendment"),
dated as of July 29, 1996, is entered into by National Golf Properties, Inc., a
Maryland corporation, as the general partner (the "General Partner") of National
Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership").
WHEREAS, the General Partner and the limited partners of the
Partnership (the "Limited Partners") are parties to that certain Agreement of
Limited Partnership (the "Partnership Agreement"), dated as of August 18, 1993
and as amended on July 25, 1996;
WHEREAS, Section 8.6 of the Partnership Agreement grants to each
Limited Partner certain exchange and put rights with respect to such Limited
Partnership's Partnership Units (as defined in the Partnership Agreement), which
rights are subject to specific limitations on the number of Partnership Units
that each Limited Partner may exchange or put in any Twelve-Month Period (as
defined in the Partnership Agreement);
WHEREAS, Section 8.6.G of the Partnership Agreement specifically
provides, among other things, that each Limited Partner (i) may not effect an
exchange for more than the greater of 75,000 Partnership Units or one-third of
the number of Partnership Units owned by such Limited Partner on August 18,
1993, less the number of Partnership Units made subject to a put during the same
Twelve-Month Period, and (ii) may not effect a put of more than one-third of
the number of Partnership Units owned by such Limited Partner on August 18,
1993, less the number of Partnership Units made subject to an exchange during
the same Twelve-Month Period;
WHEREAS, Section 11.3.A of the Partnership Agreement provides that
each Limited Partner may pledge its Partnership Units as collateral to a lending
institution not affiliated with such Limited Partner in a bona fide loan
transaction, and that such pledged Partnership Units may be transferred to such
leading institution in connection with the exercise of its remedies under such
loan;
WHEREAS, Section 11.3.A of the Partnership Agreement also provides
that any transferee of Partnership Units may exercise the exchange and put
rights provided in Section 8.6 of the Partnership Agreement;
<PAGE>
WHEREAS, the provisions of the Partnership Agreement are ambiguous as
to the maximum number of Partnership Units that a transferee of pledged
Partnership Units may exchange or put in any Twelve-Month Period under Section
8.6 of the Partnership Agreement;
WHEREAS, the General Partner desires to amend Section 8.6 of the
Partnership Agreement to eliminate such ambiguity;
WHEREAS, the General Partner has obtained the written consent to this
Amendment of Limited Partners representing at least the minimum number of
Partnership Interests (as defined in the Partnership Agreement) required to
amend the Partnership Agreement pursuant to Section 7.3 and Article 14 of the
Partnership Agreement, which written consent is attached as Exhibit A to this
Amendment.
THEREFORE, pursuant to Section 7.3 and Article 14 of the Partnership
Agreement, the General Partner hereby amends the Partnership Agreement as
follows, effective as of the date of this Amendment. Defined terms used in this
Amendment and not otherwise defined herein shall have the same meanings as such
terms have in the Partnership Agreement.
1. Section 8.6.G of the Partnership Agreement is hereby amended by
adding the following at the end the last paragraph of such section:
"In addition, (i) each lending institution, if any, to which
Partnership Units are transferred upon the exercise of
remedies in respect of a Pledge (as defined in Section
11.3A(iii) hereof) as contemplated by Section 11.3A(iii)
hereof (each such lending institution a "Lending Institution
Transferee") shall be entitled to exercise all rights of a
Limited Partner under this Section 8.6 as if such Lending
Institution Transferee were a Limited Partner hereunder,
provided, however, that (a) such Lending Institution
-------- -------
Transferee shall not be deemed to be a Substituted Limited
Partner for purposes of this Agreement on account of
exercising its remedies against Partnership Units, and (b)
all Lending Institution Transferees of all or any portion of
a Limited Partner's Partnership Interest, together with such
Limited Partner, shall have no greater rights under this
Section 8.6 than are available to such Limited Partner,
whether or not such Lending Institution Transferees act
individually or jointly with each other or such Limited
Partner; (ii) any two or more Lending Institution Transferees
to which Partnership Units were pledged by the same Limited
Partner or any of such Limited Partner's Affiliates may act
jointly in exercising the rights of a
<PAGE>
Limited Partner under this Section 8.6; and (iii) for
purposes of determining compliance with the restrictions set
forth in this Paragraph G, all Partnership Units of a Limited
Partner or any of its Affiliates transferred to Lending
Institution Transferees shall be considered to be owned or
held by such Limited Partner or such Affiliate, such that the
maximum number of Partnership Units as to which an Exchange
or Put may be effected by any Lending Institution Transferee
(or any two or more Lending Institution Transferees acting
jointly) at any time shall be the maximum number of
Partnership Units that such Limited Partner would then be
entitled to effect if such Partnership Interests had not been
pledged."
