<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 1-12246
NATIONAL GOLF PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
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)
(310) 664-4100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
12,637,045 shares of common stock, $.01 par value, as of August 4, 1999
Page 1 of 23
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets of National Golf Properties,
Inc. as of June 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations of National Golf
Properties, Inc. for the three months ended June 30,
1999 and 1998 4
Consolidated Statements of Operations of National Golf
Properties, Inc. for the six months ended June 30, 1999
and 1998 5
Consolidated Statements of Cash Flows of National Golf
Properties, Inc. for the six months ended June 30, 1999
and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 19
Part II. Other Information 20
Exhibit Index 23
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ---------------
<S> <C> <C>
ASSETS
Property:
Land $ 99,416 $ 77,317
Buildings 261,095 202,920
Ground improvements 426,972 332,066
Furniture, fixtures and equipment 50,559 39,341
Construction in progress 13,702 11,374
--------- ---------
851,744 663,018
Less: accumulated depreciation (136,991) (121,095)
--------- ---------
Net property 714,753 541,923
Cash and cash equivalents 1,296 1,711
Investments 200 1,295
Mortgage notes receivable 27,855 24,849
Investment in joint venture 7,447 7,630
Due from affiliate 532 958
Other assets, net 19,433 18,929
--------- ---------
Total assets $ 771,516 $ 597,295
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 469,321 $ 283,405
Accounts payable and other liabilities 12,875 15,011
--------- ---------
Total liabilities 482,196 298,416
--------- ---------
Minority interest 161,437 166,655
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized - none issued - -
Common stock, $.01 par value, 40,000,000 shares authorized,
12,636,545 and 12,519,745 shares issued and outstanding at
June 30, 1999 and December 31, 1998, respectively 126 125
Additional paid in capital 132,688 135,205
Unamortized restricted stock compensation (4,931) (3,106)
--------- ---------
Total stockholders' equity 127,883 132,224
--------- ---------
Total liabilities and
Stockholders' equity $ 771,516 $ 597,295
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Revenues:
Rent from affiliates $ 25,464 $ 17,873
Rent 294 823
Equity in income from joint venture 107 101
Gain on sale of property 359 -
----------- --------
Total revenues 26,224 18,797
----------- --------
Expenses:
General and administrative 1,247 1,134
Depreciation and amortization 9,545 6,502
----------- --------
Total expenses 10,792 7,636
----------- --------
Operating income 15,432 11,161
Other income (expense):
Interest income from affiliates 280 -
Interest income 220 105
Gain on property condemnation - 993
Other income 239 1
Treasury lock settlement (2,016) -
Interest expense (9,629) (4,531)
----------- --------
Income before provision for taxes and
minority interest 4,526 7,729
Provision for taxes (58) (58)
----------- --------
Income before minority interest 4,468 7,671
Income applicable to minority interest (2,927) (4,167)
----------- --------
Net income $ 1,541 $ 3,504
=========== ========
Basic earnings per share $ 0.12 $ 0.28
Weighted average number of shares 12,636 12,504
Diluted earnings per share $ 0.12 $ 0.28
Weighted average number of shares 12,696 12,619
Distribution declared per common share outstanding $ 0.44 $ 0.43
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, 1999 June 30, 1998
--------------- ---------------
<S> <C> <C>
Revenues:
Rent from affiliates $ 45,135 $ 36,859
Rent 1,130 1,646
Equity in income from joint venture 212 190
Gain on sale of property 359 -
------------- ----------
Total revenues 46,836 38,695
------------- ----------
Expenses:
General and administrative 2,626 2,524
Depreciation and amortization 16,895 13,084
------------- ----------
Total expenses 19,521 15,608
------------- ----------
Operating income 27,315 23,087
Other income (expense):
Interest income from affiliates 280 -
Interest income 763 207
Gain on property condemnation - 993
Other income 251 346
Treasury lock settlement (2,016) -
Interest expense (15,321) (9,924)
------------- ----------
Income before provision for taxes and
minority interest 11,272 14,709
Provision for taxes (115) (116)
------------- ----------
Income before minority interest 11,157 14,593
Income applicable to minority interest (6,702) (7,378)
------------- ----------
Net income $ 4,455 $ 7,215
============= ==========
Basic earnings per share $ 0.35 $ 0.58
Weighted average number of shares 12,629 12,481
Diluted earnings per share $ 0.35 $ 0.57
Weighted average number of shares 12,691 12,597
Distribution declared per common share outstanding $ 0.88 $ 0.86
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, 1999 June 30, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,455 $ 7,215
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 16,895 13,084
Amortization of loan costs 449 -
Amortization of restricted stock 778 942
Minority interest in earnings 6,702 7,378
Distributions from joint venture, net of equity in income
150 198
Gain on property condemnation - (993)
Gain on sale of property (359) -
Straight-line rents (1,130) -
Other 2,345 -
Changes in assets and liabilities:
Other assets (2,531) (2,322)
Accounts payable and other liabilities 4,582 (117)
Due from/to affiliate (1,633) 1,205
--------- --------
Net cash provided by operating activities 30,703 26,590
--------- --------
Cash flows from investing activities:
Purchase of available-for-sale securities (1,953) (2,709)
Proceeds from sale of available-for-sale securities 3,049 2,727
Investment in joint venture - 2
Proceeds from short-term investment - 366
Treasury lock settlement (2,016) -
Issuance of mortgage note receivable (12,655) -
Proceeds from mortgage notes receivable 9,649 -
Loan costs on mortgage note issued (63) -
Purchase of property and related assets (184,234) (6,320)
Proceeds from sale of property and related assets 2,834 1,305
--------- --------
Net cash used by investing activities (185,389) (4,629)
--------- --------
Cash flows from financing activities:
Principal payments on notes payable (127,099) (96,498)
Proceeds from notes payable 307,350 20,500
Loan costs (4,500) (15)
Proceeds from Preferred Units, net of offering expenses - 73,012
Proceeds from stock options exercised 444 1,053
Cash distributions (11,112) (10,744)
Limited partners' cash distributions (10,812) (7,945)
--------- --------
Net cash provided (used) by financing activities 154,271 (20,637)
--------- --------
Net increase (decrease) in cash (415) 1,324
Cash and cash equivalents at beginning of period 1,711 1,698
--------- --------
Cash and cash equivalents at end of period $ 1,296 $ 3,022
========= ========
Supplemental cash flow information:
Interest paid $ 13,594 $ 10,440
Taxes paid 101 132
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
National Golf Properties, Inc. (the "Company") owns all of the golf courses
through its general partner interest in National Golf Operating
Partnership, L.P. (the "Operating Partnership"), pursuant to its 59.1%
ownership of the common units of partnership interest in the Operating
Partnership ("Common Units"). The Operating Partnership has an 89% general
partner interest in Royal Golf, L.P. II ("Royal Golf"). 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 consolidated financial statements include the accounts of the Company,
the Operating Partnership and Royal Golf. All significant intercompany
transactions and balances have been eliminated.
The accompanying consolidated financial statements for the three and six
months ended June 30, 1999 and 1998 have been prepared in accordance with
generally accepted accounting principles ("GAAP") and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. These financial statements
have not been audited by independent public accountants, but include all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
condition, results of operations and cash flows for such periods. However,
these results are not necessarily indicative of results for any other
interim period or for the full year. The accompanying consolidated balance
sheet as of December 31, 1998 has been derived from the audited financial
statements, but does not include all disclosures required by GAAP.
Certain information and footnote disclosures normally included in financial
statements in accordance with GAAP have been omitted pursuant to
requirements of the Securities and Exchange Commission (the "SEC").
Management believes that the disclosures included in the accompanying
interim financial statements and footnotes are adequate to make the
information not misleading, but should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
The computation of basic earnings per share is computed by dividing net
income by the weighted average number of outstanding common shares during
the period. The computation of diluted 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 incremental shares for the three months ended June 30, 1999
and 1998 were 59,783 and 114,635, respectively. The incremental shares for
the six months ended June 30, 1999 and 1998 were 61,878 and 116,015,
respectively.
The accompanying consolidated balance sheets reflect an accounting
allocation for reporting purposes from additional paid in capital to
minority interest for the limited partners' interest in the net assets of
the Company after giving effect to their exchange rights of Common Units
into the Company's common stock. GAAP requires the reporting of such
exchange rights "as if converted." This reallocation had no effect on
7
<PAGE>
earnings per share or results of operations or allocations of net income to
the general and limited partners of the Operating Partnership. The
reallocation at June 30, 1999 and December 31, 1998 was approximately $77.5
million and $78.6 million, respectively.
In May 1998, the Emerging Issues Task Force (the "EITF") of the Financial
Accounting Standards Board issued Issue No. 98-9, "Accounting for
Contingent Rent in Interim Financial Periods." This statement provides
that recognition of contingent rental income should be deferred until
specified targets that trigger the contingent rent are achieved. This
statement applies to all contingent rental income effective with the second
quarter of 1998. On a quarterly basis, there is a material impact to the
Company's earnings per share, financial condition, and results of
operations. Contingent rent not recorded in the first, second or third
quarters will be recognized in the fourth quarter. Therefore, on an annual
basis, there will be no impact to the Company's earnings per share,
financial condition, or results of operations. In November 1998, Issue No.
98-9 was withdrawn by the EITF. However, the Company has continued to
account for contingent rent in accordance with Issue No. 98-9. As a result
of EITF 98-9, no percentage rent was recognized in the first and second
quarters of 1999.
(2) Property Acquisitions and Sales
-------------------------------
During the six months ended June 30, 1999, the Company purchased two golf
courses, excluding the Acquired Cobblestone Courses, described below, for
an initial investment of approximately $10.7 million. 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. Initial investment amount
includes purchase price, closing costs and other direct costs associated
with the purchase. The aforementioned golf courses are leased to American
Golf Corporation ("AGC"), a related party, pursuant to long-term triple net
leases.
<TABLE>
<CAPTION>
Acquisition Initial
Date Course Name Location Investment
----------- ----------- -------- ----------
(In thousands)
<S> <C> <C> <C>
1/6/99 Beaver Brook Country Club Clinton,
New Jersey $ 8,181
1/6/99 The Classic Golf Club Spanaway,
Washington 2,475
-------
Total Initial Investment $10,656
=======
</TABLE>
On March 31, 1999, the Company purchased fee interests in 15 golf courses
and long-term leasehold interests in five golf courses and made a
participating mortgage loan collateralized by an additional golf course
(collectively, the "Acquired Cobblestone Courses") previously owned by
subsidiaries of Meditrust Corporation and Meditrust Operating Company
(collectively, "Meditrust") comprising the "Cobblestone Golf Group" for an
aggregate initial investment of approximately $184.3 million, which
investment was financed by approximately $178.7 million of cash and
approximately $5.6 million of assumed notes. The Company's acquisition of
8
<PAGE>
interests in these golf courses was part of a larger transaction in which
a subsidiary of AGC and a subsidiary of ClubCorp International ("ClubCorp")
formed Golf Acquisitions, L.L.C., a new limited liability company ("Golf
Acquisitions"), to purchase from Meditrust the subsidiaries comprising the
Cobblestone Golf Group. Golf Acquisitions closed this purchase on March
31, 1999, and immediately thereafter sold interests in 23 golf courses to
subsidiaries of ClubCorp, sold interests in the Acquired Cobblestone
Courses to the Company and sold to AGC short-term interests in three golf
course facilities and a portion of the personal property assets related to
the Acquired Cobblestone Courses. Three of the Acquired Cobblestone
Courses are leasehold interests in the golf courses at Carmel Mountain
Ranch Country Club and Sweetwater Country Club, in which the Company
already owned the fee interest and had previously leased such properties to
a subsidiary of Meditrust.
Concurrently with closing its purchase of the Acquired Cobblestone Courses,
the Company entered into agreements to lease or sublease 18 of the Acquired
Cobblestone Courses to AGC and two of the Acquired Cobblestone Courses to
Golf Enterprises, Inc. AGC also entered into a separate agreement to lease
the golf course which collateralizes the Company's participating mortgage
loan to a subsidiary of Golf Acquisitions.
On May 25, 1999, the Company sold Sugar Ridge Golf Course in Lawrenceburg,
Indiana for approximately $3 million. The Company recognized a gain of
approximately $359,000.
(3) Treasury Lock Swap Transactions
-------------------------------
On June 15, 1998, in anticipation of the Operating Partnership placing $100
million of fixed-rate, ten-year notes or some similar security, the
Operating Partnership entered into a $100 million treasury lock swap
transaction with a financial institution in order to hedge its exposure to
interest rate fluctuations. Under this agreement, the Operating
Partnership pays or receives an amount equal to the difference between the
treasury lock rate and the market rate on the date of settlement, based on
the principal of $100 million. At April 30, 1999, the Operating
Partnership settled its treasury lock swap transaction, resulting in a loss
of approximately $2,345,000. Such loss was netted with a gain of
approximately $329,000 from two other treasury lock swap transactions,
resulting in a net loss of approximately $2,016,000 which was recorded in
the statement of operations.
(4) Notes Payable
-------------
On March 31, 1999, the Company entered into a new $300 million unsecured
revolving credit facility with a group of lenders led by The First National
Bank of Chicago, as Administrative Agent. Advances under the credit
facility bear interest at the Administrative Agent's alternate base rate
plus the then-applicable base rate margin or, at the option of the Company,
LIBOR plus the then-applicable LIBOR rate margin. The Administrative
Agent's alternate base rate for any day means the greater of (i) a rate per
annum equal to the corporate base rate of interest announced by the
Administrative Agent from time to time, and (ii) the federal funds rate as
published by the Federal Reserve Bank plus one-half percent (0.50%) per
annum. The amount of the base rate margin and LIBOR rate margin vary
depending upon the amount of the Company's outstanding indebtedness
compared
9
<PAGE>
to its capitalization. The initial rate of interest for borrowings made
under the new facility will be equal to LIBOR plus a margin of 2.25% or the
alternate base rate plus 1.00%. The credit facility terminates on March 31,
2002, but may be extended by the Company for an additional year if approved
by all of the lenders under the credit facility. The credit facility
replaces the Company's previous $100 million credit facility, which has
been terminated. There were outstanding advances of $265 million under this
credit facility as of June 30, 1999.
(5) Lease Rental Agreements
-----------------------
For the leases of the Acquired Cobblestone Courses, the base rent generates
an initial return on the Operating Partnership's investment of 8.75% and
will step-up on a sequential basis each year to 9.25%, 9.75%, 10.25%,
10.75%, 11.25%, and finally to 11.75% in 2005. GAAP requires, for leases
with fixed increases in rent, the total rent revenue over the lease period
be straight-lined. For the three months ended June 30, 1999, the straight-
lining of rent resulted in additional rent revenue of approximately
$1,130,000.
(6) Pro Forma Financial Information
-------------------------------
The pro forma financial information set forth below is presented as if the
1999 acquisitions (Note 2) had been consummated as of January 1, 1998.
The pro forma financial information is not necessarily indicative of what
actual results of operations of the Company would have been assuming the
acquisitions had been consummated as of January 1, 1998, nor does it
purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
For the six
(In thousands, except per share amounts) Months ended June 30,
- ---------------------------------------- ---------------------
1999 1998
---- ----
<S> <C> <C>
Revenues from rental property $49,022 $46,860
Net income $ 3,268 $ 5,298
Basic earnings per share $ 0.26 $ 0.42
Diluted earnings per share $ 0.26 $ 0.42
</TABLE>
The pro forma financial information includes the following adjustments:
(i) an increase in depreciation and amortization expense and (ii) an
increase in interest expense.
(7) Statement of Cash Flows - Supplemental Disclosures
--------------------------------------------------
Non-cash transactions for the six months ended June 30, 1999 include
approximately $5.6 million of assumed notes as partial consideration for
the Acquired Cobblestone Courses and approximately $2.1 million in capital
improvements accrued but not paid.
Non-cash transactions for the six months ended June 30, 1998 include
approximately $3.9 million in capital improvements accrued but not paid.
10
<PAGE>
(8) Other Data
----------
AGC is the lessee of all but four of the golf courses in the Company's
portfolio at June 30, 1999. David G. Price, the Chairman of the Board of
Directors of the Company, owns approximately 2.8% of the Company's
outstanding common stock and approximately 16% of the Common Units of the
Operating Partnership and a controlling interest in AGC. 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 unaudited financial
information concerning AGC:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ----------------
(In thousands)
<S> <C> <C>
Current assets $ 93,005 $ 82,809
Non-current assets 179,876 163,629
-------- --------
Total assets $272,881 $246,438
======== ========
Current liabilities $111,532 $ 84,893
Long-term liabilities 137,076 147,667
Minority interest 487 503
Shareholders' equity 23,786 13,375
-------- --------
Total liabilities and shareholders' equity $272,881 $246,438
======== ========
<CAPTION>
For the six months ended
June 30,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
(In thousands)
Total revenues $324,941 $272,250
======== ========
Net income $ 10,529 $ 5,512
======== ========
</TABLE>
Total revenues from golf course operations and management agreements for
AGC increased by $52.6 million, or 19.3%, to $324.9 million for the six
months ended June 30, 1999 compared to $272.3 million for the six months
ended June 30, 1998. The increase in revenues was primarily attributable
to the addition of 42 leased courses and one management course.
11
<PAGE>
Net income increased by $5 million to $10.5 million for the six months
ended June 30, 1999 compared to $5.5 million for the corresponding six
months of 1998. The increase in net income was primarily due to favorable
weather conditions in the sun belt states during the first half of 1999
compared to the first half of 1998 and the addition of the above
acquisitions.
(9) Subsequent Events
-----------------
On July 28, 1999, the Operating Partnership completed the private placement
of 1,400,000 9.3% Series B Cumulative Redeemable Preferred Units ("Series B
Preferred Units"), representing limited partnership interests in the
Operating Partnership, to institutional investors in exchange for a
contribution to the Operating Partnership of $35 million. The Operating
Partnership used the proceeds from such private placement to reduce
outstanding indebtedness under the Operating Partnership's revolving credit
facility.
On July 30, 1999, the Company amended its $300 million unsecured revolving
credit facility with a group of lenders led by The First National Bank of
Chicago, as Administrative Agent. The amended credit facility splits the
$300 million revolving credit facility into (i) a $200 million revolver
(the "Revolver") and (ii) a $100 million term note (the "Term Note")
(collectively, the "New Credit Facility"). Advances under the New Credit
Facility bear interest at the Administrative Agent's alternate base rate
plus the then-applicable base rate margin or, at the option of the Company,
LIBOR plus the then-applicable LIBOR rate margin. The Administrative
Agent's alternate base rate for any day means the greater of (i) a rate per
annum equal to the corporate base rate of interest announced by the
Administrative Agent from time to time, and (ii) the federal funds rate as
published by the Federal Reserve Bank plus one-half percent (0.50%) per
annum. With respect to advances under the Revolver, the amount of the base
rate margin and LIBOR rate margin vary depending upon the amount of the
Company's outstanding indebtedness compared to its capitalization. The
initial rate of interest for borrowings made under the Revolver will be
equal to LIBOR plus a margin of 2.25% or the alternate base rate plus
1.00%. The Revolver terminates on March 29, 2002, but may be extended by
the Company for an additional year if approved by a specified number of the
lenders under the New Credit Facility. The rate of interest for the Term
Note will be equal to LIBOR plus a margin of 3.00% or the alternate base
rate plus 1.75%. The Term Note terminates on March 29, 2004. The New Credit
Facility eliminates the requirement under the old facility for the Company
to obtain certain modifications of the covenants applicable to its $175
million fixed-rate unsecured senior notes.
On August 4, 1999, the Board of Directors declared a distribution of $0.44
per share for the quarter ended June 30, 1999 to stockholders of record on
July 30, 1999, which distribution will be paid on August 13, 1999.
12
<PAGE>
ITEM 2 - 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 three months ended June
30, 1999 with the three months ended June 30, 1998 and the six months ended June
30, 1999 with the six months ended June 30, 1998.
Results of Operations
- ---------------------
Comparison of the three months ended June 30, 1999 to the three months ended
June 30, 1998
Net income decreased by $1,963,000 to $1,541,000 for the three months ended June
30, 1999 compared to $3,504,000 for the three months ended June 30, 1998. The
decrease was primarily attributable to: (i) an increase in depreciation and
amortization expense of approximately $3,043,000; (ii) an increase in treasury
lock settlement of approximately $2,016,000; and (iii) an increase in interest
expense of approximately $5,098,000, which was offset by an increase in rent
revenue of approximately $7,062,000.
The increase in rent revenue was primarily attributable to: (i) the acquisition
of 28 golf course properties subsequent to June 30, 1998, which accounted for
approximately $6,367,000 of the increase; and (ii) the increase in base rents
under the leases with respect to the golf course properties owned at March 31,
1998, which accounted for approximately $684,000 of the increase. As a result
of EITF 98-9, no percentage rent was recognized in the second quarter of 1999 or
1998.
The increase in depreciation and amortization expense was primarily due to the
acquisition of 28 golf course properties subsequent to June 30, 1998.
At April 30, 1999, the Operating Partnership settled its treasury lock swap
transaction, resulting in a loss of approximately $2,345,000. Such loss was
netted with a gain of approximately $329,000 from two other treasury lock swap
transactions, resulting in a net loss of approximately $2,016,000 which was
recorded in the statement of operations. The increase in interest expense was
primarily due to the increase in outstanding advances under the Company's credit
facility. On March 31, 1999, the Company's $100 million credit facility was
terminated and replaced with a $300 million credit facility.
Comparison of the six months ended June 30, 1999 to the six months ended June 30
1998
13
<PAGE>
Net income decreased by $2,760,000 to $4,455,000 for the six months ended June
30, 1999 compared to $7,215,000 for the six months ended June 30, 1998. The
decrease was primarily attributable to: (i) an increase in depreciation and
amortization expense of approximately $3,811,000; (ii) an increase in treasury
lock settlement of approximately $2,016,000; and (iii) an increase in interest
expense of approximately $5,397,000, which was offset by an increase in rent
revenue of approximately $7,760,000.
The increase in rent revenue was primarily attributable to: (i) the acquisition
of 28 golf course properties subsequent to June 30, 1998, which accounted for
approximately $7,619,000 of the increase; (ii) a full six months rent on one
golf course property acquired in the first six months of 1998 which accounted
for approximately $57,000 of the increase; and (iii) the increase in base rents
under the leases with respect to the golf course properties owned at December
31, 1997, which accounted for approximately $1,308,000 of the increase, which
was offset by a decrease in percentage rents under the leases with respect to
the golf course properties owned at December 31, 1997 of approximately
$1,224,000 due to EITF 98-9. As a result of EITF 98-9, no percentage rent was
recognized in the first and second quarters of 1999. Otherwise, the Company
would have recorded percentage rent in the first and second quarters of 1999 of
approximately $3,488,000 and in the second quarter of 1998 of approximately
$1,808,000.
The increase in depreciation and amortization expense was primarily due to the
acquisition of 28 golf course properties subsequent to June 30, 1998.
At April 30, 1999, the Operating Partnership settled its treasury lock swap
transaction, resulting in a loss of approximately $2,345,000. Such loss was
netted with a gain of approximately $329,000 from two other treasury lock swap
transactions, resulting in a net loss of approximately $2,016,000 which was
recorded in the statement of operations. The increase in interest expense was
primarily due to the increase in outstanding advances under the Company's credit
facility. On March 31, 1999, the Company's $100 million credit facility was
terminated and replaced with a $300 million credit facility.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1999, the Company had approximately $1.5 million in cash and
investments, mortgage notes receivable of approximately $27.9 million, mortgage
indebtedness of approximately $30.9 million and unsecured indebtedness of
approximately $438.4 million. The $469.3 million principal amount of mortgage
and unsecured indebtedness bears interest at a weighted average rate of 7.6%.
Of the $469.3 million of debt, $199 million is fixed rate debt and is payable
either monthly, quarterly, semi-annually, or annually and matures between 2000
and 2008.
In order to maintain its qualification as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), the
Company is required to make substantial distributions to its stockholders. The
following factors, among others, will affect funds from operations and will
influence the decisions of the Board of Directors regarding distributions: (i)
increase in debt service resulting from additional indebtedness; (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) increase in preferred distributions resulting from
the issuance of cumulative redeemable preferred units, representing a limited
partnership interest in the Operating Partnership. Although the Company
receives most of its rental payments on a monthly basis, it has and intends to
continue to pay distributions quarterly.
14
<PAGE>
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 are limited to projects that
the Company agreed to fund at the time a property was acquired or projects
subsequently identified by the Company or its operators that enhance the revenue
potential and long-term value of a property. For golf courses acquired through
August 4, 1999, the Company is required under the leases to pay for various
remaining capital improvements totaling approximately $35.9 million, of which
approximately $28.6 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. Upon the Company's funding of the capital improvements,
the base rent payable under the leases with respect to these golf courses will
be adjusted to reflect, over the term of the leases, the Company's investment in
such improvements. Any subsequent capital improvements are the responsibility
of the lessees.
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
Common Units as consideration for such purchases.
On July 30, 1999, the Company amended its $300 million unsecured revolving
credit facility with a group of lenders led by The First National Bank of
Chicago, as Administrative Agent. The amended credit facility splits the $300
million revolving credit facility into (i) a $200 million revolver (the
"Revolver") and (ii) a $100 million term note (the "Term Note") (collectively,
the "New Credit Facility"). Advances under the New Credit Facility bear interest
at the Administrative Agent's alternate base rate plus the then-applicable base
rate margin or, at the option of the Company, LIBOR plus the then-applicable
LIBOR rate margin. The Administrative Agent's alternate base rate for any day
means the greater of (i) a rate per annum equal to the corporate base rate of
interest announced by the Administrative Agent from time to time, and (ii) the
federal funds rate as published by the Federal Reserve Bank plus one-half
percent (0.50%) per annum. With respect to advances under the Revolver, the
amount of the base rate margin and LIBOR rate margin vary depending upon the
amount of the Company's outstanding indebtedness compared to its capitalization.
The initial rate of interest for borrowings made under the Revolver will be
equal to LIBOR plus a margin of 2.25% or the alternate base rate plus 1.00%. The
Revolver terminates on March 29, 2002, but may be extended by the Company for an
additional year if approved by a specified number of the lenders under the New
Credit Facility. The rate of interest for the Term Note will be equal to LIBOR
plus a margin of 3.00% or the alternate base rate plus 1.75%. The Term Note
terminates on March 29, 2004. The New Credit Facility eliminates the requirement
under the old facility for the Company to obtain certain modifications of the
covenants applicable to its $175 million fixed-rate unsecured senior notes.
On July 28, 1999, the Operating Partnership completed a private placement of
1,400,000 Series B Preferred Units to institutional investors in exchange for a
contribution to the Operating Partnership of $35 million. The Series B
Preferred Units, which may be called by the Operating Partnership at par on or
after July 28, 2004, have no stated maturity or mandatory redemption and pay a
cumulative, quarterly dividend at an annualized rate of 9.3%. The Series B
Preferred Units are not convertible into common stock, but are convertible into
preferred stock of
15
<PAGE>
the Company under certain circumstances. The Operating Partnership used the
proceeds from such private placement to reduce outstanding indebtedness under
the Operating Partnership's revolving credit facility.
For the period January 1, 1999 through August 4, 1999, the Company purchased
interests in 22 golf courses for an aggregate initial investment of
approximately $182.3 million and made one participating mortgage loan of
approximately $12.7 million, which investments were financed by $23.4 million of
cash from operations, $166 million of advances under the Company's credit
facility, and approximately $5.6 million of assumed notes. In addition, the
Company has two golf courses under purchase contract for an aggregate initial
investment of approximately $12.4 million. Also, the Company has one golf
course under sale contract for a price of approximately $1.9 million.
The limited partners of the Operating Partnership have the right, in each
twelve-month period ending on August 18, to sell up to one-third of their Common
Units or exchange up to the greater of 75,000 Common Units or one-third of their
Common Units to the Company. If the Common Units are sold for cash, the Company
will have the option to pay for such Common Units with available cash, borrowed
funds or from the proceeds of an offering of common stock. If the Common Units
are exchanged for shares of common stock, the limited partner will receive one
share of common stock for each Common Unit exchanged.
Year 2000
- ---------
The Year 2000 issue is the result of computer software and embedded chips using
two digits, instead of four digits, to identify the applicable year. Any of the
Company's computers, computer software and other equipment that have date-
sensitive software may recognize a date using "00" as the year 1900 instead of
2000. If any of the Company's systems or equipment that have date-sensitive
software use only two digits, system failures or miscalculations may result
causing disruptions of operations.
The Company has identified its Year 2000 risk in three categories: (i) internal
computers and equipment; (ii) tenants' compliance; and (iii) external
compliance.
The Company has replaced all its personal computers and software with computers
and software that are Year 2000 compliant. The Company also has replaced its
computer servers and all its critical software. The Company plans to upgrade
its remaining non-critical software by the end of the third quarter of 1999.
The Company has spent approximately $71,000 to replace such computer equipment
and software through August 4, 1999 and anticipates spending an additional
$15,000 before the end of 1999 on additional software upgrades. The Company has
determined that most of the other office equipment that the Company uses also is
Year 2000 compliant. This has been confirmed in writing with third party
vendors. The Company will continue to conduct ongoing testing of its software
and other equipment which has not yet been tested or replaced to ensure Year
2000 compliance.
The Company has sent written requests to all its tenants to determine their Year
2000 compliance. AGC has informed the Company that its Year 2000 compliance
project is progressing as planned and is expected to be completed by September
1999. The Company will continue to monitor its largest tenant, AGC, to ensure
their Year 2000 compliance.
The Company has sent written requests to its key service providers to determine
their Year 2000 compliance. The Company will follow up with those key service
16
<PAGE>
providers who have not returned the Year 2000 questionnaires or who are still
working on their Year 2000 compliance.
The Company does not currently have a comprehensive contingency plan with
respect to the Year 2000 problem. However, the Company intends to establish
such a plan during 1999 as part of its ongoing Year 2000 compliance effort.
Despite the Company's efforts to identify and resolve Year 2000 compliance
problems, the Company cannot guarantee that all of the Company's systems will be
Year 2000 compliant or that other companies on which the Company relies will be
timely converted. As a result, the Company's operations could be interrupted or
otherwise adversely affected. The failure to correct a material Year 2000
problem could result in an interruption in, or a failure of, certain business
operations. Such failures could have a material adverse effect on the Company's
financial condition and results of operations. However, the Company believes
that, at worst, it might cease receiving percentage rents on a temporary basis.
This would result from the Company's tenants having to use a manual system to
prepare their accounting records and, as a consequence, it would take additional
time for the Company's tenants to gather financial performance information from
its golf courses and calculate the percentage rent amounts. This temporary
reduction in rent revenue could cause price fluctuations in the Company's common
stock.
The forward-looking statements regarding Year 2000 involve risks and
uncertainties, which reflect the Company's 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 above.
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 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 GAAP
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 a measure of
liquidity.
17
<PAGE>
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 for the six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Six months ended
June 30,
--------
(In thousands)
1999 1998
----------- ------------
<S> <C> <C>
Net income $ 4,455 $ 7,215
Distributions Preferred Units (3,000) (1,797)
Minority interest 6,702 7,378
Depreciation and amortization 17,075 13,282
Gain on property condemnation - (993)
Gain on sale of property (359) -
Treasury lock 2,016 -
Straight-line rents (1,130) -
Excess land sales (248) (342)
Amortization - loan costs - (119)
Depreciation corporate (37) (33)
------- -------
Funds from operations 25,474 24,591
Company's share of funds from operations 55.8% 56.6%
------- -------
Company's funds from operations $14,214 $13,919
======= =======
</TABLE>
As a result of EITF 98-9, no percentage rent was recognized in the first and
second quarters of 1999. Otherwise, the Company would have recorded percentage
rent in the first and second quarters of approximately $3,488,000. The
additional rent would have increased funds from operations for the six months
ended June 30, 1999 from approximately $25,474,000 to approximately $28,962,000.
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 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.
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.
18
<PAGE>
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk. The Company
has and will continue to manage interest rate risk by (1) maintaining a
conservative ratio of fixed rate, long-term debt to total debt such that
variable rate exposure is kept at an acceptable level, (2) using interest rate
fixing strategies where appropriate to fix rates on anticipated debt
transactions, and (3) taking advantage of favorable market conditions for long-
term debt and/or equity.
The following table sets forth the Company's long-term debt obligations,
principal cash flows by scheduled maturity, weighted average interest rates and
estimated fair value ("FV") at June 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 Thereafter Total FV
------ ------ ------- ----------- ------ ---------- --------- ---------
Long term debt:
Fixed rate.................. $3,220 $8,561 $26,037 $ 7,172 $7,743 $146,290 $199,023 $207,312
Average interest rate 8.29% 7.72% 7.09% 8.39% 8.39% 8.35% 8.13%
Variable rate ............. 75 163 181 265,201 (1) 223 4,455 270,298 270,298
Average interest rate 10.45% 10.45% 10.45% 7.22% 10.45% 10.45% 7.28%
------ ------ ------- ----------- ------ -------- --------
Total debt ............... $3,295 $8,724 $26,218 $ 272,373 $7,966 $150,745 $469,321 $477,610
====== ====== ======= =========== ====== ======== ======== ========
</TABLE>
(1)At June 30, 1999, there were outstanding advances of $265 million under the
credit facility.
In addition, the Company has assessed the market risk for its variable rate
debt and believes that a 1% increase in interest rates would have an approximate
$2.7 million increase in interest expense based on approximately $270.3 million
outstanding at June 30, 1999.
The estimated fair value of the Company's long-term debt is estimated based on
discounted cash flows at interest rates that the Company's management believes
reflects the risks associated with long-term debt of similar risk and duration.
19
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on June 30,
1999. The matter voted upon at the meeting was the election of three
directors to serve until the 2002 annual meeting of stockholders and
until their successors are elected and have qualified.
The results of the voting for election of Mr. John C. Cushman, III,
Mr. Charles S. Paul and Mr. Edward R. Sause to the Board of Directors
are as follows:
<TABLE>
<CAPTION>
Authority
Director Shares Cast For Withheld
- -------- --------------- ---------
<S> <C> <C>
Mr. John C. Cushman, III 11,505,390 135,145
Mr. Charles S. Paul 11,508,744 131,791
Mr. Edward R. Sause 11,505,902 134,633
</TABLE>
In addition to the above directors, the following directors will
continue in office:
<TABLE>
<CAPTION>
Term
Name Expires
---- -------
<S> <C>
Mr. Richard A. Archer 2000
Mr. Bruce Karatz 2001
Mr. David G. Price 2000
Mr. James M. Stanich 2001
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)3.1 Articles Supplementary of the Registrant
20
<PAGE>
<TABLE>
<S> <C>
10.1 Third Amended and Restated Agreement of Limited Partnership of National
Golf Operating Partnership, L.P., dated as of July 28, 1999
10.2 Amended and Restated Registration Rights Agreement, dated as of July
28, 1999, by and among National Golf Properties, Inc., National Golf
Operating Partnership, L.P. and the unit holders named therein
10.3 Contribution Agreement, dated as of July 28, 1999, between Belcrest
Realty Corporation, Belair Real Estate Corporation, National Golf
Operating Partnership, L.P. and National Golf Properties, Inc.
10.4 Amended and Restated Credit Agreement, dated as of July 30, 1999 among
National Golf Operating Partnership, L.P., National Golf Properties,
Inc., The First National Bank of Chicago, Merrill Lynch Capital
Corporation, ING (U.S.) Capital LLC, Union Bank of California, N.A.,
Banc One Capital Markets, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and the several other lenders from time to time parties
hereto
10.5 Amended and Restated Guaranty, dated as of July 30, 1999 between
National Golf Properties, Inc., and The First National Bank of Chicago
and the lenders under the Amended and Restated Credit Agreement
27 Financial Data Schedule
(b) None
</TABLE>
21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Golf Properties, Inc.
Date: August 13, 1999 By: /s/ William C. Regan
---------------------------
William C. Regan
Vice President - Controller
and Treasurer
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ------------
<S> <C> <C>
3.1 Articles Supplementary of the Registrant
10.1 Third Amended and Restated Agreement of Limited Partnership
of National Golf Operating Partnership, L.P., dated as of
July 28, 1999
10.2 Amended and Restated Registration Rights Agreement, dated as
of July 28, 1999, by and among National Golf Properties,
Inc., National Golf Operating Partnership, L.P. and the unit
holders named therein
10.3 Contribution Agreement, dated as of July 28, 1999, between
Belcrest Realty Corporation, Belair Real Estate Corporation,
National Golf Operating Partnership, L.P. and National Golf
Properties, Inc.
10.4 Amended and Restated Credit Agreement, dated as of July 30,
1999 among National Golf Operating Partnership, L.P.,
National Golf Properties, Inc., The First National Bank of
Chicago, Merrill Lynch Capital Corporation, ING (U.S.)
Capital LLC, Union Bank of California, N.A., Banc One
Capital Markets, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and the several other lenders from time to
time parties hereto
10.5 Amended and Restated Guaranty, dated as of July 30, 1999
between National Golf Properties, Inc., and The First
National Bank of Chicago and the lenders under the Amended
and Restated Credit Agreement
27 Financial Data Schedule
</TABLE>
23
<PAGE>
Exhibit 3.1
NATIONAL GOLF PROPERTIES, INC.
ARTICLES SUPPLEMENTARY
1,400,000 SHARES
9.30% SERIES B CUMULATIVE REDEEMABLE PREFERRED STOCK
National Golf Properties, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board
of Directors of the Corporation by Article IV of the Articles of Incorporation
of the Corporation filed with the Department on March 28, 1995, as amended by
Amended Articles of Incorporation filed with the Department on March 30, 1995,
as amended by Articles of Merger filed with the Department on August 31, 1995,
as supplemented by Articles Supplementary filed with the Department on March 4,
1998, as supplemented by Articles Supplementary filed with the Department on
April 20, 1998 (the "Charter") and Section 2-105 of the Maryland General
Corporation Law (the "MGCL"), the Board of Directors of the Corporation (the
"Board of Directors"), by resolutions duly adopted on July 27, 1999 has
classified 1,400,000 shares of the authorized but unissued Preferred Stock, par
value $.01 per share ("Preferred Stock"), as a separate class of Preferred
Stock, authorized the issuance of a maximum of 1,400,000 shares of such class of
Preferred Stock, set certain of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, terms and conditions of redemption and other
terms and conditions of such class of Preferred Stock, and pursuant to the
powers contained in the Bylaws of the Corporation and the MGCL, appointed a
committee (the "Committee") of the Board of Directors and delegated to the
Committee, to the fullest extent permitted by the MGCL and the Charter and
Bylaws of the Corporation, all powers of the Board of Directors with respect to
designating, and setting all other preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of, such
class of Preferred Stock, and determining the number of shares of such class of
Preferred Stock (not in excess of the aforesaid maximum number) to be issued and
the consideration and other terms and conditions upon which such shares of such
class of Preferred Stock are to be issued.
SECOND: Pursuant to the authority conferred upon the Committee
as aforesaid, the Committee has unanimously adopted resolutions designating the
aforesaid class of Preferred Stock as the "9.30% Series B Cumulative Redeemable
Preferred Stock," setting the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications, terms and conditions of redemption and other terms and
conditions of such 9.30% Series B Cumulative Redeemable Preferred Stock (to the
extent not set
<PAGE>
2
by the Board of Directors in the resolutions referred to in
Article THIRD of these terms of the Series B Preferred Stock) and authorizing
the issuance of up to 1,400,000 shares of 9.30% Series B Cumulative Redeemable
Preferred Stock.
THIRD: The class of Preferred Stock of the Corporation created
by the resolutions duly adopted by the Board of Directors of the Corporation and
by the Committee and referred to in Articles FIRST and SECOND of these terms of
the Series B Preferred Stock shall have the following designation, number of
shares, preferences, conversion and other rights, voting powers, restrictions
and limitation as to dividends and other distributions, qualifications, terms
and conditions of redemption and other terms and conditions:
Section 1. Designation and Number. A class of Preferred Stock,
designated the "9.30% Series B Cumulative Redeemable Preferred Stock" (the
"Series B Preferred Stock") is hereby established. The number of shares of
Series B Preferred Stock shall be 1,400,000.
Section 2. Rank. The Series B Preferred Stock will, with
respect to distributions and rights upon voluntary or involuntary liquidation,
winding-up or dissolution of the Corporation, rank senior to all classes or
series of Common Stock (as defined in the Charter) and to all classes or series
of equity securities of the Corporation now or hereafter authorized, issued or
outstanding, other than any class or series of equity securities of the
Corporation expressly designated as ranking on a parity with or senior to the
Series B Preferred Stock as to distributions and rights upon voluntary or
involuntary liquidation, winding-up or dissolution of the Corporation. For
purposes of these terms of the Series B Preferred Stock, the term "Parity
Preferred Stock" shall be used to refer to any class or series of equity
securities of the Corporation now or hereafter authorized, issued or outstanding
expressly designated by the Corporation to rank on a parity with Series B
Preferred Stock with respect to distributions and rights upon voluntary or
involuntary liquidation, winding-up or dissolution of the Corporation including,
without limitation, the 8.0% Series A Cumulative Redeemable Preferred Stock. The
term "equity securities" does not include debt securities, which will rank
senior to the Series B Preferred Stock prior to conversion.
Section 3. Distributions. (a) Payment of Distributions. Subject
to the rights of holders of Parity Preferred Stock as to the payment of
distributions and holders of equity securities ranking senior to the Series B
Preferred Stock as to payment of distributions, holders of Series B Preferred
Stock will be entitled to receive, when, as and if declared by the Corporation,
out of funds legally available for the payment of distributions, cumulative
preferential cash distributions at the rate per annum of 9.30% of the $25
liquidation preference per share of Series B Preferred Stock. Such distributions
shall be cumulative, shall accrue from the original date of issuance and will be
payable (i) quarterly (such quarterly periods for purposes of payment and
accrual will be the quarterly periods ending on the dates specified in this
sentence and not calendar quarters) in arrears on February 15, May 15, August 15
and November 15 of each year and (ii) in the event of a redemption, on the
redemption date (each a "Series B Preferred Stock Distribution Payment Date"),
commencing in each case on the first Series B
<PAGE>
3
Preferred Stock Distribution Payment Date after the original date of issuance.
The amount of the distribution payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter than
a full quarterly period for which distributions are computed, the amount of the
distribution payable will be computed based on the ratio of the actual number of
days elapsed in such a period to ninety (90) days. If any date on which
distributions are to be made on the Series B Preferred Stock is not a Business
Day (as defined herein), then payment of the distribution to be made on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. Distributions on the Series B Preferred Stock
will be made to the holders of record of the Series B Preferred Stock on the
relevant record dates, which, unless otherwise provided by the Corporation with
respect to any distribution, will be 15 Business Days prior to the relevant
Series B Preferred Stock Distribution Payment Date (each a "Series B Preferred
Stock Distribution Record Date"). Notwithstanding any provision to the contrary
contained herein, each outstanding share of Series B Preferred Stock shall be
entitled to receive, and shall receive, a distribution with respect to any
Series B Preferred Stock Distribution Record Date equal to the distribution paid
with respect to each other share of Series B Preferred Stock which is
outstanding on such date which shall be equal to the greatest distribution per
share payable on any such share on such date. In addition, notwithstanding
anything to the contrary set forth herein, each share of Series B Preferred
Stock shall also continue to accrue all accrued and unpaid distributions up to
the exchange date on any Series B Preference Unit (as defined in the Third
Amended and Restated Limited Partnership Agreement of National Golf Operating
Partnership, L.P. (the "Operating Partnership") dated as of July 28, 1999, (the
"Partnership Agreement")) validly exchanged into such share of Series B
Preferred Stock in accordance with the provisions of such Partnership Agreement.
The term "Business Day" shall mean each day, other than a
Saturday or a Sunday, which is not a day on which banking institutions in New
York, New York or Los Angeles, California are authorized or required by law,
regulation or executive order to close.
(b) Limitation on Distributions. No distributions on the
Series B Preferred Stock shall be declared or paid or set apart for payment by
the Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration, payment or setting
apart for payment shall be restricted or prohibited by law.
(c) Distributions Cumulative. Notwithstanding the foregoing,
distributions on the Series B Preferred Stock will accrue whether or not
declared, whether or not the terms and provisions set forth in Section 3(b)
hereof at any time prohibit the current payment of distributions, whether or not
the Corporation has earnings, whether or not there are funds legally
<PAGE>
4
available for the payment of such distributions and whether or not such
distributions are authorized. Accrued but unpaid distributions on the Series B
Preferred Stock will accumulate as of the Series B Preferred Stock Distribution
Payment Date on which they first become payable. Accumulated and unpaid
distributions will not bear interest.
(d) Priority as to Distributions. (i) So long as any Series B
Preferred Stock is outstanding, no distribution of cash or other property shall
be authorized, declared, paid or set apart for payment on or with respect to any
class or series of Common Stock or any class or series of other stock of the
Corporation ranking junior as to the payment of distributions or rights upon
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation to the Series B Preferred Stock (such Common Stock or other junior
stock, collectively, "Junior Stock"), nor shall any cash or other property be
set aside for or applied to the purchase, redemption or other acquisition for
consideration of any Series B Preferred Stock, any Parity Preferred Stock with
respect to distributions or any Junior Stock, unless, in each case, all
distributions accumulated on all Series B Preferred Stock and all classes and
series of outstanding Parity Preferred Stock as to payment of distributions have
been paid in full. The foregoing sentence will not prohibit (i) distributions
payable solely in Junior Stock, (ii) the conversion of Junior Stock or Parity
Preferred Stock into stock of the Corporation ranking junior to the Series B
Preferred Stock as to distributions and rights upon voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, and (iii) purchase by
the Corporation of such Series B Preferred Stock, Parity Preferred Stock with
respect to distributions or Junior Stock pursuant to Article IV.C.3. of the
Charter with respect to the Common Stock and comparable Charter provisions with
respect to other classes of capital stock of the Corporation to the extent
required to preserve the Corporation's status as a real estate investment trust.
(ii) So long as distributions have not been paid in full (or
a sum sufficient for such full payment is not irrevocably deposited in trust for
payment) upon the Series B Preferred Stock, all distributions authorized and
declared on the Series B Preferred Stock and all classes or series of
outstanding Parity Preferred Stock shall be authorized and declared so that the
amount of distributions authorized and declared per share of Series B Preferred
Stock and such other classes or series of Parity Preferred Stock shall in all
cases bear to each other the same ratio that accrued distributions per share on
the Series B Preferred Stock and such other classes or series of Parity
Preferred Stock (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such class or series of Parity
Preferred Stock do not have cumulative distribution rights) bear to each other.
(e) No Further Rights. Holders of Series B Preferred Stock shall
not be entitled to any distributions, whether payable in cash, other property or
otherwise, in excess of the full cumulative distributions described herein.
(f) Capital Gains Dividends. If, for any taxable year, the
Corporation elects to designate as a "capital gain dividend" (as defined in
Section 857 of the Internal Revenue Code of 1986, as amended (the "Code")), any
portion (the "Capital Gains Amount") of the dividends
<PAGE>
5
paid or made available for the year to holders of any class or series of stock
of the Corporation, the portion of the Capital Gains Amount that shall be
allocable to holders of the Series B Preferred Stock shall be the amount that
the total dividends (as determined for Federal income tax purposes) paid or made
available to the holders of the Series B Preferred Stock for the year bears to
the aggregate amount of dividends (as determined for Federal income tax
purposes) paid or made available to the holders of all classes or series of
stock of the Corporation for such year.
Section 4. Liquidation Preference. (a) Payment of Liquidating
Distributions. Subject to the rights of holders of Parity Preferred Stock with
respect to rights upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation and subject to equity securities ranking senior to
the Series B Preferred Stock with respect to rights upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, the
holders of Series B Preferred Stock shall be entitled to receive out of the
assets of the Corporation legally available for distribution or the proceeds
thereof, after payment or provision for debts and other liabilities of the
Corporation, but before any payment or distributions of the assets shall be made
to holders of Common Stock or any other class or series of shares of the
Corporation that ranks junior to the Series B Preferred Stock as to rights upon
liquidation, dissolution or winding-up of the Corporation, an amount equal to
the sum of (i) a liquidation preference of $25 per share of Series B Preferred
Stock, and (ii) an amount equal to any accumulated and unpaid distributions
thereon to the date of payment. In the event that, upon such voluntary or
involuntary liquidation, dissolution or winding-up, there are insufficient
assets to permit full payment of liquidating distributions to the holders of
Series B Preferred Stock and any Parity Preferred Stock as to rights upon
liquidation, dissolution or winding-up of the Corporation, all payments of
liquidating distributions on the Series B Preferred Stock and such Parity
Preferred Stock shall be made so that the payments on the Series B Preferred
Stock and such Parity Preferred Stock shall in all cases bear to each other the
same ratio that the respective rights of the Series B Preferred Stock and such
other Parity Preferred Stock (which shall not include any accumulation in
respect of unpaid distributions for prior distribution periods if such Parity
Preferred Stock does not have cumulative distribution rights) upon liquidation,
dissolution or winding-up of the Corporation bear to each other.
(b) Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by (i) fax and (ii) by first
class mail, postage pre-paid, not less than 30 and not more that 60 days prior
to the payment date stated therein, to each record holder of the Series B
Preferred Stock at the respective addresses of such holders as the same shall
appear on the share transfer records of the Corporation.
(c) No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Series B
Preferred Stock will have no right or claim to any of the remaining assets of
the Corporation.
<PAGE>
6
(d) Consolidation, Merger or Certain Other Transactions. The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or the assets of the corporation to, or the consolidation or merger or
other business combination of the Corporation with or into any corporation,
trust or other entity (or of any corporation, trust or other entity with or
into the Corporation) shall not be deemed to constitute a liquidation,
dissolution or winding-up of the Corporation.
(e) Permissible Distributions. In determining whether a
distribution (other than upon voluntary or involuntary liquidation) by dividend,
redemption or other acquisition of shares of stock of the Corporation or
otherwise is permitted under the MGCL, no effect shall be given to amounts that
would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
shares of stock of the Corporation whose preferential rights upon dissolution
are superior to those receiving the distribution.
Section 5. Optional Redemption. (a) Right of Optional
Redemption. The Series B Preferred Stock may not, subject to Section 7 hereof,
be redeemed prior to July 28, 2004. On or after such date, the Corporation shall
have the right to redeem the Series B Preferred Stock, in whole or in part, at
any time or from time to time, upon not less than 30 nor more than 60 days'
written notice, at a redemption price, payable in cash, equal to $25 per share
of Series B Preferred Stock plus accumulated and unpaid distributions, whether
or not declared, to the date of redemption. If fewer than all of the outstanding
shares of Series B Preferred Stock are to be redeemed, the shares of Series B
Preferred Stock to be redeemed shall be selected pro rata (as nearly as
practicable without creating fractional units).
(b) Limitation on Redemption. (i) The redemption price of the
Series B Preferred Stock (other than the portion thereof consisting of
accumulated but unpaid distributions) will be payable solely out of the sale
proceeds of capital stock of the Corporation and from no other source. For
purposes of the preceding sentence, "capital stock" means any equity securities
(including Common Stock and Preferred Stock), shares, participation or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity securities) or options to
purchase any of the foregoing.
(ii) Subject to Section 7 hereof, the Corporation may not
redeem fewer than all of the outstanding shares of Series B Preferred Stock
unless all accumulated and unpaid distributions have been paid on all Series B
Preferred Stock for all quarterly distribution periods terminating on or prior
to the date of redemption.
(c) Procedures for Redemption. (i) Notice of redemption will
be (i) faxed, and (ii) mailed by the Corporation, postage prepaid, not less than
30 nor more than 60 days prior to the redemption date, addressed to the
respective holders of record of the Series B Preferred Stock to be redeemed at
their respective addresses as they appear on the transfer records of the
<PAGE>
7
Corporation. No failure to give or defect in such notice shall affect the
validity of the proceedings for the redemption of any Series B Preferred Stock
except as to the holder to whom such notice was defective or not given. In
addition to any information required by law or by the applicable rules of any
exchange upon which the Series B Preferred Stock may be listed or admitted to
trading, each such notice shall state: (i) the redemption date, (ii) the
redemption price, (iii) the number of shares of Series B Preferred Stock to be
redeemed, (iv) the place or places where such shares of Series B Preferred Stock
are to be surrendered for payment of the redemption price, (v) that
distributions on the Series B Preferred Stock to be redeemed will cease to
accumulate on such redemption date and (vi) that payment of the redemption price
and any accumulated and unpaid distributions will be made upon presentation and
surrender of such Series B Preferred Stock. If fewer than all of the shares of
Series B Preferred Stock held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of shares of Series B
Preferred Stock held by such holder to be redeemed.
(ii) If the Corporation gives a notice of redemption in
respect of Series B Preferred Stock (which notice will be irrevocable) then, by
12:00 noon, New York City time, on the redemption date, the Corporation will
deposit irrevocably in trust for the benefit of the Series B Preferred Stock
being redeemed funds sufficient to pay the applicable redemption price, plus any
accumulated and unpaid distributions, if any, on such shares to the date fixed
for redemption, without interest, and will give irrevocable instructions and
authority to pay such redemption price and any accumulated and unpaid
distributions, if any, on such shares to the holders of the Series B Preferred
Stock upon surrender of the Series B Preferred Stock by such holders at the
place designated in the notice of redemption. If fewer than all shares of Series
B Preferred Stock represented by any certificate are being redeemed, a new
certificate representing the unredeemed shares of Series B Preferred Stock shall
be issued upon surrender of the certificate representing the shares of Series B
Preferred Stock outstanding prior to the redemption, without cost to the holder
thereof. On and after the date of redemption, distributions will cease to
accumulate on the Series B Preferred Stock or portions thereof called for
redemption, unless the Corporation defaults in the payment thereof. If any date
fixed for redemption of Series B Preferred Stock is not a Business Day, then
payment of the redemption price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the redemption price or any accumulated
or unpaid distributions in respect of the Series B Preferred Stock is improperly
withheld or refused and not paid by the Corporation, distributions on such
Series B Preferred Stock will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating the
applicable redemption price and any accumulated and unpaid distributions.
(d) Status of Redeemed Stock. Any Series B Preferred Stock
that shall at any time have been redeemed shall, after such redemption, have the
status of authorized but unissued
<PAGE>
8
Preferred Stock, without designation as to class or series until such shares are
once more designated as part of a particular class or series by the Board of
Directors.
Section 6. Voting Rights. (a) General. Holders of the Series B
Preferred Stock will not have any voting rights, except as set forth below.
(b) Right to Elect Directors. (i) If at any time full
distributions shall not have been timely made on any Series B Preferred Stock
with respect to any six (6) prior quarterly distribution periods, whether or not
consecutive, (a "Series B Preferred Distribution Default"), the holders such
Series B Preferred Stock, voting together as a single class with the holders of
each class or series of Parity Preferred Stock upon which like voting rights
have been conferred and are exercisable, will have the right to elect two
additional directors to serve on the Corporation's Board of Directors (the
"Series B Preferred Stock Directors") at a special meeting called in accordance
with Section 6(b)(ii) and at the next annual meeting of stockholders, and at
each subsequent annual meeting of stockholders or special meeting held in place
thereof, until all such distributions in arrears and distributions for the
current quarterly period on the Series B Preferred Stock and each such class or
series of Parity Preferred Stock have been paid in full.
(ii) At any time when such voting rights shall have vested, a
proper officer of the Company may, and, upon written request (addressed to the
Secretary at the principal office of the Company) of holders of record of at
least 10% of the outstanding Shares of Series B Preferred Stock, shall, call or
cause to be called a special meeting of the holders of Series B Preferred Stock
and all the series of Parity Preferred Stock upon which like voting rights have
been conferred and are exercisable (collectively, the "Parity Securities") by
mailing or causing to be mailed to such holders a notice of such special meeting
to be held not less than ten and not more than 45 days after the date such
notice is given. The record date for determining holders of the Parity
Securities entitled to notice of and to vote at such special meeting will be the
close of business on the third Business Day preceding the day on which such
notice is mailed. At any such special meeting, all of the holders of the Parity
Securities, by plurality vote, voting together as a single class without regard
to series will be entitled to elect two directors on the basis of one vote per
$50.00 of liquidation preference to which such Parity Securities are entitled by
their terms (excluding amounts in respect of accumulated and unpaid dividends)
and not cumulatively. The holder or holders of one-third of the Parity
Securities then outstanding, present in person or by proxy, will constitute a
quorum for the election of the Preferred Stock Directors except as otherwise
provided by law. Notice of all meetings at which holders of the Series B
Preferred Stock shall be entitled to vote will be given to such holders at their
addresses as they appear in the transfer records. At any such meeting or
adjournment thereof in the absence of a quorum, subject to the provisions of any
applicable law, a majority of the holders of the Parity Securities present in
person or by proxy shall have the power to adjourn the meeting for the election
of the Preferred Stock Directors, without notice other than an announcement at
the meeting, until a quorum is present. If a Preferred Distribution Default
shall terminate after the notice of a special meeting has been given but before
such special meeting has been held, the Company shall, as
<PAGE>
9
soon as practicable after such termination, mail or cause to be mailed notice of
such termination to holders of the Series B Preferred Stock that would have been
entitled to vote at such special meeting.
(iii) If and when all accumulated distributions and the
distribution for the current distribution period on the Series B Preferred Stock
shall have been paid in full or a sum sufficient for such payment is irrevocably
deposited in trust for payment, the holders of the Series B Preferred Stock
shall be divested of the voting rights set forth in Section 6(b) herein (subject
to revesting in the event of each and every Preferred Distribution Default) and,
if all distributions in arrears and the distributions for the current
distribution period have been paid in full or set aside for payment in full on
all other classes or series of Parity Preferred Stock upon which like voting
rights have been conferred and are exercisable, the term and office of each
Preferred Stock Director so elected shall terminate. Any Preferred Stock
Director may be removed at any time with or without cause by the vote of, and
shall not be removed otherwise than by the vote of, the holders of record of a
majority of the outstanding Series B Preferred Stock when they have the voting
rights set forth in Section 6(b) (voting separately as a single class with all
other classes or series of Parity Preferred Stock upon which like voting rights
have been conferred and are exercisable). So long as a Preferred Distribution
Default shall continue, any vacancy in the office of a Preferred Stock Director
may be filled by written consent of the Preferred Stock Director remaining in
office, or if none remains in office, by a vote of the holders of record of a
majority of the outstanding Series B Preferred Stock when they have the voting
rights set forth in Section 6(b) (voting separately as a single class with all
other classes or series of Parity Preferred Stock upon which like voting rights
have been conferred and are exercisable). The Preferred Stock Director shall
each be entitled to one vote per director on any matter.
(c) Certain Voting Rights. So long as any Series B Preferred
Stock remains outstanding, the Corporation shall not, without the affirmative
vote of the holders of at least two-thirds of the Series B Preferred Stock
outstanding at the time (i) designate or create, or increase the authorized or
issued amount of, any class or series of shares ranking senior to the Series B
Preferred Stock with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any authorized shares of
the Corporation into any such shares, or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such shares, (ii) designate or create, or increase the authorized or issued
amount of, any Parity Preferred Stock or reclassify any authorized shares of the
Corporation into any such shares, or create, authorize or issue any obligations
or security convertible into or evidencing the right to purchase any such
shares, but only to the extent such Parity Preferred Stock is issued to an
affiliate of the Corporation, or (iii) either (A) consolidate, merge into or
with, or convey, transfer or lease its assets substantially as an entirety, to
any corporation or other entity, or (B) amend, alter or repeal the provisions of
the Corporation's Charter (including these terms of the Series B Preferred
Stock) or By-laws, whether by merger, consolidation or otherwise, in each case
that would materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series B Preferred Stock or the
holders thereof; provided, however, that with respect to the occurrence of any
event set forth in (iii) above, so long as (a) the Corporation
<PAGE>
10
is the surviving entity and the Series B Preferred Stock remains outstanding
with the terms thereof unchanged, or (b) the resulting, surviving or transferee
entity is a corporation organized under the laws of any state and substitutes
the Series B Preferred Stock for other preferred stock having substantially the
same terms and same rights as the Series B Preferred Stock, including with
respect to distributions, voting rights and rights upon liquidation, dissolution
or winding-up, then the occurrence of any such event shall not be deemed to
materially and adversely affect such rights, privileges or voting powers of the
holders of the Series B Preferred Stock, and provided further that any increase
in the amount of authorized Preferred Stock or the creation or issuance of any
other class or series of Preferred Stock, or any increase in an amount of
authorized shares of each class or series, in each case ranking either (a)
junior to the Series B Preferred Stock with respect to payment of distributions
or the distribution of assets upon liquidation, dissolution or winding-up, or
(b) on a parity with the Series B Preferred Stock with respect to payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding-up to the extent such Preferred Stock is not issued to an affiliate of
the Corporation, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
Section 7. Restrictions on Ownership and Transfer to Preserve Tax
Benefit.
(a) Definitions. for the purposes of this Section 7 of these
terms of the Series B Preferred Stock, the following terms shall have the
following meanings:
"Beneficial Ownership" shall mean ownership of Series
B Preferred Stock by a Person who is or would be treated as an
owner of such Series B Preferred Stock either actually or
constructively through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have the correlative meanings.
"Beneficial Ownership Limit" shall mean 9.8% (by
value) of the outstanding shares of capital stock the
Corporation.
"Charitable Beneficiary" shall mean one or more
beneficiaries of a Trust, as determined pursuant to
Section 7(c)(vi) of these terms of the Series B Preferred
Stock, each of which shall be an organization described in
Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
"Code" shall mean the Internal Revenue Code of 1986,
as amended. All section references to the Code shall include
any successor provisions thereof as may be adopted from time
to time.
"Constructive Ownership" shall mean ownership of
Series B Preferred Stock by a Person who is or would be
treated as an owner of such Series B Preferred Stock either
actually or constructively through the application of Section
<PAGE>
11
318 of the Code, as modified by Section 856(d)(5) of the Code.
The terms "Constructive Owner," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.
"Constructive Ownership Limit" shall mean 9.8% (by
value) of the outstanding shares of capital stock the
Corporation.
"IRS" means the United States Internal Revenue Service.
"Market Price" shall mean the last reported sales
price reported on the New York Stock Exchange of the Series B
Preferred Stock on the trading day immediately preceding the
relevant date, or if the Series B Preferred Stock is not then
traded on the New York Stock Exchange, the last reported sales
price of the Series B Preferred Stock on the trading day
immediately preceding the relevant date as reported on any
exchange or quotation system over which the Series B Preferred
Stock may be traded, or if the Series B Preferred Stock is not
then traded over any exchange or quotation system, then the
market price of the Series B Preferred Stock on the relevant
date as determined in good faith by the Board of Directors of
the Corporation.
"MGCL" shall mean the Maryland General Corporation
Law, as amended from time to time, and any successor statute
hereafter enacted.
"Operating Partnership" shall mean National Golf
Operating Partnership, L.P., a Delaware limited partnership.
"Partnership Agreement" shall mean the Agreement of
Limited Partnership of the Operating Partnership, as such
agreement may be amended from time to time.
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust
qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning
of Section 509(a) of the Code, joint stock company or other
entity; but does not include an underwriter acting in a
capacity as such in a public offering of shares of Series B
Preferred Stock provided that the ownership of such shares of
Series B Preferred Stock by such underwriter would not result
in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, or otherwise result in the
Corporation failing to qualify as a REIT.
<PAGE>
12
"Purported Beneficial Transferee" shall mean, with
respect to any purported Transfer (or other event) which
results in a transfer to a Trust, as provided in Section
7(b)(ii) of these terms of the Series B Preferred Stock, the
Purported Record Transferee, unless the Purported Record
Transferee would have acquired or owned shares of Series B
Preferred Stock for another Person who is the beneficial
transferee or owner of such shares, in which case the
Purported Beneficial Transferee shall be such Person.
"Purported Record Transferee" shall mean, with
respect to any purported Transfer (or other event) which
results in a transfer to a Trust, as provided in Section
7(b)(ii) of these terms of the Series B Preferred Stock, the
record holder of the Series B Preferred Stock if such Transfer
had been valid under Section 7(b)(i) of these terms of the
Series B Preferred Stock.
"REIT" shall mean a real estate investment trust
under Sections 856 through 860 of the Code and, for purposes
of taxation of the Corporation under applicable state law,
comparable provisions of the law of such state.
"Restriction Termination Date" shall mean the first
day after the date hereof on which the Board of Directors of
the Corporation determines that it is no longer in the best
interests of the Corporation to attempt to, or continue to,
qualify as a REIT.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Series B Preferred Stock,
(including (i) the granting of any option or entering into any
agreement for the sale, transfer or other disposition of
Series B Preferred Stock or (ii) the sale, transfer,
assignment or other disposition of any securities or rights
convertible into or exchangeable for Series B Preferred
Stock), whether voluntary or involuntary, whether such
transfer has occurred of record or beneficially or
Beneficially or Constructively (including but not limited to
transfers of interests in other entities which results in
changes in Beneficial or Constructive Ownership of Series B
Preferred Stock), and whether such transfer has occurred by
operation of law or otherwise.
"Trust" shall mean each of the trusts provided for in
Section 7(c) of these terms of the Series B Preferred Stock.
"Trustee" shall mean any Person unaffiliated with the
Corporation, or a Purported Beneficial Transferee, or a
Purported Record Transferee, that is appointed by the
Corporation to serve as trustee of a Trust.
(b) Restriction on Ownership and Transfers.
<PAGE>
13
(i) Prior to the Restriction Termination Date:
(A) except as provided in Section 7(i) of
these terms of the Series B Preferred Stock, no
Person shall Beneficially Own Series B Preferred
Stock which, taking into account any other capital
stock of the Corporation Beneficially Owned by such
Person, would cause such ownership to exceed the
Beneficial Ownership Limit;
(B) except as provided in Section 7(i) of
these terms of the Series B Preferred Stock, no
Person shall Constructively Own Series B Preferred
Stock which, taking into account any other capital
stock of the Corporation Constructively Owned by such
Person, would cause such ownership to exceed the
Constructive Ownership Limit;
(C) no Person shall Beneficially or
Constructively Own Series B Preferred Stock which,
taking into account any other capital stock of the
Corporation Beneficially or Constructively Owned by
such Person, would result in the Corporation being
"closely held" within the meaning of Section 856(h)
of the Code, or otherwise failing to qualify as a
REIT (including but not limited to Beneficial or
Constructive Ownership that would result in the
Corporation owning (actually or Constructively) an
interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the
Corporation (either directly or indirectly through
one or more partnerships) from such tenant would
cause the Corporation to fail to satisfy any of the
gross income requirements of Section 856(c) of the
Code or comparable provisions of state law).
(ii) If, prior to the Restriction Termination Date, any
Transfer or other event occurs that, if effective, would result in any Person
Beneficially or Constructively Owning Series B Preferred Stock in violation of
Section 7(b)(i) of these terms of the Series B Preferred Stock, (1) then that
number of shares of Series B Preferred Stock that otherwise would cause such
Person to violate Section 7(b)(i) of these terms of the Series B Preferred Stock
(rounded up to the nearest whole share) shall be automatically transferred to a
Trust for the benefit of a Charitable Beneficiary, as described in Section 7(c),
effective as of the close of business on the business day prior to the date of
such Transfer or other event, and such Purported Beneficial Transferee shall
thereafter have no rights in such shares or (2) if, for any reason, the transfer
to the Trust described in clause (1) of this sentence is not automatically
effective as provided therein to prevent any Person from Beneficially or
Constructively Owning Series B Preferred Stock in violation of Section 7(b)(i)
of these terms of the Series B Preferred Stock, then the Transfer of that number
of shares of Series B Preferred Stock that otherwise would cause any Person to
violate Section 7(b)(i) shall be void ab initio, and the Purported Beneficial
Transferee shall have no rights in such shares.
<PAGE>
14
(iii) Subject to Section 7(n) of this Article THIRD, and
notwithstanding any other provisions contained herein, prior to the Restriction
Termination Date, any Transfer of Series B Preferred Stock that, if effective,
would result in the capital stock of the Corporation being beneficially owned by
less than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio, and the intended transferee shall acquire no rights in
such Series B Preferred Stock.
(iv) It is expressly intended that the restrictions on
ownership and Transfer described in this Section 7(b) shall apply to the
exchange rights provided in Section 17.7 of the Partnership Agreement.
Notwithstanding any of the provisions of the Partnership Agreement to the
contrary, a partner of the Operating Partnership shall not be entitled to effect
an exchange of an interest in the Operating Partnership for Series B Preferred
Stock if the actual or beneficial or Beneficial or Constructive Ownership of
Series B Preferred Stock would be prohibited under the provisions of this
Section 7.
(c) Transfers of Series B Preferred Stock in Trust.
(i) Upon any purported Transfer or other event described in
Section 7(b)(ii) of these terms of the Series B Preferred Stock, such Series B
Preferred Stock shall be deemed to have been transferred to the Trustee in his
capacity as trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the business day prior to the purported
Transfer or other event that results in a transfer to the Trust pursuant to
Section 7(b)(ii). The Trustee shall be appointed by the Corporation and shall be
a Person unaffiliated with the Corporation, any Purported Beneficial Transferee,
or any Purported Record Transferee. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 7(c)(vi) of these terms of
the Series B Preferred Stock.
(ii) Series B Preferred Stock held by the Trustee shall be
issued and outstanding Series B Preferred Stock of the Corporation. The
Purported Beneficial Transferee or Purported Record Transferee shall have no
rights in the shares of Series B Preferred Stock held by the Trustee. The
Purported Beneficial Transferee or Purported Record Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares of Series B Preferred Stock held in the Trust.
(iii) The Trustee shall have all voting rights and rights to
dividends with respect to Series B Preferred Stock held in the Trust, which
rights shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or distribution paid prior to the discovery by the
Corporation that shares of Series B Preferred Stock have been transferred to the
Trustee shall be paid to the Trustee upon demand, and any dividend or
distribution declared but unpaid shall be paid when due to the Trustee with
respect to such Series B Preferred Stock. Any
<PAGE>
15
dividends or distribution so paid over to the Trustee shall be held in trust for
the Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial
Transferee shall have no voting rights with respect to the Series B Preferred
Stock held in the Trust and, subject to Maryland law, effective as of the date
the Series B Preferred Stock has been transferred to the Trustee, the Trustee
shall have the authority (at the Trustee's sole discretion) (i) to rescind as
void any vote cast by a Purported Record Transferee with respect to such Series
B Preferred Stock prior to the discovery by the Corporation that the Series B
Preferred Stock has been transferred to the Trustee and (ii) to recast such vote
in accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary; provided, however, that if the Corporation has already
taken irreversible corporate action, then the Trustee shall not have the
authority to rescind and recast such vote. Notwithstanding any other provision
of these terms of the Series B Preferred Stock to the contrary, until the
Corporation has received notification that the Series B Preferred Stock has been
transferred into a Trust, the Corporation shall be entitled to rely on its share
transfer and other stockholder records for purposes of preparing lists of
stockholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of stockholders.
(iv) Within 20 days of receiving notice from the Corporation
that shares of Series B Preferred Stock have been transferred to the Trust, the
Trustee of the Trust shall sell the shares of Series B Preferred Stock held in
the Trust to a Person, designated by the Trustee, whose ownership of the shares
of Series B Preferred Stock will not violate the ownership limitations set forth
in Section 7(b)(i). Upon such sale, the interest of the Charitable Beneficiary
in the shares of Series B Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Section 7(c)(iv). The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee for the shares of Series B Preferred Stock in
the transaction that resulted in such transfer to the Trust (or, if the event
which resulted in the transfer to the Trust did not involve a purchase of such
shares of Series B Preferred Stock at Market Price, the Market Price of such
shares of Series B Preferred Stock on the day of the event which resulted in the
transfer of such shares of Series B Preferred Stock to the Trust) and (2) the
price per share received by the Trustee (net of any commissions and other
expenses of sale) from the sale or other disposition of the shares of Series B
Preferred Stock held in the Trust. Any net sales proceeds in excess of the
amount payable to the Purported Record Transferee shall be immediately paid to
the Charitable Beneficiary together with any dividends or other distributions
thereon. If, prior to the discovery by the Corporation that shares of such
Series B Preferred Stock have been transferred to the Trustee, such shares of
Series B Preferred Stock are sold by a Purported Record Transferee then (i) such
shares of Series B Preferred Stock shall be deemed to have been sold on behalf
of the Trust and (ii) to the extent that the Purported Record Transferee
received an amount for such shares of Series B Preferred Stock that exceeds the
amount that such Purported Record Transferee was entitled to receive pursuant to
this Section 7(c)(iv), such excess shall be paid to the Trustee upon demand.
<PAGE>
16
(v) Series B Preferred Stock transferred to the Trustee
shall be deemed to have been offered for sale to the Corporation, or its
designee, at a price per share equal to the lesser of (i) the price paid by the
Purported Record Transferee for the shares of Series B Preferred Stock in the
transaction that resulted in such transfer to the Trust (or, if the event which
resulted in the transfer to the Trust did not involve a purchase of such shares
of Series B Preferred Stock at Market Price, the Market Price of such shares of
Series B Preferred Stock on the day of the event which resulted in the transfer
of such shares of Series B Preferred Stock to the Trust) and (ii) the Market
Price on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer until the Trustee has sold
the shares of Series B Preferred Stock held in the Trust pursuant to Section
7(c)(iv). Upon such a sale to the Corporation, the interest of the Charitable
Beneficiary in the shares of Series B Preferred Stock sold shall terminate and
the Trustee shall distribute the net proceeds of the sale to the Purported
Record Transferee and any dividends or other distributions held by the Trustee
with respect to such Series B Preferred Stock shall thereupon be paid to the
Charitable Beneficiary.
(vi) By written notice to the Trustee, the Corporation shall
designate one or more nonprofit organizations to be the Charitable Beneficiary
of the interest in the Trust such that the Series B Preferred Stock held in the
Trust would not violate the restrictions set forth in Section 7(b)(i) in the
hands of such Charitable Beneficiary.
(d) Remedies For Breach. If the Board of Directors or a
committee thereof or other designees if permitted by the MGCL shall at any time
determine in good faith that a Transfer or other event has taken place in
violation of Section 7(b) of these terms of the Series B Preferred Stock or that
a Person intends to acquire, has attempted to acquire or may acquire beneficial
ownership (determined without reference to any rules of attribution), Beneficial
Ownership or Constructive Ownership of any shares of Series B Preferred Stock of
the Corporation in violation of Section 7(b) of these terms of the Series B
Preferred Stock, the Board of Directors or a committee thereof or other
designees if permitted by the MGCL shall take such action as it deems advisable
to refuse to give effect or to prevent such Transfer, including, but not limited
to, causing the Corporation to redeem shares of Series B Preferred Stock,
refusing to give effect to such Transfer on the books of the Corporation or
instituting proceedings to enjoin such Transfer; provided, however, that any
Transfers (or, in the case of events other than a Transfer, ownership or
Constructive Ownership or Beneficial Ownership) in violation of Section 7(b)(i)
of these terms of the Series B Preferred Stock, shall automatically result in
the transfer to a Trust as described in Section 7(b)(ii) and any Transfer in
violation of Section 7(b)(iii) shall automatically be void ab initio
irrespective of any action (or non-action) by the Board of Directors.
(e) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire shares of Series B Preferred Stock in violation of Section
7(b) of these terms of the Series B Preferred Stock, or any Person who is a
Purported Beneficial Transferee such that an
<PAGE>
17
automatic transfer to a Trust results under Section 7(b)(ii) of these terms of
the Series B Preferred Stock, shall immediately give written notice to the
Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or attempted Transfer on the Corporation's status as a
REIT.
(f) Owners Required To Provide Information. Prior to the
Restriction Termination date each Person who is a beneficial owner or Beneficial
Owner or Constructive Owner of Series B Preferred Stock and each Person
(including the shareholder of record) who is holding Series B Preferred Stock
for a beneficial owner or Beneficial Owner or Constructive Owner shall provide
to the Corporation such information that the Corporation may request, in good
faith, in order to determine the Corporation's status as a REIT.
(g) Remedies Not Limited. Nothing contained in these terms of
the Series B Preferred Stock (but subject to Section 7(n) of these terms of the
Series B Preferred Stock) shall limit the authority of the Board of Directors to
take such other action as it deems necessary or advisable to protect the
Corporation and the interests of its shareholders by preservation of the
Corporation's status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of
any of the provisions of this Section 7 of these terms of the Series B Preferred
Stock, including any definition contained in Section 7(a), the Board of
Directors shall have the power to determine the application of the provisions of
this Section 7 with respect to any situation based on the facts known to it
(subject, however, to the provisions of Section 7(n) of these terms of the
Series B Preferred Stock). In the event Section 7 requires an action by the
Board of Directors and these terms of the Series B Preferred Stock fail to
provide specific guidance with respect to such action, the Board of Directors
shall have the power to determine the action to be taken so long as such action
is not contrary to the provisions of Section 7. Absent a decision to the
contrary by the Board of Directors (which the Board of Directors may make in its
sole and absolute discretion), if a Person would have (but for the remedies set
forth in Section 7(b)) acquired Beneficial or Constructive Ownership of Series B
Preferred Stock in violation of Section 7(b)(i), such remedies (as applicable)
shall apply first to the shares of Series B Preferred Stock which, but for such
remedies, would have been actually owned by such Person, and second to shares of
Series B Preferred Stock, which, but for such remedies, would have been
Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares of Series B
Preferred Stock based upon the relative number of the shares of Series B
Preferred Stock held by each such Person.
(i) Exceptions.
(i) Subject to Section 7(b)(i)(C), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning shares of Series B Preferred Stock in violation of Section
7(b)(i)(A) if the Board of Directors obtains any
<PAGE>
18
representations and undertakings from such Person as are reasonably necessary to
ascertain that no individual's Beneficial Ownership of such shares of Series B
Preferred Stock will violate Section 7(b)(i)(A) or that any such violation will
not cause the Corporation to fail to qualify as a REIT under the Code, and
agrees that any violation of such representations or undertakings (or other
action which is contrary to the restrictions contained in Section 7(b) of these
terms of the Series B Preferred Stock) or attempted violation will result in
such Series B Preferred Stock being transferred to a Trust in accordance with
Section 7(b)(ii) of these terms of the Series B Preferred Stock.
(ii) Subject to Section 7(b)(i)(C), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Series B Preferred Stock in violation of Section
7(b)(i)(B), if such Person does not and represents that it will not own,
actually or Constructively, an interest in a tenant of the Corporation (or a
tenant of any entity owned in whole or in part by the Corporation) that would
cause the Corporation to own, actually or Constructively more than a 9.8%
interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and
the Corporation obtains such representations and undertakings from such Person
as are reasonably necessary to ascertain this fact and agrees that any violation
or attempted violation will result in such Series B Preferred Stock being
transferred to a Trust in accordance with Section 7(b)(ii) of these terms of the
Series B Preferred Stock. Notwithstanding the foregoing, the inability of a
Person to make the certification described in this Section 7(i)(ii) shall not
prevent the Board of Directors, in its sole discretion, from exempting such
Person from the limitation on a Person Constructively Owning Series B Preferred
Stock in violation of Section 7(b)(i)(B) if the Board of Directors determines
that the resulting application of Section 856(d)(2)(B) of the Code and
comparable provisions of applicable state law would affect the characterization
of less than 0.5% of the gross income (as such term is used in Section 856(c)(2)
of the Code) of the Corporation in any taxable year, after taking into account
the effect of this sentence with respect to all other capital stock of the
Corporation to which this sentence applies.
(iii) Prior to granting any exception pursuant to Section
7(i)(i) or (ii) of these terms of the Series B Preferred Stock, the Board of
Directors may require a ruling from the Internal Revenue Service, or an opinion
of counsel, in either case in form and substance satisfactory to the Board of
Directors in its sole discretion, as it may deem necessary or advisable in order
to determine or ensure the Corporation's status as a REIT.
(j) Legends. Each certificate for Series B Preferred Stock shall
bear the following legends:
Class of Stock
"THE CORPORATION IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE
THAN ONE CLASS, CONSISTING OF COMMON STOCK AND ONE OR MORE
CLASSES OF PREFERRED STOCK. THE BOARD OF DIRECTORS IS
AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF ANY CLASS OF THE
<PAGE>
19
PREFERRED STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF
PREFERRED STOCK. THE CORPORATION WILL FURNISH, WITHOUT CHARGE,
TO ANY STOCKHOLDER MAKING A WRITTEN REQUEST THEREFOR, A COPY
OF THE CORPORATION'S CHARTER AND A WRITTEN STATEMENT OF THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, CONVERSION OR
OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS AND TERMS
AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH
THE CORPORATION HAS THE AUTHORITY TO ISSUE AND, IF THE
CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL
CLASS AND SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS
AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE
EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF DIRECTORS
TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES.
REQUESTS FOR SUCH WRITTEN STATEMENT MAY BE DIRECTED TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE."
Restriction on Ownership and Transfer
<PAGE>
20
"THE SHARES OF SERIES B PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND
CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE
CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS
AND EXCEPT AS EXPRESSLY PROVIDED IN THE ARTICLES SUPPLEMENTARY
FOR THE SERIES B PREFERRED STOCK, (i) NO PERSON MAY
BENEFICIALLY OWN SHARES OF THE CORPORATION'S SERIES B
PREFERRED STOCK WHICH, TAKING INTO ACCOUNT ANY OTHER CAPITAL
STOCK OF THE CORPORATION BENEFICIALLY OWNED BY SUCH PERSON,
WOULD CAUSE SUCH OWNERSHIP TO EXCEED THE BENEFICIAL OWNERSHIP
LIMIT OF 9.8%; (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF
THE CORPORATION'S SERIES B PREFERRED STOCK WHICH, TAKING INTO
ACCOUNT ANY OTHER CAPITAL STOCK OF THE CORPORATION
CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD CAUSE SUCH
OWNERSHIP TO EXCEED THE CONSTRUCTIVE OWNERSHIP LIMIT OF 9.8%;
(iii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES
B PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER CAPITAL
STOCK OF THE CORPORATION BENEFICIALLY OR CONSTRUCTIVELY OWNED
BY SUCH PERSON, WOULD RESULT IN THE CORPORATION BEING "CLOSELY
HELD" UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE
CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (iv) NO PERSON
MAY TRANSFER SERIES B PREFERRED STOCK IF SUCH TRANSFER WOULD
RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY
FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR
CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR
CONSTRUCTIVELY OWN SERIES B PREFERRED STOCK WHICH CAUSES OR
WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN
SERIES B PREFERRED STOCK IN EXCESS OF THE ABOVE LIMITATIONS
MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE
RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE SERIES
B PREFERRED STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE
OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION
MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY
THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF
DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER
EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE.
FURTHERMORE, UPON THE OCCURRENCE OF
<PAGE>
21
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE
RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS
IN THIS LEGEND DEFINED IN THE ARTICLES SUPPLEMENTARY FOR THE
SERIES B PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED TO
THEM IN THE ARTICLES SUPPLEMENTARY FOR THE SERIES B PREFERRED
STOCK AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF
WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP,
WILL BE FURNISHED TO EACH HOLDER OF SERIES B PREFERRED STOCK
ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE
DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL
OFFICE."
(k) Exchange of Series B Preferred Units. So long as the
Corporation remains the general partner of the Operating Partnership, the Board
of Directors of the Corporation (subject to the restrictions on ownership,
transfer and redemption of Series B Preferred Stock set forth in this Section 7)
is hereby expressly vested with authority to issue, and shall issue to the
extent provided in the Partnership Agreement, Series B Preferred Stock in
exchange for Series B Preferred Units (as defined in the Partnership Agreement).
(l) Reservation of Shares. Pursuant to the obligations of the
Corporation under the Partnership Agreement to issue Series B Preferred Stock in
exchange for Series B Preferred Units, the Board of Directors is hereby required
to reserve and authorize for issuance a number of authorized but unissued shares
of Series B Preferred Stock not less than the number of Series B Preferred Units
issued to permit the Corporation to issue Series B Preferred Stock in exchange
for Series B Preferred Units that may be exchanged for or converted into Series
B Preferred Stock as provided in the Partnership Agreement.
(m) Severability. If any provision of this Section 7 or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
(n) NYSE. Nothing in this Section 7 shall preclude the
settlement of any transaction entered into through the facilities of the New
York Stock Exchange. The shares of Series B Preferred Stock that are the subject
of such transaction shall continue to be subject to the provisions of this
Section 7 after such settlement.
(o) Applicability of Section 7. The provisions set forth in
this Section 7 shall apply to the Series B Preferred Stock notwithstanding any
contrary provisions of the Series B Preferred Stock provided for elsewhere in
these terms of the Series B Preferred Stock.
<PAGE>
22
Section 8. No Conversion Rights. The holders of the Series B
Preferred Stock shall not have any rights to convert such shares into shares of
any other class or series of stock or into any other securities of, or interest
in, the Corporation.
Section 9. No Sinking Fund. No sinking fund shall be established
for the retirement or redemption of Series B Preferred Stock.
Section 10. No Preemptive Rights. No holder of the Series B
Preferred Stock of the Corporation shall, as such holder, have any preemptive
rights to purchase or subscribe for additional shares of stock of the
Corporation or any other security of the Corporation which it may issue or sell.
FOURTH: The Series B Preferred Stock has been classified and
designated by the Board of Directors under the authority contained in the
Charter.
FIFTH: These Articles Supplementary have been approved by the
Board of Directors in the manner and by the vote required by law.
SIXTH: The undersigned President of the Corporation
acknowledges these Articles Supplementary to be the corporate act of the
Corporation and, as to all matters or facts required to be verified under oath,
the undersigned President acknowledges that, to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on this 28th day of July, 1999.
NATIONAL GOLF PROPERTIES, INC.
/s/ James M. Stanich
By:_____________________________
James M. Stanich
President
[SEAL]
ATTEST:
/s/ Scott S. Thompson
----------------------------
Scott S. Thompson
Secretary
<PAGE>
EXHIBIT 10.1
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP, dated as of July 28, 1999, is entered into by and among National
Golf Properties, Inc., a Maryland corporation (the "REIT"), as the General
Partner and the Persons whose names are set forth on Exhibit A as attached
hereto, as the Limited Partners, together with any other Persons who become
Partners in the Partnership as provided herein.
WHEREAS, the Partnership was formed on August 18, 1993 and an
original Agreement of Limited Partnership was entered into between the REIT, as
General Partner, and the Limited Partners;
WHEREAS, in connection with the REIT's assignment and
contribution to the Partnership of certain golf course properties acquired from
Golf Enterprises, Inc., the REIT, as General Partner, entered into the Amendment
of Agreement of Limited Partnership dated as of July 25, 1996.
WHEREAS, in order to clarify certain provisions of the
original Agreement of Limited Partnership, as amended, the REIT, as General
Partner, entered into the Second Amendment of Agreement of Limited Partnership,
dated as of July 29, 1996;
WHEREAS, in connection with certain capital contributions by
Belair Capital Fund LLC, a Massachusetts limited liability company, to the
Partnership in exchange for 8% Series A Cumulative Redeemable Preferred Units of
limited partnership interest in the Partnership the REIT, as General Partner,
entered into the Second Amended and Restated Agreement of Limited Partnership,
dated as of April 20, 1998;
WHEREAS, in order to clarify certain provisions of the Second
Amended and Restated Agreement of Limited Partnership, the REIT, as General
Partner, entered into the Amendment of Second Amended and Restated Agreement of
Limited Partnership, dated as of July 9, 1998 and the Amendment of Second
Amended and Restated Agreement of Limited Partnership, dated as of March 29,
1999;
WHEREAS, on the date hereof, Belair Real Estate Corporation
and Belcrest Realty Corporation, each a Delaware corporation (the "Series B
Contributors") are making a Capital Contribution of $35,000,000 in cash to the
Partnership in exchange for an aggregate of 1,400,000 9.30% Series B Cumulative
Redeemable Preferred Units of limited partnership interest in the Partnership
with the rights, preferences, exchange and other rights, voting powers and
restriction, limitations as to distributions, qualifications and terms and
conditions as set forth herein;
<PAGE>
WHEREAS, the REIT, as General Partner, desires to amend and
restate the Partnership Agreement to reflect (i) the issuance of 1,400,000
Series B Cumulative Redeemable Preferred Units and (ii) certain other matters
described herein;
WHEREAS, the Series B Contributors desire to make the capital
contribution referenced above and to continue to be bound by all terms,
conditions and other provisions of the Partnership Agreement; and
WHEREAS, the REIT, as General Partner, has obtained the
written consent 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.
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such statute.
"Additional Funds" shall have the meaning set forth in Section
4.5.A.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means, with respect to any Partner,
the balance in such Partner's Capital Account as of the end of the relevant
fiscal year, after giving effect to the following adjustments:
(i) add to such balance any amounts which such Partner is
obligated to restore pursuant to this Agreement or is deemed to be obligated to
restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentence of each of Regulations Sections 1.704-2(i)(5) and 1.704-2(g); and
(ii) subtract from such balance the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant fiscal
2
<PAGE>
year. The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Date" shall have the meaning set forth in Section
4.5.F. hereof.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person, and when used in Section 11.3, such Person's Immediate Family.
"Agreed Value" means (i) in the case of any Contributed
Property set forth in Exhibit A and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit A; (ii)
in the case of any Contributed Property not set forth in Exhibit A and as of the
time of its contribution to the Partnership, the fair market value of such
property or other consideration as determined by the General Partner, reduced by
any liabilities either assumed by the Partnership upon such contribution or to
which such property is subject when contributed; and (iii) in the case of any
property distributed to a Partner by the Partnership, the fair market value of
such property as determined by the General Partner at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of the
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"Agreement" means this Third Amended and Restated Agreement of
Limited Partnership, as it may be amended, supplemented or restated from time to
time.
"Appraisal" means with respect to any assets, the opinion of
an independent third party experienced in the valuation of similar assets,
selected by the General Partner in good faith; such opinion may be in the form
of an opinion by such independent third party that the value for such property
or asset as set by the General Partner is fair, from a financial point of view,
to the Partnership.
"Assignee" means a Person to whom one or more Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"Available Cash" means, with respect to any period for which
such calculation is being made, (i) the sum, without duplication, of:
(a) the Partnership's Net Income or Net Loss (as the case may be) for
such period,
(b) Depreciation and all other noncash charges deducted in determining
Net Income or Net Loss for such period,
(c) the amount of any reduction in reserves of the Partnership referred
to in clause (ii)(f) below (including, without limitation, reductions resulting
because the General Partner determines such amounts are no longer necessary),
3
<PAGE>
(d) the excess of the net proceeds from the sale, exchange, disposition
or refinancing of Partnership property for such period over the gain (or loss,
as the case may be) recognized from such sale, exchange, disposition or
refinancing during such period (excluding Terminating Capital Transactions), and
(e) all other cash received by the Partnership for such period that was
not included in determining Net Income or Net Loss for such period;
(ii) less the sum, without duplication, of:
(a) all principal debt payments made during such period by the
Partnership,
(b) capital expenditures made by the Partnership during such period,
(c) investments in any entity (including loans made thereto) to the
extent that such investments are not otherwise described in clauses (ii)(a) or
(b),
(d) all other expenditures and payments not deducted in determining Net
Income or Net Loss for such period,
(e) any amount included in determining Net Income or Net Loss for such
period that was not received by the Partnership during such period, and
(f) the amount of any increase in reserves established during such
period which the General Partner determines are necessary or appropriate in its
sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not
include any cash received or reductions in reserves, or include any
disbursements made or reserves established, after commencement of the
dissolution, liquidation and winding up of the Partnership.
"Board of Directors" means the Board of Directors of the General
Partner.
"Business Day" shall mean each day, other than a Saturday or a
Sunday, which is not a day on which banking institutions in Los Angeles,
California, or New York, New York are authorized or required by law, regulation
or executive order to close.
"Capital Account" means, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with the following
provisions:
(a) To each Partner's Capital Account, there shall be added
such Partner's Capital Contributions, such Partner's share of Net Income and any
items in the nature of income or gain which are specially allocated pursuant to
Section 6.3 hereof, and the amount of any Partnership liabilities assumed by
such Partner or which are secured by any property distributed to such Partner.
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(b) From each Partner's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 6.3 hereof,
and the amount of any liabilities of such Partner assumed by the Partnership or
which are secured by any property contributed by such Partner to the
Partnership.
(c) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest.
(d) In determining the amount of any liability for purposes of
subsections (a) and (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed in order to comply with
such Regulations, the General Partner may make such modification provided that
it is not likely to have a material effect on the amounts distributable to any
Person pursuant to Article 13 of this Agreement upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Partnership by such Partner.
"Cash Amount" is defined in Section 8.6.C.
"Certificate" means the Certificate of Limited Partnership of
the Partnership filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the General
Partner filed in the State of Maryland on August 31, 1995, as amended, restated
or supplemented from time to time.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto, as interpreted by the
applicable regulations thereunder. Any
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reference herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of future law.
"Common Limited Partner" means any Person holding Common Units
and named as a Common Limited Partner in Exhibit A attached hereto, as such
Exhibit may be amended from time to time, or any Substituted Limited Partner or
Additional Limited Partner, in such Person's capacity as a Common Limited
Partner in the Partnership.
"Common Unit" means a Partnership Unit representing a Partnership
Interest that is without preference as to distributions and allocations or
rights upon voluntary or involuntary liquidation, dissolution or winding-up.
"Consent" means the consent to, approval of, or vote on a
proposed action by a Partner given in accordance with Article 14 hereof.
"Consent of the Limited Partners" means the Consent of a
Majority in Interest of the Limited Partners, which Consent shall be obtained
prior to the taking of any action for which it is required by this Agreement and
may be given or withheld by a Majority in Interest of the Limited Partners,
unless otherwise expressly provided herein, in their sole and absolute
discretion.
"Constructive Ownership" means ownership determined through
the application of the constructive ownership rules of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code, as such provisions may be modified
from time to time. The terms "Constructive," "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
"Contributed Properties" means each property or other asset,
in such form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (or, to the extent provided in applicable
Regulations, deemed contributed by the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code).
"Contribution Agreements" means the Contribution Agreement,
dated as of the date of this Agreement, by and among the Series B Contributors
and the Partnership and the REIT and with respect to the Series B Preferred
Units, together with the Contribution Agreement dated as of March 4, 1998 and
the Contribution Agreement dated as of April 20, 1998, each with respect to the
Series A Preferred Units.
"Contributors" means the Persons identified as a "contributor" or
"contributors" in the Contribution Agreements.
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services; (ii) all amounts owed by such
Person to banks or other Persons in respect of reimbursement obligations under
letters of credit, surety bonds and other similar instruments guaranteeing
payment or other performance of obligations by such Person; (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by any lien on any property owned by such Person, to the
extent attributable to such Person's interest in such
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property, even though such Person has not assumed or become liable for the
payment thereof; and (iv) lease obligations of such Person which, in accordance
with generally accepted accounting principles, should be capitalized.
"Deemed Partnership Interest Value" means, as of any date with
respect to any class of Partnership Interests, the Deemed Value of the
Partnership Interests of such class or series multiplied by the applicable
Partner's Percentage Interest of such class or series.
"Deemed Value of the Partnership Interests" means, as of any
date with respect to any class or series of Partnership Interests, (i) the total
number of Partnership Units of the General Partner in such class or series of
Partnership Interests (as provided for in Sections 4.1 and 4.5.D) issued and
outstanding as of the close of business on such date multiplied by the Value of
a share of capital stock of the General Partner which corresponds to such class
or series of Partnership Interests on such date; (ii) divided by the Percentage
Interest of the General Partner in such class or series of Partnership Interests
on such date; provided that, if no outstanding shares of capital stock of the
General Partner correspond to a class or series of Partnership Interests, the
Deemed Value of Partnership Interests with respect to such class or series shall
be equal to an amount reasonably determined by the General Partner.
"Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
"DGP" means David G. Price, an individual.
"Effective Date" means the date of closing of the sale of REIT
Shares pursuant to that certain Underwriting Agreement among the General
Partner, the Partnership and Morgan Stanley & Co., Incorporated et al., upon
which the Certificate was filed.
"Election Notice" is defined in Section 4.5.E.
"Excess Units" has the meaning set forth in Section 16.7.A(iii).
"Exchange" has the meaning set forth in Section 8.6.
"Funding Debt" means the incurrence of any Debt by or on
behalf of the General Partner for the purpose of providing funds to the
Partnership.
"Funding Notice" has the meaning set forth in Section 4.5.B.
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"General Partner" means the REIT or its successors as general
partner of the Partnership.
"General Partner Interest" means a Partnership Interest held
by the General Partner. A General Partner Interest may be expressed as a number
of Partnership Units.
"General Partner Loan" is defined in Section 4.5.C.
"General Partner Payment" shall have the meaning set forth in
Section 15.11.
"General Partner Properties" means the properties identified
on Exhibit A attached hereto, and any rents, proceeds or assets resulting from
the ownership and operation of such properties, so long as such properties are
owned by the General Partner.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the contributing Partner and the General Partner (as set forth
on Exhibit A attached hereto, as such Exhibit may be amended from time to time);
provided that, if the contributing Partner is the General Partner, then, except
with respect to the General Partner's initial Capital Contribution or capital
contributions of cash, REIT Shares or other shares of capital stock of the
General Partner, the determination of the fair market value of the contributed
asset shall be determined by (i) the price paid by the General Partner if the
asset is acquired by the General Partner contemporaneously with its contribution
to the Partnership, or (ii) by Appraisal.
(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner using such reasonable method of valuation as it may adopt;
provided, however, that for this purpose, the net value of all of the
Partnership assets, in the aggregate, shall be equal to the Deemed Value of the
Partnership Interests of all classes of Partnership Interests then outstanding,
regardless of the method of valuation adopted by the General Partner, as of the
following times:
(i) the acquisition of an additional interest in the
Partnership by a new or existing Partner in exchange for more than a de minimis
Capital Contribution, if the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership property as consideration for an
interest in the Partnership, if the General Partner reasonably determines that
such adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
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(iv) at such other times as the General Partner shall
reasonably determine necessary or advisable in order to comply with Regulations
Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed
to a Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the General Partner; provided
that, if the distributee is the General Partner, or if the distributee and the
General Partner cannot agree on such a determination, by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subparagraph (d) to the extent that the General Partner reasonably determines
that an adjustment pursuant to subparagraph (b) is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (d).
(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subparagraph (a), (b) or (d), such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Income and Net Losses.
"Holder" means either the Partner or Assignee owning a Partnership
Unit.
"Immediate Family" means, with respect to any Person, such
Person's estate and heirs and current and former spouse(s), parents,
parents-in-law, children, children-in-law, siblings and grandchildren and any
trust or estate, all of the beneficiaries of which consist of such Person or
such Person's current or former spouse, parents, parents-in-law,
children-in-law, children, siblings or grandchildren.
"Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the
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Partner in any proceeding of the nature described in clause (b) above, (e)
the Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within 120 days after the
commencement thereof, (g) the appointment without the Partner's consent or
acquiescence of a trustee, receiver of liquidator has not been vacated or stayed
within 90 days of such appointment, or (h) an appointment referred to in clause
(g) is not vacated within 90 days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of his status as (A) the General Partner or (B) a director of the
General Partner or officer of the Partnership or the General Partner, and (ii)
such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time, in its sole
and absolute discretion.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Junior Stock" means any class or series of capital stock of
the General Partner ranking junior as to the payment of distributions or rights
upon voluntary or involuntary liquidation, winding up or dissolution of the
General Partner to the REIT Series A Preferred Shares and the REIT Series B
Preferred Shares.
"Junior Units" means any class or series of Partnership
Interest of the Partnership ranking junior as to the payment of distributions or
rights upon voluntary or involuntary liquidation, winding up or dissolution of
the Partnership to the Series A Preferred Units and the Series B Preferred
Units.
"Limited Partner" means any Common Limited Partner or Preferred
Limited Partner.
"Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Partnership Units.
"Liquidating Events" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
"Majority in Interest of the Limited Partners" means those
Limited Partners (other than (i) any Limited Partner 50% or more of whose equity
is owned, directly or indirectly, by the General Partner and (ii) any Preferred
Limited Partner) holding in the aggregate Percentage Interests that are greater
than fifty percent (50%) of the aggregate Percentage Interests
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of all Limited Partners (other than (i) any Limited Partner 50% or more of whose
equity is owned, directly or indirectly, by the General Partner and (ii) any
Preferred Limited Partner).
"Net Income" or "Net Loss" means for each fiscal year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such fiscal year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Income or Net
Loss pursuant to this definition of Net Income or Net Loss shall be added to
such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Income or Net Loss pursuant to this definition of
Net Income or Net Loss shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to subparagraph (b) or subparagraph (c) of the
definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year;
(f) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definition of
Net Income or Net Loss, any items which are specially allocated pursuant to
Section 6.3 hereof shall not be taken into account in computing Net Income or
Net Loss. The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Section 6.3 hereof
shall be determined by applying rules analogous to those set forth in this
definition of Net Income or Net Loss.
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Solely for purposes of allocating Net Income or Net Loss in any Partnership Year
to the holders of the Series A Preferred Units and the Series B Preferred Units
pursuant to Sections 6.2.B.1(b) and (d), and Section 6.2.B.2(b), items of Net
Income and Net Loss, as the case may be, shall not include Depreciation with
respect to properties that are "ceiling limited" in respect of Preferred Limited
Partners. For purposes of the preceding sentence, Partnership property shall be
considered ceiling limited in respect of a Preferred Limited Partner if
Depreciation attributable to such Partnership property which would otherwise be
allocable to such Partner, without regard to this paragraph, exceeded
depreciation determined for federal income tax purposes attributable to such
Partnership property which would otherwise be allocable to such Partner by more
than 5%.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Exchange" means the Notice of Exchange
substantially in the form of Exhibit B to this Agreement.
"Notice of Put" means the Notice of Put substantially in the
form of Exhibit B to this Agreement.
"Original Limited Partner" means the Limited Partners of the
Partnership listed on Schedule A hereto, as of August 18, 1993.
"Original Limited Partnership Unit" means a Partnership Unit
held by an Original Limited Partner on August 18, 1993.
"Parity Preferred Stock" means any class or series of
Preferred Shares now or hereafter authorized, issued or outstanding expressly
designated by the General Partner to rank on a parity with REIT Series A
Preferred Shares and REIT Series B Preferred Shares with respect to
distributions and rights upon voluntary or involuntary liquidation, winding up
or dissolution of the General Partner in accordance with the Series A Articles
Supplementary and Series B Articles Supplementary.
"Parity Preferred Unit" means any class or series of
Partnership Interests of the Partnership now or hereafter authorized, issued or
outstanding expressly designated by the Partnership to rank on a parity with
Series A Preferred Units and Series B Preferred Units with respect to
distributions or rights upon voluntary or involuntary liquidation, winding up
and dissolution of the Partnership.
"Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner
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Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(i)(2).
"Partnership" means the limited partnership formed under the
Act and pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the
Partnership of either a Limited Partner or the General Partner and includes any
and all benefits to which the holder of such a Partnership Interest may be
entitled as provided in this Agreement, together with all obligations of such
Person to comply with the terms and provisions of this Agreement. There may be
one or more classes or series of Partnership Interests as provided in Section
4.5. A Partnership Interest may be expressed as a number of Partnership Units.
Unless otherwise expressly provided for by the General Partner at the time of
the original issuance of any Partnership Interests, all Partnership Interests
(whether of a Limited Partner or a General Partner) shall be of the same class
or series. The Partnership Interests represented by the Common Units, Series A
Preferred Units and the Series B Preferred Units are the only Partnership
Interests and are separate classes of Partnership Interest for all purposes of
this Agreement.
"Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash with respect to
Partnership Interests that are not entitled to any preference in distribution
pursuant to Section 5.1 hereof which record date shall be the same as the record
date established by the General Partner for a distribution to its stockholders
of some or all of its portion of such distribution.
"Partnership Unit" means, with respect to any class or series
of Partnership Interest, a fractional, undivided share of such class or series
of Partnership Interest issued pursuant to Sections 4.1 and 4.5. The ownership
of Partnership Units may be evidenced by a certificate for units substantially
in the form of Exhibit C hereto or as the General Partner may determine with
respect to any class or series of Partnership Units issued from time to time
under Sections 4.1 and 4.5.
"Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.
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"Percentage Interest" means, as to a Partner holding a class
or series of Partnership Interests, its interest in such class or series as
determined by dividing the Partnership Units of such class or series owned by
such Partner by the total number of Partnership Units of such class or series
then outstanding as specified in Exhibit A attached hereto, as such Exhibit may
be amended from time to time. If the Partnership issues more than one class or
series of Partnership Interest, the interest in the Partnership among the
classes or series of Partnership Interests shall be determined as set forth in
the amendment to the Partnership Agreement setting forth the rights and
privileges of such additional classes or series of Partnership Interest, if any,
as contemplated by Section 4.5.D.
"Person" means an individual or a corporation, partnership,
limited liability company, trust, unincorporated organization, association or
other entity.
"Preemptive Contribution" is defined in Section 4.5.E.
"Preferred Distribution Shortfall" shall have the meaning
given to such term in Section 5.1.
"Preferred Limited Partner" means any Person holding a
Preferred Unit, and named as a Preferred Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner or Additional Limited Partner, in such Person's capacity as a
Preferred Limited Partner in the Partnership.
"Preferred Share" means a share of the General Partner's
preferred stock, par value $.01 per share, with such rights, priorities and
preferences as shall be designated by the Board of Directors in accordance with
the Charter.
"Preferred Unit" means a Series A Preferred Unit, a Series B
Preferred Unit and any other Partnership Unit representing a Limited Partnership
Interest, with such rights, priorities and preferences as shall be designated by
the General Partner pursuant to Section 4.5.D other than Common Units.
"Price Family Ownership" means the actual and "constructive"
(as determined for purposes of real estate investment trust income requirements)
ownership of interests in the Partnership and American Golf Corporation (a
significant tenant of the Partnership) by DGP, Dallas P. Price and by their
Immediate Family, which ownership would cause the rent received by the
Partnership, if the Partnership were a REIT, to fail to satisfy the income
requirements of Section 856 of the Code.
"Primary Offering Notice" shall have the meaning set forth in
Section 8.6.G.
"Priority Return" means with respect to (i) the Series A
Preferred Units, the Series A Priority Return and (ii) the Series B Preferred
Units, the Series B Priority Return.
"Pro Rata Contribution" has the meaning set forth in Section 4.5.E.
"Properties" means such interests in real property and
personal property, including without limitation, fee interests, interests in
ground leases, interests in joint ventures or
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partnerships, interests in mortgages, and Debt instruments as the Partnership
may hold from time to time.
"PTP" has the meaning set forth in Section 16.6 hereof.
"Public Offering Funding" is defined in Section 8.6.D.
"Public Offering Funding Amount" is defined in Section 8.6.D.
"Put" has the meaning set forth in Section 8.6 hereof.
"Put Amount" means the lesser of (i) the Cash Amount or (ii)
the Public Offering Funding Amount.
"Qualified REIT Subsidiary" means any Subsidiary of the
General Partner that is a "qualified REIT subsidiary" within the meaning of
Section 856(i) of the Code.
"Qualified Transferee" means an "Accredited Investor" as
defined in Rule 501 promulgated under the Securities Act.
"Registrable Shares" has the meaning set forth in Section 8.6.
"Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section
6.3.A(viii).
"REIT" means a real estate investment trust under Sections 856
through 860 of the Code.
"REIT Requirements" has the meaning set forth in Section 5.1.
"REIT Series A Preferred Share" means a share of 8% Series A
Cumulative Redeemable Preferred Stock, par value $.01 per share, liquidation
preference $50 per share, of the General Partner.
"REIT Series B Preferred Share" means a share of 9.30% Series
B Cumulative Redeemable Preferred Stock, par value $.01 per share, liquidation
preference $25 per share, of the General Partner.
"REIT Share" shall mean a share of common stock of the General
Partner.
"REIT Shares Amount" means, as of any date, an aggregate
number of REIT Shares equal to the number of Tendered Units, as adjusted
pursuant to Section 7.5 (as a result of the General Partner owning assets held
other than on behalf of the Partnership) and, as appropriate, for stock
dividends and distributions, stock splits and subdivisions, reverse stock splits
and combinations, distributions of rights, warrants or options, and
distributions of
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evidences of indebtedness or assets relating to assets not received by the
General Partner pursuant to a pro rata distribution by the Partnership.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Series A Limited Partner" means any Person holding Series A
Preferred Units and named as a Series A Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner, in such Person's capacity as a Series A Limited Partner in the
Partnership.
"Series A Preferred Capital" means a Capital Account balance
equal to the product of (i) the number of Series A Preferred Units then held by
the Holder (including the General Partner to the extent it holds such units),
multiplied by (ii) the sum of $50 and any Preferred Distribution Shortfall per
Series A Preferred Unit.
"Series A Preferred Unit Distribution Payment Date" has the
meaning set forth in Section 16.2.A.
"Series A Preferred Unit Partnership Record Date" has the
meaning set forth in Section 16.2.A.
"Series A Preferred Units" means the Partnership's 8% Series A
Cumulative Redeemable Limited Partnership Units, with the rights, priorities and
preferences set forth herein.
"Series A Priority Return" shall mean, an amount equal to 8%
per annum, determined on the basis of a 360 day year of twelve 30 day months,
and for any period shorter than a full quarterly period for which distributions
are computed, the amount of the distributions payable will be based on the ratio
of the actual number of days elapsed in such period to ninety (90) days
cumulative to the extent not distributed for any given distribution period
pursuant to Sections 5.1 and 16.2 hereof, on the stated value of $50 per Series
A Preferred Unit, commencing on the date of the issuance of such Series A
Preferred Unit.
"Series B Limited Partner" means any Person holding Series B
Preferred Units and named as a Series B Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner, in such Person's capacity as a Series B Limited Partner in the
Partnership.
"Series B Preferred Capital" means a Capital Account balance
equal to the product of (i) the number of Series B Preferred Units then held by
the Holder (including the General Partner to the extent it holds such units),
multiplied by (ii) the sum of $25 and any Preferred Distribution Shortfall per
Series B Preferred Unit.
"Series B Preferred Unit Distribution Payment Date" has the
meaning set forth in Section 17.2.A.
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"Series B Preferred Unit Partnership Record Date" has the
meaning set forth in Section 17.2.A.
"Series B Preferred Units" means the Partnership's 9.30%
Series B Cumulative Redeemable Limited Partnership Units, with the rights,
priorities and preferences set forth in Article 17 herein.
"Series B Priority Return" shall mean, an amount equal to
9.30% per annum, determined on the basis of a 360 day year of twelve 30-day
months, and for any period shorter than a full quarterly period for which
distributions are computed, the amount of the distributions payable will be
based on the ratio of the actual number of days elapsed in such period to ninety
(90) days cumulative to the extent not distributed for any given distribution
period pursuant to Sections 5.1 and 17.2 hereof, on the stated value of $25 per
Series B Preferred Unit, commencing on the date of issuance of such Series B
Preferred Unit.
"Single Funding Notice" has the meaning set forth in Section
8.6.C.
"Specified Exchange Date" means the day of receipt by the
General Partner of a Notice of Exchange.
"Specified Put Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Put; provided that in the event
that the General Partner elects a Public Offering Funding pursuant to Section
8.6.C, such Specified Put Date shall be deemed deferred until the next Business
Day following the date of the closing of the Public Offering Funding, provided
that the General Partner has complied in all respects with its obligations with
respect to the Public Offering Funding.
"Stock Incentive Plan" means, collectively, 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; the
1995 Independent Director Equity Participation Plan of National Golf Properties,
Inc.; the 1997 Equity Participation Plan of National Golf Properties, Inc.,
National Golf Operating Partnership, L.P. and American Golf Corporation; and any
similar or successor plans.
"Subsequent Put" shall have the meaning set forth in Section
8.6.G.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, joint venture or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Partnership pursuant to Section 11.4.
"Tenant" means any tenant from which the General Partner
derives rent either directly or indirectly through partnerships, including the
Partnership.
"Tendered Units" has the meaning set forth in Section 8.6.A.
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"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"Tier 3 Nonrecourse Liability" means a Debt or a portion of a
Debt that (i) represents a Nonrecourse Liability of the Partnership and (ii) is
not allocated to any Holder under paragraphs (a)(1) and/or (a)(2) of Treasury
Regulations Section 1.752-3. The term "Tier 3 Nonrecourse Liabilities" shall
have a correlative meaning.
"Twelve-Month Period" means a twelve-month period ending on
the first anniversary of the Effective Date or on each subsequent anniversary
thereof.
"Valuation Date" means the date of receipt by the General
Partner of a Notice of Exchange or Notice of Put or any other date with respect
to which "Value" must be determined hereunder, or, if such date is not a
Business Day, the immediately preceding Business Day.
"Value" means, with respect to any share of capital stock of
the General Partner, the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the Valuation Date. The market
price for each such trading day shall be: (i) if such shares are listed or
admitted to trading on any securities exchange or the Nasdaq National Market,
the closing price, regular way, on such day, or if no such sale takes place on
such day, the average of the closing bid and asked prices on such day, (ii) if
such shares are not listed or admitted to trading on any securities exchange or
the Nasdaq National Market, the last reported sale price on such day or, if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, as reported by a reliable quotation source designated by the General
Partner, or (iii) if such shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 10 days prior to the date in
question) for which prices have been so reported; provided that if there are no
bid and asked prices reported during the 10 days prior to the date in question,
the Value of such shares shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the REIT Shares
Amount includes rights that a holder of REIT Shares would be entitled to
receive, then the Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate; and
provided further that, in connection with determining the Deemed Value of the
Partnership Interests for purposes of determining the number of additional Units
issuable upon a Capital Contribution funded by an underwritten public offering
of shares of capital stock of the General Partner, then the Value of such shares
shall be the public offering price per share of such class or series of capital
stock sold.
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ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Organization.
The Partnership is a limited partnership formed pursuant to
the provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
Section 2.2. Name.
The name of the Partnership is National Golf Operating
Partnership, L.P. The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.
Section 2.3. Registered Office and Agent; Principal Office.
The address of the registered office of the Partnership in the
State of Delaware is located at 1209 Orange Street, Wilmington, Delaware, and
the registered agent for service of process on the Partnership in the State of
Delaware at such registered office is Corporation Trust Company. The principal
office of the Partnership is 2951 28th Street, Suite 3001, Santa Monica,
California 90405, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4. Power of Attorney.
A. Each Limited Partner and each Assignee hereby irrevocably
constitutes and appoints the General Partner, any Liquidator, and authorized
officers and attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (a) all
certificates, documents and other instruments
(including, without limitation, this Agreement and the
Certificate and all amendments or restatements
thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or
continue the existence or qualification of the
Partnership as a limited partnership (or a partnership
in which the limited partners have limited liability)
in the State of Delaware and in all other
jurisdictions in which the Partnership may conduct
business or own property; (b) all instruments that the
General
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Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this
Agreement in accordance with its terms; (c) all
conveyances and other instruments or documents that
the General Partner deems appropriate or necessary to
reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of
cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in,
Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the
determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner, to make,
evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or
given by the Partners hereunder or is consistent with
the terms of this Agreement or appropriate or
necessary, in the sole discretion of the General
Partner, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may be
otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall survive
and not be affected by the subsequent Incapacity of any Limited Partner or
Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney; and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or any Liquidator, within 15 days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5. Term.
The term of the Partnership commenced on August 18, 1993 and
shall continue until December 31, 2092 unless it is dissolved sooner pursuant to
the provisions of Article 13 or as otherwise provided by law.
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ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business.
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT for federal income tax
purposes, unless the General Partner has determined to cease to qualify as a
REIT, (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged in any of the foregoing and (iii) to do anything necessary or
incidental to the foregoing. The business of the Partnership shall at all times
be conducted in a manner substantially consistent with the policies set forth
under the caption "Policies and Objectives With Respect to Certain Activities"
in the final prospectus with respect to the initial public offering of REIT
Shares, unless otherwise consented to in writing by the General Partner and the
Majority in Interest of the Limited Partners.
Section 3.2. Powers.
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, provided that the Partnership
shall not take, or refrain from taking, any action which, in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the General Partner to continue to qualify as a REIT, (ii) could
subject the General Partner to any additional taxes under Section 857 or Section
4981 of the Code, except with respect to the distribution of Available Cash to
the Series A Limited Partners in accordance with Section 16.2 and the Series B
Limited Partners in accordance with Section 17.2, or (iii) could violate any law
or regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) under (i),
(ii) or (iii) shall have been specifically consented to by the General Partner
in writing.
Section 3.3. Partnership Only for Purposes Specified.
The Partnership shall be a partnership only for the purposes
specified in Section 3.1 hereof, and this Agreement shall not be deemed to
create a partnership among the Partners with respect to any activities
whatsoever other than the activities within the purposes of the Partnership as
specified in Section 3.1 hereof. Except as otherwise provided in this Agreement,
no Partner shall have any authority to act for, bind, commit or assume any
obligation or responsibility on behalf of the Partnership, its properties or any
other Partner. No Partner, in its capacity as a Partner under this Agreement,
shall be responsible or liable for any indebtedness or obligation of another
Partner, nor shall the Partnership be responsible or liable for any indebtedness
or obligation of any Partner, incurred either before or after the execution and
delivery of this Agreement by such Partner, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and as limited by
the terms of this Agreement and the Act.
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Section 3.4. Representations and Warranties by the Parties
A. Each Partner that is an individual represents and warrants
to each other Partner that (i) such Partner has the legal capacity to enter into
this Agreement and perform such Partner's obligations hereunder, (ii) the
consummation of the transactions contemplated by this Agreement to be performed
by such Partner will not result in a breach or violation of, or a default under,
any agreement by which such Partner or any of such Partner's property is or are
bound, or any statute, regulation, order or other law to which such Partner is
subject, (iii) such Partner is not a "foreign person" within the meaning of
Section 1445(f) of the Code, (iv) except for DGP, such Partner does not own,
directly or indirectly, (a) two percent (2%) or more of the total combined
voting power of all classes of stock entitled to vote, or two percent (2%) or
more of the total number of shares of all classes of stock, of any corporation
that is a tenant of either the General Partner or the Partnership or (b) an
interest of two percent (2%) or more in the assets or net profits of any tenant
of the General Partner or the Partnership and (v) this Agreement is binding
upon, and enforceable against, such Partner in accordance with its terms.
B. Each Partner that is not an individual represents and
warrants to each other Partner that (i) its execution and delivery of this
Agreement and all transactions contemplated by this Agreement to be performed by
it have been duly authorized by all necessary action, including without
limitation, that of its general partner(s), committee(s), trustee(s),
beneficiaries, directors and/or stockholder(s), as the case may be, as required,
(ii) the consummation of such transactions shall not result in a breach or
violation of, or a default under, its certificate of limited partnership,
partnership agreement, trust agreement, limited liability company operating
agreement, charter or by-laws, as the case may be, any agreement by which such
Partner or any of such Partner's properties or any of its partners,
beneficiaries, trustees or stockholders, as the case may be, is or are bound, or
any statute, regulation, order or other law to which such Partner or any of its
partners, trustees, beneficiaries or stockholders, as the case may be, is or are
subject, (iii) such Partner is neither a "foreign person" within the meaning of
Section 1445(f) of the Code nor a "foreign partner" within the meaning of
Section 1446(e) of the Code, (iv) except for DGP, such Partner does not own,
directly or indirectly, (a) two percent (2%) or more of the total combined
voting power of all classes of stock entitled to vote, or two percent (2%) or
more of the total number of shares of all classes of stock, of any corporation
that is a tenant of either the General Partner or the Partnership or (b) an
interest of two percent (2%) or more in the assets or net profits of any tenant
of the General Partner or the Partnership and (v) this Agreement has been duly
executed and delivered by such Partner and is binding upon, and enforceable
against, such Partner in accordance with its terms.
C. Each Partner represents, warrants and agrees that it has
acquired and continues to hold its interest in the Partnership for its own
account for investment only and not for the purpose of, or with a view toward,
the resale or distribution of all or any part thereof, nor with a view toward
selling or otherwise distributing such interest or any part thereof at any
particular time or under any predetermined circumstances. Each Partner further
represents and warrants that it is a sophisticated investor, able and accustomed
to handling sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds it has invested in the Partnership in what it
understands to be a highly speculative and illiquid investment.
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D. Each Limited Partner, other than David G. Price, Dallas
Price, those persons or entities who Constructively Own the Partnership Units
owned by the Prices, and any other Limited Partner to whom the General Partner
has granted an exception in its sole discretion to this Section 3.4.D (but, with
respect to any such other Limited Partner, only to the extent of the exception
so granted by the General Partner), further represents, warrants and agrees as
follows:
(i) At any time a Person actually owns or
Constructively Owns a 25% or greater capital interest or profits interest in the
Partnership, such Person does not and will not, without the prior written
consent of the General Partner, (a) actually own or Constructively Own (1) with
respect to any Tenant that is a corporation, any stock of such Tenant and (2)
with respect to any Tenant that is not a corporation, any interests in either
the assets or net profits of such Tenant; or (b) actually own or Constructively
Own any stock in the General Partner, other than any REIT Shares or other shares
of capital stock of the General Partner such Person may actually or
Constructively acquire (1) as a result of an exchange of Tendered Units pursuant
to Section 8.6 or (2) upon the exercise of options granted or delivery of REIT
Shares pursuant to any Stock Incentive Plan, in each case subject to the
applicable ownership limitations with respect to such shares of capital stock as
set forth in the Charter.
(ii) Upon request of the General Partner, such
Limited Partner will disclose to the General Partner the amount of REIT Shares
or other shares of capital stock of the General Partner that it actually owns or
Constructively Owns.
(iii) Such Limited Partner understands that if,
for any reason, (a) the representations, warranties or agreements set forth
in Section 3.4.D(i) are violated or (b) the Partnership's actual ownership or
Constructive Ownership of REIT Shares or other shares of capital stock of the
General Partner violates the limitations set forth in the Charter, then (x)
some or all of the redemption or exchange rights of the Limited Partners may
become non-exercisable, and (y) some or all of such shares owned by the Limited
Partners and/or some or all of the Partnership Units owned by the Limited
Partners may be automatically transferred to a trust for the benefit of a
charitable beneficiary, as provided in the Charter and Exhibit D of this
Agreement, respectively.
E. The representations and warranties contained in Sections
3.4.A, 3.4.B, 3.4.C, and 3.4.D hereof shall survive the execution and delivery
of this Agreement by each Partner and the dissolution, liquidation and
termination of the Partnership.
F. Each Partner hereby acknowledges that no representations as
to potential profit, cash flows, funds from operations or yield, if any, in
respect of the Partnership or the General Partner have been made by any Partner
or any employee or representative or Affiliate of any Partner, and that
projections and any other information, including, without limitation, financial
and descriptive information and documentation, which may have been in any manner
submitted to such Partner shall not constitute any representation or warranty of
any kind or nature, express or implied.
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ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Partners.
At the time of execution of this Agreement, the Partners shall
make or shall have made Capital Contributions as set forth in Exhibit A to this
Agreement. The Partners shall own Partnership Units of the class or series and
in the amounts set forth in Exhibit A and shall have a Percentage Interest in
the Partnership as set forth in Exhibit A, which Percentage Interest shall be
adjusted in Exhibit A from time to time by the General Partner to the extent
necessary to accurately reflect exchanges, redemptions, Capital Contributions,
the issuance of additional Partnership Units or similar events having an effect
on a Partner's Percentage Interest. Except as required by law or as otherwise
provided in Sections 4.5, 4.6 and 10.5, the Partners shall have no obligation to
make any additional Capital Contributions or loans to the Partnership. Unless
otherwise specified by the General Partner at the time of the creation of any
class of Partnership Interests, such Partnership Interests shall be Common Units
and the corresponding class or series of capital stock for any Partnership Units
issued shall be REIT Shares.
Section 4.2. Additional Capital Contributions Generally.
Except as otherwise required by law or pursuant to this
Article 4, no Partner shall be required or permitted to make any additional
capital contributions to the Partnership.
Section 4.3. Loans by Partners.
Except as otherwise provided in Section 4.5, no Partner shall
be required or permitted to make any loans to the Partnership.
Section 4.4. Loans by Third Parties.
Subject to Section 4.5, the Partnership may incur Debt, or
enter into other similar credit, guarantee, financing or refinancing
arrangements for any purpose (including, without limitation, in connection with
any further acquisition of Properties) from any Person that is not the General
Partner upon such terms as the General Partner determines appropriate; provided
that, the Partnership shall not incur any Debt under which a breach, violation
or default would be deemed to occur by virtue of the transfer of any Limited
Partnership Interest or General Partner Interest; and, provided, further, that
prior to the tenth anniversary of the Effective Date, without the Consent of the
Limited Partners, the Partnership will not cause its Tier 3 Nonrecourse
Liabilities to be less than $13,000,000.
Section 4.5. Additional Funding and Capital Contributions.
A. General. The General Partner may, at any time and from time
to time, determine that the Partnership requires additional funds ("Additional
Funds") for the acquisition of additional Properties or for such other purposes
as the General Partner may determine. Additional Funds may be raised by the
Partnership, at the election of the General Partner, in any manner provided in,
and in accordance with, the terms of this Section 4.5. No Person shall have
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any preemptive, preferential or similar right or rights to subscribe for or
acquire any Partnership Interest, except as set forth in this Section 4.5.
B. Additional General Partner Capital Contributions. Upon
written notice (the "Funding Notice") to the Common Limited Partners of the need
for Additional Funds and the anticipated source(s) thereof, the General Partner
may, or, to the extent the General Partner raises all or any portion of the
Additional Funds through the sale or other issuance of REIT Shares or other
equity interests in the General Partner, the General Partner shall, contribute
the Additional Funds to the capital of the Partnership in exchange for General
Partner Interests; provided, that, the proceeds of the initial public offering
of REIT Shares may be loaned to the Partnership on such terms as are described
in the final prospectus for such offering with the Consent of the Limited
Partners, and, provided further, that no Funding Notice need be given with
respect to (i) the funds received in consideration for REIT Shares or other
interests issued by the General Partner pursuant to the Stock Incentive Plan or
(ii) REIT Shares or other interests contributed to the Partnership pursuant to
the Stock Incentive Plan. The obligations of the General Partner with respect to
Additional Funds shall not apply to the issuance of REIT Shares or other equity
interests of the General Partner the proceeds of which are used by the General
Partner to acquire Common Units pursuant to Section 8.6.
C. General Partner Loans. Upon delivery of a Funding Notice to
the Common Limited Partners, the General Partner may, or, to the extent the
General Partner enters into a Funding Debt, the General Partner shall, lend the
Additional Funds to the Partnership (a "General Partner Loan"); provided,
however, that the General Partner shall not be obligated to lend the net
proceeds of any Funding Debt to the Partnership in a manner that would be
inconsistent with the General Partner's ability to remain qualified as a REIT.
If the General Partner enters into such a Funding Debt, the General Partner Loan
will consist of the net proceeds from such Funding Debt and will be on
comparable terms and conditions, including interest rate, repayment schedule and
costs and expenses, as shall be applicable with respect to or incurred in
connection with such Funding Debt. Otherwise, all General Partner Loans made
pursuant to this Section 4.5 shall be on terms and conditions no less favorable
to the Partnership than would be available to the Partnership from any third
party. Notwithstanding any other provision of this Section 4.5, the Partners
acknowledge that, except with the Consent of the Limited Partners, all loans
from third parties relating to, or for use by, the Partnership, shall be
borrowed by the Partnership and not by the General Partner. Notwithstanding the
foregoing, in the event that the General Partner incurs Debt secured solely by
the General Partner Properties and personal property incident thereto in an
amount such that the customary loan-to-value ratio for non-recourse debt secured
by such properties is not exceeded, the proceeds of such incurrence need not be
contributed or loaned to the Partnership but may be used for such purpose as the
General Partner determines.
D. Additional Capital Contributions. Subject to the prior
delivery of a Funding Notice, the General Partner may raise all or any portion
of the Additional Funds by accepting additional Capital Contributions of cash.
The General Partner also may accept additional Capital Contributions of real
property or any other non-cash assets. In connection with any such additional
Capital Contributions (of cash or property), and subject to Sections 16.5 and
17.5 hereof, the General Partner is hereby authorized to cause the Partnership
from time to time to issue to Partners (including the General Partner) or other
Persons (including, without
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limitation, in connection with the contribution of property to the Partnership)
additional Partnership Units or other Partnership Interests in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers, and duties, including rights, powers, and duties senior to then existing
Limited Partnership Interests, all as shall be determined by the General Partner
in its sole and absolute discretion subject to Delaware law, and as set forth by
amendment to this Agreement, including without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction, and credit to such class
or series of Partnership Interests; (ii) the right of each such class or series
of Partnership Interests to share in Partnership distributions; (iii) the rights
of each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; and (iv) the right to vote, including, without
limitation, the Limited Partner approval rights set forth in Section 11.2.A
hereof; provided that no such additional Partnership Units or other Partnership
Interests shall be issued to the General Partner unless (a) the additional
Partnership Interests are issued in connection with the grant, award, or
issuance of shares of the General Partner pursuant to Section 4.5.B above, which
shares have designations, preferences, and other rights (except voting rights)
such that the economic interests attributable to such shares are substantially
similar to the designations, preferences and other rights of the additional
Partnership Interests issued to the General Partner in accordance with this
Section 4.5.D, (b) the additional Partnership Interests are issued to all
Partners holding Partnership Interests in the same class in proportion to their
respective Percentage Interests in such class, (c) the additional Partnership
Interests are issued in connection with the General Partner's contribution of
all or some of the General Partner Properties and personal property reasonably
incident thereto, or (d) the additional Partnership Interests are issued with
the Consent of the Limited Partners; provided further that no additional
Partnership Interests other than Common Units shall be issued after the date of
this Agreement without the unanimous consent of all Common Limited Partners. In
the event that the Partnership issues additional Partnership Interests pursuant
to this Section 4.5.D, the General Partner shall make such revisions to this
Agreement (including but not limited to the revisions described in Section 5.5,
Section 6.2.C, and Section 8.6.H) as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
E. Preemptive Rights of Partners. The Funding Notice delivered
by the General Partner prior to its making or accepting (on behalf of the
Partnership) any additional cash Capital Contributions pursuant to either
Section 4.5.B or 4.5.D herein but not pursuant to the Stock Incentive Plan shall
contain the total amount of additional Capital Contributions sought to be made
to the Partnership, and the terms and conditions pertaining thereto. Each Common
Limited Partner may elect to make an additional Capital Contribution not to
exceed the product of (i) the total amount of additional Capital Contributions
being sought, and (ii) such Common Limited Partner's Percentage Interest (with
such product deemed the "Pro Rata Contribution"). Such election shall be made,
if at all, by providing written notice thereof (the "Election Notice") to the
General Partner within ten (10) days after delivery of the Funding Notice.
Failure to respond to such notice shall be deemed to be an election not to make
such Capital Contribution. Such Election Notice shall contain the amount of the
additional Capital Contribution, if any, the Common Limited Partner is to make
(such additional Capital Contribution not to exceed the respective Pro Rata
Contribution of such Common Limited Partner) equal to all or any portion of its
Pro Rata Contribution (with all or such portion thereof that such Common Limited
Partner elects to make hereinafter referred to as the "Preemptive
Contribution").
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F. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for any class or series of Partnership Units, the
Percentage Interest related thereto shall be equal to a fraction, the numerator
of which is equal to the amount of cash and the Agreed Value of the Property
contributed as of the Business Day immediately preceding the date on which the
additional Capital Contributions are made (an "Adjustment Date") and the
denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests of such class or series (computed as of the Business Day
immediately preceding the Adjustment Date) and (ii) the aggregate amount of cash
and the Agreed Value of the property contributed to the Partnership on such
Adjustment Date in respect of such class or series. The Percentage Interest of
each other Partner holding Partnership Interests of such class or series not
making a full pro rata Capital Contribution shall be adjusted to equal a
fraction, the numerator of which is equal to the sum of (i) the Deemed
Partnership Interest Value of such Limited Partner in respect of such class or
series (computed as of the Business Day immediately preceding the Adjustment
Date) and (ii) the amount of cash and the Agreed Value of the property
contributed by such Partner to the Partnership in respect of such class or
series as of such Adjustment Date, and the denominator of which is equal to the
sum of (i) the Deemed Value of the Partnership Interests of such class or series
(computed as of the Business Day immediately preceding the Adjustment Date),
plus (ii) the aggregate amount of cash and the Agreed Value of the property
contributed to the Partnership on such Adjustment Date in respect of such class
or series. Notwithstanding the foregoing, solely for purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.3.F, (i) in the case of
cash Capital Contributions by the General Partner, such Capital Contributions
will be deemed to equal the cash contributed by the General Partner plus, in the
case of cash contributions funded by an offering of REIT Shares or other shares
of capital stock of the General Partner, the offering costs attributable to the
cash contributed to the Partnership, (ii) in the case of the contribution of
Properties (or any portion thereof) by the General Partner which were acquired
by the General Partner in exchange for REIT Shares immediately prior to such
contribution, the General Partner shall be issued a number of Partnership Units
equal to the number of REIT Shares issued by the General Partner in exchange for
such properties, the Partnership Units held by the other Partners shall not be
adjusted, and the Partners' Percentage Interests shall be adjusted accordingly,
and (iii) in the case of a contribution of all or any portion of the General
Partner Properties and any personal property reasonably incident thereto by the
General Partner, the Percentage Interest related to such Capital Contribution
shall be determined in good faith by the Board of Directors. The General Partner
shall promptly give each Partner written notice of its Percentage Interest, as
adjusted.
G. Special Supplemental Capital Contribution by the 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 contributed 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 was issued that number of Partnership Units equal to the number of
shares of
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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 was deemed to be equal to $40,786,649, (iii) Exhibit A
to this Agreement was 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 was appropriately 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. Stock Incentive 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
of a REIT Share (provided, that, for these purposes, only the trading day on
which 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.F
shall not apply to the Capital Contributions described above in this Section
4.6.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement and Characterization of Distributions.
The General Partner shall cause the Partnership to distribute
quarterly all, or such portion as the General Partner may in its discretion
determine, of Available Cash generated by the Partnership to the Partners who
are Partners on the applicable record date with respect to such distribution,
(1) first, to the extent that the amount of cash distributed with respect to any
Partnership Interests that are entitled to any preference in distribution for
any prior distribution period was less than the required distribution for such
outstanding Partnership Interests for such prior distribution period, and to the
extent such deficiency has not been subsequently distributed pursuant to this
Section 5.1 (a "Preferred Distribution Shortfall"), in accordance with the
rights of such class of Partnership Interests (and within such class, pro rata
in proportion to the respective Percentage Interests on the applicable record
date) and to the Partners who are Partners on the applicable record date with
respect to such distribution, (2) second with respect to any Partnership
Interests that are entitled to any preference in distribution, in accordance
with the
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rights of such class of Partnership Interests (and within such class, pro rata
in proportion to the respective Percentage Interests on the applicable record
date), and, (3) third, with respect to Partnership Interests that are not
entitled to any preference in distribution, pro rata to each such class on a
quarterly basis and in accordance with the terms of such class to the Partners
who are Partners of such class on the Partnership Record Date with respect to
such distribution (and within each such class, pro rata in proportion with the
respective Percentage Interests on such Partnership Record Date). Unless
otherwise expressly provided for herein or in an agreement at the time a new
class of Partnership Interests is created in accordance with Article 4 hereof,
no Partnership Interest shall be entitled to a distribution in preference to any
other Partnership Interest. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with its qualification as a REIT, (i) to cause the Partnership to distribute
sufficient amounts to enable the General Partner to pay stockholder dividends
that will (a) satisfy the requirements for qualifying as a REIT under the Code
and Regulations ("REIT Requirements"), and (b) avoid any federal income or
excise tax liability of the General Partner, except to the extent that a
distribution pursuant to clause (b) would prevent the Partnership from making a
distribution to the holders of Series A Preferred Units in accordance with
Section 16.2 or to the holders of the Series B Preferred Units in accordance
with Section 17.2 and (ii) to distribute Available Cash to the Limited Partners
so as to preclude any such distribution or portion thereof from being treated as
part of a sale of property to the Partnership by a Limited Partner under Section
707 of the Code or the Regulations thereunder; provided that the General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated.