Except as modified by the preceding paragraph, the Partnership
Agreement shall continue in effect in accordance with all of the terms and
conditions contained therein.
IN WITNESS WHEREOF, the General Partner has executed this Amendment as
of the date first written above.
NATIONAL GOLF PROPERTIES, INC.
By: /s/ Edward R. Sause
-------------------------------
Edward R. Sause
Executive Vice President
and Secretary
<PAGE>
EXHIBIT A
---------
WRITTEN CONSENT
OF THE LIMITED PARTNERS
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
This undersigned, as the limited partners (the "Limited Partners") of
National Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), hereby consent to the proposed Second Amendment of Agreement of
Limited Partnership of National Golf Operating Partnership, L.P., to be entered
into by National Golf Properties, Inc., a Maryland corporation, as the general
partner of the Partnership (the "General Partner").
This Written Consent may be executed in two or more counterparts, all
of which shall be considered one and the same agreement and it being understood
that all parties need not sign the same counterpart.
/s/ David G. Price
-----------------------------------
David G. Price
The Joan P. Anawalt Revocable Trust
dated July 29, 1985, as amended
___________________________________
By:
Its:
A-1
<PAGE>
Exhibit A
---------
WRITTEN CONSENT
OF THE LIMITED PARTNERS
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
The undersigned, as the limited partners (the "Limited Partners") of
National Golf Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), hereby consent to the proposed Second Amendment of Agreement of
Limited Partnership of National Golf Operating Partnership, L.P., to be entered
into by National Golf Properties, Inc., a Maryland corporation, as the general
partner of the Partnership (the "General Partner").
This Written Consent may be executed in two or more counterparts, all
of which shall be considered one and the same agreement and it being understood
that all parties need not sign the same counterpart.
/s/ David G. Price
---------------------------------------
David G. Price
The Joan P. Anawalt Revocable Trust
dated July 29, 1985, as amended
/s/ Joan P. Anawalt
---------------------------------------
By:
Its:
A-1
<PAGE>
The Joan P. Anawalt Income Trust
dated August 23, 1988, as amended
/s/ Joan P. Anawalt
-----------------------------------
By:
Its:
The Joan P. Anawalt 1993 Annuity
Trust dated August 3, 1993
/s/ Joan P. Anawalt
-----------------------------------
By:
Its:
AMERICAN GOLF CORPORATION,
a California corporation
/s/ James M. Stanich
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By: James M. Stanich
Its: Executive Vice President
SUPERMARINE AVIATION, LIMITED,
a California corporation
___________________________________
By:
Its:
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RSJ GOLF, INC.,
a California corporation
/s/ James M. Stanich
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By: James M. Stanich
Its: Secretary
/s/ Richard C. Price
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Richard C. Price
/s/ Sheri L. Price
-----------------------------------
Sheri L. Price
/s/ Edward R. Sause
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Edward R. Sause
/s/ Barbara M. Colton
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Barbara M. Colton
/s/ Richard Bermudez
-----------------------------------
Richard Bermudez
/s/ Ernst C. Burns
-----------------------------------
Ernst C. Burns
/s/ Robert H. Williams
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Robert H. Williams
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EXHIBIT 10.41
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REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement (the "Agreement") is made and
entered into as of July 30, 1996, by and among NATIONAL GOLF PROPERTIES, INC., a
Maryland corporation (the "Company"), and the parties set forth on the signature
page hereto (the "Stockholders").
WHEREAS, the Stockholders are holders of shares of the Company's
common stock, par value $.01 per share (the "Common Stock");
WHEREAS, the Company has entered into a Stockholder Agreement with the
Stockholders, which requires the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions
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As used in this Agreement, the following capitalized terms shall have
the following meanings:
Exchange Act: The Securities Exchange Act of 1934, as amended from
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time to time.
NASD: National Association of Securities Dealers, Inc.
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Person: An individual, partnership, corporation, trust or
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unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in any Registration Statement, as
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amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
Registration Expenses: See Section 7 hereof.
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Registrable Securities: The shares of Common Stock (i) issued to the
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Stockholders prior to or contemporaneously herewith and (ii) issued or issuable
with respect to the Common Stock referred to in clause (i) by way of stock
dividend, stock split or in connection with a combination of stock,
recapitalization, merger, consolidation or other reorganization; provided,
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however, that a security shall cease to be a Registrable Security when (a) a
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registration statement with respect to the sale of such securities shall have
become
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effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) such securities are
permitted to be distributed pursuant to Rule 144(k) (or any successor provision
to such Rule) under the Securities Act or are otherwise freely transferable to
the public without registration pursuant to Section 4(1) of the Securities Act
(to be confirmed in a written opinion of counsel to the Company addressed to the
Stockholders) or (c) such securities shall have been otherwise transferred
pursuant to an applicable exemption under the Securities Act, new certificates
for such securities not bearing a legend restricting further transfer shall have
been delivered by the Company and such securities shall be freely transferrable
to public without registration under the Securities Act.
Registration Statement: Any registration statement of the Company
----------------------
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
Securities Act: The Securities Act of 1933, as amended from time to
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time.
SEC: The Securities and Exchange Commission.
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2. Securities Subject to this Agreement
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(a) Registrable Securities. The securities entitled to all of the
----------------------
benefits of this Agreement are the Registrable Securities.
(b) Holders of Registrable Securities. A Person is deemed to be a
---------------------------------
holder of Registrable Securities whenever such Person owns Registrable
Securities or has the right to acquire such Registrable Securities, whether or
not such acquisition has actually been effected and disregarding any legal
restrictions upon the exercise of such right.
3. Demand Registrations
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(a) Number of Demand Registrations. The Company shall be obligated
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to prepare, file and cause to become effective pursuant to this Section 3 no
more than one Registration Statement in connection with a Demand Registration
(as defined below) beginning on the first anniversary of the date hereof.
Holders of Registrable Securities may exercise demand registration rights in
accordance with the terms and conditions of this agreement so long as such
holders continue to hold Registrable Securities.
(b) Request for Registration by Certain Holders of Registrable
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Securities. At any time following the first anniversary of the date hereof, if
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the Company receives from the holder(s) of a majority of the outstanding
Registrable Securities a written request that the Company effect a registration
or qualification of such Registrable Securities (a "Demand Registration"), the
Company shall:
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(1) promptly give written notice of the proposed registration
or qualification to all other holders of Registrable Securities; and
(2) as soon as practicable, use its best efforts to effect
such registration or qualification (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under the applicable blue sky or other state securities laws
and appropriate compliance with exemptive regulations issued under the
Securities Act and any other governmental requirements or regulations) as
may be so requested and as is reasonably necessary to permit or facilitate
the sale and distribution of all or such portion of such holder's or
holders' Registrable Securities as is specified in such request, together
with all or such portion of the Registrable Securities of any other holder
or holders joining in such registration pursuant to the "piggyback"
registration rights provided in Section 4 hereof or other registration
rights agreements; provided, however, that the Company shall not be
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obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 3:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance or be
required to qualify to do business unless the Company is already
subject to service in such jurisdiction and except as may be required
by the Securities Act or subject itself to taxation in any such
jurisdiction;
(ii) within 90 days immediately following the effective
date of any registration statement pertaining to an underwritten
public offering of equity securities of the Company for its own
account, or such longer period as may be required pursuant to Section
5(a) hereof;
(iii) if, upon receipt of a request for a Demand
Registration in accordance with the provisions hereof, the Company is
advised in writing by a nationally recognized independent investment
banking firm selected by the Company to act as lead underwriter in
connection with a public offering of securities by the Company (other
than an offering in connection with employee benefit and similar plans
(a "Company Offering")) that, in such firm's opinion, a registration
at that time and on the terms requested would materially adversely
affect a Company Offering that had been contemplated by the Company
prior to receipt of the notice requesting the Demand Registration, the
Company shall not be required to effect a Demand Registration until
the earliest of (a) 90 days after completion of the Company Offering,
(b) the termination of any applicable Blackout Period (as hereinafter
defined), (c) promptly after the abandonment of such Company Offering
or (d) 120 days after the date of notice requesting a Demand
Registration; provided, however, that the Company shall be deemed to
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have abandoned a Company Offering at such time as the Company is no
longer proceeding actively or in good faith with such offering and
provided, further, that the holders so requesting the
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Demand Registration may join in the Company Offering pursuant to the
"piggyback" rights set forth in Section 4 hereof;
(iv) after the Company has effected one such Demand
Registration as specified in subsection (a) of this Section 3; or
(v) if, prior to the effectiveness of a Registration
Statement relating to Registrable Securities, the Company shall
furnish to the holders of Registrable Securities a certificate stating
that the Company has determined in the good faith judgment of the
board of directors that the sale of Registrable Securities pursuant to
the Registration Statement would require disclosure of material
non-public information the disclosure of which would have a material
adverse effect on the Company (an "Information Blackout"), then the
Company's obligation to use its best efforts to register, qualify or
comply under this Section 3 shall be deferred for a period not to
exceed the earlier of (a) the date upon which such material
information is disclosed to the public or ceases to be material or (b)
90 days after the Company makes such good faith determination (such
period being the "Blackout Period"). In the event of any such
deferral, the holders of a majority of Registrable Securities shall
have the right to withdraw their request for registration and such
withdrawn request shall not be considered a request for registration
pursuant to this Section 3.