Section 5.2. Distributions in Kind.
Except as expressly provided herein, no right is given to any
Partner to demand and receive property other than cash. The General Partner may
determine, in its sole and absolute discretion, to make a distribution in kind
to the Partners of Partnership assets, and such assets shall be distributed in
such a fashion as to ensure that the fair market value is distributed and
allocated in accordance with Articles 5, 6 and 10; provided, however, that, in
such case, the General Partner shall distribute only cash to the Series A
Limited Partners and to the Series B Limited Partners.
Section 5.3. Amounts Withheld.
All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited Partners
or Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners, or Assignees, as the case may be, pursuant to Section 5.1 for
all purposes under this Agreement.
Section 5.4. Distributions Upon Liquidation.
Proceeds from a Terminating Capital Transaction shall be
distributed to the Partners in accordance with Section 13.2.
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Section 5.5. Distributions to Reflect Issuance of
Additional Partnership Interests.
In the event that the Partnership issues additional
Partnership Interests to the General Partner or any Additional Limited Partner
pursuant to Section 4.5.D or 4.6, the General Partner shall make such
revisions to this Article 5 as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
ARTICLE 6.
ALLOCATIONS
Section 6.1. Timing and Amount of Allocations of Net
Income and Net Loss.
Net Income and Net Loss of the Partnership shall be determined
and allocated with respect to each fiscal year of the Partnership as of the end
of each such year. Subject to the other provisions of this Article 6, an
allocation to a Partner of a share of Net Income or Net Loss shall be treated as
an allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
Section 6.2. General Allocations.
A. In General. Except as otherwise provided in this
Article 6, Net Income and Net Loss shall be allocated to each of the Partners
holding the same class of Partnership Interests in accordance with their
respective Percentage Interest of such class.
B.1. Net Income. Net Income for any Partnership Year shall
be allocated in the following manner and order of priority:
(a) First, 100% to the General Partner in an amount equal to the
remainder, if any, of the cumulative Net Losses allocated to the General Partner
pursuant to Section 6.2.B.2(d) for all prior Partnership Years minus the
cumulative Net Income allocated to the General Partner pursuant to this Section
6.2.B.1(a) for all prior Partnership Years;
(b) Second, 100% to each Holder of Partnership Interests in an amount
equal to the remainder, if any, of the cumulative Net Losses allocated to each
such Holder pursuant to Section 6.2.B.2(c) for all prior Partnership Years minus
the cumulative Net Income allocated to such Holder pursuant to this Section
6.2.B.1(b) for all prior Partnership Years;
(c) Third, 100% to the Holders of Preferred Units in an amount equal to
the remainder, if any, of the cumulative Net Losses allocated to each such
Holder pursuant to Section 6.2.B.2(b) for all prior Partnership Years minus the
cumulative Net Income allocated to such Holder pursuant to this Section
6.2.B.1(c) for all prior Partnership Years;
(d) Fourth, 100% to the Holders of Common Units in an amount equal to
the remainder, if any, of (i) the cumulative Net Losses allocated to each such
Holder pursuant to Section 6.2.B.2(a) for all prior Partnership Years, minus
(ii) the cumulative Net Income allocated to each Holder pursuant to this Section
6.2.B.1(d) for all prior Partnership Years;
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(e) Fifth, 100% to the Holders of Preferred Units, with respect to each
series of Preferred Units, in an amount equal to the excess of (i) the
cumulative Priority Return to the last day of the current Partnership Year or to
the date of redemption of such Preferred Units, to the extent such Preferred
Units are redeemed during such year, over (ii) the cumulative Net Income
allocated to the Holders of such Preferred Units pursuant to this Section
6.2.B.1(e) for all Partnership Years; and
(f) Sixth, 100% to the Holders of Common Units in accordance with their
respective Percentage Interests in the Common Units. To the extent the
allocations of Net Income set forth above in any paragraph of this Section
6.2.B.1 are not sufficient to entirely satisfy the allocation set forth in such
paragraph, such allocation shall be made in proportion to the total amount that
would have been allocated pursuant to such paragraph without regard to such
shortfall.
2. Net Losses. Net Losses for any Partnership Year
shall be allocated in the following manner and order of priority.
(a) First, 100% to the Holders of Common Units in accordance with their
respective Percentage Interests in the Common Units (to the extent consistent
with this Section 6.2.B.2(a)) until the Adjusted Capital Account (not taking
into account any amounts a Holder is obligated to contribute to the capital of
the Partnership or is deemed obligated to contribute pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c)(2) and ignoring the Holder's Series A Preferred
Capital and Series B Preferred Capital) of each such Holder is zero;
(b) Second, 100% to the Holders of Preferred Units, pro rata to each
such Holder's Adjusted Capital Account (ignoring for this purpose any amounts a
Holder is obligated to contribute to the capital of the Partnership or is deemed
obligated to contribute pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)(2)), until the Adjusted Capital Account (as so modified) of
each such Holder is zero;
(c) Third, 100% to the Holders of Partnership Interests to the
extent of, and in proportion to, the positive balance (if any) in their Adjusted
Capital Accounts; and
(d) Fourth, 100% to the General Partner.
C. Notwithstanding Sections 6.2.A. and B, any item of
deduction attributable to payments made by the Partnership to or on behalf of
Paul W. Major ("Major") pursuant to (i) that certain Non-Qualified Stock Option
Agreement (as amended from time to time), dated as of April 30, 1997, by and
between David G. Price ("Price"), Major, and the Partnership, with respect to
its rights and covenants contained therein, or (ii) that certain Letter
Agreement, dated as of January 28, 1998, by and between Price, Major, and the
Partnership, with respect to its rights and covenants contained therein, shall
be specially allocated to Price in an amount equal to 100% of such item of
deduction.
D. Allocations to Reflect Issuance of Additional Partnership
Interests. In the event that the Partnership issues additional Partnership
Interests to the General Partner or any Additional Limited Partner pursuant to
Section 4.5 or 4.6 hereof, the General Partner shall make
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such revisions to this Section 6.2 as it determines are necessary to reflect the
terms of the issuance of such additional Partnership Interests, including making
preferential allocations to certain classes of Partnership Interests, subject to
the terms of the Series A Preferred Units and Series B Preferred Units.
Section 6.3. Additional Allocation Provisions.
Notwithstanding the foregoing provisions of this Article 6:
A. Regulatory Allocations.
(i) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 of
the Agreement, or any other provision of this Article 6, if there is a net
decrease in Partnership Minimum Gain during any fiscal year, each Holder shall
be specially allocated items of Partnership income and gain for such year (and,
if necessary, subsequent years) in an amount equal to such Holder's share of the
net decrease in Partnership Minimum Gain, as determined under Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each Holder
pursuant thereto. The items to be allocated shall be determined in accordance
with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(i)
is intended to qualify as a "minimum gain chargeback" within the meaning of
Regulation Section 1.704-2(f) which shall be controlling in the event of a
conflict between such Regulation and this Section 6.3.A(i).
(ii) Partner Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), and notwithstanding the
provisions of Section 6.2 of the Agreement or any other provision of this
Article 6 (except Section 6.3.A(i)), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Holder who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Holder's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Holder
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section
6.3.A(ii) is intended to qualify as a "chargeback of partner nonrecourse debt
minimum gain" within the meaning of Regulation Section 1.704-2(i) which shall be
controlling in the event of a conflict between such Regulation and this Section
6.3.A(ii).
(iii) Nonrecourse Deductions and Partner Nonrecourse
Deductions. Any Nonrecourse Deductions for any fiscal year shall be specially
allocated to the Holders in accordance with their Percentage Interests
attributable to such deductions. Any Partner Nonrecourse Deductions for any
fiscal year shall be specially allocated to the
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Holder(s) who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable,
in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
(iv) Qualified Income Offset. If any Holder unexpectedly
receives an adjustment, allocation or distribution described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and
gain shall be allocated, in accordance with Regulations Section
1.704-1(b)(2)(ii)(d), to the Holder in an amount and manner sufficient to
eliminate, to the extent required by such Regulations, the Adjusted Capital
Account Deficit of the Holder as quickly as possible provided that an allocation
pursuant to this Section 6.3.A(iv) shall be made if and only to the extent that
such Holder would have an Adjusted Capital Account Deficit after all other
allocations provided in this Article 6 have been tentatively made as if this
Section 6.3.A(iv) were not in the Agreement. It is intended that this Section
6.3.A(iv) qualify and be construed as a "qualified income offset" within the
meaning of Regulations 1.704-1(b)(2)(ii)(d), which shall be controlling in the
event of a conflict between such Regulations and this Section 6.3.A(iv).
(v) Gross Income Allocation. In the event any Holder has a
deficit Capital Account at the end of any fiscal year which is in excess of the
sum of (1) the amount (if any) such Holder is obligated to restore to the
Partnership, and (2) the amount such Holder is deemed to be obligated to restore
pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Holder shall be specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 6.3.A(v) shall be made if and only to the extent that
such Holder would have a deficit Capital Account in excess of such sum after all
other allocations provided in this Article 6 have been tentatively made as if
this Section 6.3.A(v) and Section 6.3.A(iv) were not in the Agreement.
(vi) Limitation on Allocation of Net Loss. To the extent any
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Holder, such allocation of Net Loss shall be reallocated among
the other Holders in accordance with their respective Percentage Interests,
subject to the limitations of this Section 6.3.A(vi).
(vii) Section 754 Adjustment. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Holder in complete liquidation of his interest in the
Partnership, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Holders in accordance with their interests in the
Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Holders to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
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(viii) Curative Allocation. The allocations set forth in
Sections 6.3.A(i), (ii), (iii), (iv), (v), (vi) and (vii) (the "Regulatory
Allocations") are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Sections 6.1 and 6.2, the Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss and deduction among the Holders so that, to the extent possible, the
net amount of such allocations of other items and the Regulatory Allocations to
each Holder shall be equal to the net amount that would have been allocated to
each such Holder if the Regulatory Allocations had not occurred.
B. For purposes of determining a Holder's proportional share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), each Holder's interest in Partnership profits
shall be such Holder's Percentage Interest, provided that the Holders of Series
A Preferred Units and Series B Preferred Units shall have no share of such
excess nonrecourse liabilities.
Section 6.4. Tax Allocations.
A. In General. Except as otherwise provided in this
Section 6.4, for income tax purposes each item of income, gain, loss and
deduction (collectively, "Tax Items") shall be allocated among the Holders in
the same manner as its correlative item of "book" income, gain, loss or
deduction is allocated pursuant to Sections 6.2 and 6.3.
B. Allocations Respecting Section 704(c) Revaluations.
Notwithstanding Section 6.4.A, Tax Items with respect to Partnership property
that is contributed to the Partnership by a Partner shall be shared among the
Holders for income tax purposes pursuant to Regulations promulgated under
Section 704(c) of the Code, so as to take into account the variation, if any,
between the basis of the property to the Partnership and its initial Gross Asset
Value. With respect to Partnership property that is initially contributed to the
Partnership upon its formation, such variation between basis and initial Gross
Asset Value shall be taken into account under the "traditional method" as
described in Regulations Section 1.704-3(b). With respect to properties
subsequently contributed to the Partnership, the Partnership shall account for
such variation under any method approved under Section 704(c) of the Code and
the applicable regulations as chosen by the General Partner. In the event the
Gross Asset Value of any Partnership asset is adjusted pursuant to subparagraph
(b) of the definition of Gross Asset Value (provided in Article 1 of this
Agreement), subsequent allocations of Tax Items with respect to such asset shall
take account of the variation, if any, between the adjusted basis of such asset
and its Gross Asset Value in the same manner as under Section 704(c) of the Code
and the applicable regulations consistent with the requirements of Regulations
Section 1.704-1(b)(2)(iv)(g) using any method approved under Section 704(c) of
the Code and the applicable regulations as chosen by the General Partner.
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ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1. Management.
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to the other provisions hereof,
shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes set forth
in Section 3.1 hereof, including, without limitation:
(1) the making of any expenditures, the lending of money,
borrowing of money (including, without limitation, making
prepayments on loans and borrowing money to permit the
Partnership to make distributions to its Partners in such
amounts as will permit the General Partner (so long as the
General Partner has determined to qualify as a REIT) to
avoid the payment of any federal income tax (including,
for this purpose, any excise tax pursuant to Section 4981
of the Code), to make distributions to its stockholders
sufficient to permit the General Partner to maintain REIT
status and to satisfy any Put rights pursuant to Section
8.6), the assumption or guarantee of, or other contracting
for, indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of same
by mortgage, deed of trust or other lien or encumbrance on
the Partnership's assets) and the incurring of any
obligations it deems necessary for the conduct of the
activities of the Partnership; provided, that all such
borrowing, incurrence of Debt and prepayments shall be
subject to the limitations set forth in Sections 4.4 and
4.5;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or
assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of
the Partnership or the merger or other combination of the
Partnership with or into another entity; provided, that,
in the event of any sale, exchange, disposition or other
transfer of any property of the Partnership contributed at
the time of the closing of the initial public offering of
REIT Shares, occurring prior to the end of the fifteenth
(15th) year following the Effective Date, the Partnership
shall no later than the end of the calendar quarter in
which such sale, exchange, disposition or other transfer
becomes a taxable event
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to Partners effect a distribution of cash (or, at the
option of the General Partner, a promissory note, bearing
interest at the then approved price per annum equal to the
dividend yield on the REIT Shares, based on the most recent
quarterly dividend and the Value of a REIT Share as of the
date of issuance of such note), and due and payable as soon
as reasonably practicable but in no event later than 90
days after the date of issuance), in addition to its then
regular quarterly distribution, in an amount such that the
pro rata share thereof received by each Partner shall equal
or exceed the total liability of such Partner for federal,
state and local income and franchise taxes resulting from
such sale, exchange, disposition or other transfer and from
such distribution as determined in accordance with the
books and records of the Partnership (which determination
will be conclusive and binding absent manifest error);
provided, further, that any Partner may elect not to
receive all or any portion of such additional distribution
and in such event, although such Partner's Capital Account
will not be reduced to the extent that no distribution is
received by such Partner, the Partner's Percentage Interest
or the number of Partnership Units Considered owned by such
Partner shall not be adjusted, it being the intent that the
sole effect of the election not to receive a distribution
will be to increase the amount of cash or other property to
be received by such Partner upon a dissolution of the
Partnership; and provided, further, however, that any
Partner may elect not to receive all or any portion of such
distribution in cash but in lieu thereof to receive a
promissory note bearing interest at a rate per annum equal
to the annualized dividend yield on the REIT Shares based
on the most recent quarterly dividend and the Value of a
REIT Share as of the date of issuance of such note and due
and payable on the third anniversary of issuance.
(4) the mortgage, pledge, encumbrance or hypothecation of any
Assets of the Partnership, and the use of the assets of the
Partnership (including, without limitation, cash on hand) for
any purpose consistent with the terms of this Agreement and on
any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the General
Partner or the Partnership, the lending of funds to other
Persons (including, without limitation, the General Partner
(if necessary to permit the financing or capitalization of a
subsidiary of the General Partner or the Partnership) and any
Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and
any other Person in which it has an equity investment;
(5) the negotiation, execution and performance of any contracts,
leases, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the General
Partner's powers under this Agreement;
(6) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
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(7) the selection and dismissal of employees of the Partnership
(including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer"),
and agents, outside attorneys, accountants, consultants and
contractors of the Partnership and the determination of their
compensation and other terms of employment or hiring;
(8) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(9) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the acquisition
of interests in, and the contributions of property to, any
Subsidiary and any other Person in which it has an equity
investment from time to time); provided that as long as the
General Partner has determined to continue to qualify as a
REIT, the Partnership may not engage in any such formation,
acquisition or contribution that would cause the General
Partner to fail to qualify as a REIT;
(10) the control of any matters affecting the rights anD obligations
of the Partnership, including the conduct of litigation and the
incurring of legal expense and the settlement of claims and
litigation, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by law;
(11) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any Person
(including, without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(12) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as it may adopt, provided that such methods are
otherwise consistent with requirements of this Agreement; and
(13) the enforcement of any rights against any Partner pursuant to
representations, warranties, covenants and indemnities relating
to such Partner's contribution of property or assets to the
Partnership.
B. Each of the Limited Partners agrees that the General
Partner is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provisions of
this Agreement (except as provided in Section 7.3), the Act or any applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or
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the Limited Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnities hereunder.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain working capital
reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the
General Partner may, but, other than as expressly set forth in the Contribution
Agreements, shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partner) of any action taken
by the General Partner. The General Partner and the Partnership shall not have
liability to a Partner under any circumstances as a result of an income tax
liability incurred by such Partner as a result of an action (or inaction) by the
General Partner pursuant to its authority under this Agreement.
Section 7.2. Certificate of Limited Partnership.
To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, the District of Columbia or any other jurisdiction, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto to any Limited Partner. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners limited liability) in the State of Delaware any other
state, or the District of Columbia, in which the Partnership may elect to do
business or own property.
Section 7.3. Restrictions on General Partner's Authority.
A. The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(1) take any action that would make it impossible to carry on
the ordinary business of the Partnership, except as
otherwise provided in this Agreement;
(2) possess Partnership property, or assign any rights in
specific Partnership property, for other than a Partnership
purpose except as otherwise provided in this Agreement;
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(3) admit a Person as a Partner, except as otherwise provided
in this Agreement;
(4) perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any
other liability except as provided herein or under the Act;
or
(5) enter into any contract, mortgage, loan or other agreement
that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited
Partner to exercise its rights set forth herein to effect
in full an Exchange or a Put or an exchange or redemption
pursuant to Section 16.7 or Section 17.7, except with the
written consent of such Limited Partner (for purposes of
clarification, contracts with respect to the issuance of
additional Partnership Interests pursuant to Section 4.5.D
which prohibit or restrict such Exchange or Put rights
solely by virtue of the preferences, rights, powers and
duties attributable to the Partnership Interests subject to
such contract shall be deemed not to include such
prohibitions or restrictions); provided that this
subparagraph (5) shall not apply to any contract or
agreement with respect to indebtedness under which a
Limited Partner's exercise of a Put or redemption pursuant
to Section 16.7 or Section 17.7 would constitute a default
or breach thereunder if such contract or agreement is or
was entered into with a third party on commercially
reasonable terms negotiated on an arms-length basis (it
being agreed that if such default or breach would arise by
virtue of the election by the General Partner to cause the
Partnership to redeem all or a portion of the Series A
Preferred Units or Series B Preferred Units for cash
pursuant to Section 16.7.A(ii) or Section 17.7(A)(ii), the
General Partner shall make such election only with respect
to Excess Units as defined in Section 16.7.A(iii) and
Series B Excess Units as defined in Section 17.7(A)(iii)).
B. The General Partner shall not, without the prior Consent of
the Limited Partners, undertake, on behalf of the Partnership, any of the
following actions or enter into any transaction which would have the effect of
such transactions:
(1) except as provided in Section 7.3.C., amend, modify or
terminate this Agreement other than to reflect the
admission, substitution, termination or withdrawal of
partners pursuant to Article 12 hereof;
(2) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of
the Partnership;
(3) institute any proceeding for Bankruptcy on behalf of the
Partnership; or
(4) subject to the rights of transfer provided in Section 11.2,
approve or acquiesce to the transfer of the Partnership
Interest of the General Partner,
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or admit into the Partnership any Additional or Substitute
General Partners.
C. Notwithstanding Section 7.3.B, the General Partner shall
have the power, without the Consent of the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the issuance of additional Partnership Interests
pursuant to Sections 4.5.D and 4.6 or the admission,
substitution, termination, or withdrawal of Partners in
accordance with this Agreement;
(3) to reflect a change that is of an inconsequential nature
and does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes
with respect to matters arising under this Agreement, that
will not be inconsistent with law or with the provisions of
this Agreement;
(4) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law;
(5) to reflect such changes as are reasonably necessary for the
General Partner to maintain its status as a REIT, including
changes which may be necessary due to a change in
applicable law (or an authoritative interpretation thereof)
or a ruling of the IRS; and
(6) to modify the manner in which Capital Accounts are computed
but only to the extent set forth in the definition of
"Capital Account." The General Partner will provide notice
to the Limited Partners when any action under this Section
7.3.C is taken.
D. Notwithstanding Sections 7.3.B and 7.3.C hereof, this
Agreement shall not be amended, and no action may be taken by the General
Partner, without the Consent of each Partner adversely affected if such
amendment or action would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest (except as the result of the
General Partner acquiring such interest), (ii) modify the limited liability of a
Limited Partner, (iii) alter rights of the Partner to receive distributions
pursuant to Article 5, Section 7.1.A(3), Section 13.2, Article 16 or Article 17,
or the allocations specified in Article 6 (except as permitted pursuant to
Section 4.2, Section 4.5 and Section 7.3.C), (iv) alter or modify the Exchange
Right, Put Right, REIT Shares Amount or Put Amount as set forth in Sections 8.6
and 11.2, and related definitions thereof, (v) cause the termination of the
Partnership prior to the time set forth in Sections 2.5 or 13.1, (vi) alter the
redemption or exchange rights as set forth in Sections 16.4, 16.7, 17.4 and
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17.7 hereof, respectively, or (vii) amend this Section 7.3.D. Further, no
amendment may alter the restrictions on the General Partner's authority set
forth elsewhere in this Section 7.3 without the Consent specified in such
section. Any such amendment or action consented to by any Limited Partner shall
be effective as to that Limited Partner, notwithstanding the absence of such
consent by any other Limited Partner.
E. For so long as the Partnership Interests of all of the
Limited Partners of the Partnership equal, in the aggregate, not less than
fifteen percent (15%), the General Partner shall not, without the prior Consent
of the Limited Partners, undertake, on behalf of the Partnership, any of the
following actions:
(1) Dissolve the Partnership.
(2) Agree to or consummate any merger, consolidation,
reorganization or other business combination to which the
Partnership is a party, in each case resulting in the
disposition by the then Limited Partners and Assignees of
all outstanding Common Units and interests of Assignees
therein in consideration for (a) cash, (b) debt
instruments or other evidences of indebtedness, (c) other
securities issued by a corporation, partnership or other
entity, other than (i) the General Partner, (ii) the
Partnership or (iii) any entity at least 80% of the total
assets of which (on the basis of market value) are
comprised of assets which, immediately prior to such
transaction, were assets of the Partnership, or (d) any
combination of the consideration described in (a), (b)
and/or (c) above.
(3) Sell or otherwise transfer all or substantially all of the
assets of the Partnership.
Section 7.4. Reimbursement of the General Partner.
A. Except as provided in this Section 7.4 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
B. Subject to Section 15.11, the General Partner shall be
reimbursed on a monthly basis, or such other basis as the General Partner may
determine in its sole and absolute discretion, for all expenses it incurs
relating to the ownership of interests in and operation of, or for the benefit
of, the Partnership. The Limited Partners acknowledge that the General Partner's
sole business is the ownership of interests in and operation of the Partnership
and the General Partner Properties and personal property reasonably incident
thereto and that all of the General Partner's expenses are incurred for the
benefit of the Partnership; provided that, the General Partner shall not be
reimbursed for expenses it incurs relating to the organization of the
Partnership and the General Partner or the initial public offering or subsequent
public offerings of REIT Shares, other shares of capital stock or Funding Debt
by the General Partner, but shall be reimbursed for expenses it incurs with
respect to any other issuance of additional Partnership Interests pursuant to
the provisions hereof. Such reimbursements shall be in addition to any
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reimbursement of the General Partner as a result of indemnification pursuant to
Section 7.7 hereof.
C. If and to the extent any reimbursements to the General
Partner pursuant to this Section 7.4 constitute gross income of the General
Partner (as opposed to the repayment of advances made by the General Partner on
behalf of the Partnership), such amounts shall constitute guaranteed payments
within the meaning of Section 707(c) of the Code, shall be treated consistently
therewith by the Partnership and all Partners, and shall not be treated as
distributions for purposes of computing the Partners' Capital Accounts.
Section 7.5. Outside Activities of the General Partner.
A. The General Partner shall not, directly or indirectly,
enter into or conduct any business, other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner and
the management of the business of the Partnership, its operation as a public
reporting company with a class (or classes) of securities registered under the
Securities Exchange Act of 1934, as amended, its operation as a REIT and such
activities as are incidental to the same. Without the Consent of the Limited
Partners, the General Partner shall not, directly or indirectly, participate in
or otherwise acquire any interest in any real or personal property, except its
General Partner Interest, its minority interest in any Subsidiary Partnership(s)
(held directly or indirectly through a Qualified REIT Subsidiary) that the
General Partner holds in order to maintain such Subsidiary Partnership's status
as a partnership, and such bank accounts, similar instruments or other
short-term investments as it deems necessary to carry out its responsibilities
contemplated under this Agreement and the Charter. In the event the General
Partner desires to contribute cash to any Subsidiary Partnership to acquire or
maintain an interest of 1% or less in the capital of such partnership, the
General Partner may acquire such cash from the Partnership in exchange for a
reduction in the General Partner's Partnership Units, in an amount equal to the
amount of such cash divided by the Value of a REIT Share on the day such cash is
received by the General Partner. Notwithstanding the foregoing, the General
Partner may acquire Properties in exchange for REIT Shares, to the extent such
Properties are immediately contributed by the General Partner to the
Partnership, pursuant to the terms described in Section 4.5.F. Any Limited
Partner Interests acquired by the General Partner, whether pursuant to exercise
by a Limited Partner of its rights to Exchange or Put or exchange pursuant to
Section 16.7 or Section 17.7 or otherwise, shall be automatically converted into
a General Partner Interest comprised of an identical number of Partnership Units
with the same rights, priorities and preferences as the class or series
acquired. If, at any time after the Effective Date, the General Partner acquires
material assets (other than on behalf of the Partnership), the definition of
"REIT Shares Amount" shall be adjusted, as reasonably agreed to by the General
Partner and the other Limited Partners, to reflect the relative Value of a share
of capital stock of the General Partner relative to the Deemed Partnership
Interest Value of the related Partnership Unit. The General Partner's General
Partner Interest in the Partnership, its minority interest in any Subsidiary
Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary)
that the General Partner holds in order to maintain such Subsidiary
Partnership's status as a partnership, and interests in such short-term liquid
investments, bank accounts or similar instruments as the General Partner deems
necessary to carry out its responsibilities contemplated under this Agreement
and the Charter are interests which the General Partner is permitted to acquire
and hold for purposes of this Section 7.5.A.
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B. In the event the General Partner exercises its rights under
the Charter to purchase REIT Shares or Preferred Shares, then the General
Partner shall cause the Partnership to purchase from it a number of Partnership
Units of the appropriate class as determined based on, in the case of REIT
Shares, an amount equal to the number of REIT Shares (as adjusted pursuant to
Section 7.5.A) so purchased or, in the case of Preferred Shares, an equal number
of Preferred Units which correspond in ranking to the Preferred Shares so
purchased, in each case on the same terms that the General Partner purchased
such REIT Shares or Preferred Shares, as applicable.
Section 7.6. Contracts with Affiliates.
A. The Partnership may lend or contribute to Persons in which
it has an equity investment, and such Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Person.
B. Except as provided in Section 7.5.A, the Partnership may
transfer assets to joint ventures, other partnerships, corporations or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law.
C. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership employee benefit plans funded by the Partnership for
the benefit of employees of the General Partner, the Partnership, Subsidiaries
of the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership or any of
the Partnership's Subsidiaries.
D. The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, such conflict avoidance agreements
with various Affiliates of the Partnership and the General Partner, on such
terms as the General Partner, in its sole and absolute discretion, believes are
advisable.
E. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership Employee benefit plans funded by the Partnership for
the benefit of employees of the General Partner, the Partnership, Subsidiaries
of the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership, the
General Partner or any of the Partnership's Subsidiaries. The General Partner
also is expressly authorized to cause the Partnership to issue to it Partnership
Units corresponding to REIT Shares issued by the General Partner pursuant to its
Stock Incentive 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 7.7. Indemnification.
A. The Partnership shall indemnify an Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including legal fees and expenses), judgments, fines, settlements, and
other amounts arising from any and all claims,
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demands, actions, suits or proceedings, civil, criminal, administrative or
investigative, that relate to the operations of the Partnership as set forth in
this Agreement in which any Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A. The termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or any entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 7.7.A. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership. Notwithstanding the foregoing provisions, the General Partner shall
be entitled to reimbursement by the Partnership for any amounts paid by it in
satisfaction of indemnification obligations owed by the General Partner to
present or former directors of the General Partner or its predecessors, as
provided for in or pursuant to the Charter and By-Laws of the General Partner.
B. Reasonable expenses incurred by an Indemnitee who is a
party to a proceeding may be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.7.A has been met, and (ii) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity.
D. The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by any such Person in connection with the Partnership's
activities, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
E. For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the
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performance by it of its duties to the Partnership also imposes duties on, or
otherwise involves services by, it to the plan or participants or beneficiaries
of the plan; excise taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute fines within the
meaning of Section 7.7; and actions taken or omitted by the Indemnitee with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
G. An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons .
I. If and to the extent any reimbursements to the General
Partner pursuant to this Section 7.7 constitute gross income of the General
Partner (as opposed to the repayment of advances made by the General Partner on
behalf of the Partnership), such amounts shall constitute guaranteed payments
within the meaning of Section 707(c) of the Code, shall be treated consistently
therewith by the Partnership and all Partners, and shall not be treated as
distributions for purposes of computing the Partners' Capital Accounts.
Section 7.8. Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this
Agreement, none of the General Partner or any of its officers, directors, agents
and employees shall be liable or accountable in damages or otherwise to the
Partnership, any Partners or any Assignees, or their successors or assigns, for
losses sustained, liabilities incurred or benefits not derived as a result of
errors in judgment or mistakes of fact or law or of any act or omission if the
General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that (i) the
General Partner is acting for the benefit of the Partnership, the Limited
Partners and the General Partner's stockholders collectively, and (ii) the
General Partner is under no obligation to give priority to the separate
interests of the Limited Partners, on the one hand, or the General Partner's
stockholders, on the other, in deciding whether to cause the Partnership to take
(or decline to take) any actions (including, without limitation, with respect to
the tax consequences to either).
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.
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D. Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability of the General Partner and any of its
officers, directors, agents and employees to the Partnership and the Limited
Partners under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
E. Notwithstanding anything herein to the contrary, except for
fraud, willful misconduct and gross negligence, or pursuant to any express
indemnities given to the Partnership by any Partner pursuant to any other
written instrument, no Partner shall have any personal liability whatsoever, to
the Partnership or to the other Partner, for the debts or liabilities of the
Partnership or its obligations hereunder, and the full recourse of the other
Partner shall be limited to the interest of that Partner in the Partnership. To
the fullest extent permitted by law, no officer, director or stockholder of the
General Partner shall be liable to the Partnership for money damages except for
(i) active and deliberate dishonesty established by a final judgment or (ii)
actual receipt of an improper benefit or profit in money, property or services.
Without limitation of the foregoing, and except for fraud, willful misconduct
and gross negligence, or pursuant to any such express indemnity, no property or
assets of any Partner, other than its interest in the Partnership, shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of any judgment (or other judicial process) in favor of any other Partner(s) and
arising out of, or in connection with, this Agreement. This Agreement is
executed by the officers of the General Partner solely as officers of the same
and not in their own individual capacities.
Section 7.9. Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any
of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform all and every act
and duty which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or
any non-mandatory provision of the Act, any action of the General Partner on
behalf of the Partnership or any decision of the General Partner to refrain from
acting on behalf of the Partnership,
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undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the General Partner to continue
to qualify as a REIT or (ii) to avoid the General Partner incurring any taxes
under Section 857 or Section 4981 of the Code (except with respect to the
distribution of Available Cash to the Series A Limited Partners in accordance
with Section 16.2 and to the Series B Limited Partners in accordance with
Section 17.2), is expressly authorized under this Agreement and is deemed
approved by all of the Limited Partners.
Section 7.10. Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partners, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the Partnership assets may be held in the name of the
Partnership, the General Partner or one or more nominees, as the General Partner
may determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
Section 7.11. Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement,
any Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and such Person shall be entitled to
deal with the General Partner as if it were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
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ARTICLE 8.
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1. Limitation of Liability.
The Limited Partners shall have no liability under this
Agreement except as expressly provided in this Agreement or under the Act.
Section 8.2. Management of Business.
No Limited Partner or Assignee (other than the General
Partner, any of its Affiliates or any officer, director, employee, partner,
agent or trustee of the General Partner, the Partnership or any of their
Affiliates, in their capacity as such) shall take part in the operations,
management or control (within the meaning of the Act) of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent, representative, or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
Section 8.3. Outside Activities of Limited Partners.
Subject to any agreements entered into by a Limited Partner or
its Affiliates with the General Partner, the Partnership or a Subsidiary and any
employment agreement), any Limited Partner and any officer, director, employee,
agent, trustee, Affiliate or stockholder of any Limited Partner shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership. Neither the Partnership
nor any Partners shall have any rights by virtue of this Agreement in any
business ventures of any Limited Partner or Assignee. Subject to such
agreements, none of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the partnership relationship established
hereby in any business ventures of any other Person, other than the General
Partner, and such Person shall have no obligation pursuant to this Agreement to
offer any interest in any such business ventures to the Partnership, any Limited
Partner or any such other Person, even if such opportunity is of a character
which, if presented to the Partnership, any Limited Partner or such other
Person, could be taken by such Person.
Section 8.4. Return of Capital.
Except pursuant to the rights of Exchange and Put set forth in
Section 8.6 and the redemption and exchange rights set forth in Sections 16.4,
16.7, 17.4 and 17.7 no Limited Partner shall be entitled to the withdrawal or
return of his Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except as expressly set forth herein with respect to the rights,
priorities and preferences of the Preferred Limited Partners holding any series
of Preferred Units, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee either as to the return of
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Capital Contributions or as otherwise expressly provided in this Agreement, as
to profits, losses, distributions or credits.
Section 8.5. Rights of Limited Partners Relating to the
Partnership.
A. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.C hereof, each
Limited Partner shall have the right, for a purpose reasonably related to
such Limited Partner's interest as a limited partner in the Partnership,
upon written demand with a statement of the purpose of such demand and at such
Limited Partner's own expense:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission
by the General Partner pursuant to the Securities
Exchange Act of 1934, as amended, and each report sent to
the stockholders of the General Partner;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate
and all amendments thereto, together with executed copies
of all powers of attorney pursuant to which this
Agreement, the Certificate and all amendments thereto
have been executed; and
(5) to obtain true and full information regarding the amount
of cash and a description and statement of any other
property or services contributed by each Partner and
which each Partner has agreed to contribute in the
future, and the date on which each became a Partner.
B. The Partnership shall notify each Common Limited Partner in
writing of any adjustment made in the calculation of the REIT Shares Amount
within 10 Business Days of the date such change becomes effective.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the General Partner or (ii) the Partnership
or the General Partner is required by law or by agreements with unaffiliated
third parties to keep confidential.
Section 8.6. Common Limited Partner Exchange and Put Rights.
A. On or after the date one (1) year after the Effective Date
or on or after such later date as expressly provided in an agreement entered
into between the partnership and any
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Common Limited Partner, but prior to the date forty (40) years after the
Effective Date, each Common Limited Partner shall have the right (subject to the
terms and conditions set forth herein and in any other such agreement, as
applicable) to require the General Partner to acquire all or a portion of the
Common Units held by such Common Limited Partner (such Common Units being
hereafter "Tendered Units") in exchange for, at the election of such Common
Limited Partner, (i) REIT Shares, in which event such required acquisition shall
be considered a "Exchange," or (ii) cash, in which event such required
acquisition shall be considered a "Put." Any Exchange or Put shall be exercised
pursuant to a Notice of Exchange or Notice of Put, as the case may be, delivered
to the General Partner by the Common Limited Partner who is exercising the
relevant right (the "Tendering Partner").
B. A Tendering Partner effecting an Exchange shall have the
right to receive, on the Specified Exchange Date, the REIT Shares Amount
(calculated as of the Valuation Date) with respect to the Tendered Units,
subject to the limitations on ownership and provisions with respect to Excess
Shares set forth in Article IV of the Charter. The REIT Shares Amount shall be
delivered as duly authorized, validly issued, fully paid and nonassessable REIT
Shares and, if applicable, rights, free of any pledge, lien, encumbrance or
restriction, other than those provided in the Charter, the By-Laws of the
General Partner, the Securities Act and relevant state securities or blue sky
laws. Notwithstanding any delay in such delivery, the Tendering Partner shall be
deemed the owner of such REIT Shares and rights for all purposes, including
without limitation, rights to vote or consent, receive dividends, and exercise
rights, as of the Specified Exchange Date.
C. (1) A Tendering Partner effecting a Put shall have the
right to receive on the Specified Put Date cash in the amount of the Put Amount;
provided, that, within five (5) Business Days after receipt of the Notice of
Put, the General Partner shall give written notice to the Tendering Partner as
to whether the General Partner will purchase the Tendered Units with the
proceeds of a registered public offering (a "Public Offering Funding") of a
number of REIT Shares ("Registrable Shares") equal to the REIT Shares Amount
with respect to the Tendered Units. In the event that the General Partner fails
to give such notice, it will be deemed to have elected not to purchase the
Tendered Units through a Public Offering Funding and shall purchase the Tendered
Units on the Specified Put Date for cash in the amount (the "Cash Amount") equal
to the Value on the Valuation Date of the REIT Shares Amount (calculated as of
the Valuation Date) with respect to the Tendered Units.
(2) In the event that the General Partner elects a Public
Offering Funding with respect to a Put covering in excess of 75,000 Common
Units, it may at such time, give notice (a "Single Funding Notice") of such
election to all Common Limited Partners and require that all Common Limited
Partners elect whether or not to effect a Put to be funded through such Public
Offering Funding. In the event a Common Limited Partner elects to effect such a
Put, it shall give notice thereof and of the number of Common Units to be made
subject thereto in writing to the General Partner within 10 Business Days after
receipt of the Single Funding Notice, and such Common Limited Partner shall be
treated as a Tendering Partner for all purposes of this Section 8.6. In the
event that a Common Limited Partner does not so elect, it shall be deemed to
have waived its right to effect a Put for the current Twelve-Month Period,
except that it may effect a Put for no more than 20,000 Common Units during such
Twelve-Month Period.
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D. In the event that the General Partner elects a Public
Offering Funding, it shall purchase the Tendered Units on the Specified Put Date
for cash in immediately available funds in the amount (the "Public Offering
Funding Amount") equal to the lesser of (i) the Cash Amount or (ii) the proceeds
received by the General Partner from the Public Offering Funding after deduction
of reasonable expenses related thereto, including underwriting discounts and
commissions, legal and accounting fees and expenses, Securities and Exchange
Commission ("SEC") registration fees, state blue sky and securities laws fees
and expenses, printing expenses, NASD filing fees and listing fees.
E. If the General Partner elects a Public Offering
Funding, the following additional terms and conditions shall apply:
(1) As soon as practicable after the General Partner gives the
Tendering Partner notice of its election, the General Partner shall use its best
efforts to effect as promptly as possible a registration, qualification or
compliance (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as would permit or facilitate the sale and
distribution of the REIT Shares; provided, that, the General Partner shall not
by reason hereof, be required to submit to jurisdiction or taxation, or qualify
to do business in any jurisdiction in which such submission or qualification
would not be otherwise required; provided, further, that if the General Partner
shall deliver a certificate to the Tendering Partner stating that the General
Partner has determined in the good faith judgment of the Board of Directors that
such filing, registration or qualification would require disclosure of material
non-public information, the disclosure of which would have a material adverse
effect on the General Partner, then the General Partner may delay making any
filing or delay the effectiveness of any registration or qualification for the
shorter of (a) the period ending on the date upon which such information is
disclosed to the public or ceases to be material or (b) an aggregate period of
90 days in connection with any Public Offering Funding.
(2) The General Partner shall advise the Tendering Partner,
regularly and promptly upon any request, of the status of the registration,
including the timing of all filings, the selection of and understandings with
underwriters, dealers and brokers, the nature and contents of all communications
with the Securities and Exchange Commission and other governmental bodies, the
expenses related to the Public Offering Funding as they are being incurred, the
nature of marketing activities, and any other matters reasonably related to the
timing, price and expenses relating to the Public Offering Funding and the
compliance by the General Partner with its obligations with respect thereto. In
addition, the General Partner and each Tendering Partner may, but shall be under
no obligation to, enter into understandings in writing ("Pricing Agreements")
whereby the Tendering Partner will agree in advance as to the acceptability of
the net price (after deducting all expenses referred to in Section 8.6.D) at or
below the Value on the Valuation Date of a REIT Share, at which the Registrable
Shares are to be offered pursuant to the Public Offering Funding (the "Price").
Furthermore, the General Partner shall establish pricing notification procedures
with each such Tendering Partner, such that
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the Tendering Partner will have the maximum opportunity practicable to determine
whether to become a Withdrawing Partner pursuant to Section 8.6.E(3) below.
(3) The General Partner, upon notification of the Price from
the managing underwriter(s) engaged by the General Partner in order to sell the
Registrable Shares, shall immediately use its best efforts to notify the
Tendering Partner of the Price. Each Tendering Partner shall have one hour (as
such time may be extended by the General Partner) to elect to withdraw his Put
(a Tendering Partner making such an election being a "Withdrawing Partner"), and
Common Units with a REIT Shares Amount equal to such excluded Registrable Shares
shall be considered to be withdrawn from the related Put. If a Tendering
Partner, within such time period, does not notify the General Partner of such
Tendering Partner's election not to become a Withdrawing Partner, then such
Tendering Partner shall, except as otherwise provided in a Pricing Agreement, be
deemed to have elected to become a Withdrawing Partner, without liability to the
General Partner. To the extent that the General Partner is unable to notify any
Tendering Partner, such unnotified Tendering Partner shall, except as otherwise
provided in any Pricing Agreement, be deemed to have elected to become a
Withdrawing Partner. Each Tendering Partner whose Put is being funded through
the Public Offering Funding who does not become a Withdrawing Partner shall have
the right, subject to the approval of the managing underwriter(s), to Put
additional Common Units in a number no greater than the number of Common Units
withdrawn. In the event that the Price is in excess of the Value on the
Valuation Date of a REIT Share, then the Withdrawing Partner shall bear its pro
rata share of the expenses described in Section 8.6.D (such share calculated as
if such Partner had not been a Withdrawing Partner). If more than one Tendering
Partner so elects to Put additional Common Units, then such Common Partnership
Units shall be Put on a pro rata basis, based on the number of additional Common
Units sought to be so Put.
(4) The General Partner shall take all reasonable action in
order to effectuate the sale of the Registrable Shares including, but not
limited to, the entering into of an underwriting agreement in customary form
with the managing underwriter(s) selected for such underwriting by the Tendering
Partner or, if there is more than one Tendering Partner, by the Tendering
Partner who, together with the affiliates of such Tendering Partner,
beneficially owns the greatest number of Common Units then being made subject to
a Put. Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) advises the General Partner in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
General Partner shall so advise all Tendering Partners and the number of Common
Units to be sold to the General Partner pursuant to the Put shall be allocated
among all Tendering Partners in proportion, as nearly as practicable, to the
respective number of Common Units as to which each Tendering Partner elected to
effect a Put. No Registrable Shares excluded from the underwriting by reason of
the managing underwriter's marketing limitation shall be included in such
registration.
(5) The General Partner may include securities for its own
account in any registration filed pursuant to Section 8.6.D hereof and, if the
managing underwriter has not limited the number of Registrable Shares to be
underwritten, the General Partner
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may include securities for the account of others in such registration, in each
case only if and to the extent that (i) the managing underwriter, the General
Partner and Tendering Partners owning Common Units representing at least
seventy-five percent (75%) of the Common Units with respect to which the Public
Offering Funding is being effected so agree in writing, and (ii) the right of
any party to Put Common Units pursuant to this Section 8.6, and the Put Amount
to be received by such party (including by virtue of the number of Registrable
Shares which would otherwise have been included in such registration and
underwriting, the offering price for such Registrable Shares and the
underwriting commissions or discounts for such Registrable Shares) will not
thereby be limited, reduced or adversely affected.
F. Notwithstanding the provisions of Section 8.6.A, a Common
Limited Partner shall not be entitled to effect an Exchange if the ownership or
right to acquire REIT Shares by such Partner on or prior to the Specified
Exchange Date would be prohibited under the Charter.
G. Notwithstanding anything herein to the contrary, with
respect to any Exchange or Put pursuant to this Section 8.6:
(1) All Common Units acquired by the General Partner pursuant
thereto shall automatically, and without further action
required, be converted into and deemed to be General
Partner Interests comprised of the same number of Common
Units.
(2) Each Common Limited Partner may not effect an Exchange (a)
for less than 2,500 Partnership Units or, if such Common
Limited Partner holds less than 2,500 Partnership Units,
all of the Common Units held by such Partner; or (b) for
more than the greater of 75,000 Common Units or one-third
of the number of Common Units set forth by its name on
Exhibit A hereto as of the closing of the initial public
offering of REIT Shares, less the number of Common Units
made subject to a Put during the same Twelve-Month Period;
(3) Each Common Limited Partner may not effect a Put (a) for
less than 5,000 Common Units or, if such Common Limited
Partner holds less than 5,000 Common Units, all of the
Common Units held by such Common Limited Partner, or (b)
for more than one-third of the number of Common Units set
forth by its name on Exhibit A hereto as of the closing of
the initial public offering of REIT Shares, less the
number of Common Units made subject to an Exchange during
the same Twelve-Month Period;
(4) Each Common Limited Partner (a) may effect an Exchange or
Put only once in each Twelve-Month Period, and (b) may not
effect an Exchange or Put during the period after the
Partnership Record Date with respect to a distribution and
before the record date established by the General Partner
for a distribution to its stockholders of some or all of
its portion of such distribution.
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(5) Notwithstanding anything herein to the contrary, with
respect to any Put, in the event the General Partner gives
notice to all Common Limited Partners (a "Primary Offering
Notice") that it desires to effect a primary offering of
its equity securities for cash (other than an offering in
connection with a merger, consolidation or similar
transaction, or employee benefit or similar plans) then,
unless the General Partner otherwise consents, the actions
described in Section 8.6.E as to a Public Offering Funding
with respect to any Notice of Put thereafter received may
be delayed until the earlier of (a) the completion of the
primary offering or (b) 120 days following the giving of
the Primary Offering Notice; provided that, to the extent
that the managing underwriter(s) of such primary offering
advise that the inclusion of such additional REIT Shares
will not adversely affect the offering, additional REIT
Shares the proceeds of which are to be used to satisfy a
Put made subject to such a Notice of Put (a "Subsequent
Put") (without regard to the limitations of subparagraph
(3) (a) of this paragraph G) shall be included in such
offering, and the procedures of this Section 8.6 shall
otherwise be followed as closely as practicable; provided,
further that, unless the entire REIT Shares Amount
relating to the Common Units made subject to the
Subsequent Put shall be sold in such offering, such
Subsequent Put shall not count as a Put for purposes of
subparagraph (4) of this Paragraph G; and, provided,
further, that a Primary Offering Notice may be given no
more than once in any Twelve-Month Period without the
Consent of the Common Limited Partners.
(6) The General Partner may delay a Public Offering Funding,
such that it will not occur (1) during the same Twelve-
Month Period as the General Partner has effected a "Demand
Registration" pursuant to the Registration Rights
Agreement dated as of August 18, 1993, among the General
Partner and certain Common Limited Partners (it being
understood that in the event a Notice of Put is received
prior to the receipt of requisite requests for a Demand
Registration, such Notice of Put shall control, and vice
versa) or (b) within 120 days following the closing of any
prior Public Offering Funding;
(7) The consummation of such Exchange or Put shall be subject
to the expiration or termination of the applicable waiting
period, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(8) Each Tendering Partner shall continue to own all Common
Units subject to any Exchange or Put, and be treated as a
Common Limited Partner with respect such Common Units for
all purposes of this Agreement, until such Common Units
are transferred to the General Partner and the
consideration provided by this Section 8.6 is delivered in
full on the Specified Exchange Date or Specified Put Date,
as the case may be. Until a Specified Exchange Date, the
Tendering Partner shall have no rights as a stockholder of
the General Partner.
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(9) The right of each Common Limited Partner to effect a Put
shall be subject to the ability of the Partnership to
comply with the terms of Section 16.2.C(i) and 17.2.C(i).
For purposes of determining compliance with the restrictions set forth in
this Paragraph G, all Common Units beneficially owned by Affiliates of a Common
Limited Partner shall be considered to be owned or held by such Common Limited
Partner; provided that the Dallas P. Price Trust and the David G. Price Trust
shall be considered Affiliates of each other for purposes of this sentence, it
being expressly understood that (x) the Dallas P. Price Trust and the David G.
Price Trust (and their respective Affiliates) collectively shall have the right
to effect an Exchange and/or a Put in any Twelve-Month Period of up to one-third
of the Common Units owned by David G. Price and his Affiliates as of the closing
of the initial public offering of REIT Shares, and (y) Dallas P. Price and David
G. Price together may agree how to allocate between the Dallas P. Price Trust
and the David G. Price Trust (and their respective Affiliates) the number of
Common Units that each of them may Exchange and/or Put in any Twelve-Month
Period, but in the absence of such agreement, each of the Dallas P. Price Trust
and the David G. Price Trust (and their respective Affiliates) shall have the
right to effect an Exchange and/or Put in any Twelve-Month Period up to
one-sixth of the Common Units owned by both of them (and their respective
Affiliates). In addition, (i) each lending institution, if any, to which Common
Units are transferred upon the exercise of remedies in respect of a Pledge (as
defined in Section 11.3.A(iii) hereof) as contemplated by Section 11.3.A(iii)
hereof (each such lending institution a "Lending Institution Transferee") shall
be entitled to exercise all rights of a Common Limited Partner under this
Section 8.6 as if such Lending Institution Transferee were a Common 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 Common Limited
Partner, shall have no greater rights under this Section 8.6 than are available
to such Common Limited Partner, whether or not such Lending Institution
Transferees act individually or jointly with each other or such Common Limited
Partner; (ii) any two or more Lending Institution Transferees to which Common
Units were pledged by the same Common Limited Partner or any of such Common
Limited Partner's Affiliates may act jointly in exercising the rights of a
Common Limited Partner under this Section 8.6; and (iii) for purposes of
determining compliance with the restrictions set forth in this Paragraph G, all
Common Units of a Common Limited Partner or any of its Affiliates transferred to
Lending Institution Transferees shall be considered to be owned or held by such
Common Limited Partner or such Affiliate, such that the maximum number of Common
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 Common Units that such Common Limited
Partner
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would then be entitled to effect if such Common Limited Partner would then be
entitled to effect if such Partnership Interests had not been pledged.
H. Notwithstanding the provisions of this Section 8.6
permitting the General Partner to delay a Public Offering Funding by virtue of
an event described in Section 8.6.E, the giving of a Primary Offering Notice, or
a delay referred to in Section 8.6.G.(6), the General Partner shall use its
reasonable efforts to take all such actions, as are consistent with the purposes
of such delay provisions, to effect a Public Offering Funding at the earliest
time practicable. It is understood that such periods of delay shall run, to the
extent practicable, concurrently, and shall not limit the right of a Common
Limited Partner to deliver a Notice of Put.
I. In the event that the Partnership issues additional
Partnership Interests to any Additional Limited Partner pursuant to Section
4.5.D, the General Partner shall make such revisions to this Section 8.6 as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.
J. In the event of a Put, the General Partner shall have the
right to assign to the Partnership, and the Partnership agrees to accept such
assignment, the right or obligation to acquire Common Units subject to a Put as
described in this Section 8.6.
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting.
The General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including without limitation, all books and
records necessary to provide to the Limited Partners any information, lists and
copies of documents required to be provided pursuant to Sections 9.3 or Section
8.5.A. Any records maintained by or on behalf of the Partnership in the regular
course of its business may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device, provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial and tax reporting purposes, on an
accrual basis in accordance with generally accepted accounting principles.
Section 9.2. Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
Section 9.3. Reports.
A. As soon as practicable, but in no event later than 105 days
after the close of each Partnership Year, or such later date as they are filed
with the Securities and Exchange Commission, the General Partner shall cause to
be mailed to each Limited Partner as of the close of the Partnership Year, an
annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis
with the General Partner, for such Partnership Year, presented in accordance
with generally accepted
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accounting principles, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than 105 days
after the close of each calendar quarter (except the last calendar quarter of
each year) or such later date as they are filed with the Securities and Exchange
Commission, the General Partner shall cause to be mailed to each Limited Partner
as of the last day of the calendar quarter, a report containing unaudited
financial statements of the Partnership, or of the General Partner, if such
statements are prepared solely on a consolidated basis with those of the General
Partner, in accordance with the applicable law or regulation, or as the General
Partner determines to be appropriate.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns.
The General Partner shall arrange for the preparation and
timely filing of all returns of Partnership income, gains, deductions, losses
and other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within 90 days of the
close of each taxable year, the tax information reasonably required by Limited
Partners for federal and state income tax reporting purposes. The Limited
Partners shall promptly provide the General Partner with such information
relating to the Contributed Properties, including tax basis and other relevant
information, as may be reasonably requested by the General Partner from time to
time.
Section 10.2. Tax Elections.
Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code, including the election under Section
754 of the Code. The General Partner shall have the right to seek to revoke any
such election (including without limitation, any election under Section 754 of
the Code) upon the General Partner's determination in its sole and absolute
discretion that such revocation is the best interests of the Partners.
Section 10.3. Tax Matters Partner.
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profit interest of each
of the Limited Partners; provided, however, that such information is provided to
the Partnership by the Limited Partners.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect
to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken
into account by a Partner for income tax purposes (such
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administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to
as "judicial review"), and in the settlement agreement
the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such
settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and
Regulations) files a statement with the IRS providing
that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf
of such Partner or (ii) who is a "notice partner" (as
defined in Section 6231 of the Code) or a member of a
"notice group" (as defined in Section 6223(b)(2) of the
Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required
to be taken into account by a Partner for tax purposes
(a "final adjustment") is mailed to the tax matters
partner, to seek judicial review of such final
adjustment, including the filing of a petition for
readjustment with the Tax Court or the United States
Claims Court, or the filing of a complaint for refund
with the District Court of the United States for the
district in which the Partnership's principal place of
business is located ;
(3) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is
not allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with respect
to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to
any item required to be taken into account by a Partner
for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of
the Partnership in connection with any tax audit or
judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of the
tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing his duties as such (including legal and accounting fees)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
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partner in discharging his duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
Section 10.4. Organizational Expenses.
The Partnership shall elect to deduct expenses, if any,
incurred by it in organizing the Partnership ratably over a 60-month period as
provided in Section 709 of the Code.
Section 10.5. Withholding.
Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner (including, without limitation, the right to receive
distributions). Any amounts payable by a Limited Partner hereunder shall bear
interest at the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
plus four percentage points (but not higher than the maximum lawful rate) from
the date such amount is due (i.e., 15 days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership or
the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer.
A. The term "transfer," when used in this Article 11 with
respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports
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to assign its General Partner Interest to another Person or by which a Limited
Partner purports to assign its Limited Partnership Interest to another Person,
and includes a sale, assignment, gift (outright or in trust), pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. Except to the extent otherwise specified, the term "transfer" when
used in this Article 11 does not include any redemption of Common Units by the
Partnership or acquisition of Common Units from a Common Limited Partner by the
General Partner pursuant to Section 8.6 or any exchange or redemption of Series
A Preferred Units pursuant to Section 16.7 or Series B Preferred Units pursuant
to Section 17.7. No part of the interest of a Limited Partner shall be subject
to the claims of any creditor, any spouse for alimony or support, or to legal
process, and may not be voluntarily or involuntarily alienated or encumbered,
except as may be specifically provided for in this Agreement.
B. No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void ab initio unless
otherwise consented to by the General Partner in its sole and absolute
discretion.
Section 11.2. Transfer of General Partner's Partnership
Interest.
A. Subject to Section 11.2.B., the General Partner shall not
withdraw from the Partnership and shall not sell, assign, pledge, encumber or
otherwise dispose of all or any portion of its interest in the Partnership
(whether by sale, disposition, statutory merger or consolidation, liquidation or
otherwise) without the Consent of the Limited Partners. Upon any transfer of
such a Partnership Interest pursuant to the Consent of the Limited Partners and
otherwise in accordance with the provisions of this Section 11.2.A, the
transferee shall become a substitute General Partner for all purposes herein,
and shall be vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all duties
of the General Partner, once such transferee has executed such instruments as
may be necessary to effectuate such admission and to confirm the agreement of
such transferee to be bound by all the terms and provisions of this Agreement
with respect to the Partnership Interest so acquired. It is a condition to any
such transfer that the transferee assumes, by operation of law or express
agreement, all of the obligations of the transferor General Partner under this
Agreement with respect to such transferred Partnership Interest, and no such
transfer (other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor General Partner are assumed by a
successor corporation by operation of law) shall relieve the transferor General
Partner of its obligations under this Agreement without the Consent of the
Limited Partners. In the event the General Partner withdraws from the
Partnership, in violation of this Agreement or otherwise, or otherwise dissolves
or terminates, or upon the Bankruptcy of the General Partner, a Majority In
Interest of the Limited Partners may elect to continue the Partnership business
by selecting a Substitute General Partner in accordance with the Act.
B. Notwithstanding any provision herein to the contrary, the
General Partner may, without the Consent of the Limited Partners, effect a
transfer of up to one-third (1/3) of its original General Partner Interest, to
one or more transferees subject to the following restrictions and limitations:
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(1) The General Partner shall at all times after such transfer
continue to be the sole general partner of the Partnership,
vested with the powers and rights and liable for all
obligations and responsible for all duties of same which
powers, rights, obligations and duties may not be delegated
or assigned;
(2) The transferee shall receive only the economic interest of
the General Partnership Interest as an assignee, including
the right to receive distributions from the Partnership and
the share of Net Income, Net Losses, gain and loss
attributable to the Partnership Units assigned to such
transferee, but shall not be deemed to be a holder of
Partnership Units for any other purpose under this
Agreement, and shall not be entitled to effect a Consent
with respect to such Partnership Units on any matter
presented to Partners for approval and shall not be counted
as a Limited Partner for purposes of determining the
Consent of the Limited Partners or the Majority In Interest
of the Limited Partners. The transferee shall be admitted
as a substitute or additional General Partner only upon
receipt of the Consent of the Limited Partners therefor.
(3) Such transfer shall not be effected by merger,
consolidation, liquidation, or sale of all or substantially
all of the assets of the General Partner.
Section 11.3. Limited Partners' Rights to Transfer.
A. Prior to the third (3rd) anniversary of the closing of the
initial public offering of REIT Shares, no Limited Partner shall transfer all or
any portion of its Partnership Interest to any transferee without the consent of
the General Partner, which consent may be withheld in its sole and absolute
discretion; provided, however, that any Limited Partner or transferee of
Partnership Units or Assignee may, at any time before or after such third
anniversary, without the consent of the General Partner, (i) transfer all or any
portion of its Partnership Interest to the General Partner or to the Affiliates
of the transferor or Affiliates of DGP, subject to the provisions of Section
11.6, (ii) transfer its Partnership Interest pursuant to its rights to effect an
Exchange or a Put as provided in Section 8.6 hereof or transfer its Partnership
Interest pursuant to its rights to effect an exchange as provided in Section
16.7 and Section 17.7 and (iii) subject to Section 11.6, pledge (a "Pledge") all
or any portion of its Partnership Interest to a lending institution which is not
an Affiliate of such Limited Partner, as collateral or security for a bona fide
loan or other extension of credit, and transfer such pledged Partnership
Interest to such lending institution in connection with the exercise of remedies
under such loan or extension or credit. After such third (3rd) anniversary, each
Limited Partner, and each transferee of Partnership Units or Assignee shall also
have the right to transfer all or any portion of its Partnership Interest to any
Person, subject to the provisions of Section 11.6 and to satisfaction of each of
the following conditions; provided, however, that any transfer or series of
transfers by DGP or Dallas P. Price each of 625,000 Partnership Units to Oaks
Christian High School shall not be subject to satisfaction of the conditions
contained in paragraphs (b), (c) and (d) of this Section 11.3 A:
(a) General Partner Right of First Refusal. The transferring Partner shall
give written notice of the proposed transfer to the General Partner,
which notice
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shall state (i) the identity of the proposed transferee, and (ii) the
amount and type of consideration proposed to be received for the
transferred Partnership Units. The General Partner shall have ten (10)
Business Days upon which to give the transferring Partner notice of its
election to acquire the Partnership Units on the proposed terms. If it
so elects, it shall purchase the Partnership Units on such terms within
ten (10) Business Days after giving notice of such election; provided,
that, in the event that the proposed terms involve a purchase for cash,
the General Partner may at its election deliver in lieu of all or any
portion of such cash a note payable to the transferring Partner at a
date as soon as reasonably practicable but in no event later than 180
days after such purchase, and bearing interest at an annual rate equal
to the total dividends declared with respect to one REIT Share for the
four preceding fiscal quarters of the General Partner, divided by the
Value of a REIT Share as of the closing of such purchase; and,
provided, further, that such closing may be deferred to the extent
necessary to effect compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, if applicable, and any other applicable
requirements of law. If it does not so elect, the transferring Partner
may transfer such Partnership Units to a third party, on terms no more
favorable to the transferee than the proposed terms, subject to the
other conditions of this Section 11.3.
(b) Qualified Transferee. Any transfer of a Partnership Interest in Common
Units shall be made only to a single Qualified Transferee; provided,
that, for such purposes, all Qualified Transferees which are
Affiliates, or which comprise investment accounts or funds managed by a
single Qualified Transferee and its Affiliates, shall be considered
together to be a single Qualified Transferee; provided, further, that,
each transfer meeting the minimum transfer restriction of subsection
(c) below may be to a separate Qualified Transferee.
(c) Minimum Transfer Restriction. Any transferring Common Limited Partner
must transfer not less than the lesser of (i) greater of 50,000 Common
Units or one-third (1/3) of the number of Common Units owned by such
Partner as of the Effective Date, or (ii) all of the remaining Common
Units owned by such transferring Partner; provided, that, for purposes
of determining compliance with the foregoing restriction, all Common
Units owned by Affiliates of a Common Limited Partner shall be
considered to be owned by such Common Limited Partner.
(d) Transferee Agreement to Exchange. Any proposed transferee of Common
Units shall deliver to the General Partner a written agreement
reasonably satisfactory to the General Partner to the effect that,
subject to the ownership restrictions contained in the Charter, the
transferee will, (i) within six (6) months after consummation of the
Common Units transfer, Exchange its Common Units into REIT Shares in
accordance with the terms of the Exchange rights provided in Section
8.6, and (ii) to the extent
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prohibited from effecting such an Exchange by virtue of such ownership
restrictions, effect a further Exchange of Common Units once during
each subsequent six-month period to the extent such ownership
restrictions then permit.
(e) No Further Transfers. The transferee of Common Units shall not be
permitted to effect any further transfer of the Common Units, other
than to its own Affiliates, Affiliates of DGP or to the General
Partner.
It is a condition to any transfer otherwise permitted
hereunder that the transferee assumes by operation of law or express agreement
all of the obligations of the transferor Limited Partner under this Agreement
with respect to such transferred Partnership Interest and no such transfer
(other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of its
obligations under this Agreement without the approval of the General Partner, in
its sole and absolute discretion. Notwithstanding the foregoing, any transferee
of any transferred Partnership Interest shall be subject to any and all
ownership limitations contained in the Charter which may limit or restrict such
transferee's ability to exercise its Exchange rights or the exchange rights set
forth in Section 16.7 and Section 17.7. Any transferee, whether or not admitted
as a Substituted Limited Partner, shall take subject to the obligations of the
transferor hereunder. Unless admitted as a Substituted Limited Partner, no
transferee, whether by a voluntary transfer, by operation of law or otherwise,
shall have any rights hereunder, other than the rights of an Assignee as
provided in Section 11.5.
B. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but not more rights than those enjoyed by other Limited Partners, for the
purpose of settling or managing the estate, and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its interest in
the Partnership. The Incapacity of a Limited Partner, in and of itself, shall
not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer otherwise
permitted under Section 11.3 by a Limited Partner of his Partnership Units if,
in the opinion of legal counsel to the Partnership, such transfer would require
the filing of a registration statement under the Securities Act by the
Partnership or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Partnership Units.
D. No transfer by a Limited Partner of his Partnership Units
(including any Exchange or Put pursuant to Section 8.6, any redemption or
exchange pursuant to Sections 16.4, 16.7, 17.4 and 17.7, any other acquisition
of Common Units, Series A Preferred Units or Series B Preferred Units by the
General Partner or the Partnership) may be made to any person if (i) in the
opinion of legal counsel for the Partnership, it could result in the Partnership
being treated as an association taxable as a corporation, or (ii) except with
the consent of the General Partner, which may be given or withheld in its sole
and absolute discretion, such transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Code.
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E. No transfer of any Partnership Units may be made to a
lender to the Partnership or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose
loan constitutes a Nonrecourse Liability, without the consent of the General
Partner, in its sole and absolute discretion; provided that, as a condition to
such consent, the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem or exchange for the REIT Shares
Amount, the specified amount of REIT Series A Preferred Shares or the specified
amount of REIT Series B Preferred Shares, as the case may be, any Partnership
Units in which a security interest is held simultaneously with the time at which
such lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
F. Notwithstanding any other provisions in this Agreement to
the contrary, any transferee of Common Units that is an Affiliate of the
transferor shall be deemed to have the same rights and be subject to the same
limitations with respect to effecting an Exchange or Put pursuant to Section 8.6
or a transfer of Common Units pursuant to Section 11.3 as if such transferee had
been a Limited Partner as of the closing of the initial public offering of REIT
Shares or as of the Effective Date, as applicable.
Section 11.4. Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a
transferee (including transferees pursuant to transfers permitted by Section
11.3) as a Limited Partner in his place. The General Partner shall, however,
have the right to consent to the admission of a transferee of the interest of a
Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner,
which consent may be given or withheld by the General Partner in its sole and
absolute discretion. The General Partner's failure or refusal to permit a
transferee of any such interests to become a Substituted Limited Partner shall
not give rise to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited Partner
under this Agreement. The admission of any transferee as a Substituted Limited
Partner shall be subject to the transferee executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
(including without limitation, the provisions of Section 12.4 and such other
documents or instruments as may be required to effect the admission, each in
form and substance satisfactory to the General Partner) and the acknowledgment
by such transferee that each of the representations and warranties set forth in
Section 3.4 hereof are true and correct with respect to such transferee as of
the date of the transfer of the Partnership Interest to such transferee and will
continue to be true to the extent required by such representations or
warranties.
C. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
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Section 11.5. Assignees.
If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any permitted transferee under Section 11.3
as a Substituted Limited Partner, as described in Section 11.4, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited partnership
interest under the Act, including the right to receive distributions from the
Partnership and the share of Net Income, Net Losses, gain and loss attributable
to the Partnership Units assigned to such transferee, the rights to transfer the
Partnership Units provided in this Article 11, the rights to effect an Exchange
or a Put provided in Section 8.6 and the right of redemption or exchange for
REIT Series A Preferred Shares provided in Section 16.7 and the right of
redemption or exchange for REIT Series B Preferred Shares provided in Section
17.7., but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to effect a Consent with
respect to such Partnership Units on any matter presented to the Limited
Partners for approval (such Consent remaining with the transferor Limited
Partner). In the event any such transferee desires to make a further assignment
of any such Partnership Units, such transferee shall be subject to all the
provisions of this Article 11 to the same extent and in the same manner as any
Limited Partner desiring to make an assignment of Partnership Units.
Notwithstanding anything contained in this Agreement to the contrary, as a
condition to becoming an Assignee, any prospective Assignee must first execute
and deliver to the Partnership an acknowledgment that each of the
representations and warranties set forth in Section 3.4 hereof are true and
correct with respect to such prospective Assignee as of the date of the
prospective assignment of the Partnership Interest to such prospective Assignee
and will continue to be true to the extent required by such representations or
warranties.
Section 11.6. General Provisions.