Subject to the foregoing provisions, the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, but in any event within 60 days, after
receipt of the request or requests of the initiating holders.
(c) Effective Registration and Expenses. A registration of
-----------------------------------
Registrable Securities will not count as a Demand Registration pursuant to this
Agreement until it has become effective and has remained effective for 90 days
or until 90% of the Registrable Securities included therein have been sold, if
earlier. The Stockholders shall pay all Registration Expenses in connection with
any registration initiated as a Demand Registration, whether or not it becomes
effective.
(d) Priority on Demand Registrations. If the holder or holders of a
--------------------------------
majority of the Registrable Securities to be registered in a Demand Registration
under this Section 3 so elect by written notice to the Company, the offering of
such Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering. In the event of an underwritten offering, if
the managing underwriter or underwriters of such offering advise the Company and
the holders in writing that in their opinion the number of Registrable
Securities requested to be included in such offering is sufficiently large so as
to adversely affect the success of the offering, the Company shall include in
such registration the maximum amount of Registrable Securities which in the
opinion of such managing underwriter or underwriters can be sold without any
such adverse effect. Further, subject to the advice of the managing underwriter
or underwirters concerning the size and composition of the offering, the Company
shall include Registrable
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Securities in such registration in accordance with the following priorities: (i)
first, the Registrable Securities owned by the holder(s) of Registrable
Securities from whom the Company received a Demand Registrable pursuant to
Section 3(b); (ii) second, other securities of the Company proposed to be
included in such registration for its own account; and (iii) third, pro rata
(based upon the number of shares of Registrable Securities owned by such
holders) among the other holders of Registrable Securities who have requested to
be included in such registration pursuant to the "piggyback" registration
provisions of Section 4 or other registration rights agreements, provided,
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however, that in the event that the Company proposes to include newly issued
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securities in any Registration Statement pursuant to this Section 3 and such
securities would be excluded from such registration by operation of the priority
provision set forth above, the Company may elect to cause such Registration
Statement to be filed under Section 4 of this Agreement; provided, further, that
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in the event that the Company makes such election, all of the provisions of
Section 4 shall apply to such registration and such registration shall not be
deemed to be an exercise of a Demand Registration under this Section 3.
(e) Selection of Underwriters. If any Demand Registration is to be
-------------------------
in the form of an underwritten offering, the investment banker or bankers that
will administer the offering shall be selected by the holders of a majority of
the Registrable Securities to be included in such offering (provided that such
investment banker or bankers must be reasonably satisfactory to the Company).
The Company shall (together with all holders of Registrable Securities proposing
to distribute such securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting in the manner set forth above.
(f) Withdrawal. If any holder of Registrable Securities disapproves
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of the terms of any such underwriting, such holder may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any Registrable
Securities excluded or withdrawn from such underwriting shall also be withdrawn
from registration and shall not be transferred in a public distribution prior to
90 days after the effective date of the registration statement relating thereto,
or such shorter period of time as the underwriter may require; provided,
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however, that if by the withdrawal of such Registrable Securities a greater
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number of Registrable Securities held by other holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the priority and proportions specified in Section 3(d). Subject to
the provisions of Sections 3(b)(2)(v) and 6(m), if a holder of Registrable
Securities withdraws after exercising a Demand Registration, such holder shall
nevertheless be deemed to have utilized a Demand Registration.
4. Piggyback Registration. If at any time the Company shall determine to
----------------------
file a registration statement under the Securities Act relating to a proposed
sale to the public of any of its equity securities (other than a registration
statement in connection with mergers, acquisitions, exchange offers,
subscription offers, dividends reinvestment plans or stock options or other
employee benefit plans), the Company shall:
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(a) promptly give to each holder of a Registrable Security written
notice thereof (which notice shall include a list of the jurisdictions in which
the Company intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws, the proposed offering price, and the
plan of distribution);
(b) include in such registration (and any related qualification or
other compliance under blue sky laws) and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests to the
Company by any holder or holders of Registrable Securities, made within 30 days
after such written notice from the Company;
(c) use its best efforts to cause the managing underwriter or
underwriters, if any, of such proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing,
unless the registration statement is being filed pursuant to a Demand
Registration (in which case the priority of "piggyback" rights shall be as
provided in Section 3(d)), if the managing underwriter or underwriters of such
offering deliver a written opinion to the holders of such Registrable Securities
that marketing considerations require a limitation on the number of shares of
Common Stock or Registrable Securities offered pursuant to any registration
statement subject to this Section 4, then subject to the advice of such managing
underwriter or underwriters as to the size and composition of the offering, the
Company shall include Common Stock and other Registrable Securities in such
registration in accordance with the following priorities: (i) first, Common
Stock to be sold for the account of the Company; and (ii) second, pro rata
(based on the number of Registrable Securities owned by such holders) with
respect to all holders of Registrable Securities who have requested to be
included in the registration pursuant to this Section 4 or other registration
rights agreements. The Company shall pay all Registration Expenses in connection
with a registration initiated as a piggy-back registration, whether or not it
becomes effective.