A. No Limited Partner may withdraw from the Partnership other
than (i) as a result of a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11, with respect to which the
transferee becomes a Substituted Limited Partner, or (ii) pursuant to an
Exchange or a Put of all of its Common Units under Section 8.6 or a redemption
or exchange of all of such Limited Partner's Series A Preferred Units under
Section 16.4 or Section 16.7 or Series B Preferred Units under Section 17.4 of
Section 17.7.
B. Any Limited Partner who shall transfer all of his
Partnership Units in a transfer permitted pursuant to this Article 11 where such
transferee was admitted as a Substituted Limited Partner or pursuant to the
exercise of its rights of Exchange or Put of all of its Partnership Units under
Section 8.6 or its rights of redemption or exchange of all of its Series A
Preferred Units under Section 16.7 or its rights of redemption or exchange of
all of its Series B Preferred Units under Section 17.7 shall cease to be a
Limited Partner.
C. Transfers pursuant to this Article 11 may only be made as
of the first day of a fiscal quarter of the Partnership, unless the General
Partner otherwise consents, which shall not be unreasonably withheld.
D. If any Partnership Interest is transferred or assigned
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article 11 or
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exchanged or redeemed pursuant to Sections 8.6, 16.4, 16.7, 17.4 or 17.7 on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items attributable to such Partnership Interest
for such fiscal year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the fiscal year in accordance with Section 706(d) of the Code
using the interim closing of the books method. Except as otherwise required by
Section 706(d) of the Code or as otherwise determined by the General Partner (to
the extent consistent with Section 706(d) of the Code), solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the Person who is a Partner
as of midnight on the last day of said month and none of such items for the
calendar month in which a redemption or exchange occurs will be allocated to the
redeeming or exchanging Partner. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of such
transfer, assignment, exchange or redemption shall be made to the transferor
Partner, and all distributions of Available Cash thereafter, in the case of a
transfer or assignment other than an exchange or redemption, shall be made to
the transferee Partner.
E. In addition to any other restrictions on transfer herein
contained, including without limitation the provisions of this Article 11 and
Section 12.4, in no event may any transfer or assignment of a Partnership
Interest by any Partner (including any Exchange, Put, redemption of Series A
Preferred Units or exchange of Series A Preferred Units for REIT Series A
Preferred Shares, redemption of Series B Preferred Units or exchange of Series B
Preferred Units for REIT Series B Preferred Shares, or any other acquisition of
Common Units, Series A Preferred Units or Series B Preferred Units by the
Partnership or the General Partner) be made (i) to any person or entity who
lacks the legal right, power or capacity to own a Partnership Interest; (ii) in
violation of applicable law; (iii) except with the consent of the General
Partner, which may be given or withheld in its sole and absolute discretion, of
any component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a
Partnership Interest, (iv) if such transfer would cause a termination of the
Partnership for federal or state income tax purposes (except as a result of an
Exchange or Put, or redemption or exchange for cash or REIT Series A Preferred
Shares pursuant to Sections 16.4 and 16.7, or redemption or exchange for cash or
REIT Series B Preferred Shares, pursuant to Sections 17.4 and 17.7, of all
Partnership Units held by all Limited Partners); (v) if such transfer would, in
the opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a partnership for Federal or state income tax purposes (except as
a result of the Exchange or Put, and redemption or exchange for cash or REIT
Series A Preferred Shares pursuant to Sections 16.4 and 16.7, or redemption or
exchange for cash or REIT Series B Preferred Shares, pursuant to Sections 17.4
and 17.7 of all Partnership Units held by all Limited Partners); (vi) if such
transfer would cause the Partnership to become, with respect to any employee
benefit plan subject to Title I of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(c) of the Code); (vii) if such transfer would, in the opinion of counsel to
the Partnership, cause any portion of the assets of the Partnership to
constitute assets of any employee benefit plan pursuant to Department of Labor
Regulations Section 2510.2-101; (viii) if such transfer requires the
registration of such Partnership Interest, or requires the registration of the
exchange of such Partnership Interest for any capital stock of the General
Partner, pursuant to any applicable federal or state securities laws (other than
pursuant to any applicable registration rights agreement); (ix) except with the
consent of the General Partner, which may be given or withheld in its sole and
absolute discretion, if such transfer is effectuated
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through an "established securities market" or a "secondary market" (or the
substantial equivalent thereof) within the meaning of Section 7704 of the Code
or such transfer could cause the Partnership to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code; (x) if such transfer subjects the Partnership to be regulated under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended; (xi) if the
transferee or assignee of such Partnership Interest is unable to make the
representations set forth in Section 3.4 or such transfer could otherwise
adversely affect the ability of the General Partner to remain qualified as a
REIT; or (xii) except with the consent of the General Partner, which consent may
be given or withheld in its sole and absolute discretion, if such transfer would
subject the General Partner to any additional taxes under Section 857 or Section
4981 of the Code.
F. The General Partner shall monitor the transfers of
interests in the Partnership (including any Exchange, Put, redemption of Series
A Preferred Units or exchange of Series A Preferred Units for REIT Series A
Preferred Shares, redemption of Series B Preferred Units or exchange of Series B
Preferred Units for REIT Preferred Shares, or any other acquisition of Common
Units, Series A Preferred Units or Series B Preferred Units by the Partnership
or the General Partner) to determine (i) if such interests are being traded on
an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code, and (ii)
whether such transfers of interests would result in the Partnership being unable
to qualify for at least one of the "safe harbors" set forth in Regulations
Section 1.7704-1 or such other applicable guidance published by the IRS setting
forth safe harbors under which interests will not be treated as "readily
tradable on a secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code including, without limitation, IRS
Notice 88-75, to the extent applicable (the "Safe Harbors"). The General Partner
shall have the authority, but shall not be required, to take all steps
reasonably necessary or appropriate in its sole and absolute discretion to
prevent any trading of interests which could cause the Partnership to become a
"publicly traded partnership" or any recognition by the Partnership of such
transfers or to insure that at least one of the Safe Harbors is met.
ARTICLE 12.
ADMISSION OF PARTNERS
Section 12.1. Admission of Successor General Partner.
A successor to all of the General Partner's General Partner Interest pursuant to
Section 11.2 hereof who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner effective
upon such transfer. Any such transferee shall carry on the business of the
Partnership without dissolution. In each case, the admission shall be subject to
the successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Article 11 hereof.
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Section 12.2. Admission of Additional Limited Partners.
A. A Person (other than an existing Partner) who makes a
Capital Contribution to the Partnership in accordance with this Agreement shall
be admitted to the Partnership as an Additional Limited Partner only upon
furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other documents or instruments as may be
required in the discretion of the General Partner in order to effect such
Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole and absolute discretion (it being understood that such
consent is hereby granted with respect to all signatories of this Agreement).
The admission of any Person as an Additional Limited Partner shall become
effective on the date upon which the name of such Person is recorded on the
books and records of the Partnership, following the receipt of the Capital
Contribution in respect of such Limited Partner, the documents set forth in
Paragraph A of this Section 12.2 hereof and the consent of the General Partner
to such admission. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items allocable among
Partners and Assignees for such Partnership Year shall be allocated among such
Limited Partner and all other Partners and Assignees by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using the interim closing books method. Except as otherwise
determined by the General Partner (to the extent consistent with Section 706 of
the Code), solely for purposes of making such allocations, each of such items
for the calendar month in which an admission of an Additional Limited Partner
occurs shall be allocated among all the Partners and Assignees including such
Additional Limited Partner. All distributions of Available Cash with respect to
which the Partnership Record Date is before the date of such admission shall be
made solely to Partners and Assignees other than the Additional Limited Partner
(other than in its capacity as an Assignee) and except as otherwise agreed to by
the Additional Limited Partners and the General Partner, and all distributions
of Available Cash thereafter shall be made to all Partners and Assignees
including such Additional Limited Partner.
Section 12.3. Amendment of Agreement and Certificate of
Limited Partnership.
For the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the Act
to amend the records of the Partnership and, if necessary, to prepare
as soon as practical an amendment of this Agreement (including an amendment of
Exhibit A) and, if required by law, shall prepare and file an amendment to the
Certificate and may for this purpose exercise the power of attorney granted
pursuant to Section 2.4 hereof.
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Section 12.4. Limit on Number of Partners.
The Partnership shall not at any time have more than 100
Partners (including as Partners those persons indirectly owning an interest in
the Partnership through a partnership, limited liability company, S corporation
or grantor trust (such entity, a "flow through entity"), but only if
substantially all of the value of such person's interest in the flow through
entity is attributable to the flow through entity's interest (direct or
indirect) in the Partnership).
ARTICLE 13.
DISSOLUTION AND LIQUIDATION
Section 13.1. Dissolution.
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the admission
of a successor General Partner in accordance with the terms of this Agreement.
Upon the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5
hereof;
B. an event of withdrawal of the General Partner, as defined
in the Act, unless, within 90 days after the withdrawal, a Majority in Interest
of the Limited Partners and at least a Majority in Interest of all the remaining
partners agree in writing, in their sole and absolute discretion, to continue
the business of the Partnership and to the appointment, effective as of the date
of withdrawal, of a substitute General Partner;
C. an election to dissolve the Partnership made by the
General Partner, subject to the Consent of the Limited Partners;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets
and properties of the Partnership;
F. a bankruptcy of the General Partner within the
meaning of the Act, unless a majority in interest of the remaining Partners
agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such bankruptcy, of a
substitute General Partner; or
G. the Exchange, Put or other redemption or exchange
for REIT Shares or REIT Series A Preferred Shares of all Partnership Units
(other than those of the General Partner) pursuant to this Agreement.
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Section 13.2. Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner (or, in the event there is no remaining General
Partner, any Person elected by a Majority in Interest of the Limited Partners
(the "Liquidator")) shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of stock in the General Partner) shall be applied and distributed
in the following order:
(1) First, to the payment and discharge of or provision for all
of the Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of or provision for
all of the Partnership's debts and liabilities to the
General Partner;
(3) Third, to the payment and discharge of or provision for all
of the Partnership's debts and liabilities to the other
Partners; and
(4) The balance, if any, to the General Partner and Limited
Partners in accordance with their positive Capital Account
balances, determined after taking into account all Capital
Account adjustments for the Partnership taxable year during
which the liquidation occurs (other than those made as a
result of the liquidating distribution set forth in this
Section 13.2.A(4)).
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13 other than reimbursement of its
expenses as provided in Section 7.4.
B. Notwithstanding the provisions of Section 13.2.A hereof
which require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
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Section 13.3. Compliance with Timing Requirements of
Regulations.
In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the General Partner and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section 1.704-
1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in his Capital Account
(after giving effect to all contributions, distributions and allocations for the
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever. In the discretion of the General Partner, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(A) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the General Partner, in the same
proportions and the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General partner and Limited Partners
pursuant to this Agreement; or
(B) withheld to provide a reasonable reserve for partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 13.4. Deemed Distribution and Recontribution.
If the Partnership is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) and no Liquidating Event has occurred,
and is continuing, the Partnership property shall not be liquidated, the
Partnership's debts and liabilities shall not be paid or discharged (except to
the extent due and payable in the ordinary course) and the Partnership's affairs
shall not be wound up. Instead, solely for federal income tax purposes, the
Partnership shall be deemed to have contributed the Partnership property in-kind
to a "new partnership," which shall be deemed to have taken the Partnership
property subject to all debts and liabilities of the Partnership. Immediately
thereafter, the Partnership shall be deemed to have been liquidated,
distributing new partnership interests to the Partners, all in accordance with
their respective Capital Accounts. The new partnership shall operate in
accordance with this Agreement.
Section 13.5. Rights of Limited Partners.
Except as otherwise provided in this Agreement, each Limited
Partner shall look solely to the assets of the Partnership for the return of his
Capital Contribution and shall have no right or power to demand or receive
property from the General Partner. Except as expressly set
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forth herein with respect to the rights, priorities and preferences of the
Preferred Limited Partners holding any series of Preferred Units, no Limited
Partner shall have priority over any other Limited Partner as to the return of
his Capital Contributions, distributions or allocations.
Section 13.6. Notice of Dissolution.
In the event a Liquidating Event occurs or an event occurs
that would, but for provisions of Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners and to all other parties with
whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).
Section 13.7. Cancellation of Certificate of Limited
Partnership.
Upon the completion of the liquidation of the Partnership cash
and property as provided in Section 13.2 hereof, the Partnership shall be
terminated and the Certificate and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
Section 13.8. Reasonable Time for Winding-Up.
A reasonable time shall be allowed for the orderly winding-up
of the business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9. Waiver of Partition.
Each Partner hereby waives any right to partition of the
Partnership property.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
Section 14.1. Procedures For Actions And Consents of
Partners.
A. The actions requiring consent or approval of the Partners
or of the Limited Partners pursuant to this Agreement, including Sections 7.3,
16.5 and 17.5 or otherwise pursuant to applicable law, are subject to the
following procedures.
B. Amendments to this Agreement requiring the consent or
approval of Limited Partners may be proposed by the General Partner or by any
Limited Partners holding 25 percent or more of the Partnership Units held by
Limited Partners. Following such proposal, the General Partner shall submit any
proposed amendment to the Partners or to the Limited Partners, as appropriate.
The General Partner shall seek the written consent or approval of the Partners
or of the Limited Partners on the proposed amendment or shall call a meeting to
vote thereon and to
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transact any other business that it may deem appropriate. For purposes of
obtaining a written consent, the General Partner may require a response within a
reasonable specified time, but not less than 15 days, and failure to respond in
such time period shall constitute a consent which is consistent with the General
Partner's recommendation (if so recommended) with respect to the proposal;
provided, that, an action shall become effective at such time as requisite
consents are received even if prior to such specified time.
C. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Common Limited Partners holding 25 percent or more of the Partnership
Interests held by Common Limited Partners. The call shall state the nature of
the business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven days nor more than 30 days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote of the Percentage Interests of the Partners or Consent of the Limited
Partners is permitted or required under this Agreement, such vote or Consent may
be given at a meeting of Partners or may be given in accordance with the
procedure prescribed in Section 14.1.D.
D. Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by the percentage as is expressly required
by this Agreement for the action in question. Such consent may be in one
instrument or in several instruments, and shall have the same force and effect
as a vote of the Percentage Interests of the Partners (expressly required by
this Agreement). Such consent shall be filed with the General Partner. An action
so taken shall be deemed to have been taken at a meeting held on the effective
date so certified.
E. Each Limited Partner may authorize any Person or Persons to
act for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Limited Partner executing it.
F. Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate.
ARTICLE 15.
GENERAL PROVISIONS
Section 15.1. Addresses and Notice.
Any notice, demand, request or report required or permitted to
be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication
(including by telecopy, facsimile, or commercial courier service) to the Partner
or Assignee at the address set forth in Exhibit A or such other address as the
Partners shall notify the General Partner in writing.
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Section 15.2. Titles and Captions.
All article or section titles or captions in this Agreement
are for convenience only. They shall not be deemed part of this Agreement and in
no way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3. Pronouns and Plurals.
Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
Section 15.4. Further Action.
The parties shall execute and deliver all documents, provide
all information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5. Binding Effect.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
Section 15.6. Creditors.
Other than as expressly set forth herein with respect to
Indemnitees, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7. Waiver.
No failure or delay by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon any breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition,
Section 15.8. Counterparts.
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
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Section 15.9. Applicable Law.
This Agreement shall be construed in accordance with and
governed by the laws (other than the law governing the choice of law) of the
State of Delaware, without regard to the principles of conflicts of law. In the
event of a conflict between any provision of this Agreement and any
non-mandatory provision of the Act, the provisions of this Agreement shall
control and take precedence.
Section 15.10. Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
Section 15.11. Limitation to Preserve REIT Status.
To the extent that any amount paid or credited to the General
Partner or its officers, directors, employees or agents pursuant to Section 7.4
or Section 7.7 would constitute gross income to the General Partner for purposes
of Sections 856(c)(2) or 856(c)(3) of the Code (a "General Partner Payment")
then, notwithstanding any other provision of this Agreement, the amount of such
General Partner Payments for any fiscal year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.17% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in subsections
(A) through (H) of Section 856(c)(2) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(2) of the Code) derived by the
General Partner from sources other than those described in subsections (A)
through (H) of Section 856(c)(2) of the Code (but not including the amount of
any General Partner Payments); or
(ii) an amount equal to the excess, if any, of (a) 25% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in subsections
(A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(3) of the Code) derived by the
General Partner from sources other than those described in subsections (A)
through (I) of Section 856(c)(3) of the Code (but not including the amount of
any General Partner Payments);
provided, however, that General Partner Payments in excess of the amounts
set forth in subparagraphs (i) and (ii) above may be made if the General
Partner, as a condition precedent, obtains an opinion of tax counsel that the
receipt of such excess amounts would not adversely affect the General Partner's
ability to qualify as a REIT. To the extent General Partner Payments may not be
made in a year due to the foregoing limitations, such General Partner Payments
shall carry over and be treated as arising in the following year, provided,
however, that such amounts shall not carry over for more than five years, and if
not paid within such five year period, shall expire; provided further, that (i)
as General Partner Payments are made, such payments shall be applied first to
carry over amounts outstanding, if any, and (ii) with respect to carry over
amounts
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for more than one Partnership Year, such payments shall be applied to the
earliest Partnership Year first.
Section 15.12. Partition.
No Partner nor any successor-in-interest to a Partner shall
have the right while this Agreement remains in effect to have any property of
the Partnership partitioned, or to file a complaint or to institute any
proceeding at law or in equity to have such property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors and
assigns hereby waives any such right. It is the intention of the Partners that
the rights of the parties hereto and their successors-in-interest to Partnership
Property, as among themselves, shall be governed by the terms of this Agreement,
and that the rights of the Partners and their successors-in-interest shall be
subject to the limitations and restrictions as set forth in this Agreement.
Section 15.13. No Third-Party Rights Created Hereby.
The provisions of this Agreement are solely for the purpose of
defining the interests of the Partners, inter se; and no other person, firm or
entity (i.e., a party who is not a signatory hereto or a permitted successor to
such signatory hereto) shall have any right, power, title or interest by way of
subrogation or otherwise, in and to the rights, powers, title and provisions of
this Agreement.
Section 15.14. Entire Agreement.
This Agreement (together with the Contribution Agreements as
to rights and obligations in respect of the Series A Preferred Units and Series
B Preferred Units) contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
ARTICLE 16.
SERIES A PREFERRED UNITS
Section 16.1. Designation and Number
A series of Partnership Units in the Partnership designated as
8% Series A Cumulative Redeemable Preferred Units (the "Series A Preferred
Units") is hereby established. The number of Series A Preferred Units shall be
1,500,000.
Section 16.2. Distributions
A. Payment of Distributions. Subject to the rights of holders
of Parity Preferred Units as to the payment of distributions, pursuant to
Section 5.1 hereof, holders of Series A Preferred Units will be entitled to
receive, when, as and if declared by the Partnership acting through the General
Partner, out of Available Cash, cumulative preferential cash distributions at
the rate per annum of 8% of the original Capital Contribution per Series A
Preferred Unit. Such distributions shall be cumulative, shall accrue from the
original date of issuance and will be payable (A) quarterly (such quarterly
periods for purposes of payment and accrual will be the quarterly periods set
forth in this clause (A) and not calendar quarters) in arrears on or before
February 15, May 15, August 15 and November 15 of each year,
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commencing on May 15, 1998, and, (B) in the event of (i) an exchange of Series A
Preferred Units into REIT Series A Preferred Shares, or (ii) a redemption of
Series A Preferred Units, on the exchange date or redemption date, as applicable
(each a "Series A Preferred Unit Distribution Payment Date"), commencing (i) in
the case of Series A Preferred Units originally issued on March 4, 1998, on May
15, 1998 and (ii) in the case of all other Series A Preferred Units, on the
first of such payment dates to occur following their original date of issuance.
The amount of the distribution payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter than
a full quarterly period for which distributions are computed, the amount of the
distribution payable will be computed based on the ratio of the actual number of
days elapsed in such period to ninety (90) days. If any date on which
distributions are to be made on the Series A Preferred Units is not a Business
Day, then payment of the distribution to be made on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. Distributions on the Series A Preferred Units will be
made to the holders of record of the Series A Preferred Units on the relevant
record dates, which will be fifteen (15) days prior to the relevant Preferred
Unit Distribution Payment Date (the "Series A Preferred Unit Partnership Record
Date").
B. Distributions Cumulative. Notwithstanding the foregoing,
distributions on the Series A Preferred Units will accrue whether or not the
terms and provisions of any agreement of the Partnership at any time prohibit
the current payment of distributions, whether or not the Partnership has
earnings, whether or not there are funds legally available for the payment of
such distributions and whether or not such distributions are authorized. Accrued
but unpaid distributions on the Series A Preferred Units will accumulate as of
the Preferred Unit Distribution Payment Date on which they first become payable.
Accumulated and unpaid distributions will not bear interest.
C. Priority as to Distributions. (iii) So long as any Series A
Preferred Units are outstanding, no distribution of cash or other property shall
be authorized, declared, paid or set apart for payment on or with respect to any
Junior Units, nor shall any cash or other property (other than capital stock of
the General Partner which corresponds in ranking to the Partnership Interests
being acquired) be set aside for or applied to the purchase, redemption or other
acquisition for consideration of any Series A Preferred Units, any Parity
Preferred Units or any Junior Units, unless, in each case, all distributions
accumulated on all Series A Preferred Units and all classes and series of
outstanding Parity Preferred Units have been paid in full. The foregoing
sentence will not prohibit (a) distributions payable solely in Junior Units, (b)
the exchange of Junior Units or Parity Preferred Units into Partnership
Interests of the Partnership ranking junior to the Series A Preferred Units, (c)
the redemption of Partnership Interests corresponding to REIT Series A Preferred
Shares, Parity Preferred Stock with respect to distributions or Junior Stock to
be purchased by the General Partner pursuant to the Charter with respect to the
General Partner's common stock and comparable charter provisions with respect to
other classes or series of capital stock of the General Partner to preserve the
General Partner's status as a real estate investment trust, provided that such
redemption shall be upon the same terms as the corresponding purchase pursuant
to Article IV of the Charter or such other comparable provisions, (d) the
acquisition of Common Units upon exercise of Put rights pursuant
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to Section 8.6 (i) with the proceeds of a sale of Common Units or other Junior
Units by the Partnership or proceeds received from the General Partner upon a
sale of REIT Shares or other Junior Stock by the General Partner or (ii) for
cash in an amount, which, when taken together with the aggregate amount of all
cash paid previously pursuant to this clause (ii) and the corresponding clause
(ii) of Section 17.2.C(i)(d), does not exceed $5.0 million, or (e) cash
distributions from the proceeds of sales of property of the Partnership pursuant
to Section 7.1.A(3).
(iv) So long as distributions have not been paid in full (or a
sum sufficient for such full payment is not irrevocably deposited in trust for
payment) upon the Series A Preferred Units, all distributions authorized and
declared on the Series A Preferred Units and all classes or series of
outstanding Parity Preferred Units shall be authorized and declared so that the
amount of distributions authorized and declared per Series A Preferred Unit and
such other classes or series of Parity Preferred Units shall in all cases bear
to each other the same ratio that accrued distributions per Series A Preferred
Unit and such other classes or series of Parity Preferred Units (which shall not
include any accumulation in respect of unpaid distributions for prior
distribution periods if such class or series of Parity Preferred Units do not
have cumulative distribution rights) bear to each other.
(v) Notwithstanding anything to the contrary set forth herein,
distributions on Partnership Interests held by either (a) the General Partner or
(b) any other holder of Partnership Interest in the Partnership, in each case
ranking junior to or on parity with the Series A Preferred Units may be made,
without preserving the priority of distributions described in Sections 16.2.C(i)
and (ii), but only to the extent such distributions are required to preserve the
real estate investment trust status of the General Partner and, in addition, in
the case of any holder other than the General Partner only to the extent
required by the Partnership Agreement.
D. No Further Rights. Holders of the Series A Preferred
Units shall not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions described
herein.
Section 16.3. Liquidation Proceeds
A. Upon voluntary or involuntary liquidation, dissolution or
winding-up of the Partnership, distributions on the Series A Preferred Units
shall be made in accordance with Article 13 of the Partnership Agreement.
B. Notice. Written notice of any such voluntary or
involuntary liquidation, dissolution or winding-up of the Partnership, stating
the payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by (i) fax
and (ii) by first class mail, postage pre-paid, not less than 30 and not more
that 60 days prior to the payment date stated therein, to each record holder of
the Series A Preferred Units at the respective addresses of such holders as the
same shall appear on the transfer records of the Partnership.
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C. No Further Rights. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Series A Preferred Units will have no right or claim to any of the remaining
assets of the Partnership.
D. Consolidation, Merger or Certain Other Transactions.
The consolidation or merger or other business combination of the Partnership
with or into any corporation, trust or other entity (or of any corporation,
trust or other entity with or into the Partnership) shall not be deemed to
constitute a liquidation, dissolution or winding-up of the Partnership.
Section 16.4. Optional Redemption
A. Right of Optional Redemption. The Series A Preferred Units
may not be redeemed prior to March 4, 2003. On or after such date, the
Partnership shall have the right to redeem the Series A Preferred Units of any
Holder thereof, in whole or in part, at any time or from time to time, upon not
less than 30 nor more than 60 days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of such holder of Series A
Preferred Units (the "Series A Redemption Price"); provided, however, that no
redemption pursuant to this Section 16.4 will be permitted if the Redemption
Price does not equal or exceed the original Capital Contribution of such holder
plus the cumulative Series A Priority Return to the redemption date to the
extent not previously distributed. If fewer than all of the outstanding Series A
Preferred Units are to be redeemed, the Series A Preferred Units to be redeemed
shall be selected pro rata (as nearly as practicable without creating fractional
units).
B. Limitation on Redemption. (vi) The Series A Redemption
Price of the Series A Preferred Units (other than the portion thereof consisting
of accumulated but unpaid distributions) will be payable solely out of the sale
proceeds of capital stock of the General Partner, which will be contributed by
the General Partner to the Partnership as additional capital contribution, or
out of the sale of limited partner interests in the Partnership and from no
other source. For purposes of the preceding sentence, "capital stock" means any
equity securities (including Common Stock and Preferred Stock (as such terms are
defined in the Charter)), shares, participation or other ownership interests
(however designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities) or options to purchase any of the
foregoing.
(ii) The Partnership may not redeem fewer than all of the
outstanding Series A Preferred Units unless all accumulated and unpaid
distributions have been paid on all Series A Preferred Units for all quarterly
distribution periods terminating on or prior to the date of redemption.
C. Procedures for Redemption. (i) Notice of redemption will be
(i) faxed, and (ii) mailed by the Partnership, by certified mail, postage
prepaid, not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series A Preferred Units at
their respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series A Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Redemption Price, (c) the aggregate number of Series
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A Preferred Units to be redeemed and if fewer than all of the outstanding Series
A Preferred Units are to be redeemed, the number of Series A Preferred Units to
be redeemed held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding Series A
Preferred Units that the total number of Series A Preferred Units held by such
holder represents) of the aggregate number of Series A Preferred Units to be
redeemed, (d) the place or places where such Series A Preferred Units are to be
surrendered for payment of the Redemption Price, (e) that distributions on the
Series A Preferred Units to be redeemed will cease to accumulate on such
redemption date and (f) that payment of the Redemption Price will be made upon
presentation and surrender of such Series A Preferred Units.
(ii) If the Partnership gives a notice of redemption in
respect of Series A Preferred Units (which notice will be irrevocable) then, by
12:00 noon, New York City time, on the redemption date, the Partnership will
deposit irrevocably in trust for the benefit of the holders of the Series A
Preferred Units being redeemed funds sufficient to pay the applicable Redemption
Price and will give irrevocable instructions and authority to pay such
Redemption Price to the holders of the Series A Preferred Units upon surrender
of the Series A Preferred Units by such holders at the place designated in the
notice of redemption. If the Series A Preferred Units are evidenced by a
certificate and if fewer than all Series A Preferred Units evidenced by any
certificate are being redeemed, a new certificate shall be issued upon surrender
of the certificate evidencing all Series A Preferred Units, evidencing the
unredeemed Series A Preferred Units without cost to the holder thereof. On and
after the date of redemption, distributions will cease to accumulate on the
Series A Preferred Units or portions thereof called for redemption, unless the
Partnership defaults in the payment thereof. If any date fixed for redemption of
Series A Preferred Units is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption. If
payment of the Redemption Price is improperly withheld or refused and not paid
by the Partnership, distributions on such Series A Preferred Units will continue
to accumulate from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the applicable Redemption Price.
Section 16.5. Voting Rights
A. General. Holders of the Series A Preferred Units
will not have any voting rights or right to consent to any matter requiring the
consent or approval of the Limited Partners, except as set forth below
and in Sections 7.3.D.
B. Certain Voting Rights. So long as any Series A
Preferred Units remains outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Series A Preferred
Units outstanding at the time (i) authorize or create, or increase the
authorized or issued amount of, any class or series of Partnership Interests
ranking senior to the Series A Preferred Units with respect to payment of
distributions or rights upon liquidation, dissolution or winding-up or
reclassify any Partnership Interests of the Partnership into any such
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Partnership Interest, or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any such Partnership
Interests, (ii) authorize or create, or increase the authorized or issued amount
of any Parity Preferred Units or reclassify any Partnership Interest of the
Partnership into any such Partnership Interest or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such Partnership Interests, but only to the extent such Parity Preferred Units
are issued to an affiliate of the Partnership, other than the General Partner to
the extent the issuance of such interests was to allow the General Partner to
issue corresponding preferred stock to persons who are not affiliates of the
Partnership or (iii) either consolidate, merge into or with, or convey, transfer
or lease its assets substantially as an entirety to, any corporation or other
entity or amend, alter or repeal the provisions of the Partnership Agreement
(including, without limitation, this Article 16), whether by merger,
consolidation or otherwise, in each case in a manner that would materially and
adversely affect the powers, special rights, preferences, privileges or voting
power of the Series A Preferred Units or the holders thereof; provided, however,
that with respect to the occurrence of any event set forth in (iii) above, so
long as (a) the Partnership is the surviving entity and the Series A Preferred
Units remain outstanding with the terms thereof unchanged, or (b) the resulting,
surviving or transferee entity is a partnership, limited liability company or
other pass-through entity organized under the laws of any state and substitutes,
for the Series A Preferred Units, other interests in such entity having
substantially the same terms and rights as the Series A Preferred Units,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series A Preferred Units; and provided
further that any increase in the amount of Partnership Interests or the creation
or issuance of any other class or series of Partnership Interests, in each case
ranking (a) junior to the Series A Preferred Units with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up, or (b) on a parity to the Series A Preferred Units with respect to
payment of distributions or the distribution of assets upon liquidation,
dissolution or winding-up to the extent such Partnership Interest are not issued
to an affiliate of the Partnership, other than the General Partner to the extent
the issuance of such interests was to allow the General Partner to issue
corresponding preferred stock to persons who are not affiliates of the
Partnership, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
Section 16.6. Transfer Restrictions
The Series A Preferred Units shall be subject to the
provisions of Article 11 hereof; provided, however, that the Series A Preferred
Units shall not be subject to the transfer restrictions described in Section
11.3.A hereof except for the last paragraph of Section 11.3.A (to which the
Series A Preferred Units shall be subject). No transfer of the Series A
Preferred Units is permitted, without the consent of the General Partner, which
consent may be given or withheld in its sole and absolute discretion, if such
transfer would result in more than four partners holding all outstanding Series
A Preferred Units within the meaning of Treasury Regulation Section
1.7704-1(h)(3); provided, however, that the General Partner's consent may not be
unreasonably withheld if (a) such transfer would not result in more than ten
partners holding all outstanding Series A Preferred Units within the meaning of
Treasury Regulation Section 1.7704-1(h)(3) and (b) the General Partner is
relying on a provision other than Treasury Regulation Section 1.7704-1(h) to
avoid classification of Operating Partnership as a "publicly traded partnership"
within the
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meaning of Code Section 7704 (a "PTP"). In addition, no transfer may be made to
any person if such transfer would cause the exchange of the Series A Preferred
Units for REIT Series A Preferred Shares, as provided herein, to be required to
be registered under the Securities Act of 1933, as amended, or any state
securities laws.
Section 16.7. Exchange Rights
A. Right to Exchange. (viii) The Series A Preferred Units will
be exchangeable in whole but not in part unless expressly otherwise provided
herein at anytime on or after March 4, 2008, at the option of 51% of the holders
of all outstanding Series A Preferred Units, for authorized but previously
unissued REIT Series A Preferred Shares at an exchange rate of one REIT Series A
Preferred Share from the General Partner for one Series A Preferred Unit,
subject to adjustment as described below (the "Exchange Price"), provided that
the Series A Preferred Units will become exchangeable at any time, in whole but
not in part, unless expressly otherwise provided herein, at the option of 51% of
the holders of all outstanding Series A Preferred Units for REIT Series A
Preferred Shares, if (y) at any time full distributions shall not have been
timely made on any Series A Preferred Unit with respect to six (6) prior
quarterly distribution periods, whether or not consecutive, provided, however,
that a distribution in respect of Series A Preferred Units shall be considered
timely made if made within two (2) Business Days after the applicable Preferred
Unit Distribution Payment Date if at the time of such late payment there shall
not be any prior quarterly distribution periods in respect of which full
distributions were not timely made or (z) upon receipt by a holder or holders of
Series A Preferred Units of (A) notice from the General Partner that the General
Partner or a Subsidiary of the General Partner has taken the position that the
Partnership is, or upon the consummation of an identified event in the immediate
future will be, a PTP and (B) an opinion rendered by an outside nationally
recognized independent counsel familiar with such matters addressed to a holder
or holders of Series A Preferred Units, that the Partnership is or likely is, or
upon the occurrence of a defined event in the immediate future will be or likely
will be, a PTP. In addition, the Series A Preferred Units may be exchanged for
REIT Series A Preferred Shares, in whole but not in part unless expressly
otherwise provided herein, at the option of 51% of the holders of all
outstanding Series A Preferred Units prior to March 4, 2008 and after March 4,
2001 if such holders of a Series A Preferred Units shall deliver to the General
Partner either (i) a private ruling letter addressed to such holder of Series A
Preferred Units or (ii) an opinion of independent counsel reasonably acceptable
to the General Partner based on the enactment of temporary or final Treasury
Regulations or the publication of a Revenue Ruling, in either case to the effect
that an exchange of the Series A Preferred Units at such earlier time would not
cause the Series A Preferred Units to be considered "stock and securities"
within the meaning of section 351(e) of the Code for purposes of determining
whether the holder of such Series A Preferred Units is an "investment company"
under section 721(b) of the Code if an exchange is permitted at such earlier
date. Furthermore, the Series A Preferred Units may be exchanged in whole but
not in part if any holder is a real estate investment trust within the meaning
of Sections 856 through 859 of the Code for Series A Preferred Shares (but only
if the exchange in whole may be accomplished consistently with the ownership
limitations set forth under the Series A Articles Supplementary (as defined
herein) (taking into account exceptions thereto and exemptions therefrom)) and
if at any time, (i) the Partnership reasonably determines that the assets and
income of the Partnership for a taxable year (disregarding the Price Family
Ownership) after 1999 would not satisfy the income and assets tests of Section
856 of the Code
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for such taxable year if the Partnership were a real estate investment trust
within the meaning of the Code or (ii) any such holder of Series A Preferred
Units shall deliver to the Partnership and the General Partner an opinion of
independent counsel reasonably acceptable to the General Partner to the effect
that, based on the assets and income of the Partnership for a taxable year after
1999, the Partnership would not satisfy the income and assets tests of Section
856 of the Code (disregarding the Price Family Ownership) for such taxable year
if the Partnership were a real estate investment trust within the meaning of the
Code and that such failure would create a meaningful risk that a holder of the
Series A Preferred Units would fail to maintain qualification as a real estate
investment trust.
(ix) Notwithstanding anything to the contrary set forth in
Section 16.7.A(i), if an Exchange Notice (as defined herein) has been delivered
to the General Partner, then the General Partner may, at its option, within ten
(10) Business Days after receipt of the Exchange Notice, elect to cause the
Partnership to redeem all or a portion of the outstanding Series A Preferred
Units for cash in an amount equal to the original Capital Contribution per
Series A Preferred Unit and all accrued and unpaid distributions thereon to the
date of redemption. If the General Partner elects to redeem fewer than all of
the outstanding Series A Preferred Units, the number of Series A Preferred Units
held by each holder to be redeemed shall equal such holder's pro-rata share
(based on the percentage of the aggregate number of outstanding Series A
Preferred Units that the total number of Series A Preferred Units held by such
holder represents) of the aggregate number of Series A Preferred Units being
redeemed.
(x) In the event an exchange of all Series A Preferred Units
pursuant to Section 16.7.A would violate the provisions on ownership limitation
of the General Partner set forth in Section 7 of the Articles Supplementary to
the Charter with respect to REIT Series A Preferred Shares (the "Series A
Articles Supplementary"), each holder of Series A Preferred Units shall be
entitled to exchange, pursuant to the provisions of Section 16.7.B, a number of
Series A Preferred Units which would comply with the provisions on the ownership
limitation of the General Partner set forth in such Section 7 of the Series A
Articles Supplementary, with respect to such holder, and any Series A Preferred
Units not so exchanged (the "Excess Units") shall be redeemed by the Partnership
for cash in an amount equal to the original Capital Contribution per Excess
Unit, plus any accrued and unpaid distributions thereon to the date of
redemption subject to any restriction thereon contained in any debt instrument
or agreement of the Partnership. In the event an exchange would result in Excess
Units, as a condition to such exchange, each holder of such units agrees to
provide representations and covenants reasonably requested by the General
Partner relating to (i) the widely held nature of the interests in such holder,
sufficient to assure the General Partner that the holder's ownership of stock of
the General Partner (without regard to the limits described above) will not
cause any individual to own in excess of 9.8% of the stock of the General
Partner; and (ii) to the extent such holder can so represent and covenant
without obtaining information from its owners, the holder's ownership of tenants
of the Partnership and its affiliates. For purposes of determining the number of
Excess Units under this Section 16.7.A(iii), the "Beneficial Ownership Limit"
and "Constructive Ownership Limit" set forth in the Series A Articles
Supplementary shall be deemed to be 9%. To the extent the General Partner would
not be able to pay the cash set forth above in exchange for the Excess Units,
and to the extent consistent with the Charter, the General Partner agrees that
it will grant to the holders of the Series A Preferred Units exceptions to the
Beneficial Ownership Limit and Constructive Ownership Limit set forth in the
Series A Articles Supplementary
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sufficient to allow such holders to exchange all of their Series A Preferred
Units for REIT Series A Preferred Stock, provided such holders furnish to the
General Partner representations acceptable to the General Partner in its sole
and absolute discretion which assure the General Partner that such exceptions
will not jeopardize the General Partner's tax status as a REIT for purposes of
federal and applicable state law. Notwithstanding any provision of this
Agreement to the contrary, no Series A Limited Partner shall be entitled to
effect an exchange of Series A Preferred Units for REIT Series A Preferred
Shares to the extent that ownership or right to acquire such shares would cause
the Partner or any other Person or, in the opinion of counsel selected by the
General Partner, may cause the Partner or any other Person, to violate the
restrictions on ownership and transfer of REIT Series A Preferred Shares set
forth in the Charter. To the extent any such attempted exchange for REIT Series
A Preferred Shares would be in violation of the previous sentence, it shall be
void ab initio and such Series A Limited Partner shall not acquire any rights or
economic interest in the REIT Series A Preferred Shares otherwise issuable upon
such exchange.
(xi) The redemption of Series A Preferred Units described in
Section 16.7.A(ii) and (iii) shall be subject to the provisions of Section
16.4.B(i) and Section 16.4.C(ii); provided, however, that the term "Redemption
Price" in such Sections 16.4.B(i) and 16.4.C(ii) shall be read to mean the
original Capital Contribution per Series A Preferred Unit being redeemed plus
all accrued and unpaid distributions to the redemption date.
B. Procedure for Exchange and/or Redemption of Series A
Preferred Units. (i) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General Partner by the
Partners representing at least 51% of the outstanding Series A Preferred Units
(or by Contributors and any assignees of Contributors that are REITs in the case
of an exchange pursuant to the last sentence of Section 16.7.A.(i) hereof) by
(a) fax and (b) by certified mail postage prepaid. The General Partner may
effect any exchange of Series A Preferred Units, or exercise its option to
redeem any portion of the Series A Preferred Units for cash pursuant to Section
16.7.A(ii) or redeem Excess Units pursuant to Section 16.7.A(iii), by delivering
to each holder of record of Series A Preferred Units, within ten (10) Business
Days following receipt of the Exchange Notice, (a) if the General Partner elects
to cause the Partnership to exchange any of the Series A Preferred Units then
outstanding, (1) certificates representing the Series A Preferred Shares being
issued in exchange for the Series A Preferred Units of such holder being
exchanged and (2) a written notice (a "Redemption Notice") stating (A) the
redemption date, which may be the date of such Redemption Notice or any other
date which is not later than sixty (60) days following the receipt of the
Exchange Notice, (B) the redemption price, (C) the place or places where the
Series A Preferred Units are to be surrendered and (D) that distributions on the
Series A Preferred Units will cease to accrue on such redemption date, or (b) if
the General Partner elects to cause the Partnership to redeem all of the Series
A Preferred Units then outstanding in exchange for cash, a Redemption Notice.
Series A Preferred Units shall be deemed canceled (and any corresponding
Partnership Interest represented thereby deemed terminated) simultaneously with
the delivery of shares of Series A Preferred Shares (with respect to Series A
Preferred Units exchanged) or simultaneously with the redemption date (with
respect to Series A Preferred Units redeemed). Holders of Series A Preferred
Units shall deliver any canceled certificates representing Series A Preferred
Units which have been exchanged or redeemed to the office of General Partner
(which currently is located at 2951 28th Street, Suite 3001, Santa Monica, CA
90405) within ten (10) Business Days
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of the exchange or redemption with respect thereto. Notwithstanding anything to
the contrary contained herein, any and all Series A Preferred Units to be
exchanged for REIT Series A Preferred Stock pursuant to this Section 16.7 shall
be so exchanged in a single transaction at one time. As a condition to exchange,
the General Partner may require the holders of Series A Preferred Units to make
such representations as may be reasonably necessary for the General Partner to
establish that the issuance of REIT Series A Preferred Shares pursuant to the
exchange shall not be required to be registered under the Securities Act of
1933, as amended, or any state securities laws. Any Series A Preferred Shares
issued pursuant to this Section 16.7 shall be delivered as shares which are duly
authorized, validly issued, fully paid and nonassessable, free of any pledge,
lien, encumbrance or restriction other than those provided in the Charter, the
By-Laws of the General Partner, the Securities Act and relevant state securities
or blue sky laws.
The certificates representing the Series A Preferred Shares
issued upon exchange of the Series A Preferred Units shall contain the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR (B) IF THE CORPORATION HAS BEEN
FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS
EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS THEREUNDER.
(ii) In the event of an exchange of Series A Preferred Units
for REIT Series A Preferred Shares, an amount equal to the accrued and unpaid
distributions to the date of exchange on any Series A Preferred Units tendered
for exchange shall (i) accrue on the REIT Series A Preferred Shares into which
such Series A Preferred Units are exchanged, and (ii) continue to accrue on such
Series A Preferred Units, which shall remain outstanding following such
exchange, with the General Partner as the holder of such REIT Series A Preferred
Units. Notwithstanding anything to the contrary set forth herein, in no event
shall a holder of a Series A Preferred Unit that was validly exchanged for REIT
Series A Preferred Shares pursuant to this section (other than the General
Partner now holding such Series A Preferred Unit), receive a distribution out of
Available Cash of the Partnership, if such holder, after exchange, is entitled
to receive a distribution out of Available Cash with respect to the REIT Series
A Preferred Shares for which such Series A Preferred Unit was exchanged or
redeemed. Further, for purposes of the foregoing, in the event of an exchange of
Series A Preferred Units for REIT Shares, if the accrued and unpaid
distributions per Series A Preferred Unit is not the same for all Series A
Preferred Units, the accrued and unpaid distributions per Series A Preferred
Unit for all Series A Preferred Units shall be equal to the greatest amount of
such accrued and unpaid distributions per Series A Preferred Unit on any such
unit.
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(iii) Fractional REIT Series A Preferred Shares are not to be
issued upon exchange but, in lieu thereof, the General Partner will pay a cash
adjustment based upon the fair market value of the REIT Series A Preferred
Shares on the day prior to the exchange date as determined in good faith by the
Board of Directors of the General Partner.
C. Adjustment of Exchange Price. In case the General Partner
shall be a party to any transaction (including, without limitation, a merger,
consolidation, statutory share exchange, tender offer for all or substantially
all of the General Partner's capital stock or sale of all or substantially all
of the General Partner's assets), in each case as a result of which the REIT
Series A Preferred Shares will be converted into the right to receive shares of
capital stock, other securities or other property (including cash or any
combination thereof), each Series A Preferred Unit will thereafter be
exchangeable into the kind and amount of shares of capital stock and other
securities and property receivable (including cash or any combination thereof)
upon the consummation of such transaction by a holder of that number of REIT
Series A Preferred Shares or fraction thereof into which one Series A Preferred
Unit was exchangeable immediately prior to such transaction. The General Partner
may not become a party to any such transaction unless the terms thereof are
consistent with the foregoing.
Section 16.8. No Conversion Rights
The holders of the Series A Preferred Units shall not have any
rights to convert such Partnership Units into any other class of Partnership
Interests or any interest in the Partnership.
Section 16.9. No Sinking Fund
No sinking fund shall be established for the retirement or
redemption of the Series A Preferred Units.
Section 16.10. Reports
In addition to the reports required pursuant to Section 9.3,
so long as any Series A Preferred Units are outstanding, the General Partner
shall cause to be mailed to each Series A Limited Partner:
A. As soon as available, but in no event later than ten
Business Days following the date on which the General Partner files its annual
report in respect of a fiscal year on Form 10-K, or such other applicable form
("Form 10-K"), with the Securities and Exchange Commission (the "Commission")
(or, in the event that the Partnership is required under rules and regulations
promulgated by the Commission to file with the Commission a Form 10-K separate
from General Partner's Form 10-K, ten business days after the filing of such
report by the Partnership with the Commission), a complete copy of the
Partnership's financial statements for such fiscal year including a balance
sheet, income statement and cash flow statement for such fiscal year prepared in
accordance with GAAP (except with respect to footnotes); and
B. As soon as available, but in no event later than ten
Business Days following the date on which the General Partner files its
quarterly report in respect of a fiscal quarter on Form 10-Q, or such other
applicable form ("Form 10-Q"), with the Commission (or, in the event the
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Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-Q separate from the General
Partner's Form 10-Q, ten business days after the filing of such report by the
Partnership with the Commission), a complete copy of the Partnership's unaudited
quarterly financial statements for such fiscal quarter including a balance
sheet, income statement and cash flow statement for such fiscal quarter prepared
in accordance with GAAP (except with respect to footnotes).
ARTICLE XVII.
SERIES B PREFERRED UNITS
Section 17.1. Designation and Number. A series of
Partnership Units in the Partnership designated as 9.30% Series B Cumulative
Redeemable Preferred Units (the "Series B Preferred Units") is hereby
established. The number of Series B Preferred Units shall be 1,400,000.
Section 17.2. Distributions.
A. Payment of Distributions. Subject to the rights of holders
of Parity Preferred Units as to the payment of distributions, pursuant to
Section 5.1 hereof, holders of Series B Preferred Units will be entitled to
receive, when, as and if declared by the Partnership acting through the General
Partner, out of Available Cash, cumulative preferential cash distributions at
the rate per annum of 9.30% of the original Capital Contribution per Series B
Preferred Unit. Such distributions shall be cumulative, shall accrue from the
original date of issuance and will be payable (A) quarterly (such quarterly
periods for purposes of payment and accrual will be the quarterly periods ending
on the last day of the quarterly periods set forth in this clause (A) and not
calendar quarters) in arrears on February 15, May 15, August 15 and November 15
of each year, commencing on August 15, 1999, and, (B) in the event of (i) an
exchange of Series B Preferred Units into REIT Series B Preferred Shares, or
(ii) a redemption of Series B Preferred Units, on the exchange date or
redemption date, as applicable (each a "Series B Preferred Unit Distribution
Payment Date"). The amount of the distribution payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and for any
period shorter than a full quarterly period for which distributions are
computed, the amount of the distribution payable will be computed based on the
ratio of the actual number of days elapsed in such period to ninety (90) days.
If any date on which distributions are to be made on the Series B Preferred
Units is not a Business Day, then payment of the distribution to be made on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. Distributions on the Series B Preferred Units
will be made to the holders of record of the Series B Preferred Units on the
relevant record dates, which will be fifteen (15) days prior to the relevant
Preferred Unit Distribution Payment Date (the "Series B Preferred Unit
Partnership Record Date").
B. Distributions Cumulative. Distributions on the Series B
Preferred Units will accrue whether or not declared, whether or not the terms
and provisions of any agreement of the Partnership at any time prohibit the
current payment of distributions, whether or not the Partnership has earnings,
whether or not there are funds legally available for the payment of such
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distributions and whether or not such distributions are authorized. Accrued but
unpaid distributions on the Series B Preferred Units will accumulate as of the
Preferred Unit Distribution Payment Date on which they first become payable.
Accumulated and unpaid distributions will not bear interest.
C. Priority as to Distributions. (i) So long as any Series B
Preferred Units are outstanding, no distribution of cash or other property shall
be authorized, declared, paid or set apart for payment on or with respect to
Junior Units, nor shall any cash or other property (other than capital stock of
the General Partner which corresponds in ranking to the Partnership Interests
being acquired) be set aside for or applied to the purchase, redemption or other
acquisition for consideration of any Series B Preferred Units, any Parity
Preferred Units or any Junior Units, unless, in each case, all distributions
accumulated on all Series B Preferred Units and all classes and series of
outstanding Parity Preferred Units have been paid in full. The foregoing
sentence will not prohibit (a) distributions payable solely in Junior Units, (b)
the exchange of Junior Units or Parity Preferred Units into Partnership
Interests of the Partnership ranking junior to the Series B Preferred Units as
to distributions and rights upon involuntary or voluntary liquidation,
dissolution or winding up of the Partnership, (c) the redemption of Partnership
Interests corresponding to REIT Series B Preferred Shares, Parity Preferred
Stock or Junior Stock to be purchased by the General Partner pursuant to the
Charter with respect to the General Partner's common stock and comparable
charter provisions with respect to other classes or series of capital stock of
the General Partner to preserve the General Partner's status as a real estate
investment trust, provided that such redemption shall be upon the same terms as
the corresponding purchase pursuant to Article IV of the Charter or such other
comparable provisions, (d) the acquisition of Common Units upon exercise of Put
rights pursuant to Section 8.6 (i) with the proceeds of a sale of Common Units
or other Junior Units by the Partnership or proceeds received from the General
Partner upon a sale of REIT Shares or other Junior Stock by the General Partner
or (ii) for cash in an amount, which, when taken together with the aggregate
amount of all cash paid previously pursuant to this clause (ii) and the
corresponding clause (ii) of Section 16.2.C(i)(d), does not exceed $5.0 million,
or (e) cash distributions from the proceeds of sales of property of the
Partnership pursuant to Section 7.1.A(3).
(ii) So long as distributions have not been paid in
full (or a sum sufficient for such full payment is not irrevocably deposited
in trust for payment) upon the Series B Preferred Units, all distributions
authorized and declared on the Series B Preferred Units and all classes
or series of outstanding Parity Preferred Units shall be authorized and declared
so that the amount of distributions authorized and declared per Series B
Preferred Unit and such other classes or series of Parity Preferred Units shall
in all cases bear to each other the same ratio that accrued distributions per
Series B Preferred Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such class or series of Parity
Preferred Units do not have cumulative distribution rights) bear to each other.
(iii) Notwithstanding anything to the contrary set
forth herein, distributions on Partnership Interests held by either (a) the
General Partner or (b) any other holder of Partnership Interest in the
Partnership, in each case ranking junior to or on parity with the Series B
Preferred Units may be made, without preserving the priority of distributions
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described in Sections 17.2.C(i) and (ii), but only to the extent such
distributions are required to preserve the real estate investment trust status
of the General Partner and, in addition, in the case of any holder other than
the General Partner only to the extent required by the Partnership Agreement.
D. No Further Rights. Holders of the Series B Preferred
Units shall not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions described
herein.
Section 17.3. Liquidation Proceeds.
A. Upon voluntary or involuntary liquidation, dissolution or
winding-up of the Partnership, distributions on the Series B Preferred Units
shall be made in accordance with Article 13 of the Partnership Agreement.
B. Notice. Written notice of any such voluntary or
involuntary liquidation, dissolution or winding-up of the Partnership, stating
the payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by (i) fax
and (ii) by first class mail, postage pre-paid, not less than 30 days and not
more that 60 days prior to the payment date stated therein, to each record
holder of the Series B Preferred Units at the respective addresses of such
holders as the same shall appear on the transfer records of the Partnership.
C. No Further Rights. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Series B Preferred Units will have no right or claim to any of the remaining
assets of the Partnership.
D. Consolidation, Merger or Certain Other Transactions.
The consolidation or merger or other business combination of the Partnership
with or into any corporation, trust or other entity (or of any corporation,
trust or other entity with or into the Partnership) shall not be deemed to
constitute a liquidation, dissolution or winding-up of the Partnership.
Section 17.4. Optional Redemption.
A. Right of Optional Redemption. The Series B Preferred Units
may not be redeemed prior to July 28, 2004. On or after such date, the
Partnership shall have the right to redeem the Series B Preferred Units of any
holder thereof, in whole or in part, at any time or from time to time, upon not
less than 30 days nor more than 60 days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of such holder of Series B
Preferred Units (the "Series B Redemption Price"); provided, however, that no
redemption pursuant to this Section 17.4 will be permitted if the Series B
Redemption Price does not equal or exceed the original Capital Contribution of
such holder plus the cumulative Series B Priority Return to the redemption date
to the extent not previously distributed. If fewer than all of the outstanding
Series B Preferred Units are to be redeemed, the Series B Preferred Units to be
redeemed shall be selected pro rata (as nearly as practicable without creating
fractional units).
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B. Limitation on Redemption.
(i) The Series B Redemption Price of the Series
B Preferred Units (other than the portion thereof consisting of accumulated
but unpaid distributions) will be payable solely out of the sale proceeds of
capital stock of the General Partner, which will be contributed by the
General Partner to the Partnership as an additional capital contribution, or
out of the sale of limited partner interests in the Partnership and from no
other source. For purposes of the preceding sentence, "capital stock" means any
equity securities (including Common Stock and Preferred Stock (as such terms are
defined in the Charter)), shares, participation or other ownership interests
(however designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities) or options to purchase any of the
foregoing.
(ii) The Partnership may not redeem fewer than
all of the outstanding Series B Preferred Units unless all accumulated and
unpaid distributions have been paid on all Series B Preferred Units for all
quarterly distribution periods terminating on or prior to the date of
redemption.
C. Procedures for Redemption.
(i) Notice of redemption will be (i) faxed, and
(ii) mailed by the Partnership, by certified mail, postage prepaid, not less
than 30 days nor more than 60 days prior to the redemption date, addressed to
the respective holders of record of the Series B Preferred Units at their
respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series B Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Series B Redemption Price, (c) the aggregate number of Series B
Preferred Units to be redeemed and if fewer than all of the outstanding Series B
Preferred Units are to be redeemed, the number of Series B Preferred Units to be
redeemed held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding Series B
Preferred Units that the total number of Series B Preferred Units held by such
holder represents) of the aggregate number of Series B Preferred Units to be
redeemed, (d) the place or places where such Series B Preferred Units are to be
surrendered for payment of the Series B Redemption Price, (e) that distributions
on the Series B Preferred Units to be redeemed will cease to accumulate on such
redemption date and (f) that payment of the Series B Redemption Price will be
made upon presentation and surrender of such Series B Preferred Units.
(ii) If the Partnership gives a notice of
redemption in respect of Series B Preferred Units (which notice will be
irrevocable) then, by 12:00 noon, New York City time, on the redemption
date, the Partnership will deposit irrevocably in trust for the benefit of the
holders of the Series B Preferred Units being redeemed funds sufficient to
pay the applicable Series B Redemption Price and will give irrevocable
instructions and authority to pay such Series B Redemption Price to the
holders of the Series B Preferred Units upon surrender of the Series B
Preferred Units by such holders at the place designated in the notice of
redemption. If the Series B Preferred Units are evidenced by a certificate and
if fewer than all Series B Preferred Units evidenced by any certificate are
being redeemed, a new certificate shall be issued upon surrender
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of the certificate evidencing all Series B Preferred Units, evidencing the
unredeemed Series B Preferred Units without cost to the holder thereof. On and
after the date of redemption, distributions will cease to accumulate on the
Series B Preferred Units or portions thereof called for redemption, unless the
Partnership defaults in the payment thereof. If any date fixed for redemption of
Series B Preferred Units is not a Business Day, then payment of the Series B
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Series B Redemption Price is improperly withheld
or refused and not paid by the Partnership, distributions on such Series B
Preferred Units will continue to accumulate from the original redemption date to
the date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the applicable Series
B Redemption Price.
Section 17.5. Voting Rights.
A. General. Holders of the Series B Preferred Units
will not have any voting rights or right to consent to any matter requiring the
consent or approval of the Limited Partners, except as set forth below and in
Section 7.3.D.
B. Certain Voting Rights. So long as any Series B
Preferred Units remain outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Series B Preferred
Units outstanding at the time (i) authorize or create, or increase the
authorized or issued amount of, any class or series of Partnership Interests
ranking senior to the Series B Preferred Units with respect to payment of
distributions or rights upon liquidation, dissolution or winding-up or
reclassify any Partnership Interests of the Partnership into any such senior
Partnership Interest, or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any such senior Partnership
Interests, (ii) authorize or create, or increase the authorized or issued amount
of any Parity Preferred Units or reclassify any Partnership Interest of the
Partnership into any such Partnership Interest or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such Partnership Interests, but only to the extent such Parity Preferred Units
are issued to an affiliate of the Partnership, other than the General Partner to
the extent the issuance of such interests was to allow the General Partner to
issue corresponding preferred stock to persons who are not affiliates of the
Partnership or (iii) either consolidate, merge into or with, or convey, transfer
or lease its assets substantially as an entirety to, any corporation or other
entity or amend, alter or repeal the provisions of the Partnership Agreement
(including, without limitation, this Article 17), whether by merger,
consolidation or otherwise, in each case in a manner that would materially and
adversely affect the powers, special rights, preferences, privileges or voting
power of the Series B Preferred Units or the holders thereof; provided, however,
that with respect to the occurrence of any event set forth in (iii) above, so
long as (a) the Partnership is the surviving entity and the Series B Preferred
Units remain outstanding with the terms thereof unchanged, or (b) the resulting,
surviving or transferee entity is a partnership, limited liability company or
other pass-through entity organized under the laws of any state and substitutes,
for the Series B Preferred Units, other interests in such entity having
substantially the same terms and rights as the Series B Preferred Units,
including with respect to distributions, voting rights and rights upon
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liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series B Preferred Units; and provided
further that any increase in the amount of Partnership Interests or the creation
or issuance of any other class or series of Partnership Interests, in each case
ranking (a) junior to the Series B Preferred Units with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up, or (b) on a parity with the Series B Preferred Units with respect to
payment of distributions and the distribution of assets upon liquidation,
dissolution or winding-up to the extent such Partnership Interest are not issued
to an affiliate of the Partnership, other than the General Partner to the extent
the issuance of such interests was to allow the General Partner to issue
corresponding preferred stock to persons who are not affiliates of the
Partnership, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
Section 17.6. Transfer Restrictions.
The Series B Preferred Units shall be subject to the
provisions of Article 11 hereof; provided, however, that the Series B Preferred
Units shall not be subject to the transfer restrictions described in Section
11.3.A hereof except for the last paragraph of Section 11.3.A (to which the
Series B Preferred Units shall be subject). No transfer of the Series B
Preferred Units is permitted, without the consent of the General Partner, which
consent may be given or withheld in its sole and absolute discretion, if such
transfer would result in more than four partners holding all outstanding Series
B Preferred Units within the meaning of Treasury Regulation Section
1.7704-1(h)(1)(ii) (without regard to Treasury Regulation Section
1.7704-1(h)(3)(ii); provided, however, that the General Partner's consent may
not be unreasonably withheld if (a) such transfer would not result in more than
ten partners holding all outstanding Series B Preferred Units within the meaning
of such Treasury Regulation Sections and (b) the General Partner is relying on a
provision other than Treasury Regulation Section 1.7704-1(h) to avoid
classification of Operating Partnership as PTP. In addition, no transfer may be
made to any person if such transfer would cause the exchange of the Series B
Preferred Units for REIT Series B Preferred Shares, as provided herein, to be
required to be registered under the Securities Act, or any state securities
laws.
Section 17.7. Exchange Rights.
A. Right to Exchange.
(i) The Series B Preferred Units will be
exchangeable in whole but not in part unless expressly otherwise provided herein
at anytime on or after July 28, 2009, at the option of 51% of the holders of all
outstanding Series B Preferred Units, for authorized but previously unissued
REIT Series B Preferred Shares at an exchange rate of one REIT Series B
Preferred Share from the General Partner for one Series B Preferred Unit,
subject to adjustment as described below (the "Series B Exchange Price"),
provided that the Series B Preferred Units will become exchangeable at any time,
in whole but not in part, unless expressly otherwise provided herein, at the
option of 51% of the holders of all outstanding Series B Preferred Units for
REIT Series B Preferred Shares, if (y) at any time full distributions shall not
have been timely made on any Series B Preferred Unit with respect to six (6)
prior quarterly distribution periods, whether or not consecutive, provided,
however, that a distribution in respect of Series B
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Preferred Units shall be considered timely made if made within two (2) Business
Days after the Series B Preferred Unit Distribution Payment Date if at the time
of such late payment there shall not be any prior quarterly distribution periods
in respect of which full distributions were not timely made or (z) upon receipt
by a holder or holders of Series B Preferred Units of (A) notice from the
General Partner that the General Partner or a Subsidiary of the General Partner
has taken the position that the Partnership is, or upon the consummation of an
identified event in the immediate future will be, a PTP and (B) an opinion
rendered by an outside nationally recognized independent counsel familiar with
such matters addressed to a holder or holders of Series B Preferred Units, that
the Partnership is or likely is, or upon the occurrence of a defined event in
the immediate future will be or likely will be, a PTP. In addition, the Series B
Preferred Units may be exchanged for REIT Series B Preferred Shares, in whole
but not in part unless expressly otherwise provided herein, at the option of 51%
of the holders of all outstanding Series B Preferred Units prior to July 28,
2009 and after July 28, 2002 if such holders of a Series B Preferred Units shall
deliver to the General Partner either (i) a private ruling letter addressed to
such holder of Series B Preferred Units or (ii) an opinion of independent
counsel reasonably acceptable to the General Partner based on the enactment of
temporary or final Treasury Regulations or the publication of a Revenue Ruling,
in either case to the effect that an exchange of the Series B Preferred Units at
such earlier time would not cause the Series B Preferred Units to be considered
"stock and securities" within the meaning of section 351(e) of the Code for
purposes of determining whether the holder of such Series B Preferred Units is
an "investment company" under section 721(b) of the Code if an exchange is
permitted at such earlier date. Furthermore, the Series B Preferred Units may be
exchanged in whole but not in part if any holder is a real estate investment
trust within the meaning of Sections 856 through 859 of the Code for Series B
Preferred Shares (but only if the exchange in whole may be accomplished
consistently with the ownership limitations set forth under the Series B
Articles Supplementary (as defined herein) (taking into account exceptions
thereto and exemptions therefrom)) and if at any time, (i) the Partnership
reasonably determines that the assets and income of the Partnership for a
taxable year (disregarding the Price Family Ownership) after 1999 would not
satisfy the income and assets tests of Section 856 of the Code for such taxable
year if the Partnership were a real estate investment trust within the meaning
of the Code or (ii) any such holder of Series B Preferred Units shall deliver to
the Partnership and the General Partner an opinion of independent counsel
reasonably acceptable to the General Partner to the effect that, based on the
assets and income of the Partnership for a taxable year after 1999, the
Partnership would not satisfy the income and assets tests of Section 856 of the
Code (disregarding the Price Family Ownership) for such taxable year if the
Partnership were a real estate investment trust within the meaning of the Code
and that such failure would create a meaningful risk that a holder of the Series
B Preferred Units would fail to maintain qualification as a real estate
investment trust.
(ii) Notwithstanding anything to the contrary set
forth in Section 17.7.A(i), if a Series B Exchange Notice (as defined herein)
has been delivered to the General Partner, then the General Partner may, at its
option, within ten (10) Business Days after receipt of the Series B Exchange
Notice, elect to cause the Partnership to redeem all or a portion of the
outstanding Series B Preferred Units for cash in an amount equal to the original
Capital Contribution per Series B Preferred Unit and all accrued and unpaid
distributions thereon to the date of redemption. If the General Partner elects
to redeem fewer than all of the outstanding Series B Preferred Units, the number
of Series B Preferred Units held by each holder to be redeemed shall equal such
holder's pro rata share (based on the percentage of the aggregate
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number of outstanding Series B Preferred Units that the total number of Series B
Preferred Units held by such holder represents) of the aggregate number of
Series B Preferred Units being redeemed.
(iii) In the event an exchange of all Series B
Preferred Units pursuant to Section 17.7.A would violate the provisions on
ownership limitation of the General Partner set forth in Section 7 of Article
THIRD of the Articles Supplementary to the Charter with respect to REIT
Series B Preferred Shares (the "Series B Articles Supplementary"), each
holder of Series B Preferred Units shall be entitled to exchange, pursuant
to the provisions of Section 17.7.B, a number of Series B Preferred Units which
would comply with the provisions on the ownership limitation of the General
Partner set forth in such Section 7 of Article THIRD of the Series B Articles
Supplementary, with respect to such holder, and any Series B Preferred Units
not so exchanged (the "Series B Excess Units") shall be redeemed by the
Partnership for cash in an amount equal to the original Capital Contribution
per Excess Unit, plus any accrued and unpaid distributions thereon to the date
of redemption subject to any restriction thereon contained in any debt
instrument or agreement of the Partnership. In the event an exchange would
result in Series B Excess Units, as a condition to such exchange, each holder of
such units agrees to provide representations and covenants reasonably requested
by the General Partner relating to (i) the widely held nature of the interests
in such holder, sufficient to assure the General Partner that the holder's
ownership of stock of the General Partner (without regard to the limits
described above) will not cause any individual to own in excess of 9.8% of the
stock of the General Partner; and (ii) to the extent such holder can so
represent and covenant without obtaining information from its owners (other than
its direct or indirect parent corporation, partnership or limited liability
company and not the holders of any interests in such parent), the holder's
ownership of tenants of the Partnership and its affiliates. For purposes of
determining the number of Series B Excess Units under this Section 17.7.A(iii),
the "Beneficial Ownership Limit" and "Constructive Ownership Limit" set forth in
the Series B Articles Supplementary shall be deemed to be 9%. To the extent the
General Partner would not be able to pay the cash set forth above in exchange
for the Series B Excess Units, and to the extent consistent with the Charter,
the General Partner agrees that it will grant to the holders of the Series B
Preferred Units exceptions to the Beneficial Ownership Limit and Constructive
Ownership Limit set forth in the Series B Articles Supplementary sufficient to
allow such holders to exchange all of their Series B Preferred Units for REIT
Series B Preferred Stock, provided such holders furnish to the General Partner
representations acceptable to the General Partner in its sole and absolute
discretion which assure the General Partner that such exceptions will not
jeopardize the General Partner's tax status as a REIT for purposes of federal
and applicable state law. Notwithstanding any provision of this Agreement to the
contrary, no Series B Limited Partner shall be entitled to effect an exchange of
Series B Preferred Units for REIT Series B Preferred Shares to the extent that
ownership or right to acquire such shares would cause the Partner or any other
Person or, in the opinion of counsel selected by the General Partner, may cause
the Partner or any other Person, to violate the restrictions on ownership and
transfer of REIT Series B Preferred Shares set forth in the Charter. To the
extent any such attempted exchange for REIT Series B Preferred Shares would be
in violation of the previous sentence, it shall be void ab initio and such
Series B Limited Partner shall not acquire any rights or economic interest in
the REIT Series B Preferred Shares otherwise issuable upon such exchange.
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(iv) The redemption of Series B Preferred Units
described in Section 17.7.A(ii) and (iii) shall be subject to the provisions of
Section 17.4.B(i) and Section 17.4.C(ii); provided, however, that the term
"Series B Redemption Price" in such Sections 17.4.B(i) and 17.4.C(ii) shall be
read to mean the original Capital Contribution per Series B Preferred Unit being
redeemed plus all accrued and unpaid distributions to the redemption date.
B. Procedure for Exchange and/or Redemption of Series B
Preferred Units.
(i) Any exchange shall be exercised pursuant to
a notice of exchange (the "Series B Exchange Notice") delivered to the General
Partner by the Partners representing at least 51% of the outstanding Series B
Preferred Units (or by Contributors and any assignees of Contributors that are
REITs in the case of an exchange pursuant to the last sentence of Section
17.7.A.(i) hereof) by (a) fax and (b) by certified mail postage prepaid.
The General Partner may effect any exchange of Series B Preferred Units, or
exercise its option to redeem any portion of the Series B Preferred Units
for cash pursuant to Section 17.7.A(ii) or redeem Series B Excess Units
pursuant to Section 17.7.A(iii), by delivering to each holder of record of
Series B Preferred Units, within ten (10) Business Days following receipt
of the Series B Exchange Notice, (a) if the General Partner elects to cause
the Partnership to exchange any of the Series B Preferred Units then
outstanding, (1) certificates representing the Series B Preferred Shares
being issued in exchange for the Series B Preferred Units of such holder being
exchanged and (2) a written notice (a "Series B Redemption Notice") stating (A)
the redemption date, which may be the date of such Redemption Notice or any
other date which is not later than sixty (60) days following the receipt of the
Series B Exchange Notice, (B) the redemption price, (C) the place or places
where the Series B Preferred Units are to be surrendered and (D) that
distributions on the Series B Preferred Units will cease to accrue on such
redemption date, or (b) if the General Partner elects to cause the Partnership
to redeem all of the Series B Preferred Units then outstanding in exchange for
cash, a Series B Redemption Notice. Series B Preferred Units shall be deemed
canceled (and any corresponding Partnership Interest represented thereby deemed
terminated) simultaneously with the delivery of shares of Series B Preferred
Shares (with respect to Series B Preferred Units exchanged) or simultaneously
with the redemption date (with respect to Series B Preferred Units redeemed).
Holders of Series B Preferred Units shall deliver any canceled certificates
representing Series B Preferred Units which have been exchanged or redeemed to
the office of General Partner (which currently is located at 2951 28th Street,
Suite 3001, Santa Monica, CA 90405) within ten (10) Business Days of the
exchange or redemption with respect thereto. Notwithstanding anything to the
contrary contained herein, any and all Series B Preferred Units to be exchanged
for REIT Series B Preferred Stock pursuant to this Section 17.7 shall be so
exchanged in a single transaction at one time. As a condition to exchange, the
General Partner may require the holders of Series B Preferred Units to make such
representations as may be reasonably necessary for the General Partner to
establish that the issuance of REIT Series B Preferred Shares pursuant to the
exchange shall not be required to be registered under the Securities Act or any
state securities laws. Any Series B Preferred Shares issued pursuant to this
Section 17.7 shall be delivered as shares which are duly authorized, validly
issued, fully paid and nonassessable, free of any pledge, lien, encumbrance or
restriction other than those provided in the Charter, the By-Laws of the General
Partner, the Securities Act and relevant state securities or blue sky laws.
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The certificates representing the Series B Preferred Shares issued
upon exchange of the Series B Preferred Units shall contain the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR (B) IF THE
CORPORATION HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS
THEREUNDER.
(ii) In the event of an exchange of Series B Preferred Units for
REIT Series B Preferred Shares, an amount equal to the accrued and unpaid
distributions to the date of exchange on any Series B Preferred Units tendered
for exchange shall (i) accrue on the REIT Series B Preferred Shares into which
such Series B Preferred Units are exchanged, and (ii) continue to accrue on such
Series B Preferred Units, which shall remain outstanding following such
exchange, with the General Partner as the holder of such REIT Series B Preferred
Units. Notwithstanding anything to the contrary set forth herein, in no event
shall a holder of a Series B Preferred Unit that was validly exchanged for REIT
Series B Preferred Shares pursuant to this section (other than the General
Partner now holding such Series B Preferred Unit), receive a distribution out of
Available Cash of the Partnership, if such holder, after exchange, is entitled
to receive a distribution out of Available Cash with respect to the REIT Series
B Preferred Shares for which such Series B Preferred Unit was exchanged or
redeemed. Further, for purposes of the foregoing, in the event of an exchange
of Series B Preferred Units for REIT Series B Preferred Shares, if the accrued
and unpaid distributions per Series B Preferred Unit is not the same for all
Series B Preferred Units, the accrued and unpaid distributions per Series B
Preferred Unit for all Series B Preferred Units shall be equal to the greatest
amount of such accrued and unpaid distributions per Series B Preferred Unit on
any such unit.
(iii) Fractional REIT Series B Preferred Shares are not to be
issued upon exchange but, in lieu thereof, the General Partner will pay a cash
adjustment based upon the fair market value of the REIT Series B Preferred
Shares on the day prior to the exchange date as determined in good faith by the
Board of Directors of the General Partner.
C. Adjustment of Series B Exchange Price. In case the General
-------------------------------------
Partner shall be a party to any transaction (including, without limitation, a
merger, consolidation, statutory share exchange, tender offer for all or
substantially all of the General Partner's capital stock or sale of all or
substantially all of the General Partner's assets), in each case as a result of
which the REIT Series B Preferred Shares will be converted into the right to
receive shares of capital stock, other securities or other property (including
cash or any combination thereof), each Series
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B Preferred Unit will thereafter be exchangeable into the kind and amount of
shares of capital stock and other securities and property receivable (including
cash or any combination thereof) upon the consummation of such transaction by a
holder of that number of REIT Series B Preferred Shares or fraction thereof into
which one Series B Preferred Unit was exchangeable immediately prior to such
transaction. The General Partner may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing. In addition, so long
as either a Series A Limited Partner or a Series B Limited Partner, or any of
their permitted successors or assigns, hold any Series A Preferred Units or
Series B Preferred Units, as the case may be, the General Partner shall not,
without the affirmative vote of the holders of at least two-thirds of the Series
A Preferred Units and Series B Preferred Units outstanding at the time: (a)
designate or create, or increase the authorized or issued amount of, any class
or series of shares ranking senior to the REIT Series A Preferred Shares and
REIT Series B Preferred Shares with respect to the payment of distributions or
rights upon liquidation, dissolution or winding-up or reclassify any authorized
shares of the General Partner into any such shares, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such shares; (b) designate or create, or increase the authorized or
issued amount of, any Parity Preferred Shares or reclassify any authorized
shares of the General Partner into any such shares, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such shares, but only to the extent that such Parity Preferred
Shares are issued to an Affiliate of the General Partner; (c) amend, alter or
repeal the provisions of the Charter or bylaws of the General Partner, whether
by merger, consolidation or otherwise, that would materially and adversely
affect the powers, special rights, preferences, privileges or voting power of
the REIT Series A Preferred Shares or REIT Series B Preferred Shares or the
holders thereof; provided, however, that any increase in the amount of
-------- -------
authorized Preferred Shares or the creation or issuance of any other series or
class of Preferred Shares, or any increase in the amount of authorized shares of
each class or series, in each case ranking either (1) junior to the REIT Series
A Preferred Shares and REIT Series B Preferred Shares with respect to the
payment of distributions and the distribution of assets upon liquidation,
dissolution or winding-up, or (2) on a parity with the REIT Series A Preferred
Shares and REIT Series B Preferred Shares with respect to the payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up to the extent such Preferred Shares are not issued to an Affiliate of
the Company, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
Section 17.8. No Conversion Rights.
--------------------
The holders of the Series B Preferred Units shall not have any rights
to convert such Partnership Units into any other class of Partnership Interests
or any interest in the Partnership.
Section 17.9. No Sinking Fund.
---------------
No sinking fund shall be established for the retirement or redemption
of the Series B Preferred Units.
97
<PAGE>
Section 17.10. Reports.
-------
In addition to the reports required pursuant to Section 9.3, so long
as any Series B Preferred Units are outstanding, the General Partner shall cause
to be mailed to each Series B Limited Partner:
A. As soon as available, but in no event later than ten Business Days
following the date on which the General Partner files its annual report in
respect of a fiscal year on Form 10-K, with the Commission (or, in the event
that the Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-K separate from General
Partner's Form 10-K, ten Business Days after the filing of such report by the
Partnership with the Commission), a complete copy of the Partnership's financial
statements for such fiscal year including a balance sheet, income statement and
cash flow statement for such fiscal year prepared in accordance with GAAP
(except with respect to footnotes); and
B. As soon as available, but in no event later than ten Business Days
following the date on which the General Partner files its quarterly report in
respect of a fiscal quarter on Form 10-Q, with the Commission (or, in the event
the Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-Q separate from the General
Partner's Form 10-Q, ten Business Days after the filing of such report by the
Partnership with the Commission), a complete copy of the Partnership's unaudited
quarterly financial statements for such fiscal quarter including a balance
sheet, income statement and cash flow statement for such fiscal quarter prepared
in accordance with GAAP (except with respect to footnotes).
(signature pages follow)
98
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
NATIONAL GOLF PROPERTIES, INC., as
General Partner
By: /s/ James M. Stanich
------------------------------------
Name: James M. Stanich
Title: President
BELAIR REAL ESTATE CORPORATION
By:/s/ Thomas E. Faust, Jr.
-------------------------------
Name: Thomas E. Faust, Jr.
Title: Executive Vice President
BELCREST REALTY CORPORATION
By:/s/ Thomas E. Faust, Jr.
-------------------------------
Name: Thomas E. Faust, Jr.
Title: Executive Vice President
<PAGE>
ARGOSY REALTY CORPORATION
By: /s/ Thomas E. Faust, Jr.
----------------------------
Name:
Title:
BELMAR REALTY CORPORATION
By: /s/ Thomas E. Faust, Jr.
----------------------------
Name:
Title:
BELPORT REALTY CORPORATION
By: /s/ Thomas E. Faust, Jr.
----------------------------
Name:
Its:
BELRIEVE REALTY CORPORATION
By: /s/ Thomas E. Faust, Jr.
----------------------------
Name:
Its:
<PAGE>
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Agreed Value of Value of
Name Cash Contributed Contributed
of Partner Contributions Property* Property
----------------- ----------------- --------------- ---------------
(In thousands,
except Units)
<S> <C> <C> <C>
Common Units:
General Partner
National Golf Properties, $ 176,777 $57,516 $59,367
Inc.
Common Limited Partners
David G. Price Trust - $66,169 $84,994
Dallas P. Price Trust - 66,169 84,994
Black Lake / Penasquitos - 602 602
Ltd.
American Golf Corporation - 140 140
Supermarine Aviation, Ltd. - 3,107 3,112
RSJ Golf, Inc. - 137 224
Myreshan, Inc. - 3,041 4,660
Oaks Christian High School - 25,491 32,744
Joan P. Anawalt 1995
Revocable Trust - 5,064 6,530
Joan P. Stewart Income Trust - 1,225 2,019
Joan P. Anawalt 1993
Annuity Income Trust - 1,462 1,523
Richard C. and Sheri L. - 1,705 2,651
Price
Edward R. Sause - 1,132 1,998
Barbara M. Colton - 182 182
Richard Bermudez - 619 768
Ernest C. Burns - 509 659
Robert H. Williams - 1,528 1,976
- 178,282 229,776
------------- ---------- -----------
Total Common Units $ 176,777 $235,798 $289,143
</TABLE>
<TABLE>
<CAPTION>
Preferred Units:
<S> <C>
Series A Limited Partners
Belcrest Realty Corporation $38,000,000
Belair Real Estate $29,194,600
Corporation
Argosy Realty Corporation $ 1,951,350
Belport Realty Corporation $ 1,951,350
Belmar Realty Corporation $ 1,951,350
Belrieve Realty Corporation $ 1,951,350
----------------
$75,000,000
Series B Limited Partners
- -----------------------------
Belcrest Realty Corporation $20,000,000
Belair Real Estate
Corporation $15,000,000
----------------
$35,000,000
</TABLE>
<TABLE>
<CAPTION>
Interest
Total Partnership (by class
Contributions Units or series)
- ---------------- ------------ -------------
<S> <C> <C>
$ 234,293 12,636,545 59.12
$ 66,169 3,244,626 15.18
66,169 3,244,627 15.18
602 24,844 0.12
140 6,854 0.03
3,107 152,498 0.71
137 6,732 0.03
3,041 149,273 0.70
25,491 1,250,000 5.85
5,064 248,517 1.16
1,225 60,146 0.28
1,462 71,731 0.34
1,705 83,701 0.39
1,132 55,550 0.26
182 8,930 0.04
619 30,361 0.14
509 25,001 0.12
1,528 75,003 0.35
$ 178,282 8,738,394 40.88
---------- ---------- ------
$ 412,575 21,374,939 100.00%
</TABLE>
<TABLE>
<S> <C> <C>
$38,000,000 760,000 50.67%
$29,194,600 583,892 38.93%
$1,951,350 39,027 2.60%
$1,951,350 39,027 2.60%
$1,951,350 39,027 2.60%
$1,951,350 39,027 2.60%
------------ ---------- ---------
$75,000,000 1,500,000 100.00%
$20,000,000 800,000 57.14%
$15,000,000 600,000 42.86%
------------ ---------- ---------
$35,000,000 1,400,000 100.00%
</TABLE>
* * * * *
- ---------------------
* Net of Debt (if any) to which the Contributed Property is subject.
A-1
<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 28, 1999
(this "Agreement"), is entered into by and among National Golf Properties, Inc.,
a Maryland corporation (the "Company" or the "REIT"), National Golf Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
and the unit holders whose names are set forth on the signature pages hereto
(each, a "Unit Holder" and collectively, the "Unit Holders").
RECITALS
WHEREAS, in connection with the offering of 1,400,000 9.30%
Series B Cumulative Redeemable Preferred Units of the Operating Partnership (the
"Series B Preferred Units"), Belair Real Estate Corporation and Belcrest Realty
Corporation (the "Contributors") contributed to the Operating Partnership
$35,000,000 in return for 1,400,000 Series B Preferred Units on terms and
conditions set forth in the Contribution Agreement, dated July 28, 1999 (the
"Contribution Agreement") by and among the Company, the Operating Partnership
and the Contributors;
WHEREAS, the Contributors will receive the Series B Preferred
Units in exchange for cash contributed to the Operating Partnership;
WHEREAS, pursuant to the Partnership Agreement (as defined
below), the Series B Preferred Units owned by the Contributors will be
redeemable for cash or exchangeable for shares of the Company's 9.30% Series B
Cumulative Redeemable Preferred Stock (the "Preferred Stock") upon the terms and
subject to the conditions contained therein; and
WHEREAS, in order to induce the Contributors to enter into the
Contribution Agreement, the Company and the Operating Partnership have agreed to
enter into this Agreement and to provide registration rights set forth herein to
the Contributors and any subsequent holder or holders of the Series B Preferred
Units.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. In addition to the definitions set
forth above, the following terms, as used herein, shall have the following
meanings:
<PAGE>
2
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Registration Rights Agreement, as it
may be amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Articles of Amendment
and Restatement of the Company, as the same may be amended, modified or restated
from time to time.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York, New York or Los Angeles,
California are authorized by law to close.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto, as interpreted by the
applicable regulations thereunder.
"Commission" means the Securities and Exchange Commission.
"Company" means National Golf Properties, Inc., a Maryland
corporation.
"Contributors" means Belair Real Estate Corporation, a Delaware
corporation and Belcrest Realty Corporation, a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchangeable OP Units" means Series B Preferred Units which
may be redeemable for cash pursuant to Section 17.4 of the Partnership Agreement
or exchangeable for Preferred Stock or redeemable for cash pursuant to Section
17.7 of the Partnership Agreement (without regard to any limitations on the
exercise of such exchange rights as a result of the Ownership Limit Provisions,
as defined below).
"General Partner" means the Company or its successors as general
partner of the Operating Partnership.
"Holder" means any Unit Holder who is the record or beneficial
owner of any Registrable Security or any assignee or transferee of such
Registrable Security (including assignments or transfers of Registrable
Securities to such assignees or transferees as a result of
<PAGE>
3
the foreclosure on any loans secured by such Registrable Securities) unless such
Registrable Security is acquired in a public distribution pursuant to a
registration statement under the Securities Act or pursuant to transactions
exempt from registration under the Securities Act, in each such case where
securities sold in such transaction may be resold without subsequent
registration under the Securities Act.
"Incapacitated" shall have the meaning set forth in the Partnership
Agreement.
"Indemnified Party" shall have the meaning set forth in Section 2.8
hereof.
"Indemnifying Party" shall have the meaning set forth in Section
2.8 hereof.
"Inspectors" shall have the meaning set forth in Section 2.4(g).
"July Contribution Agreement" means the Contribution
Agreement, dated July 28, 1999, by and among the Company, the Operating
Partnership and the Contributors.
"Operating Partnership" means National Golf Operating
Partnership, L.P., a Delaware limited partnership.
"Ownership Limit Provisions" mean the various provisions of
the Articles of Incorporation set forth in Article IV thereof restricting the
ownership of Preferred Stock by certain Persons to specified percentages of the
outstanding Preferred Stock.
"Partnership Agreement" means the Third Amended and Restated
Agreement of Limited Partnership of the Operating Partnership dated as of July
28, 1999, as the same may be amended, modified or restated from time to time.
"Person" means an individual or a corporation, partnership,
limited liability company, association, trust, or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Piggy-Back Registration" shall have the meaning set forth in
Section 2.2 hereof.
"Primary Registration" shall have the meaning set forth in Section
2.2 hereof.
"Preferred Stock" means the Company's 9.30% Series B
Cumulative Redeemable Preferred Stock.
"REIT" means a real estate investment trust under Section 856
through Section 860 of the Code.
<PAGE>
4
"Registrable Securities" means shares of Preferred Stock at
any time owned, either of record or beneficially, by any Holder and no matter
how acquired (including, without limitation, shares of Preferred Stock issued or
issuable upon exchange of Exchangeable OP Units or issued or issuable by way of
stock dividend or stock split, or in connection with a merger, consolidation,
combination of shares, recapitalization or other reorganization and any other
securities issued pursuant to any other distribution with respect to the
Preferred Shares or in exchange for or replacement of such Preferred Shares)
until (i) a registration statement covering such securities has been declared
effective by the Commission and such shares have been sold or transferred
pursuant to such effective registration statement, (ii) such shares are
permitted to be distributed in a transaction that would constitute a sale
thereof under the Securities Act pursuant to Rule 144(k) 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 Holders) under circumstances in which all of the applicable
conditions of Rule 144 are satisfied or (iii) such shares have been otherwise
transferred pursuant to an applicable exemption under the Securities Act, new
securities for such securities not bearing a legend restricting further transfer
shall have been delivered by the Company and such securities shall be freely
transferable to the public in a transaction that would constitute a sale thereof
without registration under the Securities Act.
"Registration Expenses" shall have the meaning set forth in Section
2.5 hereof.
"Rule 144" means promulgated under the Securities Act, as such
rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the Company of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act, as such rule may be amended from time to time, or any similar rule (other
than Rule 144) or regulation hereafter adopted by the SEC.
"Rule 415" means Rule 415 promulgated under the Securities
Act, as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
"Secondary Registration" shall have the meaning set forth in
Section 2.2 hereof. "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
<PAGE>
5
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act
pursuant to this Agreement.
"Series B Preferred Units" means 9.30% Series B Cumulative
Redeemable Preferred Units of the Operating Partnership.
"Shelf Registration" shall have the meaning set forth in Section
2.1 hereof.
"Shelf Registration Statement" means any registration statement
relating to a Shelf Registration that covers any shares of Preferred Stock of
the Company filed with the Commission under the Securities Act, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
"Unit Holder(s)" shall have the meaning set forth in the
introductory paragraphs hereto.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Shelf Registration.
The Company shall prepare and file a "shelf" registration
statement (the "Shelf Registration Statement") with respect to the Registrable
Securities covering the resale thereof by the Holders on an appropriate form for
an offering to be made on a continuous or delayed basis pursuant to Rule 415
(the "Shelf Registration") within 60 days after the date the Series B Preferred
Units are exchanged for shares of Preferred Stock and shall use its best efforts
to cause the Shelf Registration Statement to be declared effective within 120
days after the date of such exchange. The Company shall use its best efforts to
keep such Shelf Registration Statement continuously effective until the earliest
of (A) 24 months following the effective date of the Shelf Registration
Statement, (B) such time as all of the Registrable Securities have been sold
pursuant to the Shelf Registration Statement or Rule 144 and (C) the date on
which the Registrable Securities may be sold without volume restrictions in
accordance with Rule 144.
SECTION 2.2. Piggy-Back Registration.
(a) If the Company proposes to file a registration statement
under the Securities Act with respect to an offering by the Company for its own
account (a "Primary
<PAGE>
6
Registration") or for the account of any of its respective securityholders
(other than (i) any registration statement filed by the Company under the
Securities Act relating to an offering of capital stock for its own account as a
result of the exercise of the exchange rights set forth in Section 8.6 of the
Partnership Agreement, and covering the resale by the Holders of the shares of
capital stock received in such exchange, or (ii) a registration statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the Commission)
or filed in connection with an exchange offer or offering of securities solely
to the Company's existing securityholders) (a "Secondary Registration"), then
the Company shall promptly give written notice of such proposed filing to the
Holders of Registrable Securities, and such notice shall offer such Holders the
opportunity to register such number of shares of Registrable Securities as each
such Holder may request (a "Piggy-Back Registration"). The Company shall use its
commercially reasonable efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company
included therein.
(b) Withdrawal from Registration. Any Holder requesting
inclusion of Registrable Securities pursuant to this Section 2.2 may, prior to
the effective date of the registration statement relating to such registration,
revoke such request by delivering written notice of such revocation to the
Company and the managing underwriter, if any, at least two days prior to the
effective date of the registration; provided, however, that if the Company, in
consultation with its financial and legal advisors, determines that such
revocation would materially delay the registration or otherwise require a
recirculation of the prospectus contained in the registration statement, then
such Holder shall have no such right to revoke its request. If the withdrawal of
any Registrable Securities would allow, within the marketing limitations set
forth above, the inclusion in the underwriting of a greater number of shares of
Registrable Securities, then, to the extent practicable and without delaying the
underwriting, the Company shall offer to the Holders an opportunity to include
additional shares of Registrable Securities in the proportions discussed in
Section 2.3 below. 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.
(c) Termination or Withdrawal by the Company. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 2.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
SECTION 2.3. Reduction of Offering. Notwithstanding anything
contained herein, if the managing Underwriter or Underwriters of an offering
described in Section 2.2 hereof are of the opinion that (i) the size of the
offering that the Holders, the Company and/or such other persons intend to make
or (ii) the kind of securities that the Holders, the
<PAGE>
7
Company and/or any other persons or entities intend to include in such offering
are such that the success of the offering would be materially and adversely
affected by inclusion of the Registrable Securities requested to be included,
then (A) if the size of the offering is the basis of such Underwriter's opinion,
the amount of securities to be offered for the accounts of Holders shall be
reduced pro rata (according to the Registrable Securities proposed for
registration) to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount recommended by such managing
Underwriter or Underwriters; provided that if securities are being offered for
the account of other persons or entities as well as the Company, then (1) in the
case of a Primary Registration, the reduction in the amount of securities
requested to be offered shall be made first pro rata among securities offered
for the accounts of Holders and such other persons or entities, and (2) in the
case of a Secondary Registration, the reduction in the amount of securities
requested to be offered shall be made in accordance with the terms of the
registration rights agreement pursuant to which such Secondary Registration is
made, provided that if any such registration rights agreement is silent with
respect to reductions in shares being registered thereunder, then with respect
to the Registrable Securities intended to be offered by Holders, the proportion
by which the amount of such class of securities intended to be offered by
Holders is reduced shall not exceed the proportion by which the amount of such
class of securities intended to be offered by such other persons or entities is
reduced and (B) if the combination of securities to be offered is the basis of
such Underwriter's opinion, (x) the Registrable Securities to be included in
such offering shall be reduced as described in clause (A) above (subject to the
proviso in clause (A)) or, (y) if the actions described in clause (x) would, in
the judgment of the managing Underwriter, be insufficient to substantially
eliminate the adverse effect that inclusion of the Registrable Securities
requested to be included would have on such offering, such Registrable
Securities will be excluded from such offering.
SECTION 2.4. Registration Procedures; Filings; Information. In
connection with any Shelf Registration Statement under Section 2.1 hereof, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as expeditiously as possible (and in any event within the
periods referred to in Section 2.1), and in connection with any such request:
(a) As provided in Section 2.1 hereof, the Company will as
expeditiously as possible prepare and file with the Commission a registration
statement on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the
sale by the Selling Holders of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof and
which shall comply as to form in all material respects with the requirements of
the applicable form and include or incorporate by reference all financial
statements required by the
<PAGE>
8
Commission to be filed therewith, and use its best efforts to cause such filed
registration statement to become and remain effective.
(b) The Company will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
notify each Holder of Registrable Securities that a Shelf Registration Statement
is being filed and advise such Holder that an offering of Registrable Securities
will be made in accordance with the method elected (which method may also
include an underwritten offering) by the Holders of a majority of the
Registrable Securities, furnish to each Selling Holder and each Underwriter, if
any, of the Registrable Securities covered by such registration statement or
prospectus copies of such registration statement or prospectus or any amendment
or supplement thereto as proposed to be filed, and thereafter furnish to such
Selling Holder and Underwriter, if any, such number of conformed copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Holder or
Underwriter may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder.
(c) The Company will notify each Holder of Registrable
Securities and counsel for such Holder promptly and, if requested by such Holder
or counsel, confirm such advice in writing promptly (i) when a registration
statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the Commission or
any state securities authority for post-effective amendments and supplements to
a registration statement has become effective, (iii) of the issuance by the
Commission or any state securities authority of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) if, during the period a registration statement is
effective, the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar agreement,
if any, relating to such offering cease to be true and correct in all material
respects, (v) 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 (vi) of any determination by the Company that a post-effective
amendment to a registration statement would be appropriate.
(d) The Company will use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States (where an exemption is not available)
as any Selling Holder or managing Underwriter or Underwriters, if any,
reasonably (in light of such Selling Holder's intended plan of distribution)
requests by the time the registration statement relating thereto is declared
effective by the Commission and (ii) cause such Registrable Securities to be
registered with or approved by such other governmental agencies or authorities,
including the National Association of Securities Dealers ("NASD"), as may be
necessary by virtue of the business and
<PAGE>
9
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable such Selling Holder to consummate
the disposition of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (d), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction except as may be required by the Securities Act.
(e) The Company will immediately notify each Selling Holder or
Underwriter of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or amendment to
such prospectus and shall file with the Commission such amendments and
supplements to such prospectus and deliver copies of the same to the Selling
Holders or Underwriters, as the case may be, so that, as thereafter delivered to
the purchasers of such Registrable Securities, such 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, in
light of the circumstances then existing, not misleading and promptly make
available to each Selling Holder a reasonable number of copies of any such
supplement or amendment.
(f) The Company will enter into customary agreements
(including an underwriting agreement or securities sale agreement, if any, in
customary form) containing 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 similar underwritten
offerings as may be reasonably requested by them and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities.
(g) The Company will make available for inspection by any Selling
Holder of such Registrable Securities, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other professional retained by any such Selling Holder or Underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection with
such registration statement. Records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction. Each
Selling Holder of such Registrable Securities agrees that information obtained
by it as a result of such inspections shall be deemed confidential and shall
<PAGE>
10
not be used by it as the basis for any market transactions in the securities of
the company or its Affiliates or otherwise disclosed by it unless and until such
is made generally available to the public. Each Selling Holder of such
Registrable Securities further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to each Selling Holder and to
each Underwriter, if any, a signed counterpart, addressed to such Selling Holder
or Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii)
a comfort letter or comfort letters from the Company's independent public
accountants (to the extent permitted by the standards of the American Institute
of Certified Public Accountants), each in customary form and covering such
matters of the type customarily covered by opinions or comfort letters, as the
case may be, as the Holders of a majority of the Registrable Securities included
in such offering or the managing Underwriter or Underwriters therefor reasonably
request.
(i) The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder (or any successor rule or regulation
hereafter adopted by the Commission).
(j) The Company will use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(k) The Company will use its best efforts to obtain CUSIP
numbers for the Preferred Stock not later than the effective date of the Shelf
Registration Statement.
The Company may require, as a condition precedent to the
obligations of the Company under the Agreement, each Selling Holder of
Registrable Securities to promptly furnish in writing to the Company such
information regarding such Selling Holder, the Registrable Securities held by it
and the intended method of distribution of the Registrable Securities as the
Company may from time to time reasonably request and such other information as
may be legally required in connection with such registration.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
2.4(e) hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement and prospectus
covering such Registrable Securities until such Selling Holder's
<PAGE>
11
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.4(e) hereof, and, if so directed by the Company, such Selling Holder
will deliver to the Company all copies, other than permanent file copies then in
such Selling Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. Each Selling
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 Selling 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, in light of the circumstances in which they were made, not misleading.
In the event the Company shall give such notice, the Company shall extend the
period during which such registration statement shall be maintained effective
(including the period referred to in Section 2.4(a) hereof) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 2.4(e) hereof to the date when the Company shall make
available to the Selling Holders of Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with the
requirements of Section 2.4(e) hereof.
SECTION 2.5. Registration Expenses. In connection with any
registration statement required to be filed hereunder, the Company shall pay the
following registration expenses incurred in connection with the registration
hereunder (the "Registration Expenses"): (i) all Commission, stock exchange,
NASD or other registration and filing fees, (ii) fees and expenses of compliance
with securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of U.S. and local counsel for any
Underwriters and Holders in connection with blue sky qualifications of the
Registrable Securities), (iii) printing expenses of any persons in preparing and
distributing any Shelf Registration Statement, any prospectus, any amendments or
supplements thereto, any underwriting agreements, securities sales agreements,
certificates representing the Preferred Stock and any other document relating to
the performance of, and compliance with, this Agreement, (iv) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange, (vi) reasonable fees and disbursements of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any special
audits or comfort letters or costs associated with compliance with such special
audits or with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested pursuant to Section 2.4(h) hereof),
(vii) the reasonable fees and expenses of any special experts retained by the
Company in connection with such registration, and (viii) reasonable fees and
expenses of one counsel (who shall be reasonably acceptable to the Company) for
the Selling Holders. Except as expressly provided in the preceding sentence, the
Company shall have no obligation to pay any underwriting fees,
<PAGE>
12
discounts or commissions attributable to the sale of Registrable Securities, or
any out-of-pocket expenses of the Holders (or the agents who manage their
accounts) or any transfer taxes relating to the registration or sale of the
Registrable Securities.
SECTION 2.6. Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Selling Holder of Registrable
Securities, its officers, directors and agents, and each Person, if any, who
controls such Selling Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages, expenses and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished in writing to the
Company by such Selling Holder or on such Selling Holder's behalf expressly for
inclusion therein. The Company also agrees to indemnify any Underwriters of the
Registrable Securities, their officers and directors and each Person who
controls such Underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act on substantially the same basis as that of
the indemnification of the Selling Holders provided in this Section 2.6,
provided that the foregoing indemnity with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter of the Registrable Securities
from whom the person asserting any such losses, claims, damages or liabilities
purchased the Registrable Securities which are the subject thereof if (i) such
person did not receive a copy of the prospectus (or the prospectus as
supplemented) at or prior to the confirmation of the sale of such Registrable
Securities to such person in any case where such delivery is required by the
Securities Act and the untrue statement or omission of a material fact contained
in such preliminary prospectus was corrected in the prospectus (or the
prospectus as supplemented), provided that such Underwriter received prior
notice that such prospectus (or the prospectus as supplemented) corrected such
untrue statement or omission of a material fact; or (ii) such person received a
prospectus at or prior to the confirmation of the sale of such Registrable
Securities to such person during the period when the use of such prospectus has
been suspended in accordance with Section 2.4, provided that such Underwriter
received prior notice of such suspension.
SECTION 2.7. Indemnification by Holders of Registrable
Securities. Each Selling Holder agrees, severally but not jointly, to indemnify
and hold harmless the Company, its officers, directors and agents 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 indemnity from the Company to such Selling Holder, but only with
respect to information relating to such Selling Holder furnished in writing by
such
<PAGE>
13
Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its officers,
directors or agents or any such controlling person, in respect of which
indemnity may be sought against such Selling Holder, such Selling Holder shall
have the rights and duties given to the Company, and the Company or its
officers, directors or agents or such controlling person shall have the rights
and duties given to such Selling Holder, by Section 2.6 hereof.
SECTION 2.8. Conduct of Indemnification Proceedings. In case
any proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Sections 2.6 or 2.7 hereof, such person (an "Indemnified Party") shall promptly
notify the person against whom such indemnity may be sought (an "Indemnifying
Party") in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all fees and expenses. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by (i) in the case
of Persons indemnified pursuant to Section 2.6 hereof, by the Selling Holders
which owned a majority of the Registrable Securities sold under the applicable
registration statement and (ii) in the case of Persons indemnified pursuant to
Section 2.7 hereof, the Company. The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Party shall have requested an Indemnifying Party
to reimburse the Indemnified Party for fees and expenses of counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
thirty (30) Business Days after receipt by such Indemnifying Party of the
aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the
Indemnified Party in accordance with such request prior to the date of such
settlement. No Indemnifying Party
<PAGE>
14
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in which any Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
SECTION 2.9. Contribution. If the indemnification provided
for in Sections 2.6 or 2.7 hereof is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each such 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 or liabilities (i)
as between the Company and the Selling Holders on the one hand and the
Underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Holders on the one
hand and the Underwriters on the other from the offering of the securities, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and the Selling Holders on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Company on the one
hand and each Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of the Company and of each Selling Holder in
connection with such statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Holders on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and the Selling Holders bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Company and
the Selling Holders on the one hand and of the Underwriters on the other 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 and the Selling
Holders or by the Underwriters. The relative fault of the Company on the one
hand and of each Selling Holder on the other 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 such Selling Holder, and the
Company's and the Selling Holder's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 2.9 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the
<PAGE>
15
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages or liabilities referred to in
Sections 2.6 and 2.7 hereof shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 2.9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission, and no
Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the securities of such Selling Holder
were offered to the public exceeds the amount of any damages which such Selling
Holder 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. The Selling Holder's obligations to contribute
pursuant to this Section 2.9 are several in the proportion that the proceeds of
the offering received by such Selling Holder bears to the total proceeds of the
offering received by all the Selling Holders and not joint.
SECTION 2.10. Participation in Underwritten Registrations. At
the election of the holders of a majority of the Registrable Securities, any
offering of Preferred Stock pursuant to a Shelf Registration shall be an
underwritten offering. No Person 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 Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents in customary form and reasonably required under
the terms of such underwriting arrangements and these registration rights
provided for in this Article II.
SECTION 2.11. Rule 144. The Company covenants that it will
file any reports required to be filed by it under the Securities Act and the
Exchange Act and that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
Holders 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 Commission. Upon the request
of any Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
SECTION 2.12. Holdback Agreements.
<PAGE>
16
(a) Restrictions on Public Sale by Holder of Registrable
Securities. To the extent not inconsistent with applicable law, upon receipt of
written notice from the Company, each Holder whose securities are included in a
registration statement pursuant to Section 2.2 agrees not to effect any sale or
distribution of the issue being registered or a similar security of the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, including a "broker's transaction" pursuant to Rule 144, but
excluding any private sale made in reliance on Section 4(2) of the Securities
Act, during the 7 days prior to, and during the 90-day period beginning on, the
effective date of such registration statement (except as part of such
registration), if and to the extent requested in writing by the Company in the
case of a non-underwritten public offering or if and to the extent requested in
writing by the managing Underwriter or Underwriters in the case of an
underwritten public offering.
(b) If the Company determines in its good faith judgment that
the filing of the Shelf Registration Statement under Section 2.1 hereof or the
use of any related prospectus would require the disclosure of non-public
material information that the Company has a bona fide business purpose for
preserving as confidential or the disclosure of which would impede the Company's
ability to consummate a material transaction, and that the Company is not
otherwise required by applicable securities laws or regulations to disclose,
upon written notice of such determination by the Company, the rights of the
Holders to offer, sell or distribute any Registrable Securities pursuant to the
Shelf Registration Statement or to require the Company to take action with
respect to the registration or sale of any Registrable Securities pursuant to
the Shelf Registration Statement shall be suspended until the earlier of (i) the
date upon which the Company notifies the Holders in writing that suspension of
such rights for the grounds set forth in this Section 2.12(b) is no longer
necessary and (ii) 180 days. The Company agrees to give such notice as promptly
as practicable following the date that such suspension of rights is no longer
necessary and the period of time for which the Company shall be obligated to
keep a Shelf Registration Statement effective under Section 2.1 shall be
extended one day for each day of such suspension period.
(c) If all reports required to be filed by the Company pursuant
to the Exchange Act have not been filed by the required date without regard to
any extension, or if the consummation of any business combination by the Company
has occurred or is probable for purposes of Rule 3-05 or Article 11 of
Regulation S-X under the Act, upon written notice thereof by the Company to the
Holders, the rights of the Holders to offer, sell or distribute any Registrable
Securities pursuant to the Shelf Registration Statement or to require the
Company to take action with respect to the registration or sale of any
Registrable Securities pursuant to the Shelf Registration Statement shall be
suspended until the date on which the Company has filed such reports or obtained
and filed the financial information required by Rule 3-05 or Article 11 of
Regulation S-X to be included or incorporated by reference, as applicable, in
the Shelf Registration Statement, and the Company shall notify the Holders as
promptly as practicable when such suspension is no longer required and the
period of time for which the
<PAGE>
17
Company shall be obligated to keep a Shelf Registration Statement effective
under Section 2.1 shall be extended one day for each day of such suspension
period.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Remedies. In addition to being entitled to
exercise all rights provided herein and granted by law, including recovery of
damages, the Holders shall be entitled to specific performance of the 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.
SECTION 3.2. 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 without the prior written consent of the
Company and the Holders and the holders of Exchangeable OP Units or any such
Holder's or holder's representative if any such Holder or holder is
Incapacitated. No failure or delay by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon any breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
SECTION 3.3. Notices. All notices and other communications in
connection with this Agreement shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:
(1) if to any Unit Holder:
Belcrest Realty Corporation and
Belair Real Estate Corporation
c/o Eaton Vance Management
24 Federal Street
Boston, MA 02110
Attn: Alan Dynner
Facsimile Number: (617) 542-7606
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attn: Peter H. Blessing, Esq.
<PAGE>
18
(6544-5)
Facsimile Number: (212) 848-7179
(2) if to the Company or the Operating
Partnership:
National Golf Properties, Inc.
2951 28th Street, Suite 3001
Santa Monica, CA 90405
Attention: President
Facsimile Number: (310) 664-6170
or to such other address as the Company may hereafter specify in writing.
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.
SECTION 3.4. Successors and Assigns. The rights and
obligations of the Holders under this Agreement shall be assignable by any
Holder to any Person that is a Holder or a holder of Exchangeable OP Units and
to no other Person except as expressly provided in this Agreement. This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
SECTION 3.5. Counterparts; Facsimile Signatures. 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. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto, which may be an original signature or facsimile
thereof.
SECTION 3.6. 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.
SECTION 3.7. 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 any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
<PAGE>
19
SECTION 3.8. 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 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.
SECTION 3.9. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 3.10. No Third Party Beneficiaries. Nothing express or
implied herein is intended or shall be construed to confer upon any person or
entity, other than the parties hereto and their respective successors and
assigns, any rights, remedies or other benefits under or by reason of this
Agreement.
(Signature Page Follows)
<PAGE>
20
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
NATIONAL GOLF PROPERTIES, INC.,
a Maryland corporation
/s/ James M. Stanich
By:____________________________
Name: James M. Stanich
Title:President
NATIONAL GOLF OPERATING
PARTNERSHIP, L.P., a Delaware
limited partnership
By: NATIONAL GOLF
PROPERTIES, INC.,
its general partner
/s/ James M. Stanich
By:___________________
James M. Stanich
President
BELCREST REALTY CORPORATION.
a Delaware corporation
/s/ Thomas E. Faust
By: ___________________________
Name:Thomas E. Faust
Title:Executive Vice President
BELAIR REAL ESTATE CORPORATION,
a Delaware corporation
/s/ Thomas E. Faust
By: ___________________________
Name:Thomas E. Faust
Title:Executive Vice President
<PAGE>
EXHIBIT 10.3
CONTRIBUTION AGREEMENT
By and Among
BELCREST REALTY CORPORATION
AND BELAIR REAL ESTATE CORPORATION
and
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
and
NATIONAL GOLF PROPERTIES, INC.
Dated: As of July 28, 1999
<PAGE>
CONTRIBUTION AGREEMENT
Contribution Agreement (this "Agreement") made as of the 28th
day of July, 1999 ("Agreement Date"), by and between BELCREST REALTY
CORPORATION, a Delaware corporation and BELAIR REAL ESTATE CORPORATION, a
Delaware corporation (the "Contributors"), and NATIONAL GOLF OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "Operating Partnership")
and NATIONAL GOLF PROPERTIES, INC., a Maryland corporation (the "Company").
WITNESSETH:
WHEREAS, Contributors desire to contribute to Operating
Partnership cash in return for Preference Units in Operating Partnership on the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Affiliate" means with respect to any Person, any other Person
controlled by, controlling or under common control with such Person. For
purposes hereof, "control" shall include the power to direct the actions of a
Person, regardless of whether the same shall involve an ownership interest in
such Person.
"Agreement" has the meaning set forth in the initial paragraph
hereof.
"Agreement Date" has the meaning set forth in the initial
paragraph hereof.
"Agreement of Limited Partnership" means the Third Amended and
Restated Agreement of Limited Partnership of Operating Partnership, dated as of
July 28, 1999 in the form attached hereto as Exhibit A, as further amended from
time to time.
"Articles Supplementary" means the Articles Supplementary of
the Company substantially in the form attached hereto as Exhibit B.
"Belair" means Belair Real Estate Corporation.
"Belcrest" means Belcrest Realty Corporation.
"Broker" has the meaning set forth in Paragraph 10.
"Bylaws" means the Bylaws of the Company, as amended from time
to time.
<PAGE>
2
"Charter" means the Articles of Incorporation of the Company,
as amended and restated from time to time, including, as supplemented by the
Articles Supplementary.
"Closing" has the meaning set forth in Paragraph 6(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the initial paragraph
hereof.
"Contribution Amount" means $35,000,000, such amount to be
contributed severally $15,000,000 by Belair and $20,000,000 by Belcrest.
"Contributors" has the meaning set forth in the initial
paragraph hereof.
"Contributors' Closing Documents" has the meaning set forth in
Paragraph 6(c).
"ERISA" means the Employee Retirement Income Securities Act of
1974, as amended.
"Exchange Date" means, with respect to any Preferred Unit, the
date on which the exchange of such Preferred Unit for a Preferred Share shall
occur in accordance with the Agreement of Limited Partnership.
"GAAP" means generally accepted accounting principles
consistently applied.
"Governing Documents" means, with respect to (i) a limited
partnership, such limited partnership's certificate of limited partnership and
the agreement of limited partnership, and any amendments or modifications of any
of the foregoing; (ii) a corporation, such corporation's articles or certificate
of incorporation, by-laws and any applicable authorizing resolutions, and any
amendments or modifications of any of the foregoing; (iii) a limited liability
company, such limited liability company's articles or certificate of
organization, by-laws and operating agreement or agreement of limited liability
company, and any amendments or modifications of any of the foregoing; and (iv) a
trust, such trust's declaration of trust and by-laws and any amendments or
modifications of any of the foregoing.
"Manager" means Boston Management and Research, a Massachusetts
business trust.
"Operating Partnership's Closing Documents" has the meaning
set forth in Paragraph 6(b).
<PAGE>
3
"Parity Preferred Shares" has the meaning ascribed to such
term in the Articles Supplementary.
"Partner" has the meaning ascribed to such term in the
Agreement of Limited Partnership.
"Person" means a natural person, partnership (whether general
or limited), trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or representative capacity.
"Preference Units" means the 9.30% Series B Cumulative
Redeemable Preferred Units more fully described in the Amendment.
"Preferred Shares" means the 9.30% Series B Cumulative
Redeemable Preferred Stock of the Company more fully described in the Articles
Supplementary.
"Price Ownership" means the actual and "constructive" (as
determined for purposes of the real estate investment trust income requirements)
ownership of interests in the Operating Partnership and American Golf
Corporation (a significant tenant of the Operating Partnership) by David Price
and Dallas Price, and by members of their family, which ownership would cause
the rent received by the Operating Partnership, if the Operating Partnership
were a REIT (as defined below), to fail to satisfy the income requirements of
Section 856 of the Code.
"PTP" means a Apublicly traded partnership" within the meaning
of Section 7704 of the Code.
"Registration Rights Agreement" has the meaning set forth in
Paragraph 6(b)(iv) hereof.
"REIT" has the meaning set forth in Paragraph 8(g) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means with respect to any Person, any
corporation, partnership, limited liability company, joint venture or other
entity of which a majority of (i) voting power of the voting equity securities
or (ii) the outstanding equity interests, is owned, directly or indirectly, by
such Person.
"US$" means United States dollars, lawful money of the United
States of America.
2. Contribution of Cash. Subject to the terms and provisions
of this Agreement, Belcrest and Belair each hereby agrees to contribute to
Operating Partnership the
<PAGE>
4
Contribution Amount on the date of the Closing in consideration for Preference
Units in Operating Partnership. Subject to the terms and provisions of this
Agreement, Operating Partnership hereby agrees to accept the Contribution Amount
and to issue to Contributors 800,000 and 600,000, respectively, Preference Units
in exchange therefor.
3. Conditions to Closing. (a) Conditions to Operating
Partnership's and Company's Obligations. Operating Partnership's and Company's
obligations under this Agreement to accept the Contribution Amount, provide
Contributors with Preference Units and otherwise consummate the transactions
contemplated herein are subject to the satisfaction (or waiver in writing by
Operating Partnership and the Company) of the following conditions on or before
the Closing:
(i) No Injunction. No temporary restraining order or
preliminary or permanent injunction or any court or
administrative agency of competent jurisdiction
prohibiting the consummation of the transactions
contemplated herein shall be in effect.
(ii) Accuracy of Representations and Warranties. The
representations and warranties of Contributors
contained in this Agreement shall be true and correct
in all material respects on the date of the Closing
with the same effect as though made on the date of
the Closing.
(iii) Performance of Agreement. Each Contributor shall have
performed, in all material respects, all of its
respective covenants, agreements and obligations
required by this Agreement to be performed or
complied with by it prior to or at the Closing,
including, without limitation, delivery of the
Contribution Amount.
(iv) Delivery of Closing Documents. Operating Partnership
and Company shall have received the Contributors'
Closing Documents.
In the event that for any reason any of the conditions set forth
in this Paragraph 3(a) or elsewhere in this Agreement are not satisfied or
waived by Operating Partnership and Company at or prior to the Closing, at
Operating Partnership's or Company's option, this Agreement shall be terminated
and Operating Partnership, Company and Contributors shall be released from their
obligations under this Agreement and none of Operating Partnership, Company or
Contributors shall have any further liability hereunder.
(b) Conditions to Contributors' Obligations. Contributors'
obligations under this Agreement to deliver the Contribution Amount and
otherwise consummate the transactions contemplated herein are subject to the
satisfaction (or waiver in writing by Contributors) of the following conditions
on or before the Closing:
<PAGE>
5
(i) No Injunction. No temporary restraining order or
preliminary or permanent injunction or any court or
administrative agency of competent jurisdiction
prohibiting the consummation of the transactions
contemplated herein shall be in effect.
(ii) Accuracy of Representations and Warranties. The
representations and warranties of Operating
Partnership and Company contained in this Agreement
shall be true and correct in all material respects on
the date of the Closing with the same effect as
though made on the date of the Closing.
(iii) Performance of Agreement. Operating Partnership and
Company shall have performed, in all material
respects, all of their respective covenants,
agreements and obligations required by this Agreement
to be performed or complied with by it prior to or at
the Closing.
(iv) Delivery of Closing Documents. Contributors shall
have received the Operating Partnership's Closing
Documents.
In the event that for any reason any of the conditions set
forth in this Paragraph 3(b) or elsewhere in this Agreement are not satisfied or
waived by Contributors at or prior to the Closing, at Contributors' option, this
Agreement shall be terminated and Contributors, Operating Partnership and
Company shall be released from their obligations under this Agreement and none
of Contributors, Operating Partnership or Company shall have any further
liability hereunder.
4. Covenants. (a) On the Exchange Date, Company shall issue
Preferred Shares in Company in a number equal to the number of Preferred Shares
into which the Preference Units are exchangeable pursuant to the terms of the
Agreement of Limited Partnership. Upon consummation of such exchange in
accordance with the terms of the Agreement of Limited Partnership, and issuance
in accordance with the Charter, the Preferred Shares shall be validly issued,
fully paid and non-assessable pursuant to the Articles Supplementary.
(b) Operating Partnership covenants to notify holders of
Preference Units promptly in the event it anticipates or realizes either that
(i) the value of its assets constituting "stock and securities" within the
meaning of Section 351(e)(1) of the Code will equal 10% or more of the value of
the Operating Partnership's total assets or (ii) there is a material increase in
such percentage of Operating Partnership's assets constituting "stock and
securities" if immediately preceding such material increase the percentage of
Operating Partnership's assets constituting "stock and securities" within the
meaning of Section 351(e)(1) of the Code equaled 10% or more of the Operating
Partnership's total assets.
<PAGE>
6
(c) Company agrees that it will notify holders of Preference
Units promptly in the event it becomes aware of any facts that it concludes will
or likely will cause Operating Partnership to become a PTP on or after January
1, 2000.
(d) Through the end of 1999, Operating Partnership: (i) shall
take all actions reasonably available to it under the Agreement of Limited
Partnership as presently in effect to avoid treatment as a PTP; and (ii) shall
not issue, or enter into binding agreements to issue, any Operating Partnership
units to the extent such issuance would cause it to fail to satisfy the private
placement safe harbor of Treasury Regulation Section 1.7704-1(h) (3) immediately
after such issuance (taking into account any person treated as a partner under
Treasury Regulation Section 1.7704-1(h)(3)) and substituting "60" for "100".
(e) Operating Partnership covenants that it shall deliver to
holders of Preference Units the following:
(i) as soon as available, but in no event later than five
business days following the date on which Company files its annual report in
respect of a fiscal year on Form 10-K, or such other applicable form ("Form
10-K"), with the Securities and Exchange Commission (the "Commission") (or, in
the event that Operating Partnership is required under rules and regulations
promulgated by the Commission to file with the Commission a Form 10-K separate
from Company's Form 10-K, five business days after the filing of such report by
Operating Partnership with the Commission), a complete copy of Operating
Partnership's financial statements for such fiscal year including a balance
sheet, income statement and cash flow statement for such fiscal year in
accordance with GAAP (except with respect to footnotes);
(ii) as soon as available, but in no event later than five
business days following the date on which Company files its quarterly report in
respect of a fiscal quarter on Form 10-Q, or such other applicable form ("Form
10-Q"), with the Commission (or, in the event the Operating Partnership is
required under rules and regulations promulgated by the Commission to file with
the Commission a Form 10-Q separate from Company's Form 10-Q, five business days
after the filing of such report by Operating Partnership with the Commission), a
complete copy of Operating Partnership's unaudited quarterly financial
statements for such fiscal quarter including a balance sheet, income statement
and cash flow statement for such fiscal quarter prepared in accordance with GAAP
(except with respect to footnotes); and
(iii) on a quarterly basis, (as soon as possible, but in no
event later than sixty (60) days following the end of each fiscal quarter of
Operating Partnership and one hundred fifteen (115) days following the end of
each fiscal year of Operating Partnership) a reasonable good faith written
estimate of, together with reasonable supporting information of, (1) the
percentage of the Operating Partnership's gross income that is derived from
sources enumerated in Section 856(c)(2) and (3) (disregarding the Price
Ownership), respectively, of the Code and (2) the percentage of the Operating
Partnership's assets (by value) that are within the relevant categories of
Section 856(c)(4) of the Code.
<PAGE>
7
(g) Provided that all other conditions to Operating
Partnership's and Company's obligations set forth in this Agreement have been
satisfied or properly waived, Operating Partnership covenants that it shall
record Contributors as the holders of the Preference Units on its books and
records and shall admit Contributors as limited partners to Operating
Partnership on the Closing Date.
(h) Operating Partnership shall not issue any Preference Units
to any Person other than Contributors and Company shall not issue any Preferred
Shares to any Person other than a holder of Preference Units upon exchange of
such Preference Units.
(i) So long as there shall be accrued and unpaid distributions
in arrears with respect to the Preference Units, Company or Operating
Partnership shall not sell, exchange, dispose of or otherwise transfer any
property of the Partnership contributed at the time of the closing of the
initial public offering of the common shares in the Company prior to the end of
the fifteenth (15th) year following the Effective Date (as defined in the
Agreement of Limited Partnership) in a manner that requires distributions to be
made to Common Limited Partners pursuant to Section 7.1.A(3) of the Agreement of
Limited Partnership, unless (i) all such Common Limited Partners entitled to
such distributions waive their right to receive such distributions in cash or by
a promissory note pursuant to Section 7.1.A(3), or (ii) any such distributions
in arrears with respect to the Preference Units are paid in full with the
proceeds of such sale, exchange, disposition or transfer.
(j) Operating Partnership covenants and agrees to promptly
provide notice to the Contributors and any Affiliate of a Contributor which
holds Preference Units in the event that the Operating Partnership or the
Company or any Affiliate thereof becomes aware of any fact that causes it to
conclude that the Operating Partnership, disregarding the Price Ownership, would
fail to satisfy the income and assets requirements of Section 856 of the Code if
the Operating Partnership were a REIT.
(k) Through July 31, 2000, upon request of any Contributor,
the Operating Partnership and the Company agree to deliver a certificate to each
Contributor bringing down the representations and warranties made by the
Operating Partnership and the Company in paragraphs 8(d), 8(e), 8(f) and 8(g)
hereof, as to a date or dates requested by a Contributor (but not later than
July 31, 2000) if and to the extent, after due inquiry, the Operating
Partnership and the Company can make such representations and warranties as of
such date.
The covenants set forth in this Paragraph 4 shall survive the
Closing.
5. Transaction Costs. Except as otherwise specifically set
forth herein, each of the parties hereto shall bear its own costs and expenses
with respect to the transaction contemplated hereby.
<PAGE>
8
6. Closing. (a) The closing of the transactions contemplated
by this Agreement shall be consummated on July 28, 1999 (the "Closing").
(b) At the Closing, Operating Partnership and Company shall
deliver to Contributors the following documents and the following other items
(the documents and other items described in this Paragraph 6(b) being
collectively referred to herein as the "Operating Partnership Closing
Documents"):
(i) This Agreement duly executed and delivered by Operating
Partnership and Company;
(ii) The Amendment, duly executed and delivered by all persons
necessary to make such amendment binding on and enforceable against all Partners
in Operating Partnership;
(iii) The Articles Supplementary of the Company, in the form
set forth on Exhibit B duly executed and delivered by the Company and certified
as filed in the State Department of Assessments and Taxation of Maryland.
(iv) The Registration Rights Agreement, substantially in the
form set forth on Exhibit C, duly executed and delivered by Company;
(v) A Certificate of the Secretary of Company substantially in
the form set forth on Exhibit D together with completed exhibits attached
thereto, executed by the secretary of the Company and dated as of the date of
the Closing;
(vi) Cross-Receipts, substantially in the form set forth on
Exhibits E-1 and E-2; and
(vii) An opinion of counsel to Company and Operating Partnership
substantially in the form set forth on Exhibit F;
(viii) A Certificate representing the Preference Units for
each Contributor.
(ix) A Written Consent of the existing limited partners in the
Operating Partnership, substantially in the form set forth on Exhibit G;
(x) Those other closing documents required to be executed by it
or as may be otherwise necessary or appropriate to consummate the transaction
contemplated herein;
(c) At the Closing, Contributors shall deliver to Operating
Partnership and Company the following documents and the following other items
(the documents and other items described in this Paragraph 6(c) being
collectively referred to herein as the "Contributors' Closing Documents"):
<PAGE>
9
(i) Counterparts of documents listed in Paragraph 6(b)(i), (ii),
(iv), and (vi), duly executed and delivered by Contributors.
(ii) Those other closing documents required to be executed by
it or as may be otherwise necessary or appropriate to consummate the transaction
contemplated hereby.
7. Representations and Warranties of Contributors.
Contributors make the following representations and warranties to Operating
Partnership and Company, all of which (except as otherwise designated) are true
and correct in all material respects on the Agreement Date and shall be true and
correct in all material respects as of the date of the Closing:
(a) Contributors are duly organized and validly existing under
the laws of the state of their organization and have been duly authorized by all
necessary and appropriate action to enter into this Agreement and to consummate
the transactions contemplated herein. This Agreement is a valid and binding
obligation of Contributors, enforceable against Contributors in accordance with
its terms, except insofar enforceability may be affected by bankruptcy,
insolvency or similar laws affecting creditor's rights generally and the
availability of any particular equitable remedy.
(b) Neither the execution nor the delivery of this Agreement nor
the consummation of the transactions contemplated hereby nor fulfillment of or
compliance with the terms and conditions hereof (a) conflict with or will result
in a breach of any of the terms, conditions or provisions of (i) the Governing
Documents of Contributors or (ii) any agreement, order, judgement, decree,
arbitration award, statute, regulation or instrument to which Contributor is a
party or by which it or its assets are bound, or (b) constitutes or will
constitute a breach, violation or default under any of the foregoing. No consent
or approval, authorization, order, regulation or qualification of any
governmental entity or any other person is required for the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by Contributors.
(c) Contributors acknowledge that the Preference Units have
not been and will not be registered or qualified under the Securities Act or any
state securities laws and are offered in reliance upon an exemption from
registration under Regulation D of the Securities Act and similar state law
exceptions. The Preference Units to be received by Contributors hereunder and
any Preferred Shares acquired in exchange therefor shall be held by Contributors
for investment purposes only for their own account, and not with a view to or
for sale in connection with any distribution of the Preference Units or such
Preferred Shares, and Contributors acknowledge that the Preference Units and
Preferred Shares cannot be sold or otherwise disposed of by the holders thereof
unless they are subsequently registered under the Securities Act or pursuant to
an exemption therefrom; and the Preference Units may not be sold, assigned or
otherwise transferred except in compliance with the Agreement of Limited
Partnership. Contributors hereby acknowledge receipt of a copy of the Agreement
of Limited Partnership, as amended to
<PAGE>
10
the date hereof, and represents that it has reviewed same and understands the
provisions thereof which have a bearing on the representations made in this
Paragraph 7(c).
(d) Contributors have no contract, understanding, agreement or
arrangement with any person or entity to sell, transfer or grant a participation
to such person or entity or any other person or entity, with respect to any or
all of the Preference Units it will receive in accordance with the provisions
hereof or any Preferred Shares to be acquired in exchange therefor.
(e) Each of the Contributors is an "accredited investor"
within the meaning of Regulation D under the Securities Act and has knowledge
and experience in financial and business matters such that it is capable of
evaluating the merits and risks of receiving and owning the Preference Units and
Contributors are able to bear the economic risk of such ownership and
understands that an investment in Preference Units involves substantial risks.
(f) No part of the funds to be used by Contributor to purchase
the Preference Units constitutes "plan assets", as defined in Department of
Labor Regulation Section 2510.3-101 (29 C.F.R. 2510.3-101), of any "employee
benefit plan", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or individual retirement account or
plan which is subject to Section 4975 of the Code (collectively, a "Benefit
Plan") or of any account or entity whose underlying assets constitute "plan
assets" of a Benefit Plan by reason of the Benefit Plan's investment in the
account or entity.
(g) In making this investment, Contributors are relying upon
the advice of their own personal, legal and tax advisors with respect to the tax
and other aspects of an investment in Operating Partnership.
(h) There has been made available to Contributors and its
respective advisors the opportunity to ask questions of, and receive answers
from, Operating Partnership and Company concerning the terms and conditions of
the investment in the Preference Units, and to obtain Company's Registration
Statements filed with the Securities and Exchange Commission on Form S-11 and
S-3, the Agreement of Limited Partnership, and any additional information, to
the extent that any of them possess such information, or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information given to it, or to otherwise make an informed investment decision,
and that Contributors have had an opportunity to consult with counsel and other
advisers about the investment in the Preference Units, and that all material
documents, records and books pertaining to such investment have, on request,
been made available to Contributors and their respective advisors. Contributors
have reviewed Company's Registration Statement, referenced above, and any other
documents filed by Company since January 1, 1997 in accordance with the
requirements of the Securities Act of 1934, including any business plans or
strategies of Company or of Operation Partnership set forth therein.
<PAGE>
11
(i) None of Contributors or any of their advisors, including
Merrill Lynch & Co., is aware of or has engaged in any form of general
solicitation or advertising with respect to sales of the Preference Units,
including (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio; and (ii) any seminar or meeting whose attendees were
invited by any general solicitation or general advertising.
(j) Contributors shall accept an interest in global
certificates representing the Preference Units with the following legends
appearing thereon:
THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE OR
INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT (A
COPY OF WHICH IS ON FILE WITH THE OPERATING PARTNERSHIP).
EXCEPT AS OTHERWISE PROVIDED IN THE PARTNERSHIP AGREEMENT, NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE PARTNERSHIP UNITS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR (B) IF THE OPERATING PARTNERSHIP HAS
BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER OF THE PARTNERSHIP UNITS REPRESENTED BY THIS
CERTIFICATE OR OTHER EVIDENCE SATISFACTORY TO THE OPERATING
PARTNERSHIP THAT SUCH TRANSFER, SALE ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND
REGULATIONS IN EFFECT THEREUNDER.
(k) For such time as a Contributor holds an interest in the
Operating Partnership, such Contributor will be treated for Federal income tax
purposes as either a real estate investment trust or a C corporation (and not an
S corporation or a division of another corporation, unless such other
corporation complies with such covenant and agreement).
Contributors hereby expressly permit Ballard Spahr Andrews &
Ingersoll, LLP, as counsel to Company, and Latham & Watkins, as counsel to
Company and Operating Partnership, to rely upon representations and warranties
set forth above as if such representations and warranties were made by
Contributors directly to Ballard Spahr Andrews & Ingersoll, LLP and Latham &
Watkins.
<PAGE>
12
8. Representations and Warranties of Operating Partnership and
Company. Operating Partnership and Company make the following representations
and warranties to Contributors and Manager, all of which (except as otherwise
designated) are true and correct in all material respects on the Agreement Date
and shall be true and correct in all material respects as of the date of the
Closing:
(a) Operating Partnership is duly organized and validly
existing under the laws of the state of its organization and is duly registered
and qualified to do business in each jurisdiction where such registration or
qualification is material to the transactions contemplated hereby and has been
duly authorized by all necessary and appropriate action to enter into this
Agreement, to issue, sell and deliver the Preference Units and to consummate the
transactions contemplated herein, and the individuals executing this Agreement
on behalf of Operating Partnership have been duly authorized by all necessary
and appropriate action on behalf of Operating Partnership. This Agreement is a
valid and binding obligation of Operating Partnership, enforceable against
Operating Partnership in accordance with its terms, except insofar
enforceability may be affected by bankruptcy, insolvency or similar laws
affecting creditor's rights generally and the availability of any particular
equitable remedy.
(b) Company is duly organized and validly existing under the
laws of the state of its organization and is duly registered and qualified to do
business in each jurisdiction where such registration or qualification is
material to the transactions contemplated herein and has been duly authorized by
all necessary and appropriate action to enter into this Agreement, to issue and
deliver, upon exchange of the Preference Units in accordance with the Agreement
of Limited Partnership, the Preferred Shares and to consummate the transactions
contemplated herein, and the individuals executing this Agreement on behalf of
Company have been duly authorized by all necessary and appropriate action on
behalf of Company. This Agreement is a valid and binding obligation of Company,
enforceable against Company in accordance with its terms, except insofar as
enforceability may be affected by bankruptcy, insolvency or similar laws
affecting creditor's rights generally and the availability of any particular
equitable remedy. Notwithstanding anything to the contrary in this Agreement,
Company shall not be obligated to issue Preferred Shares in violation of the
provisions on stock ownership limitations set forth in the Charter or the
Agreement of Limited Partnership.
(c) Neither the execution nor the delivery of this Agreement
nor the consummation of the transactions contemplated hereby nor fulfillment of
or compliance with the terms and conditions hereof (a) conflict with or will
result in a breach of any of the terms, conditions or provisions of (i) the
Governing Documents of Company or Operating Partnership or any of its general
partners or (ii) any agreement, order, judgement, decree, arbitration award,
statute, regulation or instrument to which Company or Operating Partnership is a
party or by which it or its assets are bound, or (b) constitutes or will
constitute a breach, violation or default under any of the foregoing. No consent
or approval, authorization, order, registration or qualification of any
governmental entity or any other person is required for the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by Operating Partnership or Company, except for filings under state
securities or "blue sky" laws.
<PAGE>
13
(d) Immediately following the issuance of the Preference Units
pursuant to this Agreement, less than 8% of the value of the Operating
Partnership's assets will consist of "stock and securities" within the meaning
of Section 351(e)(1) of the Code and Operating Partnership has no plan to
increase the amount of its assets constituting "stock and securities" to a
percentage equal to or greater than 10% (except for cash equivalents and assets
arising from the temporary investment of stock or debt issuance proceeds).
(e) Operating Partnership has not been and is not presently a
PTP.
(f) Neither the Company nor any Subsidiary of Company has any
present plan or intention, and neither the Company nor any Subsidiary of Company
has any actual knowledge of any present plan or intention of any partner in
Operating Partnership, to take any action or actions that would or likely would
result in Operating Partnership becoming a PTP in the foreseeable future.
Neither Company nor any Subsidiary of Company has actual knowledge of facts that
reasonably would cause it to expect that Operating Partnership would or likely
would become a PTP in the foreseeable future. For purposes of the
representations set forth in this Paragraph 8(f), it is understood that neither
the Company nor any Subsidiary of Company shall have any duty of inquiry.
(g) The Company has properly elected to be taxed as a real
estate investment trust ("REIT") under and in accordance with Sections 856 to
860 of the Code, currently qualifies for taxation as a REIT and has no plan or
intention or knowledge of facts that likely would cause it to fail to qualify
for taxation as a REIT in the foreseeable future.
(h) The Preference Units have been duly authorized and upon
contribution of the Contribution Amount to the Operating Partnership will be
validly issued, fully paid and, to the extent permitted by the Revised Uniform
Limited Partnership Act of the State of Delaware, non-assessable.
(i) The Preferred Shares issuable upon exchange of the
Preference Units in accordance with the Agreement of Limited Partnership have
been duly and validly reserved for issuance, and upon issuance in accordance
with this Agreement, the Agreement of Limited Partnership and the Charter, shall
be duly and validly issued, fully paid and non-assessable.