(c) If any holder of Registrable Securities disapproves of the terms
of the underwriting of the Company's offering, such holder may elect to withdraw
therefrom by written notice to the Company and the managing underwriter at least
two days prior to the effective date of registration. Any Registrable Securities
excluded or withdrawn from such underwriting shall also be withdrawn from
registration and shall not be transferred in a public distribution prior to 90
days after the effective date of the registration statement relating thereto, or
such shorter period of time as the managing underwriter may require.
(e) If, prior to the effectiveness of a Registration Statement
including Registrable Securities pursuant to this Section 4, the Company shall
determine for any bona fide reason not to register or to delay registration of
such securities, the Company may, at its election, give written notice of such
determination to the holders of the Registrable Securities and, thereupon (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection therewith), without
prejudice, however, to the rights, if any, of any holder or holders of
Registrable Securities to request that such registration be effective as a
Demand Registration under Section 3, and (ii)
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in the case of a delay in registering, shall be permitted to delay registering
any Registrable Securities for the same period as the delay in registering such
other securities.
Holders of Registrable Securities may exercise "piggyback"
registration rights under this Section 4 at any time or from time to time, so
long as such holders continue to hold Registrable Securities.
5. Hold-Back Agreements
--------------------
(a) Restrictions on Public Sale by Holder of Registrable Securities.
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Upon the written request of the managing underwriters of an underwritten
offering in which holders of Registrable Securities are permitted to sell all of
the Registrable Securities that they have requested to be included in such
offering under paragraph 4 above, a holder of Registrable Securities shall not
effect any public sale or distribution of securities of the Company of the same
class as the securities included in such Registration Statement, including a
sale pursuant to Rule 144 under the Securities Act (except as part of such
underwritten registration), during the 7-day period prior to, and during the
90-day period following, the effective date of the Registration Statement for
each underwritten offering made pursuant to such Registration Statement.
(b) Registrations on Public Sale by the Company and Others. The
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Company agrees:
(1) not to effect any public sale or distribution of its equity
securities (or securities exchangeable for such securities), including a
sale pursuant to Regulation D under the Securities Act, during the 7-day
period prior to, and during the 90-day period following, the effective date
of the Registration Statement for each underwritten offering made pursuant
to a Registration Statement filed under Section 3 or 4 hereof, if requested
in writing by the managing underwriters (except as part of such
underwritten registration or pursuant to registrations in connection with
mergers, acquisitions, exchange offers, subscription offers, dividend
reinvestment plans or stock options or other employee benefit plans); and
(2) to use its best efforts to cause each holder of its
privately placed equity securities that are issued by the Company at any
time on or after the date of this Agreement to agree not to effect any
public sale or distribution, including a sale pursuant to Rule 144 under
the Securities Act, of any such securities during the period set forth in
clause (1) above (except as part of such underwritten registration, if and
to the extent permitted).