(j) Neither the issuance, sale or delivery of the Preference
Units nor, upon exchange, the issuance and delivery of the Preferred Shares, is
subject to any preemptive right of any Partner of Operating Partnership arising
under law or the Agreement of Limited Partnership or any stockholder of Company
arising under applicable law or the Charter or Bylaws of Company, or to any
contractual right of first refusal or other right in favor of any person. With
the exception of the Charter, the Agreement of Limited Partnership, existing
registration rights agreements, the Credit Agreement, dated as of March 29,
1999, among the Operating Partnership, as Borrower, the Company, as General
Partner and Guarantor, and the Lenders
<PAGE>
14
named therein, as amended or modified from time to time, the Restated Note
Agreement, dated as of July 1, 1996, with respect to the Operating Partnership's
Series A-1, Series A-2 and Series A-3 7.9% Guaranteed Senior Promissory Notes
due June 15, 2006 and Series B 8% Guaranteed Senior Promissory Notes due
December 12, 2006, and the Note Purchase Agreement, dated as of December 15,
1994, and amended as of August 31, 1995, with respect to the Operating
Partnership's Series A 8.68% Guaranteed Senior Promissory Notes due December 15,
2004 and Series B 8.73% Guaranteed Senior Promissory Notes due June 15, 2005,
there are no agreements or understandings in effect restricting the voting
rights, the distribution rights or any other rights or privileges of the holders
of the Preference Units, or upon exchange, the Preferred Shares.
(k) There is no action, suit, proceeding or investigation
pending or, to Operating Partnership's and Company's knowledge, currently
threatened against Operating Partnership or Company that questions the validity
of this Agreement or the right of Operating Partnership or Company to enter into
this Agreement, to consummate the transactions contemplated herein, or that
would reasonably be expected to, either individually or in the aggregate, have a
material adverse affect on the business, capitalization, operations, properties
or condition (financially or otherwise) of Operating Partnership or Company, or
result in any change in the current equity ownership of Operating Partnership or
Company, nor is Company or Operating Partnership aware that there is any basis
for the foregoing.
(l) Neither Operating Partnership nor Company is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to it or by which any of its properties or assets
is bound or affected, or (ii) any note, bond, mortgage, indenture or obligation
to which it is a party or by which Operating Partnership or Company or any
property or asset of Company or Operating Partnership is bound or affected,
except for any such conflicts, defaults or violations that would not reasonably
be expected to, individually or in the aggregate, have a material adverse effect
on the business, operations, properties or condition (financially or otherwise)
of Operating Partnership or Company.
Operating Partnership and Company hereby consent to any pledge
and release of such pledge of the Preference Units and to any pledge and release
of such pledge of any Preferred Shares into which such Preference Units are
exchanged, to secure the obligations of Contributors, so long as the pledge and
exercise of remedies thereunder shall be subject in all respects to the
provisions of the Agreement of Limited Partnership.
Operating Partnership and Company hereby expressly permit
Shearman & Sterling, as counsel to Contributors and Manager, to rely upon the
representations and warranties set forth in this Paragraph 8 as if such
representations and warranties were made by Operating Partnership and Company
directly to Shearman & Sterling.
9. Survival of Representations and Warranties. The
representations and warranties set forth in Paragraphs 7 and 8 shall survive
the Closing.
<PAGE>
15
10. Brokers. Each party represents and warrants to the other
that it has dealt with no broker, finder or other person (collectively,
"Broker") with respect to this Agreement or the transactions contemplated hereby
and that no Broker is entitled to a commission as a result of this transaction,
except for Merrill Lynch & Co. Operating Partnership is responsible for the
commission to Merrill Lynch & Co. pursuant to a separate agreement. Each of (a)
Operating Partnership and Company, severally and not jointly, on the one hand,
and (b) Contributors on the other hand, agree to indemnify and hold harmless the
other party against any loss, liability, damage, expense or claim incurred by
reason of any brokerage commission or finder's fee alleged to be payable because
of any act, omission or statement of the indemnifying party. Such indemnity
obligation shall be deemed to include the payment of reasonable attorney's fees
and court costs incurred in defending any such claim. The provisions of this
Paragraph 10 shall survive the Closing.
11. Complete Agreement. This Agreement represents the entire
agreement between Contributors, Operating Partnership and Company covering
everything agreed upon or understood in this transaction and all other prior
agreements, written or oral, including any prior subscription agreements or
letters, are merged into this Agreement. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof in effect between the parties.
No change or addition shall be made to this Agreement except by a written
agreement executed by Contributors, Operating Partnership and Company.
12. Authorized Signatories. The persons executing this
Agreement for and on behalf of Contributors, Operating Partnership and Company
each represent that they have the requisite authority to bind the entities on
whose behalf they are signing.
13. Partial Invalidity. If any term, covenant or condition of
this Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision hereof, and
this Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein.
14. Miscellaneous. (a) Governing Law. This Agreement shall be
interpreted and enforced according to the laws of the State of New York.
(b) Headings; Sections. All headings and sections of this
Agreement are inserted for convenience only and do not form part of this
Agreement or limit, expand or otherwise alter the meaning of any provisions
hereof.
(c) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which shall constitute one and the same agreement. Facsimile signatures shall be
deemed effective execution of this Agreement and may be relied upon as such by
the other party. In the event facsimile signatures
<PAGE>
16
are delivered, originals of such signatures shall be delivered to the other
party within three (3) business days after execution.
(d) No Benefit For Third Parties. The provisions of this
Agreement are intended to be for the sole benefit of the parties hereto and
their respective successors and permitted assigns, and none of the provisions of
this Agreement are intended to be, nor shall they be construed to be, for the
benefit of any third party.
(e) Rights and Obligations. The rights and obligations of
Contributors, Operating Partnership and Company shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns in accordance with the provisions of Article 11 and Section
17.6 of the Agreement of Limited Partnership.
(f) Limitation of Liability. The liability of Contributors
hereunder shall be limited to the Contribution Amount.
15. Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered, delivered by nationally recognized
overnight courier with proof of delivery thereof, sent by United States
registered or certified mail (postage prepaid, return receipt requested)
addressed as hereinafter provided or via telephonic facsimile transmission with
proof of delivery in the form of a telecopier's transmission confirmation
report. Notice shall be sent and deemed given when (a) if personally delivered
or via nationally recognized overnight courier, then upon receipt by the
receiving party, or (b) if mailed, then three (3) days after being postmarked,
or (c) if sent via telephonic facsimile transmission, then at the time set forth
in the telecopier's transmission confirmation report.
Any party listed below may change its address hereunder by
notice to the other party listed below. Until further notice, notice and other
communications hereunder shall be addressed to the parties listed below as
follows:
If to Contributors: Belcrest Realty Corporation and
Belair Real Estate Corporation
c/o Eaton Vance Management
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
Attention: Mr. Alan Dynner
Fax: (617) 338-8054
If to Operating Partnership
or Company: National Golf Properties, Inc.
2951 28th Street, Suite 3001
<PAGE>
17
Santa Monica, CA 90405
Attention: Mr. William C. Regan
Fax: (310) 664-6170
16. Press Releases. Contributors, Operating Partnership and
Company each agrees that it will not issue any press release, advertisement or
other public communication with respect to this Agreement or transaction
contemplated therein without the prior consent of the other party hereto, except
to the extent such communication is required by applicable law or by the New
York Stock Exchange Rules; provided, however, that in such event such party
shall use best efforts to deliver a copy of the proposed press release,
advertisement or other public communication to the other party prior to the
publication thereof and shall grant the other party an opportunity to review the
same and shall make reasonable revisions to such communication requested by such
other party.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day first written above.
CONTRIBUTORS:
BELCREST REALTY CORPORATION
By: /s/ Thomas E. Faust
------------------------
Name: Thomas E. Faust
Title:Executive Vice President
BELAIR REAL ESTATE CORPORATION
By: /s/ Thomas E. Faust
------------------------
Name: Thomas E. Faust
Title:Executive Vice President
<PAGE>
OPERATING PARTNERSHIP:
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
By: NATIONAL GOLF PROPERTIES, INC.,
its general partner
By: /s/ James M. Stanich
-------------------------------
Name: James M. Stanich
Title:President
COMPANY:
NATIONAL GOLF PROPERTIES, INC.
By: /s/ James M. Stanich
-------------------------------
Name: James M. Stanich
Title:President
<PAGE>
EXHIBIT 10.4
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JULY 30, 1999
AMONG
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.,
AS BORROWER,
NATIONAL GOLF PROPERTIES, INC.,
AS GENERAL PARTNER AND GUARANTOR,
THE FIRST NATIONAL BANK OF CHICAGO, AS
ADMINISTRATIVE AGENT AND LENDER,
MERRILL LYNCH CAPITAL CORPORATION,
AS SYNDICATION AGENT AND LENDER,
ING (U.S.) CAPITAL LLC
AS CO-DOCUMENTATION AGENT, CO-ARRANGER, AND LENDER,
AND
UNION BANK OF CALIFORNIA, N.A.,
AS CO-DOCUMENTATION AGENT AND LENDER
AND
BANC ONE CAPITAL MARKETS, INC.
AND
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
AS JOINT LEAD ARRANGERS,
AND
THE SEVERAL OTHER LENDERS
FROM TIME TO TIME PARTIES HERETO
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AMENDED AND RESTATED CREDIT AGREEMENT........................................................................... 1
RECITALS........................................................................................................ 1
ARTICLE I DEFINITIONS........................................................................................... 1
ARTICLE II THE CREDIT...........................................................................................17
2.1 Commitment.........................................................................................17
2.2 Final Principal Payment............................................................................18
2.3 Applicable Margins.................................................................................18
2.4 Revolving Commitment Fee...........................................................................19
2.5 Other Fees.........................................................................................19
2.6 Reserved...........................................................................................19
2.7 Minimum Amount of Each Advance.....................................................................19
2.8 Prepayments; Reductions in Commitment..............................................................19
2.9 Method of Selecting Types and Interest Periods for New Advances....................................22
2.10 Conversion and Continuation of Outstanding Advances................................................22
2.11 Changes in Interest Rate, Etc......................................................................23
2.12 Rates Applicable After Default.....................................................................23
2.13 Swing Line Loans...................................................................................23
2.14 Extension of Revolving Facility Termination Date...................................................24
2.15 Method of Payment..................................................................................24
2.16 Notes; Telephonic Notices..........................................................................25
2.17 Interest Payment Dates; Interest and Fee Basis.....................................................25
2.18 Notification of Advances, Interest Rates and Prepayments...........................................26
2.19 Lending............................................................................................26
2.20 Non-Receipt of Funds by the Administrative Agent...................................................26
2.21 Withholding Tax Exemption..........................................................................26
2.22 Usury..............................................................................................27
2.23 Applications of Moneys Received....................................................................27
ARTICLE III THE LETTER OF CREDIT SUBFACILITY TO THE REVOLVING LOAN
FACILITY........................................................................................................29
3.1 Obligations to Issue...............................................................................29
3.2 Types and Amounts..................................................................................29
3.3 Conditions.........................................................................................29
3.4 Procedure for Issuance of Facility Letters of Credit...............................................30
3.5 Reimbursement Obligations; Duties of Issuing Bank..................................................31
3.6 Participation......................................................................................32
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3.7 Payment of Reimbursement Obligations...............................................................33
3.8 Compensation for Facility Letters of Credit........................................................34
3.9 Letter of Credit Collateral Account................................................................34
ARTICLE IV CHANGE IN CIRCUMSTANCES..............................................................................35
4.1 Yield Protection...................................................................................35
4.2 Changes in Capital Adequacy Regulations............................................................36
4.3 Availability of LIBOR Advances.....................................................................36
4.4 Funding Indemnification............................................................................36
4.5 Lender Statements; Survival of Indemnity...........................................................36
4.6 Substitutions of Lenders...........................................................................37
ARTICLE V CONDITIONS PRECEDENT..................................................................................37
5.1 Effective Date.....................................................................................37
5.2 Each Advance.......................................................................................39
ARTICLE VI REPRESENTATIONS AND WARRANTIES.......................................................................39
6.1 Existence..........................................................................................40
6.2 Authorization and Validity.........................................................................40
6.3 No Conflict; Government Consent....................................................................40
6.4 Financial Statements; Material Adverse Change......................................................40
6.5 Taxes..............................................................................................41
6.6 Litigation and Guarantee Obligations...............................................................41
6.7 Subsidiaries.......................................................................................41
6.8 ERISA..............................................................................................41
6.9 Accuracy of Information............................................................................41
6.10 Margin Stock.......................................................................................42
6.11 Material Agreements................................................................................42
6.12 Compliance with Laws...............................................................................42
6.13 Ownership of Properties............................................................................42
6.14 Investment Company Act.............................................................................42
6.15 Public Utility Holding Company Act.................................................................42
6.16 Solvency...........................................................................................42
6.17 Insurance..........................................................................................43
6.18 REIT Status........................................................................................43
6.19 Environmental Matters..............................................................................43
6.20 Unencumbered Assets................................................................................44
6.21 Year 2000 Representation and Warranty..............................................................45
ARTICLE VII COVENANTS...........................................................................................45
7.1 Financial Reporting................................................................................45
7.2 Use of Proceeds....................................................................................47
7.3 Notice of Default..................................................................................47
7.4 Conduct of Business; Limitations on Investments....................................................47
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7.5 Taxes..............................................................................................48
7.6 Insurance..........................................................................................48
7.7 Compliance with Laws...............................................................................48
7.8 Maintenance of Properties..........................................................................48
7.9 Inspection.........................................................................................48
7.10 Maintenance of Status..............................................................................48
7.11 Dividends..........................................................................................49
7.12 Merger; Sale of Assets.............................................................................49
7.13 General Partner's Ownership and Control of Borrower................................................49
7.14 Sale and Leaseback.................................................................................49
7.15 Liens:.............................................................................................49
7.16 Affiliates.........................................................................................50
7.17 Interest Rate Hedging..............................................................................50
7.18 Limitation on Variable Rate Indebtedness...........................................................50
7.19 Consolidated Net Worth.............................................................................51
7.20 Indebtedness and Cash Flow Covenants...............................................................51
7.21 Environmental Matters..............................................................................51
7.22 Control of the General Partner.....................................................................52
7.23 Approved Operating Leases..........................................................................52
7.24 Borrower's Partnership Agreement...................................................................52
7.25 General Partner's Assets...........................................................................53
7.26 Notice of Rating Change............................................................................53
7.27 Year 2000 Compliance...............................................................................53
7.28 Operating Leases...................................................................................53
7.29 Capital Expenditures...............................................................................53
7.30 No Negative Pledge.................................................................................53
ARTICLE VIII DEFAULTS...........................................................................................53
8.1 Nonpayment of Principal............................................................................53
8.2 Nonpayment of Other Amounts........................................................................54
8.3 Breach of Certain Covenants........................................................................54
8.4 Representation of Warranty Untrue..................................................................54
8.5 Breach of Other Provisions.........................................................................54
8.6 Material Indebtedness..............................................................................54
8.7 Voluntary Bankruptcy...............................................................................54
8.8 Involuntary Bankruptcy.............................................................................54
8.9 Condemnation.......................................................................................55
8.10 Judgments..........................................................................................55
8.11 AGC................................................................................................55
8.12 Pledge of AGC Ownership Interests..................................................................55
8.13 Ownership of AGC...................................................................................55
8.14 Multiemployer Plan Withdrawal Liability............................................................55
8.15 Multiemployer Plan Termination.....................................................................56
8.16 Environmental Remediation..........................................................................56
8.17 Revocation of Guaranty.............................................................................56
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ARTICLE IX ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.......................................................56
9.1 Acceleration.......................................................................................56
9.2 Amendments.........................................................................................57
9.3 Preservation of Rights.............................................................................59
ARTICLE X GENERAL PROVISIONS....................................................................................59
10.1 Survival of Representations........................................................................59
10.2 Governmental Regulation............................................................................59
10.3 Taxes..............................................................................................59
10.4 Headings...........................................................................................59
10.5 Entire Agreement...................................................................................59
10.6 Several Obligations; Benefits of this Agreement....................................................60
10.7 Expenses; Indemnification..........................................................................60
10.8 Reserved...........................................................................................60
10.9 Accounting.........................................................................................60
10.10 Severability of Provisions.........................................................................60
10.11 Nonliability of Lenders............................................................................61
10.12 Publicity..........................................................................................61
10.13 CHOICE OF LAW......................................................................................61
10.14 CONSENT TO JURISDICTION............................................................................61
10.15 WAIVER OF JURY TRIAL...............................................................................61
10.16 Confidentiality....................................................................................62
ARTICLE XI THE ADMINISTRATIVE AGENT AND AGREEMENTS AMONG LENDERS................................................62
11.1 Appointment........................................................................................62
11.2 Powers.............................................................................................62
11.3 General Immunity...................................................................................62
11.4 No Responsibility for Loans, Recitals, etc.........................................................62
11.5 Action on Instructions of Lenders..................................................................63
11.6 Employment of Agents and Counsel...................................................................63
11.7 Reliance on Documents; Counsel.....................................................................63
11.8 Administrative Agent's Reimbursement and Indemnification...........................................63
11.9 Rights as a Lender.................................................................................64
11.10 Lender Credit Decision.............................................................................64
11.11 Successor Administrative Agent.....................................................................64
11.12 Notice of Defaults.................................................................................65
11.13 Requests for Approval..............................................................................65
11.14 Copies of Documents................................................................................65
11.15 Defaulting Lenders.................................................................................65
ARTICLE XII SETOFF; RATABLE PAYMENTS............................................................................66
12.1 Setoff.............................................................................................66
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12.2 Ratable Payments...................................................................................66
ARTICLE XIII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..................................................66
13.1 Successors and Assigns.............................................................................66
13.2 Participations.....................................................................................67
13.3 Assignments........................................................................................68
13.4 Dissemination of Information.......................................................................69
13.5 Tax Treatment......................................................................................69
ARTICLE XIV NOTICES.............................................................................................69
14.1 Giving Notice......................................................................................69
14.2 Change of Address..................................................................................69
ARTICLE XV COUNTERPARTS.........................................................................................69
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Exhibits:
Exhibit A Pricing Grid
Exhibit B Form of Revolving Note
Exhibit C Form of Term Note
Exhibit D Form of Opinion
Exhibit E Form of Loan/Credit Related Money Transfer Instruction
Exhibit F Form of Compliance Certificate
Exhibit G Minimum Specifications for Environmental Investigations
Exhibit H Form of Assignment Agreement
Schedules:
- ----------
Schedule 1 Subsidiaries
Schedule 2 Unencumbered Assets
Schedule 3 Approved Operators
Schedule 4 Jurisdictions from which Good Standing Certificates
Must be Delivered
Schedule 5 Current Financeable Ground Leases
vi
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This Agreement, dated as of July 30, 1999, is among National Golf Operating
Partnership, L.P., a Delaware limited partnership (the "Borrower"), National
--------
Golf Properties, Inc., a Maryland corporation (the "General Partner" and the
---------------
"Guarantor"), Banc One Capital Markets, Inc. ("BOCM"), Merrill Lynch, Pierce,
- ---------- ----
Fenner & Smith Incorporated ("Merrill Lynch") and, collectively with BOCM, the
"Joint Lead Arrangers" or "Arrangers"), The First National Bank of Chicago
- --------------------- ---------
("First Chicago") as a Lender and as "Administrative Agent", Merrill Lynch
- --------------- --------------------
Capital Corporation ("MLCC"), as a Lender and as Syndication Agent, ING (U.S.)
----
Capital LLC, as Co-Documentation Agent, Co-Arranger, and Lender, Union Bank of
California, N.A., as Co-Documentation Agent and Lender, and the several banks,
financial institutions and other entities from time to time parties to this
Agreement (collectively, with First Chicago and MLCC, the "Lenders").
-------
RECITALS
--------
A. The Borrower is primarily engaged in the business of purchasing,
developing, owning, lending upon the security of, and leasing golf course
properties.
B. The General Partner, the Borrower's sole general partner, is listed on
the New York Stock Exchange and is qualified as a real estate investment trust.
The General Partner owns approximately 59% of the total partnership units in the
Borrower and various limited partners in the Borrower own approximately 41% of
such partnership units.
C. The Borrower, the Guarantor, BOCM, Merrill Lynch, First Chicago, MLCC
and several other Lenders party thereto entered into that certain Revolving
Credit Agreement dated as of March 29, 1999 (as amended from time to time, the
"Prior Credit Agreement").
----------------------
D. The Borrower and the General Partner have requested that the existing
facility be replaced by (i) a term loan facility in the amount of $100,000,000
("Term Facility") and a revolving credit facility in the maximum aggregate
-------------
amount of $200,000,000 ("Revolving Facility") and (ii) that the Prior Credit
------------------
Agreement be amended and restated in order to provide for such facilities. The
Lenders are willing on the terms and conditions set forth herein to do so.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree that on the Closing Date, the Prior
Credit Agreement shall be amended and restated as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"ABR Advance" means an Advance which bears interest at the Adjusted ABR
Rate.
<PAGE>
"ABR Applicable Margin" means, as of any date, the ABR Applicable Margin in
effect on such date with respect to ABR Advances and ABR Loans for the Revolving
Facility or the Term Facility, as applicable, as determined in accordance with
Section 2.3.
"ABR Loan" means a Loan which bears interest at the Adjusted ABR Rate.
"Adjusted ABR Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the ABR Applicable Margin for such
day, in each case changing when and as the Alternate Base Rate changes.
"Administrative Agent" means The First National Bank of Chicago in its
capacity as agent for the Lenders pursuant to Article XI, and not in its
----------
individual capacity as a Lender, and any successor Administrative Agent
appointed pursuant to Article XI.
----------
"Advance" means a portion of the indebtedness outstanding under either the
Revolving Facility or the Term Facility consisting of the aggregate amount of
the several Loans (including Swing Line Loans) made by the Lenders (or, in the
case of Swing Line Loans, the Swing Line Lender) to the Borrower of the same
Type and, in the case of LIBOR Advances, for the same Interest Period. Multiple
Advances may result from different interest rate selections made by Borrower
applying to different portions of the Term Facility or Revolving Facility
regardless of the number of disbursements.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 50% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"AGC" shall mean American Golf Corporation, a California subchapter S
corporation, and its majority owned subsidiaries.
"Aggregate Commitment" means the sum of (i) the Aggregate Revolving
Commitment, and (ii) the Aggregate Term Balance (except that prior to
disbursement of the Term Facility the sum of the Term Commitment for each Term
Lender shall be used instead of the Aggregate Term Balance).
"Aggregate Revolving Commitment" means the aggregate of the Revolving
Commitment of all the Lenders at such time, which shall be initially
$200,000,000.
"Aggregate Term Balance" means the aggregate principal amount outstanding
under the Term Facility.
"Agreement" means this Amended and Restated Credit Agreement, as it may be
amended or modified and in effect from time to time.
"Allocated Facility Amount" means, at any time, the sum of all then
outstanding Advances and the then outstanding Facility Letter of Credit
Obligations.
2
<PAGE>
"Alternate Base Rate" for any day means the greater of (i) the Corporate
Base Rate or (ii) the federal funds rate as published by the Federal Reserve
Bank plus one-half percent (0.50%) per annum.
"Applicable Margin" means the LIBOR Applicable Margin or ABR Applicable
Margin, as applicable.
"Approved Operator" means each Person listed on Schedule 3 hereto and each
other tenant under an operating lease for a Project which tenant has been
approved by the Required Lenders, such approval not to be unreasonably withheld
if the proposed tenant is an experienced, reputable operator.
"Approved Operating Lease" means an operating lease for a Project with an
Approved Operator, which lease (i) has been approved by the Required Lenders or
(ii) is in substantially the form of the form operating lease which has
theretofore been approved by the Required Lenders, with no changes thereto that
would reasonably be anticipated to adversely affect the Borrower in any material
respect.
"Arrangers" means Merrill Lynch and BOCM.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the President, Chairman of Finance
Committee, Vice President Controller or Vice President Finance, acting singly.
"BOCM" means Banc One Capital Markets, Inc.
"Borrower" means National Golf Operating Partnership, L.P., a Delaware
limited partnership, and its successors and permitted assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.9.
-----------
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of LIBOR Advances, a day (other than a Saturday or Sunday) on which
banks generally are open in Los Angeles, California, Chicago, Illinois, and New
York, New York for the conduct of substantially all of their commercial lending
activities and on which dealings in U.S. dollars are carried on in the London
interbank market and (ii) for all other purposes, a day (other than a Saturday
or Sunday) on which banks generally are open in Los Angeles, California,
Chicago, Illinois and New York, New York for the conduct of substantially all of
their commercial lending activities.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person which is not a corporation
and any and all warrants or options to purchase any of the foregoing.
3
<PAGE>
"Capitalization Value" means the sum of (a) the quotient obtained by
dividing Total Property Operating Income by 10.5% plus (b) an amount equal to
100% of the then-current book value, determined in accordance with GAAP, of all
first mortgage receivables of the Borrower or its Wholly-Owned Subsidiaries on
golf course properties, provided that in no event shall the aggregate amount
added to the amount determined pursuant to the foregoing clause (a) pursuant to
this clause (b) exceed the lesser of (i) five percent (5%) of the amount
determined pursuant to the foregoing clause (a) and (ii) $50,000,000.00.
"Capitalized Lease" of a Person means any lease of Property imposing
obligations on such Person, as lessee thereunder, which are required in
accordance with GAAP to be capitalized on a balance sheet of such Person.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"Cash Equivalents" means, as of any date, (i) securities issued or directly
and fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than one year from such
date, (ii) time deposits and certificates of deposit having maturities of not
more than one year from such date and issued by any domestic commercial bank
having (A) senior long-term unsecured debt rated at least A or the equivalent
thereof by S&P or A2 or the equivalent thereof by Moody's and (B) capital and
surplus in excess of $500,000,000, and (iii) commercial paper rated at least A-1
or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's and
in either case maturing within 90 days from such date.
"Closing Date" means July 30, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, its Revolving Commitment and/or Term
Commitment, as applicable.
"Condemnation" is defined in Section 8.9.
-----------
"Consolidated Net Income" means, for any period, consolidated net income
(or loss) of the General Partner, the Borrower and its Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; provided that
--------
there shall be excluded (a) the income (or deficit) of any other Person accrued
prior to the date it becomes a Subsidiary of the General Partner or the Borrower
or is merged into or consolidated with the General Partner, the Borrower or any
of their Subsidiaries and (b) the undistributed earnings of any Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Subsidiary is not at the time permitted by the terms of any contractual
obligation or requirement of law applicable to such Subsidiary.
"Consolidated Net Worth" means, as of any date of determination, an amount
equal to (a) Capitalization Value as of such date minus (b) Consolidated Total
-----
Indebtedness as of such date.
4
<PAGE>
"Consolidated Secured Indebtedness" means, as of any date of determination,
the sum of (a) the aggregate principal amount of all Indebtedness of the General
Partner, the Borrower and their respective Subsidiaries outstanding at such date
which is secured by a Lien on any asset of the General Partner, the Borrower or
any of their respective Subsidiaries and (b) the excess, if any, of (i) the
aggregate principal amount of all Consolidated Unsecured Indebtedness of those
Subsidiaries of the General Partner or the Borrower which are not Guarantors
over (ii) $5,000,000, determined on a consolidated basis in accordance with GAAP
- ----
and (c) the General Partner's and the Borrower's pro rata share of any secured
debt in Investment Affiliates.
"Consolidated Total Indebtedness" means, as of any date of determination,
all Indebtedness of the General Partner, the Borrower and their respective
Subsidiaries outstanding at such date, determined on a consolidated basis in
accordance with GAAP, plus their pro rata share of all Investment Affiliate
debt.
"Consolidated Unsecured Indebtedness" means, as of any date of
determination, the sum of the aggregate principal amount of all Indebtedness of
the General Partner, the Borrower and their Subsidiaries outstanding at such
date, including the Facility Letter of Credit Obligations, which does not
constitute Consolidated Secured Indebtedness.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the General Partner, the Borrower or any of their
Subsidiaries, are treated as a single employer under Section 414(b) or (c) of
the Code solely for the purposes of potential liability under Section 302(c)(11)
of ERISA and Section 412(c)(11) of the Code and the lien created under Section
302(f) of ERISA and Section 412(n) of the Code, are treated as a single employer
under Section 414(m) or (o) of the Code.
"Conversion/Continuation Notice" is defined in Section 2.10.
------------
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by Administrative Agent from time to time, changing
when and as such corporate base rate changes.
"Debt Service" means, for any fiscal quarter, Interest Expense plus
scheduled principal amortization payments (excluding balloon payments),
provided that in the case of amortization payments made less frequently than
- --------
quarterly, 25% of the aggregate amortization payments for the fiscal year
including such fiscal quarter shall be included in Debt Service for such quarter
and provided further that Debt Service shall not include any Indebtedness,
-------- -------
extension, renewal or refinancing of Indebtedness among the General Partner, the
Borrower and their Subsidiaries (or any payments with respect thereto) or any
repayment of revolving credit Advances under the Revolving Facility.
"Default" means an event of Default described in Article VIII.
"Default Rate" is defined in Section 2.12.
------------
"Defaulting Lender" means any Lender which fails or refuses to perform its
obligations under this Agreement within the time period specified for
performance of such obligation, or, if
5
<PAGE>
no time frame is specified, if such failure or refusal continues for a period of
five Business Days after written notice from the Administrative Agent; provided
--------
that if such Lender cures such failure or refusal, such Lender shall cease to be
a Defaulting Lender.
"EBITDA" means operating income before gains and losses from sales of
Properties, equity in earnings of Investment Affiliates and minority interest in
earnings, as reported by the General Partner, the Borrower and their
Subsidiaries in accordance with GAAP, plus (i) depreciation, amortization and
cash taxes (excluding sales taxes) plus (ii) interest income on mortgage loans
on golf course properties held by the Borrower or any of its Wholly-Owned
Subsidiaries plus (iii) (without redundancy) the General Partner's and the
Borrower's pro rata share of Net Operating Income from Investment Affiliates, in
each case for the most recent four (4) full fiscal quarters for which financial
results have been reported. EBITDA shall be adjusted to include pro forma
earnings (as substantiated to the satisfaction of the Administrative Agent) for
the entire four (4) fiscal quarter period for any Property acquired or placed in
service during such period and to exclude earnings during such period from any
Property not owned as of the end of such period.
"Environmental Laws" means any and all applicable foreign, federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other requirements
of law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect, in each case to the extent the
foregoing are applicable to the General Partner, the Borrower or any Subsidiary
or any of their respective assets or Projects.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Facility Letter of Credit" means a Letter of Credit issued hereunder.
"Facility Letter of Credit Fee" is defined in Section 3.8.
-----------
"Facility Letter of Credit Obligations" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of the
Borrower with respect to Facility Letters of Credit, including the sum of (a)
the Reimbursement Obligations and (b) the aggregate undrawn face amount of the
then outstanding Facility Letters of Credit.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Financeable Ground Lease" means a Major Ground Lease satisfactory to the
Required Lenders and the Administrative Agent's counsel in their reasonable
discretion, which must
6
<PAGE>
provide protections for a potential leasehold mortgagee ("Mortgagee") which
---------
include, among other things (i) a remaining term (including renewal options
exercisable solely at the option of the Borrower) of no less than 20 years, (ii)
that the lease will not be terminated until the Mortgagee has received notice of
a default and has had a reasonable opportunity to cure or complete foreclosure,
and fails to do so, (iii) provision for a new lease on substantially the same
terms to the Mortgagee as tenant if the ground lease is terminated for any
reason, (iv) non-merger of the fee and leasehold estates, (v) transferability of
the tenant's interest under the ground lease, without the ground lessor's prior
consent except for restrictions based on the satisfaction of certain objective
criteria reasonably acceptable to Administrative Agent, and (vi) that insurance
proceeds and condemnation awards (from the fee interest as well as the leasehold
interest) will be applied pursuant to the terms of a leasehold mortgage. The
existing Major Ground Leases described on Schedule 5 attached hereto have been
reviewed and approved for inclusion as "Financeable Ground Leases" by the
Required Lenders as of the Closing Date, notwithstanding any deviations from the
standards set forth in the preceding sentence.
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.
"Fixed Charges" means, for any fiscal quarter, (i) Debt Service plus (ii)
cash tax payments (excluding sales taxes) plus (iii) any ground lease rental
(except to the extent it has been deducted from operating income for purposes of
determining EBITDA) plus (iv) required dividends on preferred stock of the
General Partner and the Subsidiaries of the General Partner and the Borrower
plus (v) distributions on account of preferred operating partnership units of
the Borrower.
"Funded Debt" means, as of any date, that portion of Consolidated Total
Indebtedness represented by borrowed money.
"Funded Percentage" means, with respect to any Revolving Lender at any
time, a percentage equal to a fraction the numerator of which is the amount
actually disbursed and outstanding to Borrower by such Revolving Lender at such
time (including Swing Line Loans), and the denominator of which is the total
amount disbursed and outstanding to Borrower by all of the Revolving Lenders at
such time (including Swing Line Loans).
"Funds From Operations" means, for any period, Consolidated Net Income for
such period without giving effect to depreciation and amortization, gains or
losses from extraordinary items, gains or losses on sales of real estate, gains
or losses on investments in marketable securities and any provisions for or
benefits from income taxes for such period.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time and consistently applied.
"General Partner" means National Golf Properties, Inc., a Maryland
corporation, the sole general partner of the Borrower, and its successors and
assigns.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
7
<PAGE>
"Guarantee Obligation" means, as to any Person (the "guaranteeing person"),
-------------------
any obligation (determined without duplication) of (a) the guaranteeing person
or (b) another Person (including, without limitation, any bank under any Letter
of Credit) to induce the creation of which the guaranteeing person has issued a
reimbursement, counter-indemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
-------------------
"primary obligor") in any manner, whether directly or indirectly, including,
- ----------------
without limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any Property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
Property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
- -------- -------
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the maximum stated amount of the primary obligation
relating to such Guarantee Obligation (or, if less, the maximum stated liability
set forth in the instrument embodying such Guarantee Obligation), provided, that
--------
in the absence of any such stated amount or stated liability, the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"Guarantor" means the General Partner in its capacity as the guarantor
under the Guaranty and such Subsidiaries as have executed a guaranty of the
Company's Obligations hereunder.
"Guaranty" means (i) that certain Guaranty of even date herewith executed
by the Guarantor in favor of the Administrative Agent, for the ratable benefit
of the Lenders, as it may be amended or modified and in effect from time to time
and (ii) any guaranty that may hereafter be executed and delivered by any
Subsidiary which is in form and substance satisfactory to the Administrative
Agent and is accompanied by such evidence of due execution and enforceability
(including, without limitation, Lien searches, organizational documents, good
standing certificates, officers' certificates and opinions of counsel) as may be
required by the Administrative Agent.
"Indebtedness" of any Person at any date means without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of Property or services (other than
current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), to the extent such obligations
constitute indebtedness for the purposes of GAAP, (c) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar instrument,
(d) all Capitalized Lease Obligations, (e) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (f) all
Guarantee Obligations of such Person (excluding in any calculation of
consolidated indebtedness of the Borrower and the General Partner, Guarantee
Obligations of the Borrower or the General Partner in respect of primary
obligations of any
8
<PAGE>
Subsidiary), (g) all reimbursement obligations of such Person for letters of
credit and other contingent liabilities, (h) all liabilities secured by any Lien
(other than Liens for taxes not yet due and payable) on any Property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof; provided that, with respect to liabilities which have
not been assumed by such Person, the amount of such Indebtedness shall be
limited to the fair market value of the Property encumbered by such Lien, (i)
any repurchase obligation or liability of such Person or any of its Subsidiaries
with respect to accounts or notes receivable sold by such Person or any of its
Subsidiaries, (j) any other transaction which is the functional equivalent of or
takes the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person, (k) such Person's pro rata share of
debt in Investment Affiliates and (l) such Person's pro rata share of any loans
where such Person is liable as a general partner.
"Interest Expense" means all interest expense of the General Partner, the
Borrower and their Subsidiaries determined in accordance with GAAP plus (i) the
General Partner's and the Borrower's pro rata share of interest expense in
Investment Affiliates, (ii) capitalized interest, (iii) 100% of any accrued, or
paid interest incurred on any obligation for which the Borrower or the General
Partner is wholly or partially liable under repayment, interest carry, or
performance guarantees, or other relevant liabilities, provided that no expense
shall be included more than once in such calculation even if it falls within
more than one of the foregoing categories.
"Interest Period" means a LIBOR Interest Period.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person (other
than a Subsidiary of such Person) or any investment in, or purchase or other
acquisition of, the stock, partnership interests, notes, debentures or other
securities of any other Person (other than a Subsidiary of such Person) made by
such Person.
"Investment Affiliate" means any Person in which the General Partner or the
Borrower, directly or indirectly, has an ownership interest, whose financial
results are not consolidated under GAAP with the financial results of the
General Partner or the Borrower on the consolidated financial statements of the
General Partner or the Borrower.
"Issuing Bank" means, with respect to each Facility Letter of Credit, the
Lender which issues such Facility Letter of Credit.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement, their respective successors and assigns and any other lending
institutions that subsequently become parties to this Agreement pursuant to
Section 13.3.
- ------------
"Lending Installation" means, with respect to a Lender, any office, branch,
subsidiary or affiliate of such Lender.
9
<PAGE>
"Letter of Credit" of a Person means 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.
"Letter of Credit Collateral Account" is defined in Section 3.9.
-----------
"Leverage Ratio" means, as of the date of determination, the ratio of
Funded Debt to Capitalization Value.
"LIBOR Advance" means an Advance which bears interest at a LIBOR Rate.
"LIBOR Applicable Margin" means, as of any date with respect to any LIBOR
Interest Period, the LIBOR Applicable Margin in effect for such LIBOR Interest
Period as determined in accordance with Section 2.3 hereof.
-----------
"LIBOR Base Rate" means, with respect to a LIBOR Advance for the relevant
LIBOR Interest Period, the rate determined by the Administrative Agent to be the
rate at which deposits in U.S. dollars are offered by First Chicago to first-
class banks in the London interbank market at approximately 11 a.m. (London
time) two Business Days prior to the first day of such LIBOR Interest Period, in
the approximate amount of the relevant LIBOR Advance and having a maturity
approximately equal to such LIBOR Interest Period.
"LIBOR Interest Period" means, with respect to a LIBOR Advance, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such LIBOR Interest Period shall end on
(but exclude) the day which corresponds numerically to such date one, two, three
or six months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such LIBOR Interest Period shall end on the last Business Day of such
next, second, third or sixth succeeding month. If a LIBOR Interest Period would
otherwise end on a day which is not a Business Day, such LIBOR Interest Period
shall end on the next succeeding Business Day, provided, however, that if said
next succeeding Business Day falls in a new calendar month, such LIBOR Interest
Period shall end on the immediately preceding Business Day.
"LIBOR Loan" means a Loan which bears interest at a LIBOR Rate.
"LIBOR Rate" means, with respect to a LIBOR Advance for the relevant LIBOR
Interest Period, the sum of (i) the quotient of (a) the LIBOR Base Rate
applicable to such LIBOR Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such LIBOR Interest Period,
plus (ii) the LIBOR Applicable Margin in effect on the day that such LIBOR Base
Rate was determined. The LIBOR Rate shall be rounded to the next higher
multiple of 1/16 of 1%.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
10
<PAGE>
"Loan Documents" means this Agreement, the Notes, the Guaranty, and any
other document from time to time evidencing or securing indebtedness or
obligations incurred by the General Partner or the Borrower under this
Agreement, as any of the foregoing may be amended or modified from time to time.
"Major Ground Lease" means a ground lease demising to the Borrower or a
Guarantor all of the land included in any Project or any portion of such land
which the Administrative Agent, in its reasonable judgement, deems necessary for
the continued operation of a golf course on such Project.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the General Partner, the Borrower and their Subsidiaries taken
as a whole, (ii) the ability of the General Partner or the Borrower to perform
their obligations under the Loan Documents, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Administrative Agent or the Lenders thereunder.
"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maximum Legal Rate" means the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or in the Note or other Loan Documents, under the laws of such state
or states whose laws are held by any court of competent jurisdiction to govern
the interest rate provisions of the Loan.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Multiemployer Plan" means any "multiemployer plan," as defined in Section
4001(a)(3) of ERISA, which the General Partner, the Borrower or any member of
the Controlled Group maintains, administers, contributes to or is required to
contribute to, or may incur any liability.
"Net Cash Proceeds" means, with respect to any sale, transfer or other
disposition of any asset or the sale or issuance of any Indebtedness or stock,
partnership interests or other ownership interest or warrants, rights or options
to acquire any of the same by any Person, the aggregate amount of cash received
from time to time by or on behalf of such Person in connection with such
transaction after deducting therefrom only (a) reasonable and customary
brokerage commissions, underwriting fees and discounts, legal fees, finder's
fees and other similar fees and commissions and (b) the amount of taxes payable
in connection with or as a direct result of such transaction and, in the case of
a sale or disposition of assets, the amount of any distributions required to be
made in order to avoid the imposition of any corporate level income or excise
tax and (c) the amount of any Indebtedness secured by a Lien on such asset that,
by the terms of such transaction, is required to be repaid upon such
disposition, in each case with respect to the foregoing clauses (a) and (c) to
the extent, but only to the extent, that the
11
<PAGE>
amounts so deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate and are properly attributable to such
transaction or to the asset that is the subject thereof.
"Net Operating Income" means, with respect to any Investment Affiliate for
any period, such entity's operating income minus all operating expenses (as
determined in accordance with GAAP) incurred in connection with and directly
attributable to the generation of such operating income but excluding interest
expense and other debt service charges and any non cash charges such as
depreciation or amortization of financing costs.
"Note Purchase Agreements" shall mean, collectively, (i) the Note Purchase
Agreement dated as of December 15, 1994 between National Golf Operating
Partnership and the Purchasers listed therein with respect to Series A
$50,000,000 8.68% Guarantied Senior Promissory Notes due December 15, 2004 and
Series B $50,000,000 8.73% Guarantied Senior Promissory Notes due June 15, 2005
and (ii) the Restated Note Agreement dated as of July 1, 1996 between National
Golf Operating Partnership and the Purchasers listed therein with respect to
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 and Series B $35,000,000 8% Guarantied Senior Promissory Notes due
10 years from the date of issuance.
"Notes" means collectively each Term Note and each Revolving Note.
"Notice of Assignment" is defined in Section 13.3.2.
--------------
"Obligations" means the Advances, the Facility Letter of Credit Obligations
and all accrued and unpaid fees and all expenses, reimbursements, indemnities
and other obligations of Borrower to the Administrative Agent, the Lenders or
any indemnified party hereunder arising under this Agreement or any of the other
Loan Documents.
"Original Closing Date" means March 29, 1999.
"Participants" is defined in Section 13.2.1.
--------------
"Payment Date" means, with respect to the payment of interest accrued on
any ABR Advance, the first day of each calendar month and, with respect to the
payment of interest accrued on any LIBOR Advance, the last day of the Interest
Period relating thereto or, if sooner, the last day of the third month of such
Interest Period.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Liens" are defined in Section 7.15.
------------
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
12
<PAGE>
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the General Partner, the Borrower or any member of the
Controlled Group may have any liability.
"Project" means any real estate asset owned or operated by the Borrower,
General Partner, or any Subsidiary and operated or intended to be operated as,
or ancillary to, a golf course.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Purchasers" is defined in Section 13.3.1.
--------------
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reimbursement Obligations" means at any time, the aggregate of the
Obligations of the Borrower to the Lenders, the Issuing Bank and the
Administrative Agent in respect of all unreimbursed payments or disbursements
made by the Lenders, the Issuing Bank and the Administrative Agent under or in
respect of the Facility Letters of Credit.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Aggregate Lenders" means those Lenders (other than Defaulting
Lenders who are not entitled to vote) in the aggregate whose portion of the Term
Balance and Aggregate Revolving Commitment is at least 66-2/3% of the sum of (i)
the Aggregate Term Balance and (ii) the Aggregate Revolving Commitment (not held
by Defaulting Lenders), except that if the Aggregate Revolving Commitment has
been terminated, the aggregate unpaid principal amount of the outstanding
Revolving Advances that are not held by Defaulting Lenders shall be substituted
for the Aggregate Revolving Commitment for purposes of determining Required
Lenders.
"Required Lenders" means the Required Revolving Lenders and the Required
Term Lenders.
"Required Revolving Lenders" means Revolving Lenders in the aggregate
having at least 66 2/3% of the Aggregate Revolving Commitment (not held by
Defaulting Lenders who are not entitled to vote) or, if the Aggregate Revolving
Commitment has been terminated, Revolving Lenders in the aggregate holding at
least 66 2/3% of the aggregate unpaid principal amount of
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<PAGE>
the outstanding Revolving Advances (not held by Defaulting Lenders who are not
entitled to vote).
"Required Term Lenders" means Term Lenders in the aggregate holding at
least 66 2/3% of the Aggregate Term Balance (not held by Defaulting Lenders who
are not entitled to vote).
"Reserve Requirement" means, with respect to a LIBOR Interest Period, the
maximum aggregate reserve requirement on Eurocurrency liabilities.
"Revolving Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Revolving Loans (including Swing Line Loans) made by the
Revolving Lenders (or, in the case of Swing Line Loans, the Swing Line Lender)
to the Borrower of the same Type and, in the case of LIBOR Advances, for the
same Interest Period.
"Revolving Commitment" means, for each Revolving Lender, the obligation of
such Revolving Lender to make Revolving Loans not exceeding the amount set forth
opposite its signature below or as set forth in any Notice of Assignment
relating to any assignment that has become effective pursuant to Section 13.3.2,
--------------
as such amount may be modified from time to time pursuant to the terms hereof.
"Revolving Commitment Fee" is defined in Section 2.4.
-----------
"Revolving Commitment Fee Rate" is defined in Section 2.4.
-----------
"Revolving Facility" is defined in Recital D.
---------
"Revolving Facility Termination Date" means March 29, 2002, as the same may
be extended pursuant to Section 2.14.
------------
"Revolving Lender" means the lending institutions listed on the signature
pages of this Agreement that have a Revolving Commitment, their respective
successors and assigns and any other lending institutions that subsequently
become parties to this Agreement pursuant to Section 13.3 and that have a
------------
Revolving Commitment.
"Revolving Loan" means, with respect to a Lender, such Lender's portion of
any Revolving Advance.
"Revolving Note" means a promissory note, in substantially the form of
Exhibit B hereto, duly executed by the Borrower and payable to the order of a
- ---------
Revolving Lender in the amount of its Revolving Commitment, including any
amendment, modification, renewal or replacement of such promissory note.
"Revolving Percentage" means, for each Revolving Lender, the ratio that
such Lender's Revolving Commitment bears to the Aggregate Revolving Commitment,
expressed as a percentage.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
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<PAGE>
"Section 1031 Transaction" means any transaction or series of related
transactions which qualifies as an exchange pursuant to Section 1031 of the
Code.
"Single Employer Plan" means a Plan which is maintained by the General
Partner or the Borrower or any member of the Controlled Group for employees of
the General Partner or the Borrower or any member of the Controlled Group and
which is not a Multiemployer Plan.
"Subsidiary" means, as to any Person, a corporation, partnership or other
entity the financial results of which, in accordance with GAAP, are consolidated
with the financial results of such Person on the consolidated financial
statements of such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower or the General Partner.
"Substantial Portion" means, at any time of determination, with respect to
the Property of the General Partner, the Borrower or their Subsidiaries,
Property which represents more than 10% of the Capitalization Value for the most
recent four calendar quarters for which results have been reported.
"Super Majority Lenders" means Lenders in the aggregate having at least 80%
of the Aggregate Commitment (not held by Defaulting Lenders who are not entitled
to vote) or, if the Aggregate Revolving Commitment has been terminated, Lenders
in the aggregate holding at least 80% of the aggregate unpaid principal amount
of the outstanding Advances (not held by Defaulting Lenders who are not entitled
to vote).
"Swing Line Lender" shall mean Administrative Agent, in its capacity as a
Lender.
"Swing Line Loans" means loans of up to $5,000,000 made by the Swing Line
Lender in accordance with Section 2.13 hereof.
------------
"S&P" means Standard & Poor's Ratings Group and its successors.
"Term Advance" means an Advance outstanding under the Term Facility.
"Term Commitment" means, for each Term Lender, the obligation of such Term
Lender to make a Term Loan in a single disbursement not exceeding the amount set
forth opposite its signature below.
"Term Facility" is defined in Recital D.
---------
"Term Facility Termination Date" means March 29, 2004.
"Term Lenders" means the Lenders which have a Term Commitment, or hold Term
Loans.
"Term Loan" means, with respect to a Lender, such Lender's portion of any
Term Advance.
15
<PAGE>
"Term Note" means a promissory note, in substantially the form of Exhibit C
---------
hereto, duly executed by the Borrower and payable to the order of a Term Lender
in the amount of its Term Commitment, including any amendment, modification,
renewal or replacement of such promissory note.
"Term Percentage" means, for each Term Lender, the ratio that the
outstanding principal balance of such Lender's Term Note bears to the Aggregate
Term Balance, expressed as a percentage. Prior to disbursement of the Term
Facility each Lender's Term Percentage shall be the ratio of such Lender's Term
Commitment to the total amount of the Term Facility.
"Total Property Operating Income" means (i) EBITDA less (ii) interest
----
income on mortgage loans on golf course properties held by the Borrower or any
of its Wholly-Owned Subsidiaries, all for the most recent four (4) fiscal
quarters for which financial results have been reported.
"Transferee" is defined in Section 13.4.
------------
"Type" means, with respect to any Advance, its nature as an ABR Advance or
a LIBOR Advance.
"Unencumbered Asset" means, with respect to any Project which is in
service, at any date of determination, the circumstance that such asset on such
date is wholly owned by the Borrower or a Guarantor holding a fee simple
interest or the tenant's interest under a Financeable Ground Lease and (a) is
not subject to any Liens or claims (including restrictions on transferability or
assignability) of any kind (including any such Lien, claim or restriction
imposed by the organizational documents of any Subsidiary, but excluding
Permitted Liens other than those identified in Sections 7.15(v)), (b) is not
----------------
subject to any agreement (including (i) any agreement governing Indebtedness
incurred in order to finance or refinance the acquisition of such asset, and
(ii) if applicable, the organizational documents of any Subsidiary) which
prohibits or limits the ability of the General Partner, the Borrower or any of
their Subsidiaries to create, incur, assume or suffer to exist any Lien upon any
assets or Capital Stock of the General Partner, the Borrower or any of their
Subsidiaries, and (c) is not subject to any agreement (including any agreement
governing Indebtedness incurred in order to finance or refinance the acquisition
of such asset) which entitles any Person to the benefit of any Lien (but
excluding Permitted Liens other than those identified in Sections 7.15(v)) on
----------------
any assets or Capital Stock of the General Partner, the Borrower or any of their
Subsidiaries, or would entitle any Person to the benefit of any Lien (but
excluding Permitted Liens (other than those identified in Sections 7.15(v)) on
----------------
such assets or Capital Stock upon the occurrence of any contingency (including,
without limitation, pursuant to an "equal and ratable" clause) and (d) is
located in the United States. Each Unencumbered Asset must be leased to an
Approved Operator pursuant to an Approved Operating Lease. Notwithstanding the
foregoing, any Project which would be an Unencumbered Asset but for the
existence of any restrictions on Liens, sales, transferability or assignabilty
contained in the Note Purchase Agreements shall be an Unencumbered Asset for all
purposes of this Agreement.
"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of
16
<PAGE>
all such Plan assets allocable to such benefits, all determined as of the then
most recent valuation date for such Single Employer Plans.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Unrestricted Cash and Cash Equivalents" means, as of any date of
determination, the sum of (a) the aggregate amount of Unrestricted cash then
held by the Borrower or any of its consolidated Subsidiaries and (b) the
aggregate amount of Unrestricted Cash Equivalents (valued at the lower of cost
and fair market value) then held by the Borrower or any of its consolidated
Subsidiaries. As used in this definition, "Unrestricted" means the specified
asset is not subject to any Liens of any kind in favor of any Person.
"Value of Unencumbered Assets" means, as of the end of a quarter, the value
of all Unencumbered Assets owned or leased pursuant to a Financeable Ground
Lease by the Borrower or a Guarantor as of such date, determined by dividing (a)
the result obtained by subtracting from the Total Property Operating Income (i)
the Borrower's and the General Partner's share of the Net Operating Income of
Investment Affiliates, and (ii) the difference between (A) gross rental income
for the most recent four (4) fiscal quarters for which financial results have
been reported attributable to Properties which are not, as of the end of such
quarter, Unencumbered Assets and (B) an allocation of general and administrative
expense equal to seven percent (7%) of such gross rental income by (b) 10.5%.
The gross rental income of Properties which are not Unencumbered Assets shall be
adjusted to include pro forma gross rental income (as substantiated to the
satisfaction of the Administrative Agent) for such four (4) fiscal quarter
period for any such Property acquired or placed in service during such period
and to exclude gross rental income during such period from any such Property not
owned as of the end of such period; provided that in no event shall Unencumbered
Assets held pursuant to Financeable Ground Leases exceed 7% of the total Value
of Unencumbered Assets.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
THE CREDIT
2.1 Commitments
-----------
(a) Revolving Facility. From and including the date of this
------------------
Agreement and prior to the Revolving Facility Termination Date, each
Revolving Lender severally agrees, subject to the terms and conditions set
forth in this Agreement, to make Revolving Loans
17
<PAGE>
to the Borrower from time to time, provided the making of any such
--------
Revolving Loan will not cause the total of the outstanding principal
balance of all Revolving Loans (including Swing Line Loans) and the
Facility Letter of Credit Obligations to exceed the Aggregate Revolving
Commitment. Except for Swing Line Loans, each Revolving Lender shall fund
its Revolving Percentage of each Revolving Advance and no Revolving Lender
will be required to fund any amount, which when aggregated with such
Lender's Revolving Percentage of: (i) all other Revolving Advances then
outstanding, (ii) Facility Letter of Credit Obligations, and (iii) all
Swing Line Loans then outstanding (after giving effect to any repayment of
Swing Line Loans to be made with the proceeds of such Advance), would
exceed such Lender's Revolving Commitment. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow at any time prior to
the Revolving Facility Termination Date. The Revolving Commitments of each
Revolving Lender to lend hereunder shall expire on the Revolving Facility
Termination Date. Each Revolving Advance hereunder shall consist of
Revolving Loans made from the several Revolving Lenders ratably in
proportion to the ratio that their respective Revolving Commitments bears
to the Aggregate Revolving Commitment except for Swing Line Loans which
shall be made by the Swing Line Lender in accordance with Section 2.13. The
------------
Revolving Advances may be ABR Advances or LIBOR Advances, or a combination
thereof, selected by the Borrower in accordance with Sections 2.9 and 2.10.
------------ ----
(b) Term Facility. Each Term Lender severally agrees, subject to
-------------
the terms and conditions set forth in this Agreement, to fund its Term
Percentage of the Term Facility. The Term Commitments of each Term Lender
to lend hereunder shall expire on August 6, 1999, if the conditions to
disbursement of the Term Facility have not been satisfied on or before such
date. The Term Facility may be comprised of ABR Advances or LIBOR Advances,
or a combination thereof, selected by the Borrower in accordance with
Sections 2.9 and 2.10.
------------ ----
2.2 Final Principal Payment.
-----------------------
(a) Revolving Facility. Any outstanding Revolving Advances and all
-------------------
other unpaid Obligations relating to the Revolving Loans shall be paid in
full by the Borrower on the Revolving Facility Termination Date.
(b) Term Facility. Any outstanding Term Advances and all other
--------------
unpaid Obligations shall be paid in full by the Borrower on the Term
Facility Termination Date.
2.3 Applicable Margins.
-------------------
(a) Revolving Facility. For the Revolving Facility, the ABR
-------------------
Applicable Margin and the LIBOR Applicable Margin (as set forth in Exhibit
A) to be used in calculating the interest rate applicable to different
Types of Revolving Advances shall vary from time to time in accordance with
the Borrower's Leverage Ratio.
(b) Term Facility. For the Term Facility, the ABR Applicable
--------------
Margin shall be one and threequarters percent (1.75%) and the LIBOR
Applicable Margin shall be three
18
<PAGE>
percent (3.00%). Such margins shall be used in calculating the interest
rate applicable to different Types of Term Advances.
2.4 Revolving Commitment Fee. The Borrower agrees to pay to the
------------------------
Administrative Agent for the account of each Revolving Lender a commitment fee
(the "Revolving Commitment Fee") calculated on a daily basis at a rate per annum
--------- --------------
("Revolving Commitment Fee Rate") on the daily unborrowed and unallocated
-----------------------------
portion of such Lender's Revolving Commitment (which is equal to the difference
between such Lender's Revolving Commitment and the sum of (i) such Lender's
Revolving Percentage of any Facility Letters of Credit then outstanding plus
(ii) all then-outstanding Revolving Loans owed to such Lender) for each day from
the Closing Date to and including the Revolving Facility Termination Date. The
Revolving Commitment Fee Rate shall vary from time to time based on the
Borrower's Leverage Ratio as set forth in the table attached hereto as Exhibit
-------
A. The Revolving Commitment Fee shall be payable quarterly in arrears on the
last Business Day of each calendar quarter hereafter beginning September 30,
1999 and on the Revolving Facility Termination Date.
2.5 Other Fees. The Borrower will pay to the Arrangers when and as due
----------
the fees specified in that certain Administrative Agent's Fee Letter among the
Borrower, First Chicago, MLCC and the Arrangers bearing even date herewith.
2.6 Reserved.
--------
2.7 Minimum Amount of Each Advance. Each LIBOR Advance shall be in the
------------------------------
minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), and each ABR Advance shall be in the minimum amount of $1,000,000 (and
in multiples of $500,000 if in excess thereof), provided, however, that any ABR
Advance may be in the amount of the unused Aggregate Commitment.
2.8 Prepayments; Reductions in Commitment.
-------------------------------------
(a) Voluntary Prepayments. The Borrower may from time to time pay,
---------------------
without penalty or premium, all or any part of outstanding ABR Advances
that are Revolving Loans upon one Business Day's prior notice to the
Administrative Agent, provided that the amount of any such payment shall
not be less than $1,000,000. The Borrower may from time to time pay any of
the LIBOR Advances that are Revolving Loans, provided such LIBOR Advance
may not be paid prior to the last day of the applicable Interest Period
unless accompanied by any amount due pursuant to Section 4.4.
-----------
(b) Mandatory Prepayments of Term Facility From Net Cash Proceeds.
-------------------------------------------------------------
(i) Net Cash Proceeds of Equity Offering. On the date of
------------------------------------
receipt by the Borrower, the General Partner or any of their Subsidiaries
of the Net Cash Proceeds from the sale or issuance of any stock,
partnership interest or other equity interest, in each case preferred or
common (including, for purposes of this clause (i), equity-like securities
containing terms and conditions deemed to approximate an equity interest in
the discretion of the Required Lenders), in Borrower, the General Partner
or any of their Subsidiaries, except
19
<PAGE>
for (A) issuance and exercise of stock or stock options to employees of
such Person as part of their overall compensation package, (B) capital
contributions by General Partner and/or Borrower to their respective
Subsidiaries and (C) limited partnership interests in Borrower issued in
exchange for the contribution of Properties to Borrower, Borrower shall
make a principal payment to reduce the Aggregate Term Balance by an amount
equal to 50% of the amount of such Net Cash Proceeds until the Aggregate
Commitment has been permanently reduced to $225,000,000. Notwithstanding
the foregoing, the Borrower shall not be required to make any prepayment on
account of the first $50,000,000 of Net Cash Proceeds (less the amount of
Net Cash Proceeds received after the Original Closing Date and prior to the
date hereof) from any such sale or issuance of stock, partnership interest
or other equity interest, in each case preferred or common, which are
received prior to December 31, 1999.
(ii) Net Cash Proceeds of Property Sales. On the date of
-----------------------------------
receipt by the Borrower, the General Partner or any of their Subsidiaries
of the Net Cash Proceeds of the sale, transfer or other disposition of any
assets of Borrower, the General Partner or any of their Subsidiaries,
except for (A) proceeds of the sale of inventory in the ordinary course of
business, (B) proceeds of sales of damaged, worn or obsolete equipment to
the extent such proceeds are intended to be (and are) used to purchase
replacements for such equipment within 180 days or sales of damaged, worn
or obsolete equipment made after the purchase of replacements for such
equipment, (C) proceeds of any sale or disposition of assets which are used
to acquire other property in a Section 1031 Transaction or which are
invested in substantially similar assets within twelve (12) months of such
sale or disposition, (D) insurance proceeds, condemnation awards and
proceeds from the sale of excess land which are invested in substantially
similar assets within twelve (12) months of receipt of such proceeds, and
(E) any leases or subleases of golf course properties in the ordinary
course of business, the Borrower shall make a principal payment to reduce
the Aggregate Term Balance by an amount equal to 100% of the amount of such
Net Cash Proceeds. The Borrower shall deliver to the Administrative Agent a
certificate regarding its permitted use of such Net Cash Proceeds not later
than three (3) Business Days prior to the applicable outside date. If
Borrower fails to deliver such a certificate or if such certificate
discloses that any Net Cash Proceeds within the reinvestment exceptions in
the preceding sentence have not been so used by the applicable date, the
Aggregate Term Balance shall be prepaid by the full amount of such Net Cash
Proceeds (if no certificate is delivered) or any unused portion thereof, if
such a certificate is given.
20
<PAGE>
(iii) Net Cash Proceeds of Debt. On the date of receipt
-------------------------
by the Borrower, the General Partner or any of their
Subsidiaries of the Net Cash Proceeds from the incurrence
or issuance by the Borrower, the General Partner or any of
their Subsidiaries of any Indebtedness except for (A)
Indebtedness that constitutes an equity-like security
included as equity under Section 2.8(b)(i) and (B)
-----------------
Indebtedness secured by a real property mortgage or deed
of trust to the extent that proceeds thereof are used to
purchase or refinance (to the extent only of the existing
purchase money debt) the purchase of the Property that is
the security for such Indebtedness, Borrower shall make a
principal payment to reduce the Aggregate Term Balance by
an amount equal to 100% of the amount of such Net Cash
Proceeds.
(iv) Notice and Effect of Reductions. The Borrower shall give
-------------------------------
the Administrative Agent no less than three (3) Business
Days prior written notice of any anticipated receipt of
Net Cash Proceeds. On the first Business Day after receipt
of such Net Cash Proceeds, the Borrower shall deliver to
the Administrative Agent a certificate showing the source
and amount of such Net Cash Proceeds and, if no payment is
required due to one of the foregoing exceptions,
certifying that all of the conditions to such exception
have been met.
(c) Mandatory Amortization of Term Facility. In addition to the
---------------------------------------
payments required under Section 2.8(b), on each anniversary of the Original
Closing Date, Borrower shall make a principal payment to reduce the
Aggregate Term Balance by an amount equal to $1,000,000. The principal
payments required hereunder shall not be affected by any other payments
applied to reduce the Term Balance.
(d) Voluntary Reduction of Aggregate Revolving Commitment. Upon at
-----------------------------------------------------
least one (1) Business Day prior irrevocable written notice (or telephonic
notice promptly confirmed in writing) to the Administrative Agent, Borrower
shall have the right, without premium or penalty, to terminate the
Aggregate Revolving Commitment in whole or in part provided that (a)
Borrower may not reduce the Aggregate Revolving Commitment below the
Allocated Facility Amount at the time of such requested reduction, and (b)
any such partial termination shall be in the minimum aggregate amount of
Five Million Dollars ($5,000,000.00) or any integral multiple of One
Million Dollars ($1,000,000.00) in excess thereof.
(e) Effect of Reduction of Revolving Commitment. Any reduction in
-------------------------------------------
the Aggregate Revolving Commitment pursuant to this Section 2.8 shall be
-----------
applied pro rata to each Lender's Commitment and any prepayment under this
Section 2.8 shall be applied first to repay Swing Line Loans and then to
-----------
repay other Advances on a pro rata basis.
21
<PAGE>
2.9 Method of Selecting Types and Interest Periods for New Advances. For
---------------------------------------------------------------
both the Term Facility and the Revolving Facility, the Borrower shall select
the Type of Advance and, in the case of each LIBOR Advance, the Interest Period
applicable to each Advance from time to time. For each Advance, the Borrower
shall give the Administrative Agent irrevocable notice (a "Borrowing Notice")
----------------
(i) not later than noon Chicago time, at least one (1) Business Day before the
Borrowing Date of each ABR Advance, (ii) not later than noon Chicago time, at
least three (3) Business Days before the Borrowing Date for each LIBOR Advance,
and (iii) not later than noon Chicago time on the Borrowing Date for each Swing
Line Loan, specifying:
(a) the Borrowing Date, which shall be a Business Day, of such
Advance (provided that there can be only one disbursement for the
Term Facility),
(b) the aggregate amount of such Advance,
(c) the Type of Advance selected (which must be an ABR Advance in the
case of the Swing Line Loans), and
(d) in the case of each LIBOR Advance, the Interest Period applicable
thereto.
Not later than 12:00 p.m. (Chicago time) on each Borrowing Date, each
Lender shall make available its Loan or Loans, in funds immediately available
in Chicago to the Administrative Agent at its address specified pursuant to
Article XIV. The Lenders shall not be obligated to match fund their LIBOR
- -----------
Advances. The Administrative Agent will make the funds so received from the
Lenders available to the Borrower at the Administrative Agent's aforesaid
address.
No Interest Period for a Revolving Advance may end after the Revolving
Facility Termination Date and no Interest Period for a Term Advance may end
after the Term Facility Termination Date. Unless all of the Lenders otherwise
agree in writing, in no event may there be more than ten (10) different Interest
Periods for LIBOR Advances outstanding at any one time collectively under both
the Revolving Facility and the Term Facility.
2.10 Conversion and Continuation of Outstanding Advances. ABR Advances
---------------------------------------------------
shall continue as ABR Advances unless and until such ABR Advances are converted
into LIBOR Advances. Each LIBOR Advance shall continue as a LIBOR Advance until
the end of the then applicable Interest Period therefor, at which time such
LIBOR Advance shall be automatically converted into an ABR Advance unless the
Borrower shall have given the Administrative Agent a Conversion/Continuation
Notice requesting that, at the end of such Interest Period, such LIBOR Advance
continue as a LIBOR Advance for the same or another Interest Period. Subject to
the terms of Section 2.7, the Borrower may elect from time to time to convert
-----------
all or any part of an Advance of any Type into any other Type of Advance;
provided that any conversion of any LIBOR Advance shall be made on, and only on,
the last day of the Interest Period applicable thereto. The Borrower shall give
the Administrative Agent irrevocable notice (a "Conversion/Continuation Notice")
------------------------------
of each conversion of an Advance or continuation of a LIBOR Advance not later
than noon (Chicago time) at least one Business Day, in the case of a conversion
into an ABR Advance, or three Business Days, in the case of a conversion into or
22
<PAGE>
continuation of a LIBOR Advance, prior to the date of the requested conversion
or continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion
into or continuation of a LIBOR Advance, the duration of the
Interest Period applicable thereto.
2.11 Changes in Interest Rate, Etc. Each ABR Advance shall bear interest
------------------------------
on the outstanding principal amount thereof, for each day from and including the
date such Advance is made or is converted from a LIBOR Advance into an ABR
Advance pursuant to Section 2.10 to but excluding the date it becomes due or is
------------
converted into a LIBOR Advance pursuant to Section 2.10 hereof, at a rate per
------------
annum equal to the Adjusted ABR Rate for such day. Changes in the rate of
interest on that portion of any Advance maintained as a ABR Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each LIBOR
Advance shall bear interest from and including the first day of the Interest
Period applicable thereto to (but not including) the last day of such Interest
Period at the interest rate determined in accordance with the terms hereof as
applicable to such LIBOR Advance.
2.12 Rates Applicable After Default. Notwithstanding anything to the
------------------------------
contrary contained in Section 2.9 or 2.10, during the continuance of a Default
----------- ----
or Unmatured Default the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 9.2 requiring unanimous consent of the
-----------
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued beyond its current term as a LIBOR Advance. During
the continuance of a Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.2 requiring
-----------
unanimous consent of the Lenders to changes in interest rates), declare that (i)
each LIBOR Advance shall bear interest for the remainder of the applicable
Interest Period at the rate otherwise applicable to such Interest Period plus 2%
per annum and (ii) each ABR Advance shall bear interest at a rate per annum
equal to the Adjusted ABR Rate otherwise applicable to the ABR Advance plus 2%
per annum (each such rate being a "Default Rate"); provided that such rates
------------
shall become applicable automatically without notice to the Borrower if a
Default occurs under Section 8.7 or Section 8.8 with respect to the Borrower or
----------- -----------
a Guarantor.
2.13 Swing Line Loans. In addition to the other options available to
----------------
Borrower hereunder, up to $5,000,000 of the Swing Line Lender's Revolving
Commitment shall be available for Swing Line Loans subject to the following
terms and conditions. Swing Line Loans shall be made available for same day
borrowings provided that notice is given in accordance with Section 2.9 hereof.
-----------
All Swing Line Loans shall bear interest at the Adjusted ABR Rate. In
23
<PAGE>
no event shall the Swing Line Lender be required to fund a Swing Line Loan if it
would increase the total aggregate outstanding Revolving Loans by Swing Line
Lender hereunder plus its Revolving Percentage of Facility Letter of Credit
Obligations to an amount in excess of its Revolving Commitment. Upon request of
the Swing Line Lender, each Revolving Lender irrevocably agrees to purchase its
Revolving Percentage of any Swing Line Loan made by the Swing Line Lender
regardless of whether the conditions for disbursement are satisfied at the time
of such purchase, including the existence of a Default hereunder, provided that
--------
no Lender shall be required to have the sum of its total outstanding Revolving
Loans plus its Revolving Percentage of Facility Letters of Credit be greater
than its Revolving Commitment. Such purchase shall take place on the date of the
request by Swing Line Lender so long as such request is made by noon (Chicago
time), otherwise on the Business Day following such request. All requests for
purchase shall be in writing. From and after the date it is so purchased, each
such Loan shall be treated as a Revolving Loan made by the purchasing Revolving
Lender and not by the selling Lender for all purposes under this Agreement, and
shall no longer be considered a Swing Line Loan except that all interest
accruing on or attributable to such Loan for the period prior to the date of
such purchase shall be paid when due by the Borrower to the Administrative Agent
for the benefit of the Swing Line Lender and all such amounts accruing on or
attributable to such Loans for the period from and after the date of such
purchase shall be paid when due by the Borrower to the Administrative Agent for
the benefit of the purchasing Lender. If prior to purchasing its Revolving
Percentage in a Swing Line Loan one of the events described in Section 8.7 or
-----------
8.8 shall have occurred and such event prevents the consummation of the purchase
- ---
contemplated by preceding provisions, each Revolving Lender will purchase an
undivided participating interest in the outstanding Swing Line Loan in an amount
equal to its Revolving Percentage of such Swing Line Loan. From and after the
date of each Lender's purchase of its participating interest in a Swing Line
Loan, if the Swing Line Lender receives any payment on account thereof, the
Swing Line Lender will distribute to such Lender its participating interest in
such amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participating interest was
outstanding and funded); provided, however, that in the event that such payment
-------- -------
was received by the Swing Line Lender and is required to be returned to the
Borrower, each Revolving Lender will return to the Swing Line Lender any portion
thereof previously distributed by the Swing Line Lender to it. No Swing Line
Loan shall be outstanding for more than five (5) days at a time and Swing Line
Loans shall not be outstanding for more than a total of ten (10) days during any
month.
2.14 Extension of Revolving Facility Termination Date. If the Borrower
------------------------------------------------
requests an extension of the Revolving Facility Termination Date by written
notice to the Administrative Agent given no later than sixty days prior to the
Revolving Facility Termination Date, the Administrative Agent shall promptly
submit such request to the Revolving Lenders and, if 100% of the Revolving
Lenders approve such extension prior to the Revolving Facility Termination Date,
the Revolving Facility Termination Date shall be extended to March 29, 2003 by
written notice to the Borrower from the Administrative Agent given at the
direction of the Revolving Lenders.
2.15 Method of Payment. All payments of the Obligations hereunder shall be
-----------------
made, without setoff, deduction, or counterclaim, in immediately available funds
to the Administrative Agent at the Administrative Agent's address specified
pursuant to Article XIV, or at any other Lending Installation of the
-----------
Administrative Agent specified in writing by the Administrative
24
<PAGE>
Agent to the Borrower, by noon (local time) on the date when due and shall be
applied by the Administrative Agent among the Lenders in accordance with the
class or type of Obligation being paid. Each payment delivered to the
Administrative Agent for the account of any Lender shall be delivered by the
Administrative Agent to such Lender in the same type of funds that the
Administrative Agent received at its address specified pursuant to Article XIV
-----------
or at any Lending Installation specified in a notice received by the
Administrative Agent from such Lender promptly, which is expected to be by the
close of business on the same Business Day received by Administrative Agent if
received by noon (local time) but shall in any event not be later than the next
Business Day, provided that the Administrative Agent shall pay to such Lenders
--------
interest thereon, at the lesser of (i) the Federal Funds Effective Rate and (ii)
the rate of interest applicable to such Loans, from the Business Day such funds
are received by the Administrative Agent in immediately available funds
(provided, if such funds are not received by the Administrative Agent by noon
--------
(local time), such period shall commence on the Business Day immediately
following the day such funds are received) until such funds are paid to such
Lenders. The Administrative Agent is hereby authorized to charge the account of
the Borrower maintained with First Chicago for each payment of principal,
interest and fees as it becomes due hereunder if not otherwise timely made.
2.16 Notes; Telephonic Notices. Each Lender is hereby authorized to
-------------------------
record the principal amount of each of its Loans and each repayment on the
schedule attached to its Note, provided, however, that the failure to so record
-------- -------
shall not affect the Borrower's obligations under such Note. Each Lender's books
and records, including without limitation, the information, if any, recorded by
the Lender on the Schedule attached to its Note, shall be deemed to be prima
-----
facie correct. The Borrower hereby authorizes the Lenders and the
- -----
Administrative Agent to extend, convert or continue Advances, effect selections
of Types of Advances and to transfer funds based on telephonic notices made by
any Person or Persons the Administrative Agent or any Lender in good faith
believes to be acting on behalf of the Borrower. The Borrower agrees to deliver
promptly to the Administrative Agent a written confirmation signed by an
Authorized Officer of each telephonic notice, if such confirmation is requested
by the Administrative Agent or any Lender. If the written confirmation differs
in any material respect from the action taken by the Administrative Agent and
the Lenders, the records of the Administrative Agent and the Lenders shall
govern absent manifest error.
2.17 Interest Payment Dates; Interest and Fee Basis. Interest accrued on
----------------------------------------------
each Advance shall be payable on each Payment Date, commencing with the first
such date to occur after the date hereof, and at maturity, whether by
acceleration or otherwise. Interest accrued on each LIBOR Advance shall also be
payable on any date on which the LIBOR Advance is prepaid (provided that nothing
herein shall authorize a prepayment which is not otherwise permitted hereunder).
Interest and Revolving Commitment Fees shall be calculated for actual days
elapsed on the basis of a 360-day year; provided that interest on ABR Advances
shall be based on a 365 day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if payment
is received prior to noon (local time) at the place of payment. If any payment
of principal of or interest on an Advance shall become due on a day which is not
a Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
25
<PAGE>
2.18 Notification of Advances, Interest Rates and Prepayments. Promptly
--------------------------------------------------------
after receipt thereof (but in no event later than one Business Day prior to the
proposed Borrowing Date for a ABR Advance or three Business Days prior to the
proposed Borrowing Date for a LIBOR Advance), the Administrative Agent will
notify each Revolving Lender or Term Lender, as applicable, of the contents of
each Borrowing Notice, Conversion/Continuation Notice, and repayment notice
received by it hereunder. The Administrative Agent will notify each Revolving
Lender or Term Lender, as applicable, of the interest rate applicable to each
LIBOR Advance promptly upon determination of such interest rate and will give
each Lender prompt notice of each change in the Alternate Base Rate.
2.19 Lending Installations. Each Lender may book its Loans at any
---------------------
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. Each Lender shall use reasonable efforts to
select a Lending Installation that will minimize any payments by Borrower to
such Lender that may become due under Article IV. All terms of this Agreement
----------
shall apply to any such Lending Installation and the Notes shall be deemed held
by each Lender for the benefit of such Lending Installation. Each Lender may, by
written or telex notice to the Administrative Agent and the Borrower, designate
a Lending Installation through which Loans will be made by it and for whose
account Loan payments are to be made.
2.20 Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the Administrative
Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case
of the Borrower, a payment of principal, interest or fees to the Administrative
Agent for the account of the Lenders, that it does not intend to make such
payment, the Administrative Agent may assume that such payment has been made.
The Administrative Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has not in fact
made such payment to the Administrative Agent, the recipient of such payment
shall, on demand by the Administrative Agent, repay to the Administrative Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Administrative Agent until the date the Administrative Agent recovers
such amount at a rate per annum equal to (i) in the case of payment by a Lender,
the Federal Funds Effective Rate for such day or (ii) in the case of payment by
the Borrower, the interest rate applicable to the relevant Loan.
2.21 Withholding Tax Exemption. At least five Business Days prior to the
-------------------------
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Borrower and the Administrative Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or any other required form
(including a "non-bank certificate" where applicable), certifying in either case
that such Lender is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Lender which so delivers a Form 1001 or 4224 or any other required
form further undertakes to deliver to each of the Borrower and the
Administrative Agent two additional copies of such form (or a successor form) on
or before the date that such form expires (currently, three successive calendar
years for Form 1001 and one
26
<PAGE>
calendar year for Form 4224) or becomes obsolete or after the occurrence of any
event requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Administrative Agent, in each case certifying
that such Lender is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the Administrative Agent
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
2.22 Usury. This Agreement and each Note are subject to the express
-----
condition that at no time shall the Borrower be obligated or required to pay
interest on the principal balance of the Loan at a rate which could subject any
Lender (including the Swing Line Lender) to either civil or criminal liability
as a result of being in excess of the Maximum Legal Rate. If by the terms of
this Agreement or the Loan Documents, the Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in
excess of the Maximum Legal Rate, the interest rate or the Default Rate, as the
case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate
and all previous payments in excess of the Maximum Legal Rate shall be deemed to
have been payments in reduction of principal and not on account of the interest
due hereunder. All sums paid or agreed to be paid to a Lender for the use,
forbearance, or detention of the sums due under the Loan, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that the
rate or amount of interest on account of the Loan does not exceed the Maximum
Legal Rate of interest from time to time in effect and applicable to the Loan
for so long as the Loan is outstanding.
2.23 Applications of Moneys Received. So long as no Default exists
-------------------------------
payments received by Administrative Agent shall be applied to either the
Revolving Facility or Term Facility as specified by Borrower provided that such
specification is in compliance with the terms of this Agreement. After the
occurrence and during the continuance of a Default, all moneys collected or
received by the Administrative Agent on account of the Term Facility or
Revolving Facility directly or indirectly, shall be applied first to the payment
of all reasonable costs incurred in the collection of such moneys of which the
Administrative Agent shall have given notice to the Borrower and then the
remaining amount shall be allocated between the Term Facility and Revolving
Facility on a pro rata basis based on the relative principal amounts outstanding
under the Term Facility and Revolving Facility. The amount so allocated to the
Term Facility or Revolving Facility, as the case may be, shall be applied in the
following order of priority to pay amounts due in connection with the Term
Facility or Revolving Facility, as applicable:
(i) to the reimbursement of any yield protection due to the Lenders
in accordance with Section 4.1;
-----------
(ii) for amounts being applied to the Revolving Facility, to the
payment of any fee due pursuant to Section 3.8(b) in connection
--------------
27
<PAGE>
with the issuance of a Facility Letter of Credit to the Issuing
Bank and to the payment of the Revolving Commitment Fee to the
Revolving Lenders, if then due, in accordance with their
Revolving Percentages and for both the Revolving Facility and
Term Facility, to the payment of the Administrative Agent's fee
to the Administrative Agent if then due;
(iii) for amounts being applied to the Revolving Facility (a) in case
the entire unpaid principal of the Revolving Facility shall not
have become due and payable, the whole amount received as
interest and Facility Letter of Credit Fee then due to the
Revolving Lenders (other than a Defaulting Lender) as their
respective Revolving Percentages appear (except to the extent
there are Swing Line Loans outstanding in which event the full
amount of interest attributable to the Swing Line Loans shall be
payable to the Swing Line Lender unless the Swing Line Lender
shall be a Defaulting Lender), together with the whole amount,
if any, received as principal first to the Swing Line Lender,
unless the Swing Line Lender shall be a Defaulting Lender, to
repay any outstanding Swing Line Loans and then to the Lenders
as their respective Funded Percentages appear, or (b) in case
the entire unpaid principal of the Loan shall have become due
and payable, as a result of a Default or otherwise, to the
payment of the whole amount then due and payable on the
Revolving Facility for principal, together with interest thereon
at the Default Rate or the interest rate, as applicable, to the
Swing Line Lender, unless the Swing Line Lender shall be a
Defaulting Lender, for all such amounts due in connection with
Swing Line Loans and then to the Revolving Lenders (other than a
Defaulting Lender) as their respective Funded Percentages appear
until paid in full and then to the Letter of Credit Collateral
Account until the full amount of Facility Letter of Credit
Obligations is on deposit therein; and
(iv) for amounts being applied to the Term Facility (a) in case the
entire unpaid principal of the Term Facility shall not have
become due and payable, the whole amount received as interest
then due to the Term Lenders (other than a Defaulting Lender) as
their respective Term Percentages appear, together with the
whole amount, if any, received as principal to the Term Lenders
as their respective Term Percentages appear, or (b) in case the
entire unpaid principal of the Term Facility shall have become
due and payable, as a result of a Default or otherwise, to the
payment of the whole amount then due and payable on the Term
Facility for principal, together with interest thereon at the
Default Rate;
(v) to the payment of any sums due to each Defaulting Lender as
their respective Revolving Percentage or Term Percentage appear
28
<PAGE>
(provided that Administrative Agent shall have the right to set-
off against such sums any amounts due from such Defaulting
Lender).
ARTICLE III
THE LETTER OF CREDIT SUBFACILITY
TO THE REVOLVING LOAN FACILITY
3.1 Obligations to Issue. Subject to the terms and conditions of this
--------------------
Agreement and in reliance upon the representations and warranties of the
Borrower and the General Partner herein set forth, the Issuing Bank hereby
agrees to issue for the account of Borrower, one or more Facility Letters of
Credit in accordance with this Article III, from time to time during the period
-----------
commencing on the Closing Date and ending on the Business Day prior to the
Revolving Facility Termination Date. Any Revolving Lender shall have the right
to decline to be the Issuing Bank for a Facility Letter of Credit provided that
if no other Revolving Lender agrees to be the Issuing Bank then Administrative
Agent shall agree to do so.
3.2 Types and Amounts. The Issuing Bank shall not have any obligation to:
-----------------
(i) issue any Facility Letter of Credit if the aggregate maximum
amount then available for drawing under Letters of Credit issued
by such Issuing Bank, after giving effect to the Facility Letter
of Credit requested hereunder, shall exceed any limit imposed by
law or regulation upon such Issuing Bank;
(ii) issue any Facility Letter of Credit if, after giving effect
thereto, the Facility Letter of Credit Obligations would exceed
$10,000,000 or the Allocated Facility Amount would exceed the
Aggregate Commitment;
(iii) issue any Facility Letter of Credit having an expiration date,
or containing automatic extension provisions to extend such
date, to a date which is after the Revolving Facility
Termination Date; or
(iv) issue any Facility Letter of Credit having an expiration date,
or containing automatic extension provisions to extend such
date, to a date which is more than fifteen (15) months after the
date of its issuance.
3.3 Conditions. In addition to being subject to the satisfaction of the
----------
conditions contained in Section 5.2 hereof, the obligation of the Issuing Bank
-----------
to issue any Facility Letter of Credit is subject to the satisfaction in full of
the following conditions:
(i) the Borrower shall have delivered to the Issuing Bank at such
times and in such manner as the Issuing Bank may reasonably
prescribe such documents and materials as may be reasonably
required pursuant to the terms of the proposed Facility Letter
of Credit (it being understood that if any inconsistency exists
between
29
<PAGE>
such documents and the Loan Documents, the terms of the Loan
Documents shall control) and the proposed Facility Letter of
Credit shall be reasonably satisfactory to the Issuing Bank as
to form and content;
(ii) as of the date of issuance, no order, judgment or decree of any
court, arbitrator or Governmental Authority shall purport by its
terms to enjoin or restrain the Issuing Bank from issuing the
requested Facility Letter of Credit and no law, rule or
regulation applicable to the Issuing Bank and no request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank
shall prohibit or request that the Issuing Bank refrain from the
issuance of Letters of Credit generally or the issuance of the
requested Facility Letter or Credit in particular; and
(iii) there shall not exist any Default or Unmatured Default.
3.4 Procedure for Issuance of Facility Letters of Credit.
----------------------------------------------------
(a) Borrower shall give the Issuing Bank and the Administrative Agent
at least five (5) Business Days' prior written notice of any requested issuance
of a Facility Letter of Credit under this Agreement (a "Letter of Credit
----------------
Request") (except that, in lieu of such written notice, the Borrower may give
- -------
the Issuing Bank and the Administrative Agent telephonic notice of such request
if confirmed in writing by delivery to the Issuing Bank and the Administrative
Agent (i) immediately (A) of a telecopy of the written notice required hereunder
which has been signed by an Authorized Officer, or (B) of a telex containing all
information required to be contained in such written notice and (ii) promptly
(but in no event later than the requested date of issuance) of the written
notice required hereunder containing the original signature of an Authorized
Officer); such notice shall specify:
(1) the stated amount of the Facility Letter of Credit requested
(which stated amount shall not be less than $50,000 without the
approval of the Issuing Bank);
(2) the effective date (which day shall be a Business Day) of
issuance of such requested Facility Letter of Credit (the
"Issuance Date");
-------------
(3) the date on which such requested Facility Letter of Credit is to
expire (which date shall be a Business Day and shall in no event
be later than the earlier of fifteen months after the Issuance
Date and the Revolving Facility Termination Date):
(4) the purpose for which such Facility Letter of Credit is to be
issued; and
(5) the Person for whose benefit the requested Facility Letter of
Credit is to be issued.
30
<PAGE>
At the time such request is made, the Borrower shall also provide the
Administrative Agent and the Issuing Bank with a copy of the form of the
Facility Letter of Credit that the Borrower is requesting be issued, which shall
be subject to the approval of the Issuing Bank and Administrative Agent. Such
notice, to be effective, must be received by such Issuing Bank and the
Administrative Agent not later than 2:00 p.m. (Chicago time) on the last
Business Day on which notice can be given under this Section 3.4(a).
--------------
Administrative Agent shall promptly give a copy of the Letter of Credit Request
to the other Revolving Lenders.
(b) Subject to the terms and conditions of this Article III and
-----------
provided that the applicable conditions set forth in Section 4.2 hereof
-----------
have been satisfied, such Issuing Bank shall, on the Issuance Date, issue a
Facility Letter of Credit on behalf of the Borrower in accordance with the
Letter of Credit Request and the Issuing Bank's usual and customary
business practices unless the Issuing Bank has actually received (i)
written notice from the Borrower specifically revoking the Letter of Credit
Request with respect to such Facility Letter of Credit, (ii) written notice
from a Revolving Lender, which complies with the provisions of Section
-------
3.6(a), or (iii) written or telephonic notice from the Administrative
------
Agent stating that the issuance of such Facility Letter of Credit would
violate Section 3.2.
-----------
(c) The Issuing Bank shall give the Administrative Agent and the
Borrower written or telex notice, or telephonic notice confirmed promptly
thereafter in writing, of the issuance of a Facility Letter of Credit (the
"Issuance Notice") and Administrative Agent shall promptly give a copy of
---------------
the Issuance Notice to the other Revolving Lenders.
(d) The Issuing Bank shall not extend or amend any Facility Letter of
Credit unless the requirements of this Section 3.4 are met as though a new
-----------
Facility Letter of Credit was being requested and issued.
3.5 Reimbursement Obligations; Duties of Issuing Bank.
-------------------------------------------------
(a) The Issuing Bank shall promptly notify the Borrower and the
Administrative Agent of any draw under a Facility Letter of Credit, and the
Administrative Agent shall promptly notify the other Revolving Lenders that
such draw has occurred. Any such draw shall constitute a Revolving Advance
in the amount of the Reimbursement Obligation with respect to such Facility
Letter of Credit and shall bear interest from the date of the relevant
drawing(s) under the pertinent Facility Letter of Credit at a rate selected
by Borrower in accordance with Section 2.9 hereof; provided that if a
-----------
Default or an Unmatured Default involving the payment of money exists at
the time of any such drawing(s), then the Borrower shall reimburse the
Issuing Bank for drawings under a Facility Letter of Credit issued by the
Issuing Bank no later than the next succeeding Business Day after the
payment by the Issuing Bank and until repaid such Reimbursement Obligation
shall bear interest from the date funded at the Default Rate.
(b) Any action taken or omitted to be taken by the Issuing Bank under
or in connection with any Facility Letter of Credit, if taken or omitted in
the absence of willful misconduct or gross negligence, shall not put the
Issuing Bank under any resulting liability to Borrower or any Revolving
Lender or, provided that such Issuing Bank has
31
<PAGE>
complied with the procedures specified in Section 3.4 and such Revolving
-----------
Lender has not given a notice contemplated by Section 3.6(a) that continues
--------------
in full force and effect, relieve a Revolving Lender of its obligations
hereunder to the Issuing Bank. In determining whether to pay under any
Facility Letter of Credit, the Issuing Bank shall have no obligation
relative to the Revolving Lenders other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered in compliance, and that they appear to comply on their face, with
the requirements of such Letter of Credit.
3.6 Participation.
-------------
(a) Immediately upon issuance by the Issuing Bank of any Facility
Letter of Credit in accordance with the procedures set forth in Section
-------
3.4, each Revolving Lender shall be deemed to have irrevocably and
---
unconditionally purchased and received from the Issuing Bank, without
recourse, representation or warranty, an undivided interest and
participation equal to such Revolving Lender's Revolving Percentage in such
Facility Letter of Credit (including, without limitation, all obligations
of the Borrower with respect thereto) and any security therefor or guaranty
pertaining thereto; provided that a Letter of Credit issued by the Issuing
--------
Bank shall not be deemed to be a Facility Letter of Credit for purposes of
this Section 3.6 if the Issuing Bank shall have received written notice
-----------
from any Revolving Lender on or before the Business Day prior to the date
of its issuance of such Letter of Credit that one or more of the conditions
contained in Section 5.2 is not then satisfied, and in the event the
-----------
Issuing Bank receives such a notice it shall have no further obligation to
issue any Facility Letter of Credit until such notice is withdrawn by that
Revolving Lender or the Issuing Bank receives a notice from the
Administrative Agent that such condition has been effectively waived in
accordance with the provisions of this Agreement. Each Revolving Lender's
obligation to make further Loans to the Borrower (other than any payments
such Revolving Lender is required to make under subparagraph (b) below) or
issue any Letters of Credit on behalf of Borrower shall be reduced by such
Revolving Lender's pro rata share of each Facility Letter of Credit
outstanding.
(b) In the event that the Issuing Bank makes any payment under any
Facility Letter of Credit and the Borrower shall not have repaid such
amount to the Issuing Bank pursuant to Section 3.7 hereof, the Issuing Bank
-----------
shall promptly notify the Administrative Agent, which shall promptly notify
each Revolving Lender of such failure, and each Revolving Lender shall
promptly and unconditionally pay to the Administrative Agent for the
account of the Issuing Bank the amount of such Revolving Lender's Revolving
Percentage of the unreimbursed amount of such payment, and the
Administrative Agent shall promptly pay such amount to the Issuing Bank.
The failure of any Revolving Lender to make available to the Administrative
Agent for the account of any Issuing Bank its Revolving Percentage of the
unreimbursed amount of any such payment shall not relieve any other
Revolving Lender of its obligation hereunder to make available to the
Administrative Agent for the account of such Issuing Bank its Revolving
Percentage of the unreimbursed amount of any payment on the date such
payment is to be made, but no Revolving Lender shall be responsible for the
failure of any other Revolving Lender to make available to the
Administrative Agent its Revolving Percentage of the
32
<PAGE>
unreimbursed amount of any payment on the date such payment is to be made.
Any Revolving Lender which fails to make any payment required pursuant to
this Section 3.6(b) shall be deemed to be a Defaulting Revolving Lender
--------------
hereunder.
(c) Whenever the Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, the Issuing Bank
shall promptly pay to the Administrative Agent and the Administrative Agent
shall promptly pay to each Revolving Lender which has funded its
participating interest therein, in immediately available funds, an amount
equal to such Revolving Lender's Revolving Percentage thereof.
(d) Upon the request of the Administrative Agent or any Revolving
Lender, an Issuing Bank shall furnish to such Administrative Agent or
Revolving Lender copies of any Facility Letter of Credit to which that
Issuing Bank is party and such other documentation as may reasonably be
requested by the Administrative Agent or Revolving Lender.
(e) The obligations of a Revolving Lender to make payments to the
Administrative Agent for the account of each Issuing Bank with respect to a
Facility Letter of Credit shall be absolute, unconditional and irrevocable,
not subject to any counterclaim, set-off, qualification or exception
whatsoever other than a failure of any such Issuing Bank to comply with the
terms of this Agreement relating to the issuance of such Facility Letter of
Credit and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances.
3.7 Payment of Reimbursement Obligations.
------------------------------------
(a) The Borrower agrees to pay to each Issuing Bank the amount of all
Reimbursement Obligations, interest and other amounts payable to such Issuing
Bank under or in connection with any Facility Letter of Credit when due in
accordance with Section 3.5(a) above, irrespective of any claim, set-off,
--------------
defense or other right which the Borrower may have at any time against any
Issuing Bank or any other Person, under all circumstances, including without
limitation any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a
beneficiary named in a Facility Letter of Credit or any
transferee of any Facility Letter of Credit (or any Person
for whom any such transferee may be acting), the
Administrative Agent, the Issuing Bank, any Revolving
Lender, or any other Person, whether in connection with
this Agreement, any Facility Letter of Credit, the
transactions contemplated herein or any unrelated
transactions (including any underlying transactions
between the Borrower and the beneficiary named in any
Facility Letter of Credit);
33
<PAGE>
(iii) any draft, certificate or any other document presented
under the Facility Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect of any
statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of
the Loan Documents; or
(v) the occurrence of any Default or Unmatured Default.
(b) In the event any payment by the Borrower received by the Issuing
Bank with respect to a Facility Letter of Credit and distributed by the
Administrative Agent to the Revolving Lenders on account of their
participations is thereafter set aside, avoided or recovered from the
Issuing Bank in connection with any receivership, liquidation,
reorganization or bankruptcy proceeding, each Revolving Lender which
received such distribution shall, upon demand by the Issuing Bank,
contribute such Revolving Lender's Revolving Percentage of the amount set
aside, avoided or recovered together with interest at the rate required to
be paid by the Issuing Bank upon the amount required to be repaid by the
Issuing Bank.
3.8 Compensation for Facility Letters of Credit.
-------------------------------------------
(a) The Borrower shall pay to the Administrative Agent, for the
ratable account of the Revolving Lenders, based upon the Revolving Lenders'
respective Revolving Percentages, a per annum fee (the "Facility Letter of
------------------
Credit Fee") with respect to each Facility Letter of Credit that is equal
----------
to the LIBOR Applicable Margin in effect from time to time. The Facility
Letter of Credit Fee relating to any Facility Letter of Credit shall be due
and payable monthly in arrears in equal installments on the last Business
Day of each month following the issuance or extension, as applicable, of
such Facility Letter of Credit and, to the extent any such fees are then
due and unpaid, on the Revolving Facility Termination Date. The
Administrative Agent shall promptly remit such Facility Letter of Credit
Fees, when paid, to the other Revolving Lenders in accordance with their
Revolving Percentages thereof.
(b) The Issuing Bank also shall have the right to receive solely for
its own account an issuance fee of 0.15% of the face amount of each
Facility Letter of Credit, payable by the Borrower on the Issuance Date for
each such Facility Letter of Credit. The Issuing Bank shall also be
entitled to receive its reasonable out-of-pocket costs and the Issuing
Bank's standard charges of issuing, amending and servicing Facility Letters
of Credit and processing draws thereunder.
3.9 Letter of Credit Collateral Account. The Borrower hereby agrees
-----------------------------------
that it will, until the Revolving Facility Termination Date, maintain a special
collateral account (the "Letter of Credit Collateral Account") at the
-----------------------------------
Administrative Agent's office at the address specified pursuant to Article XIV,
-----------
in the name of the Borrower but under the sole dominion and control of the
Administrative Agent, for the benefit of the Revolving Lenders, and in which the
Borrower shall have no interest other than as set forth in Section 9.1. Such
-----------
Letter of Credit Collateral Account
34
<PAGE>
shall be funded to the extent required by Section 9.1. In addition to the
-----------
foregoing, the Borrower hereby grants to the Administrative Agent, for the
benefit of the Revolving Lenders, a properly perfected security interest in and
to the Letter of Credit Collateral Account, any funds that may hereafter be on
deposit in such account and the proceeds thereof.
ARTICLE IV
CHANGE IN CIRCUMSTANCES
4.1 Yield Protection. If after the date hereof there is any change in any
----------------
law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or the compliance of any Lender therewith and such law,
rule, regulation, policy, guideline, directive or interpretation, as changed,
(i) subjects any Lender or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due
from the Borrower (excluding federal, state and local income or
franchise taxes on the overall income of any Lender or
applicable Lending Installation), or changes the basis of
taxation of payments to any Lender in respect of its Loans,
Facility Letters of Credit or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to LIBOR
Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of
making, funding or maintaining loans or reduces any amount
receivable by any Lender or any applicable Lending Installation
in connection with loans, or requires any Lender or any
applicable Lending Installation to make any payment calculated
by reference to the amount of Loans held, Letters of Credit
issued or participated in or interest received by it, by an
amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making,
funding and maintaining its Loans and its Commitment.
4.2 Changes in Capital Adequacy Regulations. If a Lender determines the
---------------------------------------
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change (as hereinafter defined), then, within
fifteen days of demand by such Lender, the Borrower shall pay such Lender the
amount necessary to compensate for any shortfall in the rate of return on the
35
<PAGE>
portion on such increased capital which such Lender determines is attributable
to this Agreement, its Loans, its interest in the Facility Letters of Credit, or
its obligation to make Loans hereunder or participate in or issue Facility
Letters of Credit (after taking into account such Lender's policies as to
capital adequacy). "Change" means (i) any change after the date of this
------
Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change
in any other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of law)
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i)
-----------------------------
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
4.3 Availability of LIBOR Advances. If any Lender determines that
------------------------------
maintenance of any of its LIBOR Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation or directive, whether or not having
the force of law, the Administrative Agent shall suspend the availability of
LIBOR Advances and require any LIBOR Advances to be repaid; or if the Required
Lenders determine that (i) deposits of a type or maturity appropriate to match
fund LIBOR Advances are not available, the Administrative Agent shall suspend
the availability of LIBOR Advances with respect to any LIBOR Advances made after
the date of any such determination, or (ii) an interest rate applicable to a
LIBOR Advance does not accurately reflect the cost of making a LIBOR Advance,
then, if for any reason whatsoever the provisions of Section 4.1 are
-----------
inapplicable, the Administrative Agent shall suspend the availability of LIBOR
Advances with respect to any LIBOR Advances made after the date of any such
determination.
4.4 Funding Indemnification. If any payment of a LIBOR Advance occurs on
-----------------------
a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, or a LIBOR Advance is not made
on the date specified by the Borrower for any reason other than default by the
Lenders, the Borrower will indemnify each Lender for any loss or cost incurred
by it resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the LIBOR
Advance.
4.5 Lender Statements; Survival of Indemnity. To the extent reasonably
----------------------------------------
possible, each Lender shall designate an alternate Lending Installation with
respect to its LIBOR Loans to reduce any liability of the Borrower to such
Lender under Sections 4.1 and 4.2 or to avoid the unavailability of a Type of a
------------ ---
LIBOR Advance under Section 4.3, so long as such designation is not
-----------
disadvantageous to such Lender. Each Lender shall deliver a written statement
of such Lender as to the amount due, if any, under Sections 4.1, 4.2 or 4.4;
------------ --- ---
provided, however, that the Borrower shall not be obligated to compensate any
- -------- -------
Lender for any amounts which accrue prior to a date which is 180 days before
such notice is given. Such written statement shall set forth in reasonable
detail the calculations upon which such Lender determined such amount and shall
be final, conclusive and binding on the Borrower in the absence of manifest
error. Determination of amounts payable under such Sections in connection with
a LIBOR Loan shall be calculated as
36
<PAGE>
though each Lender funded its LIBOR Loan through the purchase of a deposit of
the type and maturity corresponding to the deposit used as a reference in
determining the LIBOR Rate applicable to such Loan, whether in fact that is the
case or not. Unless otherwise provided herein, the amount specified in the
written statement shall be payable within 10 days after receipt by the Borrower
of the written statement. The obligations of the Borrower under Sections 4.1,
------------
4.2 and 4.4 shall survive payment of the Obligations and termination of this
- --- ---
Agreement.
4.6 Substitutions of Lenders. Upon the receipt by the Borrower from any
------------------------
Lender (an "Affected Lender") of a claim for compensation under any of Sections
--------------- --------
4.1 or 4.2, or upon the inability of a Lender to make LIBOR Advances pursuant to
- ----------
Section 4.3, in either case, based upon circumstances not generally applicable
- -----------
to all Lenders the Borrower may: (i) request one or more of the other Lenders
to acquire and assume all or part of such Affected Lender's Loans and Commitment
(provided that no Lender will be required to increase its Commitment); or (ii)
designate a replacement bank or financial institution (a "Replacement Lender")
------------------
to acquire and assume all or a ratable part of all of such Affected Lender's
Loans and Commitments. Any such designation of a Replacement Lender under
clause (ii) shall be subject to the prior written consent of the Administrative
Agent, not to be unreasonably withheld.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Effective Date. This Agreement shall not become effective, and the
--------------
Lenders shall not be required to make any Advance hereunder unless (a) the
Borrower shall have paid all fees due and payable to the Lenders and the
Administrative Agent hereunder, and (b) the Borrower shall have furnished to the
Administrative Agent, in form and substance satisfactory to the Lenders and
their counsel and with sufficient copies for the Lenders, the following:
(i) The duly executed originals of the Loan Documents, including the
Notes, payable to the order of each of the Lenders, the Guaranty
and this Agreement;
(ii) Certified copies of the articles of incorporation of the General
Partner and AGC and the certificate of limited partnership of
the Borrower, each with all amendments and certified by the
appropriate governmental officer of the State of Maryland, the
State of Delaware, or other jurisdiction, as applicable, as of a
recent date;
(iii) Certificates of good standing for the General Partner, AGC and
the Borrower, certified by the appropriate governmental officer
of the State of Maryland, State of Delaware, or other
jurisdiction, as applicable, and foreign qualification
certificates for the General Partner and the Borrower, certified
by the appropriate governmental officer, for each jurisdiction
listed on Schedule 4;
37
<PAGE>
(iv) Copies, certified by an officer of the General Partner, of (1)
its by-laws, together with all amendments thereto and (2) the
Partnership Agreement of the Borrower, together with all
amendments thereto;
(v) An incumbency certificate, executed by an officer of the
General Partner, which shall identify by name and title and
bear the signature of the Persons authorized to sign the Loan
Documents and to make borrowings hereunder on behalf of the
General Partner and the Borrower, upon which certificate the
Administrative Agent and the Lenders shall be entitled to rely
until informed of any change in writing by the Borrower;
(vi) Copies, certified by the Secretary or Assistant Secretary, of
the General Partner's Board of Directors' resolutions
authorizing the Advances provided for herein and the execution,
delivery and performance of the Loan Documents to be executed
and delivered by the General Partner and the Borrower
hereunder;
(vii) A written opinion of the General Partner's and the Borrower's
counsel, addressed to the Lenders in substantially the form of
Exhibit D hereto;
---------
(viii) A certificate, signed by an officer of the General Partner on
behalf of the Borrower and for itself, stating that on the
initial Borrowing Date no Default or Unmatured Default has
occurred and is continuing and that all representations and
warranties of the General Partner and the Borrower are true and
correct as of the initial Borrowing Date;
(ix) The most recent financial statements of AGC, the General
Partner and the Borrower and a certificate from an officer of
the such entity that no material adverse change in such
entity's financial condition has occurred since the date of
such statements;
(x) UCC financing statement, judgment, and tax Lien searches with
respect to the General Partner and the Borrower from the State
of Maryland, the State of Delaware (with respect to the
Borrower only) and the State of California;
(xi) A certificate from the Borrower's principal financial officer
or principal accounting officer regarding the Unencumbered
Assets including such calculations as may be necessary to
determine the Borrower's compliance with the covenant set forth
in Section 7.20(iv) herein;
----------------
(xii) A schedule detailing the economic terms of each Approved
Operating Lease, certified as true and correct by the General
Partner, together with an estoppel certificate from AGC with
respect thereto in a form satisfactory to the Administrative
Agent, which certificate shall also confirm that AGC is not
then in default under any material agreements;
38
<PAGE>
(xiii) Written money transfer instructions, in substantially the form
of Exhibit E hereto, addressed to the Administrative Agent and
---------
signed by an Authorized Officer, together with such other
related money transfer authorizations as the Administrative
Agent may have reasonably requested;
(xiv) Evidence that all parties whose consent is required for the
Borrower or the General Partner to execute the Loan Documents
have provided such consents;
(xv) Such other documents as the Agent or the Arrangers or their
counsel may have reasonably requested, the form and substance
of which documents shall be acceptable to the parties and their
respective counsel.
5.2 Each Advance. The Lenders shall not be required to make any Advance
------------
(including Swing Line Loans) other than an Advance or Swing Line Loan that,
after giving effect thereto and to the application of the proceeds thereof, does
not increase the aggregate amount of outstanding Advances (including Swing Line
Loans), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default; and
(ii) The representations and warranties contained in Article VI are
----------
true and correct as of such Borrowing Date with respect to the
General Partner, the Borrower and to any Subsidiary in
existence (as applicable) on such Borrowing Date in all
material respects, except to the extent any such representation
or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall be true and
correct on and as of such earlier date.
Each Borrowing Notice with respect to each such Advance (including Swing
Line Loans) shall constitute a representation and warranty by the Borrower that
the conditions contained in Sections 5.2(i) and (ii) have been satisfied. At
--------------- ----
the request of the Required Lenders Borrower shall also furnish a duly completed
compliance certificate in substantially the form of Exhibit F hereto (including
---------
all schedules or exhibits) as a condition (which may be satisfied as a condition
subsequent provided it is delivered within the time set forth below) to making
an Advance (including Swing Line Loans); provided that the Borrower shall not be
required to provide such compliance certificate sooner than five (5) Business
Days following the request therefor and provided further that the calculations
contained therein shall be based on the most recent quarterly information
available.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The General Partner and the Borrower each respectively (unless otherwise
noted) represents and warrants to the Lenders that:
39
<PAGE>
6.1 Existence. The General Partner is a corporation duly organized,
---------
validly existing and in good standing under the laws of the State of Maryland,
with its principal place of business in Santa Monica, California and is duly
qualified as a foreign corporation, properly licensed (if required), in good
standing and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except where the failure to be
so qualified or in good standing would not have a Material Adverse Effect. The
Borrower is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware, with its principal place of
business in Santa Monica, California and is duly qualified as a foreign limited
partnership, properly licensed (if required), in good standing and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. Each of the Subsidiaries of
the General Partner and the Borrower is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
6.2 Authorization and Validity. It has the power and authority and legal
--------------------------
right to execute and deliver the Loan Documents to which it is a party and to
perform its obligations thereunder. The execution and delivery by it of the
Loan Documents to which it is a party and the performance of its obligations
thereunder have been duly authorized by proper proceedings, and the Loan
Documents to which it is a party constitute legal, valid and binding obligations
of, respectively, the General Partner or the Borrower enforceable against such
entity in accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity.
6.3 No Conflict; Government Consent. Neither the execution and delivery
-------------------------------
by it of the Loan Documents to which it is a party, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on, respectively, the General Partner or the Borrower or
any of such entity's Subsidiaries or such entity's or any Subsidiary's articles
of incorporation, by-laws, certificate of limited partnership or partnership
agreement or the provisions of any indenture, instrument or agreement to which
such entity or any of its Subsidiaries is a party or is subject, or by which it,
or its Property, is bound, or conflict with or constitute a default thereunder
in any manner that could be reasonably expected to have a Material Adverse
Effect, or result in the creation or imposition of any Lien in, of or on the
Property of such entity or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority is required to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents.
6.4 Financial Statements; Material Adverse Change. The December 31, 1998
---------------------------------------------
consolidated financial statements of the General Partner, the Borrower and their
Subsidiaries heretofore delivered to the Lenders were prepared in accordance
with GAAP in effect on the date such statements were prepared and fairly present
the consolidated financial condition and operations of the General Partner, the
Borrower and their Subsidiaries at such date and the
40
<PAGE>
consolidated results of their operations for the period then ended. Since
December 31, 1998, there has been no change in the business, Property,
prospects, condition (financial or otherwise) or results of operations of the
General Partner, the Borrower and their Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
6.5 Taxes. It and its Subsidiaries have filed all United States federal
-----
tax returns and all other material tax returns which are required to be filed
and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by, respectively, the General Partner or the Borrower or any
of its Subsidiaries except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. No tax Liens have
been filed and no claims are being asserted with respect to any such taxes
(other than Permitted Liens). The charges, accruals and reserves on the books of
the General Partner, the Borrower and their respective Subsidiaries in respect
of any taxes or other governmental charges are adequate.
6.6 Litigation and Guarantee Obligations. There is no litigation,
------------------------------------
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of its officers, threatened against or affecting the
General Partner, the Borrower or any of their Subsidiaries which could
reasonably be expected to have a Material Adverse Effect. It has no material
contingent obligations not provided for or disclosed in the financial statements
referred to in Section 7.1 other than contingent obligations incurred since the
-----------
date of such financial statements which are not prohibited hereunder.
6.7 Subsidiaries. Schedule 1 hereto contains an accurate list of all of
------------
the presently existing Subsidiaries of such entity, setting forth their
respective jurisdictions of incorporation and the percentage of their respective
Capital Stock owned, as of the date hereof, by it or its Subsidiaries. All of
the issued and outstanding shares of Capital Stock of such Subsidiaries have
been duly authorized and issued and are fully paid and non-assessable.
6.8 ERISA. The Unfunded Liabilities of all Single Employer Plans do not in
-----
the aggregate exceed $1,000,000. Neither it nor any other member of the
Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $250,000 in the
aggregate. Each Single Employer Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable Event has occurred
with respect to any Single Employer Plan, neither it nor any other members of
the Controlled Group has withdrawn from any Plan or initiated steps to do so,
and no steps have been taken to reorganize or terminate any Single Employer
Plan.
6.9 Accuracy of Information. All factual information heretofore or
-----------------------
contemporaneously furnished by or on behalf of such entity or any of its
Subsidiaries to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of such
entity or any of its Subsidiaries to the Administrative Agent or any Lender will
be, true and accurate in all material respects (taken as a whole) on the date as
of which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information (taken as a whole)
not materially misleading at such time.
41
<PAGE>
6.10 Margin Stock. It does not hold any margin stock (as defined in
------------
Regulation U), nor is it engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock.
6.11 Material Agreements. Neither it nor any Subsidiary is a party to any
-------------------
agreement or instrument or subject to any charter or other corporate restriction
which could reasonably be expected to have a Material Adverse Effect. Neither
it nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in (i)
any agreement to which it is a party, which default could reasonably be expected
to have a Material Adverse Effect or (ii) any agreement or instrument evidencing
or governing Indebtedness, which in each case would constitute a Default
hereunder.
6.12 Compliance with Laws. It and its Subsidiaries have complied, to the
--------------------
best of their knowledge, with all applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of their
respective businesses or the ownership of their respective Property, except for
any non-compliance which could not reasonably be expected to have a Material
Adverse Effect. Neither it nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any of the
requirements of applicable federal, state and local environmental, health and
safety statutes and regulations or the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.
6.13 Ownership of Properties. On the date of this Agreement, it and its
-----------------------
Subsidiaries will have good title, free of all Liens other than those permitted
by Section 7.15, to all of the Property and assets reflected in the financial
------------
statements as owned by it.
6.14 Investment Company Act. Neither it nor any Subsidiary is an
----------------------
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
6.15 Public Utility Holding Company Act. Neither it nor any Subsidiary is
----------------------------------
a "holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
6.16 Solvency. (i) Immediately after the Closing Date and immediately
--------
following the making of each Loan and after giving effect to the application of
the proceeds of such Loans, (a) the fair value of the assets of the General
Partner, the Borrower and their Subsidiaries on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or
otherwise, of the General Partner, the Borrower and their Subsidiaries on a
consolidated basis; (b) the present fair saleable value of the Property of the
General Partner, the Borrower and their Subsidiaries on a consolidated basis
will be greater than the amount that will be required to pay the probable
liability of the General Partner, the Borrower and their Subsidiaries on a
consolidated basis on their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) the General
42
<PAGE>
Partner, the Borrower and their Subsidiaries on a consolidated basis will be
able to pay their debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) the General
Partner, the Borrower and their Subsidiaries on a consolidated basis will not
have unreasonably small capital with which to conduct the businesses in which
they are engaged as such businesses are now conducted and are proposed to be
conducted after the date hereof.
(ii) It does not intend to, or to permit any of its Subsidiaries to,
and does not believe that it or any of its Subsidiaries will,
incur debts beyond its ability to pay such debts as they mature,
taking into account the timing of and amounts of cash to be
received by it or any such Subsidiary and the timing of the
amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
6.17 Insurance. It and its Subsidiaries carry, or cause a tenant or
---------
subtenant under a lease or sublease of a golf course property to carry (with it
or its Subsidiaries, as appropriate, named as an additional insured), insurance
on their Projects with financially sound and reputable insurance companies, in
such amounts, with such deductibles and covering such risks as are, to the best
of its knowledge, customarily carried by companies engaged in similar businesses
and owning similar projects in localities where it and its Subsidiaries operate,
including, without limitation:
(i) Property and casualty insurance (including coverage for flood
and other water damage for any improvements at any Project
located within a 100-year flood plain) in the amount of the
replacement cost of the improvements at such Project; and
(ii) Comprehensive general liability insurance in the amount of
$20,000,000 per occurrence.
6.18 REIT Status. The General Partner is in good standing on the New York
-----------
Stock Exchange, is qualified as a real estate investment trust and currently is
in compliance with all applicable provisions of the Code.
6.19 Environmental Matters. Each of the following representations and
---------------------
warranties is true and correct on and as of the Closing Date except to the
extent that the facts and circumstances giving rise to any such failure to be so
true and correct, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect:
(i) To the best knowledge of, respectively, the General Partner or
the Borrower, the Projects of such entity and its Subsidiaries
do not contain, and have not previously contained, any Materials
of Environmental Concern in amounts or concentrations which
constitute or constituted a violation of, or could reasonably be
expected to give rise to liability under, Environmental Laws. In
making this statement, the General Partner and the Borrower are
assuming (except to the extent that either of them has actual
knowledge to the contrary) that any Person handling any
Materials
43
<PAGE>
of Environmental Concern at any Project will do so in a
reasonable manner and in accordance with all legal requirements.
(ii) To the best knowledge of such entity, the Projects of such
entity and its Subsidiaries and all operations at the Projects
are in material compliance, and have in the last two years been
in material compliance, with all applicable Environmental Laws,
and there is no material contamination at, under or about the
Projects of such entity and its Subsidiaries, or violation of
any Environmental Law with respect to the Projects of such
entity and its Subsidiaries.
(iii) Neither it nor any of its Subsidiaries has received any written
notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to any of the
Projects, nor does it have knowledge or reason to believe that
any such notice will be received or is being threatened.
(iv) To the best knowledge of such entity, Materials of Environmental
Concern have not been transported or disposed of from the
Projects of such entity and its Subsidiaries in violation of, or
in a manner or to a location which could reasonably be expected
to give rise to liability under, Environmental Laws, nor have
any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Projects of
such entity and its Subsidiaries in violation of, or in a manner
that could reasonably be expected to give rise to liability
under, any applicable Environmental Laws.
(v) No judicial proceedings or governmental or administrative action
is pending, or, to the knowledge of such entity, threatened,
under any Environmental Law to which such entity or any of its
Subsidiaries is or will be named as a party with respect to the
Projects of such entity and its Subsidiaries, nor are there any
consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with
respect to the Projects of such entity and its Subsidiaries.
(vi) To the best knowledge of such entity, there has been no release
or threat of release of Materials of Environmental Concern at or
from the Projects of such entity and its Subsidiaries, or
arising from or related to the operations of such entity and its
Subsidiaries in connection with the Projects in violation of or
in amounts or in a manner that could reasonably be expected to
give rise to liability under Environmental Laws.
6.20 Unencumbered Assets. Schedule 2 hereto contains a complete and
-------------------
accurate description of Unencumbered Assets as of the Closing Date.
44
<PAGE>
6.21 Year 2000 Representation and Warranty. The Borrower has conducted a
-------------------------------------
comprehensive review and assessment of the Borrower's computer applications and
made inquiry of the Borrower's key tenants and lessees with respect to the "year
2000 problem" (that is, the risk that computer applications may not be able to
properly perform date-sensitive functions after December 31, 1999) and, based on
that review and inquiry, the Borrower does not believe the year 2000 problem
will result in a material adverse change in the Borrower's business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the Loan.
ARTICLE VII
COVENANTS
During the term of this Agreement, unless with respect to clauses (i),
(iii) and (iv) of Section 7.20 all of the Lenders or with respect to all other
------------
Sections in this Article VII, the Required Lenders, shall otherwise consent in
-----------
writing:
7.1 Financial Reporting. The General Partner and the Borrower will
-------------------
maintain, for themselves and each Subsidiary, a system of accounting established
and administered in accordance with GAAP, and furnish to the Lenders:
(i) As soon as available, but in any event not later than 50 days
after the close of each of the first three fiscal quarters, for
the General Partner (consolidated with the Borrower and their
Subsidiaries) and for AGC, an unaudited consolidated balance
sheet as of the close of each such period and the related
unaudited consolidated statements of income and retained
earnings and of cash flows of such party for such period and the
portion of the fiscal year through the end of such period,
setting forth in each case in comparative form the figures for
the previous year, all certified by the General Partner's or
AGC's (as the case may be) chief financial officer or chief
accounting officer;
(ii) As soon as available, but in any event not later than 50 days
after the close of each of the first three fiscal quarters, for
the General Partner, the Borrower and their Subsidiaries,
related reports in form and substance satisfactory to the
Required Lenders, all certified by the entity's chief financial
officer or chief accounting officer, including a statement of
Funds From Operations (for the General Partner only), a
description of Unencumbered Assets, a listing of capital
expenditures and a pro-forma acquisition report for newly
acquired Projects in the form previously approved by
Administrative Agent;
(iii) As soon as available, but in any event not later than 100 days
after the close of each fiscal year, for the General Partner
(consolidated with the Borrower and their Subsidiaries) and for
AGC, audited financial statements, including a consolidated
balance sheet as at the end of such year and the related
consolidated statements of income and retained
45
<PAGE>
earnings and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year,
reported on by PricewaterhouseCoopers LLP (or other independent
certified public accountants of nationally recognized standing
acceptable to Administrative Agent) without a "going concern" or
like qualification or exception, or qualification arising out of
the scope of the audit;
(iv) As soon as available, but in any event not later than 100 days
after the close of each fiscal year, for the General Partner,
the Borrower and their Subsidiaries, related reports in form
and substance satisfactory to the Required Lenders, certified
by the entity's chief financial officer or chief accounting
officer, including reports containing information regarding
each individual property in the form described in Section
-------
5.1(xii);
--------
(v) Together with the quarterly and annual financial statements
required hereunder, a compliance certificate in substantially
the form of Exhibit F hereto signed by the General Partner's
---------
and the Borrower's chief financial officers or chief accounting
officers showing the calculations and computations necessary to
determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status
thereof;
(vi) As soon as possible and in any event within 10 days after the
General Partner or the Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement, signed by
the chief financial officer of such entity, describing said
Reportable Event and the action which such entity proposes to
take with respect thereto;
(vii) As soon as possible and in any event within 10 days after
receipt by the General Partner or the Borrower, a copy of (a)
any notice or claim to the effect that the General Partner, the
Borrower or any of their Subsidiaries is or may be liable to
any Person as a result of the release by such entity, any of
its Subsidiaries, or any other Person of any toxic or hazardous
waste or substance into the environment, and (b) any notice
alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the
General Partner or the Borrower or any of their Subsidiaries,
which, in either case, could reasonably be expected to have a
Material Adverse Effect;
(viii) Promptly upon the furnishing thereof to the shareholders of the
General Partner or the partners of the Borrower, copies of all
financial statements, reports, proxy statements and other
materials so furnished;
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other reports and
any other public information which the General Partner, the
Borrower or any of their Subsidiaries files with the Securities
Exchange Commission;
46
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(x) Promptly upon the distribution thereof to the press or the
public, copies of all press releases;
(xi) No later than the first day of each fiscal year, an
operating budget for such fiscal year; and
(xii) Such other information (including, without limitation,
financial statements for the Borrower and non-financial
information) as the Administrative Agent or any Lender may
from time to time reasonably request.
7.2 Use of Proceeds. The General Partner and the Borrower will, and will
---------------
cause each of their Subsidiaries to, use the proceeds of the Advances for the
general business purposes of the Borrower, including working capital needs,
capital improvements and interim financing for property acquisitions of new
Projects, and to refinance existing debt. The General Partner and the Borrower
will not, nor will they permit any Subsidiary to, use any of the proceeds of the
Advances (i) to purchase or carry any "margin stock" (as defined in Regulation
U) or (ii) to fund any purchase of, or offer for, any Capital Stock of any
Person, unless such Person has consented to such offer prior to any public
announcements relating thereto and the Required Lenders have consented to such
use of the proceeds of such Advance (if such consent of the Required Lenders is
required hereunder).
7.3 Notice of Default. The General Partner and the Borrower will give, and
-----------------
will cause each of their Subsidiaries to give, prompt (and in any event within
five Business Days of such Person's learning of such event) notice in writing to
the Lenders of the occurrence of (i) any Default or Unmatured Default and (ii)
of any other development, financial or otherwise, which could reasonably be
expected to have a Material Adverse Effect.
7.4 Conduct of Business; Limitations on Investments. The General Partner
-----------------------------------------------
and the Borrower will do, and will cause each of their Subsidiaries to do, all
things necessary to remain duly incorporated and/or duly qualified, validly
existing and in good standing as a real estate investment trust, corporation,
general partnership or limited partnership, as the case may be, in its
jurisdiction of incorporation/formation and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is conducted and
to carry on and conduct its businesses in substantially the same manner as it is
presently conducted. Neither the General Partner, the Borrower nor any of their
respective Subsidiaries will undertake any business other than the acquisition,
development, ownership and leasing of golf course properties and ancillary
businesses specifically related thereto, except that the Borrower and its
Subsidiaries may invest in (i) undeveloped or non-golf course land, (ii) non-
golf property holdings, (iii) stock holdings, (iv) mortgages on golf course
properties and (v) joint ventures and partnerships, provided that the total
investment in any one of the first three of the foregoing categories (excluding
cash and Cash Equivalents) does not exceed five percent (5%) of Capitalization
Value, the total investment in either of the fourth or fifth categories
(mortgages on golf course properties and joint ventures and partnerships)
(excluding cash and Cash Equivalents) does not exceed ten percent (10%) of
Capitalization Value, and the total investment in all of the foregoing
investment categories (excluding cash and Cash Equivalents) in the aggregate is
less than or equal to fifteen percent (15%) of Capitalization Value (such
determination to be made in each case at the time such investment is made). In
addition, the aggregate amount invested by the Borrower and its
47
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Subsidiaries at any time in the development of golf course properties which are
not yet open for business (including the acquisition cost of the land therefor)
shall not exceed ten percent (10%) of Capitalization Value For the purposes of
this Section 7.4, all assets shall be valued in accordance with GAAP except that
non-revenue generating investments such as land and stock holdings shall be
valued at the lower of acquisition cost or market value. In the event of any
disagreement as to how to value an investment, the reasonable judgment of the
Administrative Agent shall prevail.
7.5 Taxes. The General Partner and the Borrower will pay, and will cause
-----
each of their Subsidiaries to pay, or cause a tenant or subtenant under a lease
or sublease of a Property to pay, when due all material taxes, assessments and
governmental charges and levies upon them or their income, profits or Projects,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside.
7.6 Insurance. The General Partner and the Borrower will maintain, and will
---------
cause each of their Subsidiaries to maintain or cause the tenant or subtenant
under a lease or sublease of a golf course property to maintain (with the
General Partner, the Borrower or their Subsidiaries, as applicable, named as an
additional insured), with financially sound and reputable insurance companies
insurance on all their Property in such amounts and covering such risks as is
consistent with sound business practice, and the General Partner and the
Borrower will furnish to any Lender upon request full information as to the
insurance carried.
7.7 Compliance with Laws. The General Partner and the Borrower will, and
--------------------
will cause each of their Subsidiaries to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
they may be subject.
7.8 Maintenance of Properties. The General Partner and the Borrower will,
-------------------------
and will cause each of their Subsidiaries to (or cause the tenant under a lease
of a golf course property to), do all things necessary to maintain, preserve,
protect and keep its Property in good repair, working order and condition
(ordinary wear and tear excepted), and make all necessary and proper repairs,
renewals and replacements so that their businesses carried on in connection
therewith may be properly conducted at all times.
7.9 Inspection. The General Partner and the Borrower will, and will cause
----------
each of their Subsidiaries to, permit the Lenders, by their respective
representatives and agents, to inspect any of the Projects, corporate books and
financial records of the General Partner, the Borrower and each of their
Subsidiaries, to examine and make copies of the books of accounts and other
financial records of the General Partner, the Borrower and each of their
Subsidiaries, and to discuss the affairs, finances and accounts of the General
Partner, the Borrower and each of their Subsidiaries, and to be advised as to
the same by, their respective officers at such reasonable times during normal
business hours and intervals as the Lenders may designate, all with reasonable
notice. Such inspections and examinations shall be at the Lenders' sole cost and
expense unless a Default has occurred and is continuing at the time thereof.
7.10 Maintenance of Status. The General Partner shall at all times (i)
---------------------
remain a corporation listed and in good standing on the New York Stock Exchange,
and (ii) maintain its status as a real estate investment trust in compliance
with all applicable provisions of the Code.
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<PAGE>
7.11 Dividends. Provided there is not a continuing Default under Section
--------- -------
8.1 or Section 8.2, and there is not a continuing Default under Section 8.3
- --- ----------- -----------
relating to a breach of any of the covenants contained in Section 7.20, the
------------
General Partner shall be permitted to declare and pay dividends on its Capital
Stock from time to time in amounts determined by the General Partner, provided,
--------
however, that subject to the terms of the next sentence, in no event shall the
- -------
General Partner declare or pay dividends on its Capital Stock if dividends paid
in any period of four fiscal quarters, in the aggregate, would exceed 90% of
Funds From Operations for such period. Notwithstanding the foregoing, the
General Partner shall be permitted to distribute whatever amount of dividends is
necessary to maintain its tax status as a real estate investment trust, provided
there is not a continuing Default under Section 8.1 or Section 8.2.
----------- -----------
7.12 Merger; Sale of Assets. The General Partner and the Borrower will not,
----------------------
nor will they permit any of their Subsidiaries to, enter into any merger,
consolidation, reorganization or liquidation or transfer or otherwise dispose of
all or a Substantial Portion of their Property, except for such transactions
that occur between Wholly-Owned Subsidiaries, provided, however, the General
Partner or the Borrower may merge with or acquire other companies or
partnerships so long as:
(i) After giving effect to such merger or acquisition, no provision
of this Agreement will have been violated;
(ii) the General Partner or the Borrower will be the surviving
entity; and
(iii) such merger is not accomplished through a hostile takeover.
The Borrower will notify all of the Lenders of all material acquisitions,
dispositions, mergers or asset purchases regardless of whether or not the
Required Lenders must first give their written consent.
7.13 General Partner's Ownership and Control of Borrower. The General
---------------------------------------------------
Partner will not allow its percentage ownership interest in or voting control of
the Borrower to be less than fifty-one percent (51%) and shall remain the sole
general partner of Borrower. The General Partner will not allow or suffer to
exist any pledge, other encumbrance or the conversion to limited partnership
interests of any of the general partnership interests in the Borrower.
7.14 Sale and Leaseback. The General Partner and the Borrower will not, nor
------------------
will they permit any of their Subsidiaries to, sell or transfer any of its
Projects in order to concurrently or subsequently lease as lessee such Projects.
7.15 Liens. The General Partner and the Borrower will not, nor will they
-----
permit any of their Subsidiaries to, create, incur, or suffer to exist any Lien
in, of or on the Property of the General Partner, the Borrower or any of their
Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on their Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings and
for which adequate reserves shall have been set aside on their
books;
49
<PAGE>
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary
course of business which secure payment of obligations not more
than 90 days past due or which are being contested in good faith
by appropriate proceedings and for which adequate reserves shall
have been set aside on its books;
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation;
(iv) Utility easements, building restrictions, customary license and
use agreements and such other encumbrances or charges against
real property as are of a nature generally existing with respect
to properties of a similar character and which do not in any
material way affect the marketability of the same or interfere
with the use thereof in the business of the General Partner, the
Borrower or their Subsidiaries; and
(v) Liens arising in connection with any Indebtedness permitted
hereunder to the extent such Liens will not result in a
violation of Section 7.20(v) or any of the other provisions of
this Agreement.
Liens permitted pursuant to clauses (i) through (v) of this Section 7.15 shall
------------
be deemed to be "Permitted Liens".
---------------
7.16 Affiliates. The General Partner and the Borrower will not, nor will
----------
they permit any of their Subsidiaries to, enter into any transaction (including,
without limitation, the purchase or sale of any Property or service) with, or
make any payment or transfer to, any Affiliate except in the ordinary course of
business and pursuant to the reasonable requirements of the General Partner's,
the Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the General Partner, the Borrower or such Subsidiary than
the General Partner, the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.
7.17 Interest Rate Hedging. The General Partner and the Borrower will not
---------------------
enter into or remain liable upon, nor will they permit any Subsidiary to enter
into or remain liable upon, any agreements, devices or arrangements designed to
protect at least one of the parties thereto from the fluctuations of interest
rates, exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to, interest
rate exchange agreements, forward currency exchange agreements, interest rate
cap or collar protection agreements, forward rate currency or interest rate
options unless such agreement, device or arrangement was entered into by the
General Partner or the Borrower in the ordinary course of its business for the
purpose of hedging interest rate risk to the General Partner or the Borrower.
7.18 Limitation on Variable Rate Indebtedness. The General Partner and the
----------------------------------------
Borrower shall, at the request of the Required Lenders, enter into such interest
rate protection agreements as may be required to maintain at all times all
Funded Debt which bears interest at a rate that is not fixed for the full period
through the Revolving Facility Termination Date at fifty percent (50%) or less
of total Funded Debt, provided that the Required Lenders shall not require the
50
<PAGE>
General Partner or the Borrower to enter into a specific interest rate
protection agreement that would cause the General Partner to lose its REIT
status.
7.19 Consolidated Net Worth. The General Partner, as of the last day of any
----------------------
fiscal quarter, shall maintain a Consolidated Net Worth of not less than the sum
of (i) $450,000,000 plus (ii) seventy-five percent (75%) of the net proceeds
received by the General Partner (net of customary related fees and expenses) in
connection with any offering of stock or other ownership interest in the General
Partner after the Original Closing Date.
7.20 Indebtedness and Cash Flow Covenants. The General Partner on a
------------------------------------
consolidated basis with the Borrower and their Subsidiaries shall not permit:
(i) as of the last day of any fiscal quarter, the ratio of (A)
EBITDA to (B) Interest Expense for the four (4) fiscal quarters
then ended to be less than, from the Closing Date through
December 31, 1999, 2.5 to 1.0 and thereafter, 2.75 to 1.0;
provided, however, that until four (4) full fiscal quarters have
elapsed after the Original Closing Date, Interest Expense will
be calculated by annualizing the Interest Expense for those full
fiscal quarters that have elapsed since the Original Closing
Date;
(ii) as of the last day of any fiscal quarter, the ratio of (A)
EBITDA to (B) Fixed Charges for the four (4) fiscal quarters
then ended to be less than, from the Closing Date through
December 31, 1999, 1.85 to 1.0 and thereafter, 2.0 to 1.0;
provided, however, that until four (4) full fiscal quarters have
elapsed after the Original Closing Date, Fixed Charges will be
calculated by annualizing the Fixed Charges for those full
fiscal quarters that have elapsed since the Original Closing
Date;
(iii) as of any day, Consolidated Total Indebtedness to exceed fifty
percent (50%) of Capitalization Value;
(iv) as of any day, the Value of Unencumbered Assets to be less than
2.0 times the Consolidated Unsecured Indebtedness; or
(v) as of any day, Consolidated Secured Indebtedness to exceed
twenty percent (20%) of Capitalization Value.
7.21 Environmental Matters. The General Partner and the Borrower will and
---------------------
will cause each of their Subsidiaries to:
7.21.1 comply with, and use its best efforts to ensure
compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and use
its best efforts to ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable
Environmental Laws, except to the extent that failure to do so could
not be reasonably expected to have a Material Adverse Effect;
51
<PAGE>
7.21.2 conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all material
respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws, except to the extent that
(a) the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect, or (b) the
General Partner has determined in good faith that contesting the same
is not in the best interests of the General Partner, the Borrower and
their Subsidiaries and the failure to contest the same could not be
reasonably expected to have a Material Adverse Effect; or
7.21.3 defend, indemnify and hold harmless the Administrative
Agent and each Lender, and their respective employees, agents,
officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Laws
applicable to the operations of the General Partner, the Borrower,
their Subsidiaries or the Projects, or any orders, requirements or
demands of Governmental Authorities related thereto, including,
without limitation, attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful misconduct of the party seeking
indemnification therefor. This indemnity shall continue in full force
and effect regardless of the termination of this Agreement; and
7.21.4 prior to the acquisition of a new Project after the
Closing Date, perform or cause to be performed an environmental
investigation, which investigation shall at a minimum comply with the
specifications and procedures attached hereto as Exhibit G. In
---------
connection with any such investigation, Borrower shall cause to be
prepared a report of such investigation, to be made available to any
Lender upon request, for informational purposes and to assure
compliance with the specifications and procedures.
7.22 Control of the General Partner. The General Partner and the Borrower
------------------------------
will not suffer or permit to occur a "DGP Change of Control" (as such term is
defined in the Note Purchase Agreements (as in effect on the date hereof).
7.23 Approved Operating Leases. The Borrower shall lease at least 90% (by
-------------------------
Capitalization Value) of its Projects to Approved Operators under Approved
Operating Leases.
7.24 Borrower's Partnership Agreement. The General Partner shall not
--------------------------------
consent to any changes to Borrower's partnership agreement without the prior
written consent of the Required Lenders, provided that without such prior
consent the General Partner may consent to (i) immaterial changes that do not
adversely affect the Lenders, (ii) any changes necessary to maintain the General
Partner's status as a real estate investment trust, and (iii) changes necessary
52
<PAGE>
to permit an additional common or preferred equity offering that do not
adversely affect the Lenders.
7.25 General Partner's Assets. The General Partner shall not invest in or
------------------------
own any material assets directly other than its partnership interest in
Borrower.
7.26 Notice of Rating Change. The Borrower shall notify the Administrative
-----------------------
Agent promptly if there is any change in the long term unsecured debt rating
from Moody's, S&P or the National Association of Insurance Commissioners of
either the General Partner or the Borrower.
7.27 Year 2000 Compliance. The Borrower will promptly notify the
--------------------
Administrative Agent in the event the Borrower discovers or determines that any
computer application (including those of its suppliers and vendors) that is
material to its or any of its Subsidiaries' business and operations will not be
Year 2000 compliant on a timely basis, except to the extent that such failure
could not reasonably be expected to have a Material Adverse Effect.
7.28 Operating Leases. The Borrower shall not, without the prior written
----------------
consent of the Required Lenders, modify, amend, or terminate any Approved
Operating Lease if such modification, amendment or termination is reasonably
anticipated to be adverse to the Borrower or Lenders in any material respect.