6. Registration Procedures
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In connection with the Company's registration obligations pursuant to
Sections 3 and 4 hereof, the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
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(a) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, furnish to the holders of the Registrable
Securities covered by such Registration Statement and the underwriters, if any,
copies of all such documents proposed to be filed, which documents shall be made
available for prior review by such holders and underwriters;
(b) prepare and file with the SEC such amendments and post-effective
amendments to any Registration Statement, and such supplements to the
Prospectus, as may be reasonably requested by any holder of Registrable
Securities or underwriters, if any, or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by the
Company or by the Securities Act or otherwise necessary to keep such
Registration Statement effective for the applicable period and cause the
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus; provided, that the Company may discontinue any
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registration of its securities which are not Registrable Securities at anytime
prior to the effective date relating thereto;
(c) promptly notify the selling holders of Registrable Securities
and the managing underwriters, if any, and (if requested by any such Person)
confirm such advice in writing,
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, and
(5) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated
therein by reference containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading:
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(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) at the request of any selling holder of Registrable Securities,
furnish to such selling holder and each managing underwriter, if any, without
charge, at least one conformed copy of the Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(f) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling holders
of Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(g) prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and each of their respective
counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such seller or underwriter reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or taxation in any such jurisdiction where it is not then so subject;
(h) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends and cause such Registrable Securities to be in
such denominations and registered in such names as such managing underwriters
may request at least two business days prior to any sale of Registrable
Securities to the underwriters;
(i) if any fact contemplated by paragraph (c)(5) above shall exist,
prepare a supplement or post-effective amendment to the Registration Statement
or the related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
(j) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which similar securities
issued by the Company are
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then listed, if requested by the holders of a majority of such Registrable
Securities or by the managing underwriters, if any;
(k) not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities and provide the
applicable transfer agent or trustee with printed certificates for the
Registrable Securities which are in a form eligible for deposit with Depositary
Trust Company;
(l) enter into customary agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection:
(1) make such representations and warranties to the holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions shall be reasonably satisfactory to the
managing underwriter, if any, and the holders of a majority of the
Registrable Securities being sold) addressed to each selling holder and the
underwriter, if any, covering the matters customarily covered in opinions
delivered to underwriters in primary underwritten offerings and such other
matters as may be reasonably requested by such holders or underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
holders of Registrable Securities and the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings;
(4) if an underwriting agreement is entered into, cause the same
to include the indemnification and contribution provisions and procedures
of Section 8 hereof with respect to all parties to be indemnified pursuant
to such Section (or, with respect to the indemnification of such
underwriters, such similar indemnification and contribution provisions as
such underwriters shall customarily require); and
(5) deliver such documents and certificates as may be requested
by the holders of a majority of the Registrable Securities being sold and
the managing underwriter, if any, to evidence compliance with clause (1)
above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by the holders
of a majority of the Registrable Securities being sold.
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(m) Blackout Periods.
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(1) At any time when a Registration Statement relating to
Registrable Securities is effective, upon written notice of an Information
Blackout from the Company to holders of Registrable Securities, the selling
holders of Registrable Securities shall suspend sales of Registrable
Securities pursuant to such Registration Statement until the earlier of:
(i) termination of the Blackout Period, or
(ii) such time as the Company notifies the selling
holders of Registrable Securities that sales pursuant to such
Registration Statement may be resumed (the number of days from
such suspension of sales by the selling holders of Registrable
Securities until the day when such sales may be resumed hereunder
is hereinafter called a "Sales Blackout Period").
(2) Any delivery by the Company of notice of an Information
Blackout during the 90 days immediately following effectiveness of any
registration statement effected pursuant to Section 3 hereof shall give the
selling holders of Registrable Securities the right, by written notice to
the Company within 10 days after the end of such period, to cancel such
registration and such registration shall not count as a Demand Registration
under Section 3 hereof.
(3) If there is an Information Blackout and the selling
holders of Registrable Securities do not exercise their cancellation right,
if any, pursuant to (2) above, or, if such cancellation right is not
available, the time period set forth in Section 3(c) shall be extended for
a number of days equal to the number of days in the Sales Blackout Period.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing. Each holder of
Registrable Securities as to which any registration is being effected may
require the Company to furnish to it such information and documents as such
holders may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (i) above, such holder
shall forthwith discontinue disposition of Registrable Securities until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by paragraph (i) above, or until it is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the Prospectus, and, if so directed by the Company, such holder shall deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such holder's possession, of the Prospectus covering such
Registrable Securities at the time
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of receipt of such notice. Each holder of Registrable Securities agrees that it
will immediately notify the Company at any time when a prospectus relating to
the registration of such Registrable Securities is required to be delivered
under the Securities Act of the happening of an event as a result of which
information previously furnished by such holder to the Company in writing for
inclusion in such prospectus contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances in
which they were made. In the event the Company or a holder shall give any such
notice, the time periods mentioned in Section 3(c) hereof shall be extended by
the number of days during the period from and including the date of the giving
of such notice to and including the date when each seller of Registrable
Securities covered by such Registration Statement either receives the copies of
the supplemented or amended prospectus contemplated by paragraph (i) above or is
advised in writing by the Company that the use of the Prospectus may be resumed.
7. Registration Expenses
---------------------
All expenses incident to the Company's performance of or compliance
with this Agreement shall be paid by the Stockholders, regardless of whether the
Registration Statement becomes effective, including, without limitation:
(1) all registration and filing fees (including, without
limitation, fees and expenses with respect to filings required to be made
with the NASD) and stock exchange listing fees;
(2) fees and expenses of compliance with securities or blue sky
laws (including, without limitation, fees and disbursements of counsel for
the underwriters or selling holders in connection with blue sky
qualifications of the Registrable Securities);
(3) printing (including, without limitation, expenses of
printing or engraving certificates for the Registrable Securities in a form
eligible for deposit with Depositary Trust Company and of printing
prospectuses), messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company and of
attorneys for the sellers of Registrable Securities;
(5) fees and disbursements of all independent certified public
accountants of the Company (including, without limitation, the expenses of
any special audit and "cold comfort" letters required by or incident to
such performance);
(6) fees and disbursements of underwriters (including discounts,
commissions or fees or underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of
the Registrable Securities, transfer taxes, if any, or legal expenses of
any Person other than the Company and the selling holders);
12
<PAGE>
(all such expenses being herein called "Registration Expenses").
The Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties) and the expense of any annual audit.
8. Indemnification
---------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each holder of Registrable Securities, its officers,
directors, employees and agents and each Person who controls such holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes hereinafter referred to as an
"Indemnified Holder") from and against all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation and legal expenses)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information furnished in writing to the Company by
suchholder expressly for use therein; provided, however, that the Company shall
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
prospectus if (i) such holder (or an underwriter on behalf of such holder)
failed to send or deliver a copy of the Prospectus with or prior to the delivery
of written confirmation of the sale of the Registrable Securities and (ii) the
Prospectus would have corrected such untrue statement or omission; and provided,
--------
further, that the Company shall not be liable in any such case to the extent
- -------
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the Prospectus, if such untrue statement or alleged untrue
statement or omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and if, having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such holder (or an underwriter on behalf of such holder)
thereafter fails to deliver such Prospectus as so amended or supplemented prior
to or concurrently with the sale of a Registrable Security to the person
asserting such loss, claim, damage, liability or expense who purchased such
Registrable Security from such holder. This indemnify shall be in addition to
any liability which the Company may otherwise have. The Company shall also
indemnify underwriters participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the Indemnified
Holders.
If any action or proceeding (including and governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which
13
<PAGE>
indemnify may be sought from the Company, such Indemnified Holder shall promptly
notify the Company in writing, and the Company shall assume the defense thereof
(including the employment of counsel reasonably satisfactory to such
Indemnified Holder) and the payment of all expenses. Such Indemnified Holder
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be paid by such Indemnified Holder unless (a) the Company has agreed to
pay such fees and expense or (b) the Company shall have failed to assume the
defense of such action or proceeding or shall have failed to employ counsel
reasonably satisfactory to such Indemnified Holder in any such action or
proceeding or (c) the named parties to any such action or proceeding (including
any impleaded parties) include both such Indemnified Holder and the Company, and
such Indemnified Holder shall have been reasonably advised by counsel that
representation of both parties by the same counsel would be inappropriate due to
actual or potential material differing interests between them (in which case, if
such Indemnified Holder notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Holder, it being understood, however, that the Company shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
such Indemnified Holder and any other Indemnified Holders). The Company shall
not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if
there be a final judgement for the plaintiff in any such action or proceeding,
the Company agrees to indemnify and hold harmless such Indemnified Holders from
and against any loss or liability by reason of such settlement or judgement.
(b) Indemnification by Holder of Registrable Securities. Each holder
---------------------------------------------------
of Registrable Securities agrees to indemnify and hold harmless the Company, its
directors and officers and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnify from the Company to
such holder, but only with respect to information relating to such holder
furnished in writing by such holder expressly for use in any Registration
Statement or Prospectus, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person,
in respect of which indemnity may be sought against a holder of Registrable
Securities, such holder shall have the rights and duties given to the Company
and the Company or its directors or officers or such controlling person shall
have the rights and duties given to each holder by the preceding paragraph. In
no event shall the liability of any selling holder of Registrable Securities
hereunder be greater than the dollar amount of the proceeds received by such
holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
The Company and each holder of Registrable Securities shall be
entitled to received indemnities from underwriters to the same extent as
provided above with respect to information so furnished in writing by them
specifically for inclusion in any Prospectus or
14
<PAGE>
Registration Statement or any amendment or supplement thereto, or any
preliminary prospectus
(c) Contribution. If the indemnification provided for in this
------------
Section 8 is unavailable to an indemnified party under Section 8(a) or Section
8(b) hereof (other than by reason of exceptions provided in those Sections) in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and of the Indemnified Holder, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omissions. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 8(c)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
8(c), an Indemnified Holder shall not be required to contribute any amount in
excess of the amount by which the total price at which the securities sold by
such Indemnified Holder or its affiliated Indemnified Holders and distributed to
the public exceeds the amount of any damages which such Indemnified Holder or
its affiliated Indemnified Holders has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
9. Rule 144
--------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder and will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon
15
<PAGE>
the request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
information and requirements.