7.29 Capital Expenditures. The Borrower shall not make any capital
--------------------
expenditures with respect to any Property unless an Approved Operator under an
Approved Operating Lease or the tenant under a lease otherwise permitted
hereunder has agreed in writing to compensate Borrower for the cost of such
capital expenditure through the payment of increased rental under such Approved
Operating Lease or lease, provided such Approved Operator or tenant shall
maintain, at its sole expense, such capital expenditure in a manner consistent
with its original condition, subject to normal wear and tear, throughout the
term of the Approved Operating Lease or lease.
7.30 No Negative Pledge. The General Partner and the Borrower will not, and
------------------
they will not permit their Subsidiaries to, enter into any agreement with any
Person after the date hereof which prohibits the ability of the General Partner,
the Borrower or any of their Subsidiaries to create, incur, assume or suffer to
exist any Lien on the assets of the General Partner, the Borrower or any of
their Subsidiaries other than any agreement in favor of the Administrative Agent
and the Lenders, provided, however, that this Section 7.30 shall not apply to
restrictions under Capitalized Leases with respect to the Property subject
thereto or to Indebtedness secured by Liens permitted hereunder, provided such
restrictions are by their terms effective only against the assets subject to
such Liens.
ARTICLE VIII
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
8.1 Nonpayment of Principal. Nonpayment of any principal payment on any
-----------------------
Note when due.
53
<PAGE>
8.2 Nonpayment of Other Amounts. Nonpayment of interest upon any Note or of
---------------------------
any Revolving Commitment Fee or other payment Obligations under any of the Loan
Documents within five (5) Business Days after the same becomes due.
8.3 Breach of Certain Covenants. The breach of any of the terms or
---------------------------
provisions of Sections 7.2, 7.10 through 7.20, 7.22, 7.24 and 7.25.
------------ ---- ---- ---- ---- ----
8.4 Representation of Warranty Untrue. Any representation or warranty made
---------------------------------
or deemed made by or on behalf of the General Partner, the Borrower or any of
their Subsidiaries to the Lenders or the Administrative Agent under or in
connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made.
8.5 Breach of Other Provisions. The breach (other than a breach which
--------------------------
constitutes a Default under Section 8.1, 8.2, 8.3 or 8.4) of any of the terms or
provisions of this Agreement or any other Loan Document which is not remedied
within thirty (30) days after written notice from the Administrative Agent or
any Lender.
8.6 Material Indebtedness. (i) Any failure of the General Partner, the
---------------------
Borrower or any of their Subsidiaries or of AGC to pay when due any payment due
under any Funded Debt or lease obligations aggregating in excess of $5,000,000
("Material Indebtedness") after giving effect to any applicable grace period
---------------------
thereunder; or (ii) any default in the performance of any term, provision or
condition contained in any agreement under which any such Material Indebtedness
was created or is governed, or any other event shall occur or condition exist,
the effect of which is to cause, or to permit the holder or holders of such
Material Indebtedness to cause, such Material Indebtedness to become due prior
to its stated maturity; or (iii) any Material Indebtedness of the General
Partner, the Borrower, any of their Subsidiaries shall or of AGC shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof.
8.7 Voluntary Bankruptcy. The General Partner, the Borrower or any of their
--------------------
Subsidiaries or AGC shall (i) have an order for relief entered with respect to
it under the federal bankruptcy laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (iv) institute any proceeding seeking an order for relief under the
federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate
it as a bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, (v) take any corporate action to authorize or effect any of the
foregoing actions set forth in this Section 8.7, (vi) not pay, or admit in
-----------
writing its inability to pay, its debts generally as they become due.
8.8 Involuntary Bankruptcy. A receiver, trustee, examiner, liquidator or
----------------------
similar official shall be appointed for the General Partner, the Borrower or any
of their Subsidiaries or for AGC, or a proceeding described in Section 8.7(iv)
---------------
shall be instituted against the General Partner, the
54
<PAGE>
Borrower or any such Subsidiary or AGC and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of sixty (60) consecutive days.
8.9 Condemnation. Any court, government or governmental agency shall
------------
condemn, seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Projects of the Borrower and its
------------
Subsidiaries which, when taken together with all other Property of the Borrower
and its Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such Condemnation occurs, constitutes a Substantial Portion of their Property.
8.10 Judgments. The General Partner, the Borrower or any of their
---------
Subsidiaries or AGC shall fail within sixty (60) days to pay, bond or otherwise
discharge any judgments or orders for the payment of money in an amount which,
when added to all other judgments or orders outstanding against the General
Partner, the Borrower or any Subsidiary or AGC would exceed $10,000,000 in the
aggregate, which have not been stayed on appeal or otherwise appropriately
contested in good faith.
8.11 AGC. AGC shall (i) have failed by December 31, 1999 to have extended
---
the termination and maturity dates of all of its existing credit facilities to
match or extend beyond the Revolving Facility Termination Date hereunder; (ii)
have failed to maintain at all times prior to the Revolving Facility Termination
Date hereunder, calculated at the end of each fiscal quarter of AGC, a ratio of
(A) EBITDA (except it shall be as reported by AGC after adjustment to add to
operating income the amount of membership initiation fees not included in
operating income due to the requirement of GAAP to recognize such fees as income
over a period of time on a straight line basis) plus GAAP rental expense, in
----
each case for the most recent four (4) fiscal quarters for which financial
results have been reported to (B) GAAP rental expense plus GAAP interest expense
----
of at least 1.1 to 1.0, in each case for the most recent four (4) fiscal
quarters for which financial results have been reported, (iii) have failed to
make any payment of rent or other material monetary obligation under any
Approved Operating Lease with the Borrower within thirty (30) days after the due
date thereof or (iv) enter into any merger, consolidation reorganization or
liquidation or transfer or otherwise dispose of all or Substantial Portion of
its assets, except for such transactions that occur between wholly-owned
Subsidiaries of AGC and the merger of Golf Enterprises, Inc. into AGC, and other
mergers where AGC is the surviving entity and such merger is not accomplished
through a hostile takeover.
8.12 Pledge of AGC Ownership Interests. Less than sixty-five percent (65%)
---------------------------------
of the total ownership interests in AGC shall be unencumbered by any pledge or
other security interest therein.
8.13 Ownership of AGC. Less than sixty-five percent (65%) of the total
----------------
ownership interests in AGC or of the total voting power shall be held, in the
aggregate, by David G. Price, Dallas Price and/or their children and
grandchildren and respective spouses of any of the foregoing or by trusts in
which such Persons hold the entire beneficial interest or other entities wholly
owned and controlled by such Persons.
8.14 Multiemployer Plan Withdrawal Liability. The General Partner, the
---------------------------------------
Borrower or any other member of the Controlled Group shall have been notified by
the sponsor of a
55
<PAGE>
Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all other amounts
required to be paid to Multiemployer Plans by the General Partner, the Borrower
or any other member of the Controlled Group as withdrawal liability (determined
as of the date of such notification), exceeds $1,000,000 or requires payments
exceeding $250,000 per annum.
8.15 Multiemployer Plan Termination. The General Partner, the Borrower or
------------------------------
any other member of the Controlled Group shall have been notified by the sponsor
of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, if as a result of
such reorganization or termination the aggregate annual contributions of the
General Partner, the Borrower and the other members of the Controlled Group
(taken as a whole) to all Multiemployer Plans which are then in reorganization
or being terminated have been or will be increased over the amounts contributed
to such Multiemployer Plans for the respective plan years of each such
Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding $250,000.
8.16 Environmental Remediation. Failure to remediate within the time period
-------------------------
permitted by law or governmental order, after all administrative hearings and
appeals have been concluded (or within a reasonable time in light of the nature
of the problem if no specific time period is so established), material
environmental problems related to Projects of the Borrower and its Subsidiaries
if the affected Projects have an aggregate book value in excess of $10,000,000.
8.17 Revocation of Guaranty. The revocation or attempted revocation of any
----------------------
Guaranty.
ARTICLE IX
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
9.1 Acceleration. If any Default described in Section 8.7 or Section 8.8
------------ ----------- -----------
occurs with respect to the General Partner or the Borrower, the obligations of
the Revolving Lenders to make Loans and of the Issuing Bank to issue Facility
Letters of Credit hereunder shall automatically terminate and the Obligations
shall immediately become due and payable without any election or action on the
part of the Administrative Agent or any Lender. If any Default other than those
described in Section 8.7 or Section 8.8 occurs, (i) the Required Revolving
----------- -----------
Lenders may terminate or suspend the obligations of the Revolving Lenders to
make Revolving Loans hereunder and to issue Facility Letters of Credit and the
Required Lenders may declare the Obligations to be due and payable, or both,
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which the Borrower
hereby expressly waives.
In addition to the foregoing, following the occurrence of a Default and so
long as any Facility Letter of Credit has not been fully drawn and has not been
cancelled or expired by its terms, upon demand by the Administrative Agent the
Borrower shall deposit in the Letter of Credit Collateral Account cash in an
amount equal to the aggregate undrawn face amount of all
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outstanding Facility Letters of Credit and all fees and other amounts due or
which may become due with respect thereto. The Borrower hereby pledges and
assigns to the Administrative Agent on behalf of the Lenders, and hereby grants
a security interest to the Administrative Agent on behalf of the Lenders in, the
Letter of Credit Collateral Account. The Borrower shall have no control over
funds in the Letter of Credit Collateral Account, which funds will be invested
by the Administrative Agent from time to time at its discretion in certificates
of deposit of First Chicago having a maturity not exceeding 30 days. Such funds
shall be promptly applied by the Administrative Agent to reimburse any Issuing
Bank for drafts drawn from time to time under the Facility Letters of Credit.
Such funds, if any, remaining in the Letter of Credit Collateral Account
following the payment of all Obligations in full shall, unless Administrative
Agent is otherwise directed by a court of competent jurisdiction, be promptly
paid over to the Borrower.
If, within ten (10) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Revolving Lenders to make
Revolving Loans hereunder or to issue Facility Letters of Credit as a result of
any Default (other than any Default as described in Section 8.7 or 8.8 with
----------- ---
respect to the Borrower) and before any judgment or decree for the payment of
the Obligations shall have been obtained or entered, (i) the Required Revolving
Lenders (in the case of termination of the obligation to make Revolving Loans or
issue Facility Letters of Credit) or (ii) the Required Lenders (in the case of
an acceleration) shall so direct, the Administrative Agent shall, by notice to
the Borrower, rescind and annul such acceleration and/or termination.
9.2 Amendments. Subject to the provisions of this Article IX, the Required
----------
Revolving Lenders and the Required Term Lenders (or the Administrative Agent
with the consent in writing of both the Required Revolving Lenders and Required
Term Lenders) and the Borrower may enter into agreements supplemental hereto for
the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder or
waiving any Default hereunder (any of the foregoing being referred to as a
"Modification"); provided, however, that any such Modification with respect to
------------ -------- -------
the matters described below shall require the consent of the number of Lenders
so indicated below:
(a) The following Modifications shall require the consent of all
Lenders:
(i) Releasing the General Partner from the Guaranty;
(ii) Reducing the percentage specified in the definition of
Required Lenders, Super Majority Lenders, Required
Revolving Lenders, or Required Term Lenders;
(iii) Increasing the amount of the Aggregate Commitment;
(iv) Permitting the Borrower to assign or allow another Person
to assume its rights under this Agreement, other than
pursuant to a merger or other transaction permitted or
consented to hereunder;
(v) Amending this Section 9.2;
-----------
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(vi) Amending clause (iv) of Section 7.20 or any of the defined
------------
terms contained therein; and
(vii) Subordinating the Obligations to any other Indebtedness of
the Borrower or the Guarantor.
(b) The following Modifications shall require the consent of the Super
Majority Lenders:
(i) Amending any of clauses (i) or (iii) of Section 7.20 or
----
any of the defined terms contained therein.
(c) The following Modifications shall require the consent of all
Revolving Lenders in addition to the consent of the Required Aggregate
Lenders:
(i) Extending the Revolving Facility Termination Date;
(ii) Forgiving all or any portion of the principal amount of
any Revolving Loan or accrued interest thereon or the
Revolving Commitment Fee;
(iii) Modifying the Applicable Margins for Revolving Advances or
otherwise changing the interest rate options available for
Revolving Advances; and
(iv) Extending the time of payment of any of the Obligations
relating to the Revolving Facility.
(d) The following Modifications shall require the consent of all Term
Lenders in addition to the consent of the Required Aggregate Lenders:
(i) Extending the Term Facility Termination Date;
(ii) Forgiving all or any portion of the principal amount of
the Term Loan or accrued interest thereon;
(iii) Modifying the Applicable Margins for Term Advances or
otherwise changing the interest rate options available for
Term Advances; and
(iv) Extending the time of payment of any of the Obligations
relating to the Term Facility, including any modification
of Section 2.8(b) regarding mandatory prepayments of the
Term Facility.
(e) Any Modification not referenced in subsections (a) through (d)
which pertains to a term or provision applicable only to either the Term
Facility or the Revolving Facility shall require the consent of the
Required Term Lenders or Required Revolving Lenders (as applicable) in
addition to the Required Aggregate Lenders, except
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that in addition to the foregoing required consents, no increase in the
Applicable Margin for the Revolving Facility or modification of the
Revolving Facility Termination Date (except as contemplated by Section
2.14) shall be effective without the consent of the Required Term Lenders.
(f) No amendment of any provision of this Agreement relating to the
Administrative Agent shall be effective without the written consent of the
Administrative Agent, and no amendment increasing either the Term
Commitment or the Revolving Commitment of any Lender shall be effective
without the written consent of such Lender.
9.3 Preservation of Rights. No delay or omission of the Lenders or the
----------------------
Administrative Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of a Default or
the inability of the Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 9.2, and
-----------
then only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Administrative Agent and the Lenders until the
Obligations have been paid in full.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations. All representations and warranties of the
---------------------------
Borrower contained in this Agreement shall survive delivery of the Notes and the
making of the Loans herein contemplated.
10.2 Governmental Regulation. Anything contained in this Agreement to the
-----------------------
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
10.3 Taxes. Any taxes (excluding federal, state and local income or
-----
franchise or other taxes on the overall net income of any Lender) or other
similar assessments or charges made by any governmental or revenue authority in
respect of the Loan Documents shall be paid by the Borrower, together with
interest and penalties, if any (to the extent such interest and penalties do not
result from delay by any Lender).
10.4 Headings. Section headings in the Loan Documents are for convenience
--------
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
10.5 Entire Agreement. The Loan Documents embody the entire agreement and
----------------
understanding among the Borrower, the General Partner, the Administrative Agent
and the Lenders and supersede all prior commitments, agreements and
understandings among the
59
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Borrower, the Administrative Agent and the Lenders relating to the subject
matter thereof, except for the agreement of the Borrower to pay certain fees to
the Administrative Agent as set forth in the Administrative Agent's Fee Letter
referred to in Section 2.5 and the agreement of the Administrative Agent to pay
-----------
certain fees to the Lenders.
10.6 Several Obligations; Benefits of this Agreement. The respective
-----------------------------------------------
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Administrative Agent is authorized to act as such). The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender from
any of its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
10.7 Expenses; Indemnification. The Borrower shall reimburse the Arrangers
-------------------------
on demand for any reasonable costs, internal charges and reasonable out-of-
pocket expenses (including, without limitation, all reasonable fees for
consultants and reasonable fees and expenses for attorneys for the Arrangers,
which attorneys may be employees of the Arrangers) paid or incurred by the
Arrangers (whether in their capacity as arrangers, or, in the case of First
Chicago, in its capacity as Administrative Agent) in connection with the
preparation, negotiation, execution, delivery, review, amendment, modification,
and administration of the Loan Documents. The Borrower also agrees to reimburse
the Arrangers and the Lenders for any reasonable costs, internal charges and
reasonable out-of-pocket expenses (including, without limitation, all reasonable
fees and expenses for attorneys for the Arrangers and the Lenders, which
attorneys may be employees of the Arrangers or the Lenders) paid or incurred by
the Arrangers (whether in their capacity as arrangers, or, in the case of First
Chicago, in its capacity as Administrative Agent) or any Lender in connection
with the collection and enforcement of the Loan Documents or the Obligations
(including, without limitation, any negotiation of any restructuring or workout
whether or not consummated). The Borrower further agrees to indemnify the
Administrative Agent, the Arrangers and each Lender and their directors,
officers and employees against all losses, claims, damages, penalties,
judgments, liabilities and reasonable expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not such entity is
a party thereto) which any of them may pay or incur arising out of or relating
to this Agreement, the other Loan Documents, the Projects, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder, except to the extent arising
from the gross negligence or willful misconduct of the person seeking
indemnification. The obligations of the Borrower under this Section 10.7 shall
------------
survive the termination of this Agreement.
10.8 Reserved.
--------
10.9 Accounting. Except as provided to the contrary herein, all accounting
----------
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.
10.10 Severability of Provisions. Any provision in any Loan Document that
--------------------------
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that
60
<PAGE>
jurisdiction or the operation, enforceability, or validity of that provision in
any other jurisdiction, and to this end the provisions of all Loan Documents are
declared to be severable.
10.11 Nonliability of Lenders. The relationship between the General Partner
-----------------------
and the Borrower, on the one hand, and the Lenders, the Arrangers and the
Administrative Agent, on the other, shall be solely that of borrower and lender.
Neither the Administrative Agent, the Arrangers nor any Lender shall have any
fiduciary responsibilities to the General Partner and the Borrower. Neither the
Administrative Agent, the Arrangers nor any Lender undertakes any responsibility
to the Borrower to review or inform the Borrower of any matter in connection
with any phase of the Borrower's business or operations.
10.12 Publicity. The Lenders shall have the right to publish a tombstone
---------
publicizing the transaction contemplated hereby without the consent of the
Borrower or the General Partner; provided, however, that the Lenders shall first
provide the Borrower and the General Partner the opportunity to review the
proposed tombstone.
10.13 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
-------------
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
10.14 CONSENT TO JURISDICTION. THE GENERAL PARTNER AND THE BORROWER EACH
-----------------------
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF (i) ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO AND (ii) ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS AND THE
GENERAL PARTNER AND THE BORROWER EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE GENERAL
PARTNER OR THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY THE GENERAL PARTNER OR THE BORROWER AGAINST THE ADMINISTRATIVE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS OR NEW YORK, NEW YORK.
10.15 WAIVER OF JURY TRIAL. THE GENERAL PARTNER, THE BORROWER, THE
--------------------
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY,
61
<PAGE>
ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
10.16 Confidentiality. Each Lender agrees to hold any non-public
---------------
confidential information which it may receive from the Borrower pursuant to this
Agreement in confidence, except for disclosure (i) to its affiliates and to
other Lenders and their respective affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Lender or to a Transferee,
(iii) to regulatory officials, (iv) as required by law, regulation, or legal
process, (v) to such Lender's direct or indirect contractual counterparts in
swap agreements or to legal counsel, accountants and other professional advisors
to such counterparts, (vi) permitted by Section 13.4, (vii) of information that
------------
was or becomes generally available to the public other than by disclosure by
such Lender, or (viii) to the extent reasonably required in connection with the
enforcement of this Agreement or any other Loan Documents.
ARTICLE XI
THE ADMINISTRATIVE AGENT AND AGREEMENTS AMONG LENDERS
11.1 Appointment. Subject to the provisions of Section 11.11, The First
----------- -------------
National Bank of Chicago is hereby appointed Administrative Agent hereunder and
under each other Loan Document, and each of the Lenders irrevocably authorizes
the Administrative Agent to act as the agent of such Lender. The Administrative
Agent agrees to act as such upon the express conditions contained in this
Article XI. The Administrative Agent shall not have a fiduciary relationship in
- ----------
respect of the Borrower or any Lender by reason of this Agreement. The
Administrative Agent agrees to administer the Term Facility and Revolving
Facility consistent with the manner in which it administers loans held for its
own account.
11.2 Powers. The Administrative Agent shall have and may exercise such
------
powers under the Loan Documents as are specifically delegated to the
Administrative Agent by the terms of each thereof, together with such powers as
are reasonably incidental thereto. The Administrative Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by the Administrative Agent.
11.3 General Immunity. Neither the Administrative Agent nor any of its
----------------
directors, officers, agents or employees shall be liable to the Borrower, the
Lenders or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
11.4 No Responsibility for Loans, Recitals, etc. Neither the Administrative
-------------------------------------------
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Lender; (iii) the
62
<PAGE>
satisfaction of any condition specified in Article V, except receipt of items
---------
required to be delivered to the Administrative Agent; (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security. The
Administrative Agent shall have no duty to disclose to the Lenders information
that is not required to be furnished by the Borrower to the Administrative Agent
at such time, but is voluntarily furnished by the Borrower to the Administrative
Agent (either in its capacity as Administrative Agent or in its individual
capacity).
11.5 Action on Instructions of Lenders. The Administrative Agent shall in
---------------------------------
all cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Loan Document in accordance with written instructions signed
by the Lenders required by Article IX, and such instructions and any action
taken or failure to act pursuant thereto shall be binding on all of the Lenders
and on all holders of Notes. The Administrative Agent shall be fully justified
in failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the Lenders
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
11.6 Employment of Agents and Counsel. The Administrative Agent may execute
--------------------------------
any of its duties as Administrative Agent hereunder and under any other Loan
Document by or through employees, agents, and attorneys-in-fact and so long as
it exercises reasonable care in the selection of such parties, the
Administrative Agent shall not be answerable to the Lenders, except as to money
or securities received by it or its authorized agents, for the default or
misconduct of any such parties. The Administrative Agent shall be entitled to
advice of counsel concerning all matters pertaining to the agency hereby created
and its duties hereunder and under any other Loan Document.
11.7 Reliance on Documents; Counsel. The Administrative Agent shall be
------------------------------
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper Person or Persons, and, in respect
to legal matters, upon the opinion of counsel selected by the Administrative
Agent, which counsel may be employees of the Administrative Agent.
11.8 Administrative Agent's Reimbursement and Indemnification. The Lenders
--------------------------------------------------------
agree to reimburse and indemnify the Administrative Agent ratably in proportion
to their respective portions of the Aggregate Commitment (i) for any reasonable
amounts not reimbursed by the Borrower for which the Administrative Agent is
entitled to reimbursement by the Borrower under the Loan Documents including
reasonable out-of-pocket expenses in connection with the preparation, execution,
delivery of the Loan Documents, (ii) for any other reasonable out-of-pocket
expenses not reimbursed by the Borrower incurred by the Administrative Agent on
behalf of the Lenders, in connection with the administration and enforcement of
the Loan Documents and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of the
Loan Documents or any other document delivered in connection therewith or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
--------
for any of the foregoing to the extent they
63
<PAGE>
arise from the gross negligence or willful misconduct of the Administrative
Agent. The obligations of the Lenders under this Section 11.8 shall survive
------------
payment of the Obligations and termination of this Agreement.
11.9 Rights as a Lender. In the event the Administrative Agent is a Lender,
------------------
the Administrative Agent shall have the same rights and powers and the same
duties and obligations hereunder and under any other Loan Document as any Lender
and may exercise the same as though it were not the Administrative Agent, and
the term "Lender" or "Lenders" shall, at any time when the Administrative Agent
is a Lender, unless the context otherwise indicates, include the Administrative
Agent in its individual capacity. The Administrative Agent may accept deposits
from, lend money to, and generally engage in any kind of trust, debt, equity or
other transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging with any
other Person.
11.10 Lender Credit Decision. Each Lender acknowledges that it has,
----------------------
independently and without reliance upon the Administrative Agent or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
11.11 Successor Administrative Agent. The Administrative Agent may resign
------------------------------
at any time by giving written notice thereof to the Lenders and the Borrower,
and the Administrative Agent shall be deemed to have automatically resigned if
it is no longer a Lender, such resignation in either case to be effective upon
the appointment of a successor Administrative Agent or, if no successor
Administrative Agent has been appointed, forty-five days after the retiring
Administrative Agent gives notice of its intention to resign or ceases to be a
Lender, as the case may be. The Administrative Agent may be removed at any time
with good cause by written notice received by the Administrative Agent from the
Required Lenders, such removal to be effective on the date specified by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders and,
provided there exists no Default or Unmatured Default hereunder, with the
consent (not to be unreasonably withheld) of the Borrower, a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning
Administrative Agent's giving notice of its intention to resign, then the
resigning Administrative Agent may appoint, on behalf of the Borrower and the
Lenders and, provided there exists no Default or Unmatured Default hereunder,
with the consent (not to be unreasonably withheld) of the Borrower, a successor
Administrative Agent. If the Administrative Agent has resigned or been removed
and no successor Administrative Agent has been appointed within 45 days, the
Lenders shall perform all the duties of the Administrative Agent hereunder and
the Borrower shall make all payments in respect of the Obligations to the
applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Administrative Agent shall be deemed to be appointed
hereunder until such successor
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<PAGE>
Administrative Agent has accepted the appointment. Any such successor
Administrative Agent shall be a commercial bank (or a subsidiary thereof) having
capital and retained earnings of at least $500,000,000, except that if the
successor Administrative Agent is a subsidiary of a bank, such capital and
retained earnings requirement shall apply only to the parent bank. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning or removed Administrative Agent. Upon the effectiveness of the
resignation or removal of the Administrative Agent, the resigning or removed
Administrative Agent and the successor Administrative Agent shall pro rate any
agency fees, and the resigning or removed Administrative Agent shall be
discharged from its duties and obligations hereunder and under the Loan
Documents. After the effectiveness of the resignation or removal of an
Administrative Agent, the provisions of this Article XI shall continue in effect
for the benefit of such Administrative Agent in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent
hereunder and under the other Loan Documents.
11.12 Notice of Defaults. If a Lender becomes aware of a Default or
------------------
Unmatured Default, such Lender shall notify the Administrative Agent of such
fact. Upon receipt of such notice that a Default or Unmatured Default has
occurred, the Administrative Agent shall notify each of the Lenders of such
fact.
11.13 Requests for Approval. If the Administrative Agent requests in
---------------------
writing the consent or approval of a Lender, such Lender shall respond and
either approve or disapprove definitively in writing to the Administrative Agent
within ten Business Days (or sooner if such notice specifies a shorter period
for responses based on Administrative Agent's good faith determination that
circumstances exist warranting its request for an earlier response) after such
written request from the Administrative Agent. If the Lender does not so
respond, that Lender shall be deemed to have approved the request, except that
such deemed approval shall not apply to any request requiring the approval of
100% of the Lenders.
11.14 Copies of Documents. Within fifteen Business Days after a request by
-------------------
a Lender to the Administrative Agent for documents furnished to the
Administrative Agent by the Borrower, the Administrative Agent shall provide
copies of such documents to such Lender.
11.15 Defaulting Lenders. At such time as a Lender becomes a Defaulting
------------------
Lender, such Defaulting Lender's right to vote on matters which are subject to
the consent or approval of the Required Lenders, each affected Lender or all
Lenders shall be immediately suspended until such time as the Lender is no
longer a Defaulting Lender. If a Defaulting Lender has failed to fund its pro
rata share of any Advance and until such time as such Defaulting Lender
subsequently funds its pro rata share of such Advance, all Obligations owing to
such Defaulting Lender hereunder shall be subordinated in right of payment, as
provided in the following sentence, to the prior payment in full of all
principal of, interest on and fees relating to the Loans funded by the other
Lenders in connection with any such Advance in which the Defaulting Lender has
not funded its pro rata share (such principal, interest and fees being referred
to as "Senior Loans" for the purposes of this section). All amounts paid by the
------------
Borrower and otherwise due to be applied to the Obligations owing to such
Defaulting Lender pursuant to the terms hereof shall be distributed by the
Administrative Agent to the other Lenders in accordance with their respective
pro rata
65
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shares (recalculated for the purposes hereof to exclude the Defaulting Lender)
until all Senior Loans have been paid in full. After the Senior Loans have been
paid in full equitable adjustments will be made in connection with future
payments by the Borrower to the extent a portion of the Senior Loans had been
repaid with amounts that otherwise would have been distributed to a Defaulting
Lender but for the operation of this Section 11.15. This provision governs only
-------------
the relationship among the Administrative Agent, each Defaulting Lender and the
other Lenders; nothing hereunder shall limit the obligation of the Borrower to
repay all Loans in accordance with the terms of this Agreement. The provisions
of this section shall apply and be effective regardless of whether a Default
occurs and is continuing, and notwithstanding (i) any other provision of this
Agreement to the contrary, (ii) any instruction of the Borrower as to its
desired application of payments or (iii) the suspension of such Defaulting
Lender's right to vote on matters which are subject to the consent or approval
of the Required Lenders or all Lenders.
ARTICLE XII
SETOFF; RATABLE PAYMENTS
12.1 Setoff. In addition to, and without limitation of, any rights of the
------
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of the Borrower may be offset and applied toward
the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due. The Lenders agree for the
benefit of each other Lender (but not the Borrower) that any set-off shall first
be applied to the Obligations before being applied to any other Indebtedness
owing to such Lender.
12.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
----------------
payment made to it upon its Loans (other than payments received pursuant to
Sections 4.1, 4.2 or 4.4) in a greater proportion than that received by any
- ------------ --- ---
other Lender (based on the total outstanding amount of the Revolving Facility
and Term Facility), such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
ARTICLE XIII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1 Successors and Assigns. The terms and provisions of the Loan Documents
----------------------
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns, except that (i) the Borrower shall
not have the right to assign its rights or obligations under the Loan Documents
and (ii) any assignment by any Lender must be made in
66
<PAGE>
compliance with Section 13.3. Notwithstanding clause (ii) of this Section 13.1,
------------ ------------
any Lender may at any time, without the consent of the Borrower or the
Administrative Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided, however, that no
such assignment shall release the transferor Lender from its obligations
hereunder. The Administrative Agent may treat the payee of any Note as the owner
thereof for all purposes hereof unless and until such payee complies with
Section 13.3 in the case of an assignment thereof or, in the case of any other
- ------------
transfer, a written notice of the transfer is filed with the Administrative
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
13.2 Participations.
--------------
13.2.1 Permitted Participants; Effect. Any Lender, in the
------------------------------
ordinary course of its business and in accordance with applicable law,
at any time, may sell participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents.
Any Person to whom such a participating interest is sold is a
"Participant". In the event of any such sale by a Lender of
-----------
participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder
of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrower under this Agreement shall be
determined as if such Lender had not sold such participating
interests, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.
13.2.2 Voting Rights. Each Lender shall retain the sole right to
-------------
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment or postpones any
date fixed for any regularly-scheduled payment of principal of, or
interest or fees on, any such Loan or Commitment or releases any
guarantor of any such Loan or releases any substantial portion of
collateral, if any, securing such Loan.
13.2.3 Benefit of Setoff. The General Partner and the Borrower
-----------------
each agrees that each Participant shall be deemed to have the right of
setoff provided in Section 12.1 in respect of its participating
------------
interest in amounts owing under the Loan Documents to the same extent
as if the amount of its participating interest were owing directly to
it as a Lender under the Loan Documents, provided that each Lender
shall retain the right of setoff provided in Section 12.1 with respect
------------
67
<PAGE>
to the amount of participating interests sold to each Participant. The
Lenders agree to share with each Participant, and each Participant, by
exercising the right of setoff provided in Section 12.1, agrees to
------------
share with each Lender, any amount received pursuant to the exercise
of its right of setoff, such amounts to be shared in accordance with
Section 12.2 as if each Participant were a Lender.
------------
13.3 Assignments.
-----------
13.3.1 Permitted Assignments. Any Lender, in the ordinary course
---------------------
of its business and in accordance with applicable law, at any time,
may assign all or any portion (greater than or equal to $5,000,000 per
assignee if it is only a portion of such Lender's interest) of its
rights and obligations under the Loan Documents. Any Person to whom
such rights and obligations are assigned is a "Purchaser". Such
---------
assignment shall be substantially in the form of Exhibit G hereto or
---------
in such other form as may be agreed to by the parties thereto. Any
such assignment made after the initial syndication of the Facility has
been completed by the Arrangers shall also require the consent of the
Borrower, which consent shall not be unreasonably withheld, provided
that no consent of the Borrower shall be required with respect to any
assignment by a Lender to an Affiliate of that Lender or to any other
Lenders or if a Default has occurred and is continuing. Lenders may
hold and assign different percentages in the Revolving Facility and
the Term Facility. The consent of the Administrative Agent shall be
required prior to an assignment becoming effective with respect to a
Purchaser which is not a Lender or an Affiliate thereof, which consent
shall not be unreasonably withheld or delayed.
13.3.2 Effect; Effective Date. Upon (i) delivery to the
----------------------
Administrative Agent of a notice of assignment, substantially in the
form attached as Exhibit J to Exhibit H hereto (a "Notice of
--------- --------- ---------
Assignment"), together with any consents required by Section 13.3.1,
---------- --------------
and (ii) payment by the assigning Lender of a $3,500 fee to the
Administrative Agent for processing such assignment (unless the
assignment is to an affiliate of the Lender in which case no fee shall
be charged), such assignment shall become effective on the effective
date specified in such Notice of Assignment. The Notice of Assignment
shall contain a representation by the Purchaser to the effect that
none of the consideration used to make the purchase of the Commitment
and Loans under the applicable assignment agreement are "plan assets"
as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets"
under ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement
and any other Loan Document executed by the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to
the same extent as if it were an original party hereto, and no further
consent or action by the Borrower, the Lenders or the Administrative
Agent shall be required to release the transferor Lender with respect
to the percentage of the Aggregate Commitment and Loans assigned to
such Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 13.3.2, the transferor Lender, the
--------------
Administrative Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such
68
<PAGE>
transferor Lender and new Notes or, as appropriate, replacement Notes,
are issued to such Purchaser, in each case in principal amounts
reflecting their Commitment, as adjusted pursuant to such assignment.
13.4 Dissemination of Information. The General Partner and the Borrower
----------------------------
authorize each Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
----------
Lender's possession concerning the creditworthiness of the General Partner, the
Borrower and their Subsidiaries.
13.5 Tax Treatment. If any interest in any Loan Document is transferred to
-------------
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any state thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.21.
------------
ARTICLE XIV
NOTICES
14.1 Giving Notice. Except as otherwise permitted by Section 2.16 with
------------- ------------
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties, and, in the case
of a notice to the General Partner or the Borrower, shall be directed to the
attention of its principal accounting officer. Any notice, if mailed and
properly addressed with postage prepaid, shall be deemed given when received;
any notice, if transmitted by telex or facsimile, shall be deemed given when
transmitted (answerback confirmed in the case of telexes).
14.2 Change of Address. The General Partner, the Borrower, the
-----------------
Administrative Agent and any Lender may each change the address for service of
notice upon it by a notice in writing to the other parties hereto.
ARTICLE XV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Administrative Agent
and the Lenders and each party has notified the Administrative Agent by telex or
telephone that it has taken such action.
[REMAINDER OF PAGE LEFT BLANK]
69
<PAGE>
IN WITNESS WHEREOF, the Borrower, the General Partner, the Lenders and the
Administrative Agent have executed this Agreement as of the date first above
written.
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
By: National Golf Properties, Inc., its General
Partner
By: /s/ James M. Stanich
-----------------------------
Print Name: James M. Stanich
----------------------
Title: President
----------------------------
c/o National Golf Properties, Inc.
2951 28th Street, Suite 3001
Santa Monica, California 90405
Attention: Principal Accounting Officer
Telephone: (310) 664-4000
Facsimile: (310) 664-6170
NATIONAL GOLF PROPERTIES, INC.
By: /s/ James M. Stanich
-----------------------------
Print Name: James M. Stanich
----------------------
Title: President
----------------------------
2951 28/th/ Street, Suite 3001
Santa Monica, California 90405
Attention: Principal Accounting Officer
Telephone: (310) 664-4000
Facsimile: (310) 664-6170
<PAGE>
Commitments:
Revolving Commitment: $22,500,000.00 THE FIRST NATIONAL BANK OF
Term Commitment: $ 2,500,000.00 CHICAGO, Individually and
Administrative Agent
By: /s/ Richard G. Hillsman
------------------------------
Print Name: Richard G. Hillsman
------------------------
Title: First Vice President
-----------------------------
One First National Plaza
10th Floor, Mail Suite 0634
Chicago, Illinois 60670
Attention: Sharon Bosch
Telephone: (312) 732-7112
Facsimile: (312) 732-4840
Revolving Commitment: $17,500,000.00 MERRILL LYNCH CAPITAL
Term Commitment: $17,500,000.00 CORPORATION, Individually and as
Syndication Agent
By: /s/ Howard B. Sysler
----------------------------
Print Name: Howard B. Sysler
--------------------
Title: Vice President
--------------------------
World Financial Center
North Tower, 7/th/ Floor
New York, New York 10281-1307
Attention: Carol Feeley
Telephone: (212) 449-8414
Facsimile: (212) 738-1649
<PAGE>
Revolving Commitment: $20,000,000.00 ING (U.S.) CAPITAL LLC,
Term Commitment: $0 Individually and as Co-Documentation
Agent and Co-Arranger
By: /s/ David A. Mazujian
---------------------------
Print Name: David A. Mazujian
---------------------
Title: Managing Director
---------------------------
55 East 52/nd/ Street, 35th Floor
New York, NY 10055
Attention: David Mazujian
Telephone: (212) 409-1207
Facsimile: (212) 409-5848
Revolving Commitment: $25,000,000.00 UNION BANK OF CALIFORNIA, N.A.,
Term Commitment: $0 Individually and as Co-Documentation
Agent
By: /s/ Thomas D. Nations
---------------------------
Print Name: Thomas D. Nations
---------------------
Title: Sr. Vice President
---------------------------
445 S. Figueroa Street
Los Angeles, CA 90071
Attention: Thomas Nations
------------------------
Telephone: (213) 236-7765
----------------
Facsimile: (213) 236-7635
----------------
<PAGE>
Revolving Commitment: $10,000,000.00 BANKBOSTON, N.A., Individually and
Term Commitment: $10,000,000.00 as Co-Agent
By: /s/ CB Moore
---------------------------
Print Name: CB Moore
---------------------
Title: Vice President
---------------------------
Diversified Finance, MS 01-08-05
100 Federal Street
Boston, MA 02110
Attention: Constance Moore
Telephone: (617) 434-9383
Facsimile: (617) 434-4929
Revolving Commitment: $16,000,000.00 CITY NATIONAL BANK, Individually
Term Commitment: $0 and as Co-Agent
By: /s/ Steven K. Sloan
---------------------------
Print Name: Steven K. Sloan
---------------------
Title: Vice President
---------------------------
400 N. Roxbury Drive, 3/rd/ Floor
Beverly Hills, CA 90210
Attention: Steven K. Sloan
Telephone: (310) 888-6140
Facsimile: (310) 888-6564
<PAGE>
Revolving Commitment: $16,000,000.00 WELLS FARGO BANK, NATIONAL
Term Commitment: $0 ASSOCIATION, Individually and as Co-Agent
By: /s/ Anthony D. Premer
---------------------------
Print Name: Anthony D. Premer
---------------------
Title: Vice President
---------------------------
333 S. Grand Avenue, 3/rd/ Floor
Los Angeles, CA 90071
Attention: Perry Moreth
Telephone: (213) 253-6866
Facsimile: (213) 687-3501
Revolving Commitment: $0 PACIFIC LIFE INSURANCE COMPANY
Term Commitment: $20,000,000.00
By: /s/ T. Anthony Premer
-------------------------------
Print Name: T. Anthony Premer
-----------------------
Title: Assitant Vice President
----------------------------
By: /s/ C.S. Dillion
-------------------------------
Print Name: C.S. Dillion
------------------------
Title: Assistant Secretary
------------------------------
700 Newport Center Drive
Newport Beach, CA 92660-6397
Attention: T. Anthony Premer
Telephone: (949) 219-5447
Facsimile: (949) 219-5174
<PAGE>
Revolving Commitment: $16,000,000.00 AMSOUTH BANK
Term Commitment: $ 0
By: /s/ Lawrence Clark
---------------------------
Print Name: Lawrence Clark
---------------------
Title: VP
---------------------------
1900 5/th/ Avenue North, 9/th/ Floor
AmSouth Sonat Tower
Birmingham, AL 35203
Attention: Lawrence Clark
Telephone: (205) 581-7493
Facsimile: (205) 326-4075
Revolving Commitment: $16,000,000.00 CALIFORNIA FEDERAL BANK
Term Commitment: $0
By: /s/ Scott Aney
---------------------------
Print Name: Scott Aney
---------------------
Title: Senior Vice President
---------------------------
15233 Ventura Boulevard
Sherman Oaks, CA 91403
Attention: Gary Gruman
Telephone: (818) 528-7585
Facsimile: (818) 528-7590
<PAGE>
Revolving Commitment: $16,000,000.00 FIRST AMERICAN BANK TEXAS, SSB
Term Commitment: $0
By: /s/ Amy Engelberg
---------------------------
Print Name: Amy Engelberg
---------------------
Title: Assistant Vice President
---------------------------
14651 Dallas Parkway
Dallas, TX 75240
Attention: Amy Engelberg
Telephone: (972) 419-3542
Facsimile: (972) 419-3308
Revolving Commitment: $5,000,000.00 BANK OF MONTREAL
Term Commitment: $10,000,000.00
By: /s/ R.J. McClorey
---------------------------
Print Name: R.J. McClorey
---------------------
Title: Director
---------------------------
430 Park Avenue
New York, NY 10022
Attention: Melanie Hamlon
Telephone: (212) 605-1464
Facsimile: (212) 605-1455
<PAGE>
Revolving Commitment: $0 BHF (USA) CAPITAL CORPORATION
Term Commitment: $10,000,000.00
By: /s/ Patrick S. Marsh
---------------------------
Print Name: Patrick S. Marsh
---------------------
Title: Associate
---------------------------
By: /s/ Hans J. Scholt
---------------------------
Print Name: Hans J. Scholt
---------------------
Title: Vice President
---------------------------
590 Madison Avenue
New York, NY 10022
Attention: Thomas J. Scifo
Telephone: (212) 756-5912
Facsimile: (212) 756-5536
Revolving Commitment: $10,000,000.00 CREDIT LYONNAIS NEW YORK
Term Commitment: $0 BRANCH
By: /s/ Joseph A. Asciolla
---------------------------
Print Name: Joseph A. Asciolla
---------------------
Title: First Vice President
---------------------------
1301 Avenue of the America
New York, New York 10019-6022
Attention: Bruno DeFloor
Telephone: (212) 261-3234
Facsimile: (212) 261-7532
<PAGE>
Revolving Commitment: $10,000,000.00 DRESDNER BANK, AG, NEW YORK
Term Commitment: $0 AND GRAND CAYMAN BRANCHES
By: /s/ John W. Sweeney
---------------------------
/s/ Christopher E. Saris
---------------------------
Print Name: John W. Sweeney
---------------------
Christopher E. Saris
----------------------
Title: Vice President
---------------------------
Assistant Vice President
---------------------------
Real Estate Finance Group
75 Wall Street
New York, New York 10005-2889
Attention: John Sweeney
Telephone: 212-429-2955
Facsimile: 212-429-2130
with a copy to:
--------------
Allen Kirschenbaum
Dresdner Bank AG
Real Estate Finance Group
333 South Grand Avenue
Suite 1700
Los Angeles, California 90071
Revolving Commitment: $0 PILGRIM PRIME RATE TRUST
Term Commitment: $10,000,000.00
By: Pilgrim Investments, Inc.,
As its investment manager
By: /s/ Robert L. Wilson
---------------------------
Print Name: Robert L. Wilson
---------------------
Title: Vice President
---------------------------
Two Renaissance Square
40 N. Central Avenue, Suite 1200
Phoenix, AZ 85004-4424
Attention: Mark Haak
Telephone: (602) 417-8155
Facsimile: (602) 417-8327
<PAGE>
Revolving Commitment: $0 THE TRAVELERS INSURANCE
Term Commitment: $10,000,000.00 COMPANY
By: /s/ Craig H. Farnsworth
---------------------------
Print Name: Craig H. Farnsworth
---------------------
Title: 2nd Vice President
---------------------------
One Tower Square
Hartford, CT 06183-2030
Attention: Teresa M. Torrey
Telephone: (860) 277-5952
Facsimile: (860) 954-5243
Revolving Commitment: $0 MASSACHUSETTS MUTUAL
Term Commitment: $5,000,000.00 LIFE INSURANCE COMPANY
By: /s/ John B. Wheeler
---------------------------
Print Name: John B. Wheeler
---------------------
Title: Managing Director
---------------------------
1295 State Street, Mail Stop F461
Springfield, MA 01111-0001
Attention: John Wheeler
Telephone: (413)744-5075
Facsimile:
<PAGE>
Revolving Commitment: $0 OCTAGON LOAN TRUST
Term Commitment: $5,000,000
By: /s/ James P. Ferguson
---------------------------
Print Name: James P. Ferguson
---------------------
Title: Senior Portfolio Manager
---------------------------
380 Madison Avenue, 9/th/ Floor
New York, NY 10017
Attention: James P. Ferguson
Telephone: (212) 622-3070
Facsimile: (212) 622-3797
<PAGE>
EXHIBIT A
---------
REVOLVING FACILITY
------------------
PRICING GRID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Pricing
- ---------------------------------------------------------------------------------------------------------------------------------
Leverage RATIO LIBOR Applicable Margin ABR Applicable Margin Revolving Commitment Fee
(Funded (BPS) (BPS) (BPS)
Debt/Capital-ization Value)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or
equal to 45% 225 100 50
- --------------------------------------------------------------------------------------------------------------------------------
Greater than or
equal to 40% but 200 75 37.5
less than 45%
- --------------------------------------------------------------------------------------------------------------------------------
Greater than or
equal to 35% but 175 50 30
less than 40%
- -------------------------------------------------------------------------------------------------------------------------------
Less than 35% 150 25 25
===============================================================================================================================
</TABLE>
On the Closing Date, the LIBOR Margin for the Revolving Facility shall be
225 basis points, the ABR Applicable Margin for the Revolving Facility shall be
100 basis points and the Revolving Commitment Fee shall be 50 basis points. All
Applicable Margins and the Revolving Commitment Fee for the Revolving Facility
shall remain at their Closing Date level through September 30, 1999. For
purposes of this Exhibit A, Leverage Ratio for the Revolving Facility shall take
effect with respect to all outstanding Advances on the date of delivery of the
Borrower's statement under Section 7.1 certifying such change in Borrower's
Leverage Ratio.
<PAGE>
EXHIBIT B
---------
REVOLVING NOTE
--------------
$ July , 1999
---------------- -----
National Golf Operating Partnership, L.P., a Delaware limited partnership
(the "Borrower"), promises to pay to the order of
----------------------------
(the "Lender") the lesser of the principal sum of
----------------------------
Dollars or the aggregate unpaid principal amount of all Revolving Loans made by
the Lender to the Borrower pursuant to Article II of the Amended and Restated
Credit Agreement hereinafter referred to, in immediately available funds at the
main office of The First National Bank of Chicago in Chicago, Illinois, as
Administrative Agent, together with interest on the unpaid principal amount
hereof at the rates and on the dates set forth in the Agreement. The Borrower
shall pay the remaining unpaid principal of and accrued and unpaid interest on
the Loans in full on the Revolving Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Revolving Note is one of the Notes issued pursuant to, and is
entitled to the benefits of, the Amended and Restated Credit Agreement (as the
same may be amended or modified, the "Agreement"), dated as of July __, 1999
among the Borrower, National Golf Properties, Inc., as Guarantor and General
Partner, The First National Bank of Chicago, individually and as the
Administrative Agent, Merrill Lynch Capital Corporation, individually and as the
Syndication Agent, First Chicago Capital Markets, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as Joint Lead Arrangers, ING (U.S.) Capital
LLC, individually and as Co-Documentation Agent and Co-Arranger, Union Bank of
California N.A., individually and as Co-Documentation Agent, and the other
Lenders named therein, to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Revolving Note, including
the terms and conditions under which this Revolving Note may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the Agreement.
If there is a Default or Unmatured Default under the Agreement or any
other Loan Document and Administrative Agent exercises the remedies provided
under the Agreement and/or any of the Loan Documents for the Lenders, then in
addition to all amounts recoverable by the Administrative Agent and the Lenders
under such documents, the Administrative Agent and the Lenders shall be entitled
to receive reasonable attorneys fees and expenses incurred by Administrative
Agent and the Lenders in connection with the exercise of such remedies.
Borrower and all endorsers severally waive presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this
Revolving Note, and any and all lack of diligence or delays in collection or
enforcement of this Revolving Note, and expressly agree that this Note, or any
payment hereunder, may be extended from time to time, and expressly consent to
the release of any party liable for the obligation secured by this Revolving
Note, the release of any of the security for this Revolving Note, the acceptance
of any other security therefor, or any other indulgence or forbearance
whatsoever, all without notice to any party and without affecting the liability
of the Borrower and any endorsers hereof.
This Revolving Note shall be governed and construed under the internal
laws of the State of Illinois.
<PAGE>
BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT
UNDER THIS PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR
ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS PROMISSORY
NOTE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE
AND NOT BEFORE A JURY.
NATIONAL GOLF OPERATING PARTNERSHIP,
L.P.
By: NATIONAL GOLF PROPERTIES, INC., its
General Partner
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
DATED JULY ______, 1999
<TABLE>
<CAPTION>
================================================================================================================
Date Principal Maturity Maturity Unpaid
- ---- Amount of Interest Principal Balance
of Loan Period Amount Paid -------
------- ------ -----------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
================================================================================================================
</TABLE>
<PAGE>
EXHIBIT C
---------
TERM NOTE
---------
$ July , 1999
---------------- -----
National Golf Operating Partnership, L.P., a Delaware limited partnership
(the "Borrower"), promises to pay to the order of
-------------------------------
(the "Lender") the principal sum of Dollars, in immediately
-------------------
available funds at the main office of The First National Bank of Chicago in
Chicago, Illinois, as Administrative Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay the remaining unpaid principal of and accrued
and unpaid interest on the Loans in full on the Term Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Term Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Amended and Restated Credit Agreement (as the same may be
amended or modified, the "Agreement"), dated as of July __, 1999 among the
Borrower, National Golf Properties, Inc., as Guarantor and General Partner, The
First National Bank of Chicago, individually and as the Administrative Agent,
Merrill Lynch Capital Corporation, individually and as the Syndication Agent,
First Chicago Capital Markets, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Joint Lead Arrangers, ING (U.S.) Capital LLC, individually and
as Co-Documentation Agent and Co-Arranger, Union Bank of California N.A.,
individually and as Co-Documentation Agent, and the other Lenders named therein,
to which Agreement reference is hereby made for a statement of the terms and
conditions governing this Term Note, including the terms and conditions under
which this Term Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Agreement.
If there is a Default or Unmatured Default under the Agreement or any
other Loan Document and Administrative Agent exercises the remedies provided
under the Agreement and/or any of the Loan Documents for the Lenders, then in
addition to all amounts recoverable by the Administrative Agent and the Lenders
under such documents, the Administrative Agent and the Lenders shall be entitled
to receive reasonable attorneys fees and expenses incurred by Administrative
Agent and the Lenders in connection with the exercise of such remedies.
Borrower and all endorsers severally waive presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Term
Note, and any and all lack of diligence or delays in collection or enforcement
of this Term Note, and expressly agree that this Note, or any payment hereunder,
may be extended from time to time, and expressly consent to the release of any
party liable for the obligation secured by this Term Note, the release of any of
the security for this Term Note, the acceptance of any other security therefor,
or any other indulgence or forbearance whatsoever, all without notice to any
party and without affecting the liability of the Borrower and any endorsers
hereof.
This Term Note shall be governed and construed under the internal laws of
the State of Illinois.
<PAGE>
BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT
UNDER THIS PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR
ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS PROMISSORY
NOTE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE
AND NOT BEFORE A JURY.
NATIONAL GOLF OPERATING PARTNERSHIP,
L.P.
By: NATIONAL GOLF PROPERTIES, INC., its
General Partner
By:
---------------------------
Print Name:
---------------------
Title:
---------------------------
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
DATED JULY ______, 1999
<TABLE>
<CAPTION>
================================================================================================================
Date Principal Maturity Maturity Unpaid
- ---- Amount of Interest Principal Balance
of Loan Period Amount Paid -------
------- ----------- -----------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 10.5
AMENDED AND RESTATED GUARANTY
This Amended and Restated Guaranty ("Guaranty") is made as of July 30,
1999, by National Golf Properties, Inc., a Maryland corporation (the
"Guarantor"), to and for the benefit of The First National Bank of Chicago, as
administrative agent (the "Agent") for itself and the lenders under the Amended
and Restated Credit Agreement (as defined below) and their respective successors
and assigns (collectively, the "Lenders").
RECITALS
A. Certain of the Lenders previously made a revolving credit facility
available to National Golf Operating Partnership, L.P., a Delaware limited
partnership ("the Borrower"), in an aggregate principal amount of $300,000,000
(the "Prior Facility").
B. Borrower has requested that the Prior Facility be replaced by
a combined Revolving and Term Loan Facility, in an aggregate principal amount of
$300,000,000 (the "Facility").
C. The Lenders have agreed to make available the Facility to the
Borrower pursuant to the terms and conditions set forth in an Amended and
Restated Credit Agreement of even date herewith between the Borrower, the
Guarantor, The First National Bank of Chicago, individually ("FNBC"), and as
Administrative Agent, Merrill Lynch Capital Corporation, individually and as
Syndication Agent, ING (U.S.) Capital LLC ("ING"), individually and as Co-
Documentation Agent, Union Bank of California, N.A., individually and as Co-
Documentation Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
Banc One Capital Markets, Inc., as Joint Lead Arrangers and the Lenders named
therein (as amended, modified or restated from time to time, the "Credit
Agreement"). All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Credit Agreement.
D. The Borrower has executed and delivered or will execute and deliver
to the Lenders promissory notes in the principal amount of each Lender's
Commitment as evidence of its indebtedness to each such Lender with respect to
the Facility (the promissory notes described above, together with any amendments
or allonges thereto, or restatements, replacements or renewals thereof, and/or
new promissory notes to new Lenders under the Credit Agreement, are collectively
referred to herein as the "Notes").
E. The Guarantor is the sole general partner of the Borrower and,
therefore, the Guarantor will derive financial benefit from the Facility
evidenced by the Notes, the Credit Agreement and the other Loan Documents. The
Guarantor executed and delivered a Guaranty dated March 29, 1999 in connection
with the Prior Facility and has agreed to amend and restate it in connection
with the Facility. The execution and delivery of this Guaranty is a condition
precedent to the performance by the Lenders of their obligations under the
Credit Agreement.
<PAGE>
AGREEMENTS
NOW, THEREFORE, the Guarantor, in consideration of the matters
described in the foregoing Recitals, which Recitals are incorporated herein and
made a part hereof, and for other good and valuable consideration, hereby agrees
as follows:
1. The Guarantor absolutely, unconditionally, and irrevocably
guarantees to each of the Lenders:
(a) the full and prompt payment of the principal of and interest on the
Notes when due, whether at stated maturity, upon acceleration or otherwise, and
at all times thereafter, and the prompt payment of all sums which may now be or
may hereafter become due and owing under the Notes, the Credit Agreement, and
the other Loan Documents, including without limitation, the Facility Letter of
Credit Obligations;
(b) the payment of all Enforcement Costs (as hereinafter defined
in Paragraph 7 hereof); and
(c) the full, complete, and punctual observance, performance, and
satisfaction of all of the obligations, duties, covenants, and agreements of the
Borrower under the Credit Agreement and the Loan Documents. All amounts due,
debts, liabilities, and payment obligations described in subparagraphs (a) and
(b) of this Paragraph 1 are referred to herein as the "Facility Indebtedness."
All obligations described in subparagraph (c) of this Paragraph 1 are referred
to herein as the "Obligations."
2. Upon the occurrence of a Default, the Guarantor agrees, on demand by
the Agent or the holder of a Note, to pay all the Facility Indebtedness and to
perform all the Obligations as are then or thereafter become due and owing or
are to be performed under the terms of the Notes, the Credit Agreement, and the
other Loan Documents.
3. The Guarantor does hereby waive (i) notice of acceptance of this
Guaranty by the Agent and the Lenders and any and all notices and demands of
every kind which may be required to be given by any statute, rule or law, (ii)
any defense, right of set-off or other claim which the Guarantor may have
against the Borrower or which the Guarantor or the Borrower may have against the
Agent or the Lenders or the holder of a Note, (iii) presentment for payment,
demand for payment (other than as provided for in Paragraph 2 above), notice of
nonpayment (other than as provided for in Paragraph 2 above) or dishonor,
protest and notice of protest, diligence in collection and any and all
formalities which otherwise might be legally required to charge the Guarantor
with liability, (iv) any failure by the Agent and the Lenders to inform the
Guarantor of any facts the Agent and the Lenders may now or hereafter know about
the Borrower, the Facility, or the transactions contemplated by the Credit
Agreement, it being understood and agreed that the Agent and the Lenders have no
duty so to inform and that the Guarantor is fully responsible for being and
remaining informed by the Borrower of all circumstances bearing on the existence
or creation, or the risk of nonpayment of the Facility Indebtedness or the risk
of nonperformance of the Obligations, and (v) any and all right to cause a
marshalling of assets of the Borrower or any other action by any court or
governmental body with respect thereto, or to cause the Agent and the Lenders to
proceed against any other security
- 2 -
<PAGE>
given to a Lender in connection with the Facility Indebtedness or the
Obligations. Credit may be granted or continued from time to time by the Lenders
to the Borrower without notice to or authorization from the Guarantor,
regardless of the financial or other condition of the Borrower at the time of
any such grant or continuation. The Agent and the Lenders shall have no
obligation to disclose or discuss with the Guarantor their assessment of the
financial condition of the Borrower. The Guarantor acknowledges that no
representations of any kind whatsoever have been made by the Agent and the
Lenders to the Guarantor. No modification or waiver of any of the provisions of
this Guaranty shall be binding upon the Agent and the Lenders except as
expressly set forth in a writing duly signed and delivered on behalf of the
Agent and the Lenders. The Guarantor further agrees that any exculpatory
language contained in the Credit Agreement, the Notes, and the other Loan
Documents shall in no event apply to this Guaranty, and will not prevent the
Agent and the Lenders from proceeding against the Guarantor to enforce this
Guaranty.
4. The Guarantor further agrees that Guarantor's liability as guarantor
shall in no way be impaired by any renewals or extensions which may be made from
time to time, with or without the knowledge or consent of the Guarantor of the
time for payment of interest or principal under a Note or by any forbearance or
delay in collecting interest or principal under a Note, or by any waiver by the
Agent and the Lenders under the Credit Agreement, or any other Loan Documents,
or by the Agent or the Lenders' failure or election not to pursue any other
remedies they may have against the Borrower, or by any change or modification in
a Note, the Credit Agreement, or any other Loan Documents, or by the acceptance
by the Agent or the Lenders of any security or any increase, substitution or
change therein, or by the release by the Agent and the Lenders of any security
or any withdrawal thereof or decrease therein, or by the application of payments
received from any source to the payment of any obligation other than the
Facility Indebtedness, even though a Lender might lawfully have elected to apply
such payments to any part or all of the Facility Indebtedness, it being the
intent hereof that Guarantor shall remain liable as principal for payment of the
Facility Indebtedness and performance of the Obligations until all indebtedness
has been paid in full and the other terms, covenants and conditions of the
Credit Agreement, and other Loan Documents and this Guaranty have been
performed, notwithstanding any act or thing which might otherwise operate as a
legal or equitable discharge of a surety. The Guarantor further understands and
agrees that the Agent and the Lenders may at any time enter into agreements with
the Borrower to amend and modify a Note, the Credit Agreement or any of the
other Loan Documents, or any thereof, and may waive or release any provision or
provisions of a Note, the Credit Agreement, or any other Loan Document and, with
reference to such instruments, may make and enter into any such agreement or
agreements as the Agent, the Lenders and the Borrower may deem proper and
desirable, without in any manner impairing this Guaranty or any of the Agent's
and the Lenders' rights hereunder or any of the Guarantor's obligations
hereunder.
5. This is an absolute, unconditional, complete, present and continuing
guaranty of payment and performance and not of collection. The Guarantor agrees
that this Guaranty may be enforced by the Agent and the Lenders without the
necessity at any time of resorting to or exhausting any security or collateral,
if any, given in connection herewith or with a Note, the Credit Agreement, or
any of the other Loan Documents or by or resorting to any other guaranties, and
the Guarantor hereby waives the right to require the Agent and the Lenders to
join the Borrower in any action brought hereunder or to commence any action
against or obtain
-3-
<PAGE>
any judgment against the Borrower or to pursue any other remedy or enforce any
other right. The Guarantor further agrees that nothing contained herein or
otherwise shall prevent the Agent and the Lenders from pursuing concurrently or
successively all rights and remedies available to them at law and/or in equity
or under a Note, the Credit Agreement or any other Loan Documents, and the
exercise of any of their rights or the completion of any of their remedies shall
not constitute a discharge of any of the Guarantor's obligations hereunder, it
being the purpose and intent of the Guarantor that the obligations of such
Guarantor hereunder shall be primary, absolute, independent and unconditional
under any and all circumstances whatsoever. Neither the Guarantor's obligations
under this Guaranty nor any remedy for the enforcement thereof shall be
impaired, modified, changed or released in any manner whatsoever by any
impairment, modification, change, release or limitation of the liability of the
Borrower under a Note, the Credit Agreement or any other Loan Document or by
reason of the Borrower's bankruptcy or by reason of any creditor or bankruptcy
proceeding instituted by or against the Borrower. This Guaranty shall continue
to be effective and be deemed to have continued in existence or be reinstated
(as the case may be) if at any time payment of all or any part of any sum
payable pursuant to a Note, the Credit Agreement or any other Loan Document is
rescinded or otherwise required to be returned by the payee upon the insolvency,
bankruptcy, or reorganization of the payor, all as though such payment to such
Lender had not been made, regardless of whether such Lender contested the order
requiring the return of such payment. The obligations of the Guarantor pursuant
to the preceding sentence shall survive any termination, cancellation, or
release of this Guaranty.
6. This Guaranty shall be assignable by a Lender to any assignee of all
or a portion of such Lender's rights under the Loan Documents.
7. If: (i) this Guaranty, a Note, or any of the Loan Documents are
placed in the hands of an attorney for collection or are collected through any
legal proceeding; (ii) an attorney is retained to represent the Agent or any
Lender in any bankruptcy, reorganization, receivership, or other proceedings
affecting creditors' rights and involving a claim under this Guaranty, a Note,
the Credit Agreement, or any Loan Document; (iii) an attorney is retained to
enforce any of the other Loan Documents or to provide advice or other
representation with respect to the Loan Documents in connection with an
enforcement action or potential enforcement action; or (iv) an attorney is
retained to represent the Agent or any Lender in any other legal proceedings
whatsoever in connection with this Guaranty, a Note, the Credit Agreement, any
of the Loan Documents, or any property subject thereto (other than any action or
proceeding brought by any Lender or participant against the Agent alleging a
breach by the Agent of its duties under the Loan Documents), then the Guarantor
shall pay to the Agent or such Lender upon demand all reasonable attorney's
fees, costs and expenses, including, without limitation, court costs, filing
fees and all other costs and expenses incurred in connection therewith (all of
which are referred to herein as "Enforcement Costs"), in addition to all other
amounts due hereunder.
8. The parties hereto intend that each provision in this Guaranty
comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or provisions, or if any portion of any
provision or provisions, in this Guaranty is found by a court of law to be in
violation of any applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Guaranty to be illegal,
invalid, unlawful, void or
-4-
<PAGE>
unenforceable as written, then it is the intent of all parties hereto that such
portion, provision or provisions shall be given force to the fullest possible
extent that they are legal, valid and enforceable, that the remainder of this
Guaranty shall be construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained therein, and
that the rights, obligations and interest of the Agent and the Lender or the
holder of a Note under the remainder of this Guaranty shall continue in full
force and effect.
9. Any indebtedness of the Borrower to the Guarantor now or hereafter
existing is hereby subordinated to the Facility Indebtedness. The Guarantor
agrees that until the entire Facility Indebtedness has been paid in full, (i)
the Guarantor will not seek, accept, or retain for the Guarantor's own account,
any payment from the Borrower on account of such subordinated debt, and (ii) any
such payments to the Guarantor on account of such subordinated debt shall be
collected and received by the Guarantor in trust for the Lenders and shall be
paid over to the Agent on behalf of the Lenders on account of the Facility
Indebtedness without impairing or releasing the obligations of the Guarantor
hereunder; provided, however, that so long as no Default or Unmatured Default
exists, the Guarantor may accept such payments when due in the ordinary course.
10. Until the entire Facility Indebtedness has been paid in full and
each Commitment thereunder shall have been permanently and irrevocably
terminated, the Guarantor waives and releases any claim (within the meaning of
11 U.S.C. ss. 101) which the Guarantor may have against the Borrower arising
from a payment made by the Guarantor under this Guaranty and agrees not to
assert or take advantage of any subrogation rights of the Guarantor or the
Lenders or any right of the Guarantor or the Lenders to proceed against (i) the
Borrower for reimbursement, or (ii) any other guarantor or any collateral
security or guaranty or right of offset held by the Lenders for the payment of
the Facility Indebtedness and performance of the Obligations, nor shall the
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Borrower or any other guarantor in respect of payments made by the Guarantor
hereunder. It is expressly understood that the waivers and agreements of the
Guarantor set forth above constitute additional and cumulative benefits given to
the Lenders for their security and as an inducement for their extension of
credit to the Borrower. Nothing contained in this Paragraph 10 is intended to
prohibit the Guarantor from making all distributions to its constituent
shareholders which are required by law from time to time in order for the
Guarantor to maintain its status as a real estate investment trust in compliance
with all applicable provisions of the Code.
11. Any amounts received by a Lender from any source on account of any
indebtedness may be applied by such Lender toward the payment of such
indebtedness, and in such order of application, as a Lender may from time to
time elect.
12. The Guarantor hereby submits to personal jurisdiction in the State
of Illinois and the State of New York for the enforcement of this Guaranty and
waives any and all personal rights to object to such jurisdiction for the
purposes of litigation to enforce this Guaranty. The Guarantor hereby consents
to the jurisdiction of either the Circuit Court of Cook County, Illinois, the
United States District Court for the Northern District of Illinois, the Supreme
Court of New York County, New York or the United States District Court for the
Southern District of New York in any action, suit, or proceeding which the Agent
or a Lender may at any time wish to file in
-5-
<PAGE>
connection with this Guaranty or any related matter. The Guarantor hereby agrees
that an action, suit, or proceeding to enforce this Guaranty may be brought in
any state or federal court in the State of Illinois and hereby waives any
objection which the Guarantor may have to the laying of the venue of any such
action, suit, or proceeding in any such court; provided, however, that the
provisions of this Paragraph shall not be deemed to preclude the Agent or a
Lender from filing any such action, suit, or proceeding in any other appropriate
forum.
13. All notices and other communications provided to any party hereto
under this Agreement or any other Loan Document shall be sent in the manner
provided in the Credit Agreement.
14. This Guaranty shall be binding upon the heirs, executors, legal and
personal representatives, successors and assigns of the Guarantor and shall
inure to the benefit of the Agent and the Lenders' successors and assigns.
15. This Guaranty shall be construed and enforced under the internal
laws of the State of Illinois.
16. THE GUARANTOR, THE AGENT AND THE LENDERS, BY THEIR ACCEPTANCE
HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS
THE SUBJECT OF THIS GUARANTY AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the Guarantor has delivered this Guaranty
in the State of Illinois as of the date first written above.
NATIONAL GOLF PROPERTIES, INC.
a Maryland corporation
By: /s/ James M. Stanich
-----------------------------
Its: President
----------------------------
- 7 -
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,296
<SECURITIES> 200
<RECEIVABLES> 28,387
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,828
<PP&E> 851,744
<DEPRECIATION> 136,991
<TOTAL-ASSETS> 771,516
<CURRENT-LIABILITIES> 12,875
<BONDS> 469,321
0
0
<COMMON> 126
<OTHER-SE> 127,757
<TOTAL-LIABILITY-AND-EQUITY> 771,516
<SALES> 0
<TOTAL-REVENUES> 46,836
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,321
<INCOME-PRETAX> 11,272
<INCOME-TAX> 115
<INCOME-CONTINUING> 11,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,455
<EPS-BASIC> .35
<EPS-DILUTED> .35
</TABLE>