10. Participation in Underwritten Registrations
-------------------------------------------
No holder of Registered Securities (or its successors or assigns) may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the underwriters and other Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
11. Miscellaneous
-------------
(a) Remedies. In addition to being entitled to exercise all rights
--------
provided herein and granted by law, including recovery of damages, each holder
of Restricted Securities shall be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) Adjustments Affecting Registrable Securities. The Company shall
--------------------------------------------
not take action, or permit any change to occur, with respect to the combination
or subdivision of Registrable Securities which would (i) adversely affect the
ability of the holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement or (ii)
adversely affect the marketability of such Registrable Securities in any such
registration.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of holders
of at least a majority of the outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by the holders of a
majority of the Registrable Securities being sold.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery;
(1) if to a holder of Registrable Securities, at the most
current address given by such holder to the Company in accordance with the
provisions
16
<PAGE>
hereof, which address initially is the address of the Company's principal
executive offices; and
(2) if to the Company, initially at the address of the Company's
principal executive offices, with a copy to Latham & Watkins, 633 West
Fifth Street, Suite 4000, Los Angeles, California 90071, Attention: John M.
Newell, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received if
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
(e) Transfer of Registration Rights. Holders of Registrable
-------------------------------
Securities may not transfer the registration rights granted hereunder to any
Person.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of California without regard
to the choice of law provisions thereof.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
such provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained
17
<PAGE>
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the registration
rights granted by the Company with respect to the Registrable Securities. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the date above written.
NATIONAL GOLF PROPERTIES, INC.
By:_____________________________
STOCKHOLDERS:
GOLDER, THOMA, CRESSEY FUND II
By: GOLDER, THOMA, CRESSEY &
RAUNER, L.P.
Its: General Partner
By:_____________________________
Its:____________________________
GOLDER, THOMA, CRESSEY
FUND III LIMITED PARTNERSHIP
By: GOLDER, THOMA, CRESSEY &
RAUNER, L.P.
Its: General Partner
By:_____________________________
Its:____________________________
/s/ Robert H. Williams
--------------------------------
ROBERT H. WILLIAMS
18
<PAGE>
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
PRIMARY
Net income........................... $ 13,412 $ 13,286 $ 11,876
----------- ----------- -----------
Weighted average number of shares
outstanding......................... 11,317,016 10,621,975 10,611,790
Incremental shares resulting from
stock options....................... 103,365 20,816 4,581
----------- ----------- -----------
Weighted average number of common
stock and common stock equivalents.. 11,420,381 10,642,791 10,616,371
----------- ----------- -----------
Primary earnings per share........... $ 1.17 $ 1.25 $ 1.12
----------- ----------- -----------
FULLY DILUTED
Net income........................... $ 13,412 $ 13,286 $ 11,876
----------- ----------- -----------
Weighted average number of shares
outstanding......................... 11,317,016 10,621,975 10,611,790
Incremental shares resulting from
stock options....................... 174,101 55,926 42,204
----------- ----------- -----------
Weighted average number of common
stock and common stock equivalents.. 11,491,117 10,677,901 10,653,994
----------- ----------- -----------
Fully diluted earnings per share..... $ 1.17 $ 1.24 $ 1.11
----------- ----------- -----------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of National Golf Properties, Inc. on Form S-8 (and related prospectus) (File
No. 33-67350), of our report dated March 4, 1997, on our audits of the
consolidated financial statements and financial statement schedule of National
Golf Properties, Inc. as of December 31, 1996 and 1995, and for each of the
three years in the period ended December 31, 1996, which report is included in
this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 4, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
GOLF PROPERTIES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,224
<SECURITIES> 286
<RECEIVABLES> 2,971
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,510
<PP&E> 515,794
<DEPRECIATION> 73,031
<TOTAL-ASSETS> 469,945
<CURRENT-LIABILITIES> 3,775
<BONDS> 229,949
0
0
<COMMON> 123
<OTHER-SE> 215,267
<TOTAL-LIABILITY-AND-EQUITY> 469,945
<SALES> 0
<TOTAL-REVENUES> 60,097
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,858
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,067
<INCOME-PRETAX> 24,520
<INCOME-TAX> 256
<INCOME-CONTINUING> 24,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,412
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
